Commerce Paper III (English Version)-munotes

Page 1

11
INTRODUCTION
TOMANAGEMENT
Unit Structure
1.0 Objectives
1.1 Introduction to Management
1.2 Definition sof Management
1.3 Features of Management
1.4 Importance of Management
1.5 Principles of Management
1.6 Functions of Management
1.7 New Horizons inManagement
1.8 Management Skills and Competencies In 21st Centur y
1.9 Evolution of Management Thoughts
1.10Modern Management Approach
1.11Summ ary
1.12Questions
1.0OBJECTIVES
After studying the unit the students will be able to:
Define the concept ofManagement.
Discuss the features of management.
Know the management principles .
Understand thefactors responsible for new horizons of management,
Explain the management skills and competence in the21st century,
Understand the concept ofManagemen t by exception.
1.1INTRODUCTION TO MANA GEMENT
Management is a process of managing various activities.
Management means managing an activity. It is aprocess of planning,
organizing sta ffing,and controlling the organizational activities to
accompli sh itsw e l l -designed activities . Management is theart of getting
things done by the people who are directly or indirectly associated with
the organization. It is one of the important elements of business -like men,
materials, money market ,and management. Effective utili zation of all
theirelements purely depends on effective and efficient management. The
importance of management cannot be neglected in today’s businessmunotes.in

Page 2

2process. Management is not only essential to business concern sbut also
essential to anorgani zation like schools , Colleges, Hospitals, Charitable
trusts.
Many organi zations are effective and efficient management for
planning organi zing and controlling their activities to accomplish their
goals.
1.2DEFINITION SOF MANAGEMENT
1. Mary Parker Foll et:-“Management is the art of getting thing sdone
through people”.
2. George Terry: -“Management is a distinct process consisting of
planning organi zing staffing and controlling performed to determine and
accomplish stated objectives by theuse of huma n being and other
resources”.
3. Henry Fayol: -“To manage is to forecast and to plan to organi ze, to
command, to coordinate and to control”.
4. Harold Koontz: -“Management is the art of getting things done
through and with people in formally organized groups”.
1.3FEATURES OF MANAGEME NT
The Features of management are as follows: -
1. Management is a continuous and never -ending process :
Asstated, above management is a process. It includes four basic
functions like planning organi zing directing and co ntrolling. It is a
continuous and never -ending process as it does not come to an end like the
accomplishment of organizational goals.
2. Management deals with the people :
Management involves people who are directly or indirectly
involves with the organi zation effective management requires teamwork
the collective efforts of all the people tobring success to the organization.
3. It involves getting things done through people:
Management involves people to get thething done effective and
efficient system of management maintain qualified and knowledgeable
staff to whom aproper direction is given to implement the plans of an
organization.munotes.in

Page 3

34. Management is goal -oriented:
Management places emphasis on the accomplishment of an
organization 'sgoal. Ev ery managerial activity results in the achievement
of well -defined objectives.
5. Management is a system of activity:
Management is anintegral part of thesystem. A system may be
defined as a set of various departments working in an organization to
achieve a common objective.
6. Management is an art, science as well as profession.
7. Management is innovative:
Management techniques are creative and innovative. Every
manager in the organization uses their innovative skills and talent to make
better things with higher efficiency at minimum cost.
8. Management has a different operation level:
Such as higher level, middle level ,and lower level. All the
managers at different levels have to work with adequate authorities and
responsibilities.
9. Management is dynamic:
Business is influenced by economics, social, political, and
technological and changes in human resources. Management adjusts itself
to the changing atmosphere. Management ha sto make suitable forecasts
and make the changes in the e xisting policies, therefore it is adynamic
activity.
10. Management follows well -established princip les:
It follows well -established princip les in managing the organization.
The principals include: -
Division of work
Authority and responsibility
Discip line
Unity of command
Unity of direction etc.
These principles help to solve the problems of theorganization.
11. Management is universal:
It is all -pervasive. It applies not to business organization s, but also
toother organization ssuch as educatio nal institutions charitable trust s,
hospitals, etc. Management is amust for all activities.munotes.in

Page 4

412. Management adopts professional approach:
Nowadays managers use a professional approach for getting the
work done by their subordinate s. The delegates 'authority and
responsibility to their subordinates give direction and guidance and also
accept thesuggestion from the subordinates for improving their work.
13. Management adopts multi -disciplinary approach:
Management has to manage people. It is very di fficult for
managers to handle people of different backgrounds without the
knowledge of different subjects such as economics, Information
Technology, psychology, sociology ,etc.
14. Ownership and management are separated from each other.
15. Management is an intangible activity.
16. Management is aided by computers but cannot be replaced -As
managers can use computers to make quick decision s, computerized
data can be used. But the judgment and experience of managers are
required to use computerized data to take quick decision s.
1.4 IMPORTANCE OF MANAGEMENT
The need and importance ofmanagement can be stated as follows: -
1. Accomplishment of goal:
Effective and efficient management facilitates theaccomplishment
of an organization 'sgoals Organ izational activities are performed by the
people under proper direction and guidance.
2. Optimum use of resources:
Management facilitates optimum utili zation of available human
and physical resources with the minimum cost. This helps to bring
progress and prosperity toa business enterprise.
3. Management encourages initiative:
Management deals with people. It encourages people or
subordinate sto take an initiative to perform their work more effectively
and efficiently. Employees and subordinate sare encourage dto make their
plans and policies and implement them to perform their work and
accomplishment individual and organi zational goals.
4. Management facilitates theintroduction of new Techniques:
It facilitates the introduction of new machin e methods in the
conduct of business activities. It also brings useful technological
developments and innovations in the management of business activities.munotes.in

Page 5

55. Cordial industrial relations:
Management develops better industrial relations. It ensures bett er
life and welfare to employees and raiser their moral ethrough suitable
incentives.
6. Motivates employees:
It motivates employees to take more interest and initiative in the
work assigned to them. Effective management facilitates higher
performance. Employees can be m otivated with higher incentives .
Motivated employees work with application and dedication which leads to
higher efficiency in the organi zation.
7. Expansion of business:
Effective management facilitates expansion growth and
diversifi cation of business. It creates agood corporate image fora
business enterprise. Successful managers are responsible to bring success
and stability to a business enterprise.
8. Reduction in wastages:
Effective management facilitates thereduction of wa stages in the
organi zation. This facilitates theimprove ment ofproductivity and overall
efficiency of theorgani zation.
9. Reduces absenteeism and labo ur turnover:
Absenteeism means remaining absent from the workplace without
permission. Absenteeism creates several problems in the organi zation
which affects adversely the efficiency and productivity of the
organi zation.
Labo ur turnover means the employees learn the organi zation.
Labour turnover and absenteeism raise the cost of pricing. Effective
mana gement uses different techniques to reduce absenteeism and labour
turnover in the organi zation.
10.Encourages teamwork:
Management facilitates the improve ment ofbetter relations
between individuals ,groups ,departments ,and between various levels of
management. Better relations among employees develop team spirit in the
organi zation which helps to bring success and stability tothe organi zation.
11. Exploiting opportunities:
Success, stability prosperity expansion, growth ,and diversification
of bus iness organi zation slargely depend on effective management.
Management helps to make effective use of available resources to exploitmunotes.in

Page 6

6the opportunities in a better manner. As well as it helps to face challenges
effectively and efficiently.
12. Improves Co rporate Image:
Efficient management enables the organi zation to improve its
performance in respect of quality goods and services higher sales and
higher profits. This creates goodwill and thecorporate image of the
organi zation in the minds of not only the employees but also in the minds
of customers and society. A good corporate image helps to bring success
and stability to abusiness organi zation.
13. Qualities of Worker’s Life:
Modern Management shares the fruits of productivity and
efficiency with the workers. At present workers are provided not only
better working conditions but also other benefits like monetary and non -
monetary incentives which enable them to work honestly and sincerely.
Such monetary and non -monetary reward helps to improve the quality of
life of the employees.
CHECK YOUR PROGRESS:
1.“An effective utili zation of Men, Material ,and Money purely depends
on an effective and efficient management”. Explain.
2.Give the definitions of management.
3.Enlist the Features of managemen t.
1.5PRINCIPLES OF MANAGEMENT
Henry Fayol (1841 –1925) is rightly treated as the father of
Modern Management thought has developed the management principles
and general management theory in the form of a book “Administration
Industrialist Ge neral” Published in 1916. It was translated into English in
1930 as “Industrial and General Administration”. Henry Fayol has given
14 principles of management to manage organi zational activities smoothly
and efficiently. Principles mean the fundamental tru th or principles which
can be used by organi zations to manage their business activities smoothly
and successfully.munotes.in

Page 7

7Henry Fayol’s fourteen principles of management are as follows: -
1. Division of work:
Division of work means dividing the total work i nto small
division sa department under the departmental head a manager. Fayol
suggests that a division of works brings specification in the work and the
managers and the subordinates will work with more interest and initiative.
The performance of managers will also improve as they will get an
opportunity to use their skills & talent to perform their work.
The principle of division of work can be applied at all levels of the
organi zation
2. Authority and responsibility:
Authority and responsibility are t wo sides of management.
Managers must be given authority to get things done delegation of
adequate authority enables the managers to perform their activities with
almost devotion and dedications it improves the moral eof the manager 's
responsibility arises out of assignment of activity. to discharge the
responsibility properly then should be abalance between authority and
responsibility.
3. Discipline:
All the person nel serving in an organization should be disciplined.
Discipline is obedience, applicat ion, energy behavior ,an outward mark of
respect shown by employees. Fayol stressed the need for discipline in the
organization from top -level to lower level. There should be certain rules
and regulations clear and fair agreements and judicious use of pena lties to
be laid down to govern the organization. All the employees and
shareholders must respect all these rules and regulation sand agreements to
run the organi zation successfully. Principle of discipline state that
subordinate should respect their super iorsand obey their orders.
4. Unity of command:
Unity of commands means that a person should get orders and
instructions from only one superior. As well as subordinate should report
only to one superior. Fayol observed that if one subordinate receive s
orders from more than one superior then he will have problems and
confusion regarding whom he has to report. Lack of unity of command
creates confusion and chaos in the organi zation. Therefore Fayol
suggested that dual subordination should be avoided unles s and until it is
essential.
5. Unity of Direction:
Fayol suggested that there should be one head and one plan for a
group of activities having the same objectives. There should be the same
directions to all employees doing similar activities. According to this
principle, theefforts ofall employees or members of the organi zation
should be directed towards acommon goal. Unity of direction is different
from theunity of command in the sense that the former is concerned withmunotes.in

Page 8

8thefunctioning of the organi zation in respect of its grouping of activities
while the la tter is concerned with personnel at all levels in the organi zation
in terms of reporting relationship.
6. Subordination of Individual to General Interest:
This principle suggests that thegeneral interest of the organi zation
is more important than the interest of one employee or group of
employees. Fayols states that common interest is above the individual
interest. All employees of the organi zation should give more importance
to accomplish the organi zational objectives rather than individual
objectives or group objectives. The superior should set an example in
fairness and goodness. In other words, the interest of the organi zation
should come first and then theindividual or group interest.
7.Remuneration:
Fayol suggested that theremuneration of employees should be fair
andprovide maximum satisfaction to employees and employers. Wages
and salaries should be fair. More importantly ,wages must be paid on time.
Wages and salaries should be d etermined based on cost-of-living work
assigned, the financial position of the business ,and talent of the
employees ,etc. Fayol also suggested that wages should be supported by
non-financial benefits such as good working conditions, canteen facilities,
recreation facilities ,etc.
8. Centralisation:
Everything which goes to increase the importance of subordinate’s
role is decentrali zation. Everything which goes to reduce it is
centrali zation Fayol suggested that authority and responsibility must be
centralization in any organi zation with adequate decentrali zation polic ies
in other words extreme centrali zation and decentrali zation of authority
should be avoided and proper balance between centrali zation and
decentrali zation should be maintained
9. Scalar chain:
The s calar chain principle refers to the line of authority or
command for communication from the top levels to the lowest level of
management . Fayol suggested that there should be a scalar chain of
authority and of communication ranging from the highest to the lowest
level to avoid delay in thedecision -making process principle of scalar
chain suggest that each communication going up or coming down must
flow through each position in the line of authority. Fa yol has suggested a
gangplank which is used to prevent the scalar chain from bagging down
theaction.munotes.in

Page 9

9A
B K
C L
D M
E N
F O
G P
In this diagram A to G and A to P is the scalar chain. A is the head
of the organi zation having immediate subordinate B & K. Thus B is
superior toC while K is superior to L and so on at the respective level of
management. Ordinarily ,communication must flow from A to B to C to E
to F and so on while going down. Similarly ,it must flow from G to F to E
andthesame while going up. It means if any co mmunication is going
from F to oit will flow from F to A via E, D, L,and B and coming down to
O via K, L,M,and N. Fay suggested that this scalar chain system takes
time and therefore can be substituted by agangplank. Gang Plank
suggested that F & P can have direct communication to avoid delay as
decision making. A gangplank is a temporary arrangement between two
different points to facilitate easy and quick communication.
10. Order:
This is a principle relating to the arrangement of things and peopl e.
In material order, there should be a place for everything and everything
should be in its place. Similarly ,inthesocial order ,there should be the
`Rightperson at theright place .
11. Equity:
Equity is the combination of justice kindness and fairn ess. Equity
is treatment and behavior is liked by everyone and it brings loyalty tothe
organi zation. Impartial, fai r,and good treatment should be given to all
employees of the organi zation. The application of equity requires good
sense experience and goo d nature for soliciting loyalty and devotion from
subordinates.
12. Stability of Tenure:
Fayol suggested no employees should be removed within ashort
time from one job to another position job. Sufficient time is to be given to
the employees to learn th e new job to get used to new work and succeed in
doing it well. It means enough time is to be given to employees to get
stability in the organi zation. This creates team spirit and asense of
belongingness among the workers.
13. Initiative:
Initiative me ans taking lead, coming forward to do the things. If
managers are l eading down the examples w ithin the limits of authority andmunotes.in

Page 10

10discipline, managers should encourage their employees for taking
initiative. The i nitiative is concerned with thinking out and ex ecuti nga
plan. The i nitiative increases zeal and energy o nthe part of employees.
14. Esprit de corps:
This is the principle of uni tyasastrength and extension of unity of
command for establishing team spirit .
Fayol suggested that the managers shou ld encourage team spirit
among the employees of the organi zation. Employees should not be
divided into small groups or competing groups. Because it might be
damaged the moral eof the employees. Esprit de corps facilitates to
develop ment ofproper coordinat ion, informal relations among employees.
It also creates interest and enthusiasm.
1.6FUNCTIONS OF MANAGEMENT
Management is a process thatrefers to various functions which a
manager performs in an organi zation to accomplish organi zational
objectives. H enry Fayol has classified managerial functions in his well -
known book "Industrial and General management” on 19/6. He identified
fine functions of management such as planning organi zing commanding,
coordinating ,and controlling.
George R Terry, a well -known author believes that management is
a distinct process consisting of planning, organi zing, directing ,and
controlling, which are performed to determine and accomplish objectives
by the use of people and resources. Like this various management ,
scholars h ave identified separate functions of management. In 1937 Luther
Gullite gave the seven functions of management they are POSDCORB
which refers to: -
1. Planning (P). 2. Organizing (O).
3. Staffing (S). 4. Directing (D).
5. Coordinating (C). 6. Reporting (R) .
7. Budgeting (B).
Hence, the function of management has been classified as per the
studies undertaken by the management experts.
The important functions of management are as given below: -
1. Planning:
Planning is the first managerial function to be performed in the
process of management. Planning is the primary function of management.
It occupies the first position in the management process. It is the starting
point of the whole management process as other management functions
are related to theplanning function. Planning is concerned with deciding
in advance what is to be done & when, where, how ,and by whom to what
is to be done. It deals with -chalking out a future course of action and
deciding in advance the most appropriate course of action for themunotes.in

Page 11

11achievement of pre -determined goals of action. Planning is a decision -
making process. It is an intellectual process as it deals with the
determination of thecourse of action to achieve predetermined goals.
Playing is bri dging the gap between the pres ent and future planning begins
with the determination of objectives of the organi zation. i.e deciding the
future course of action. Planning is necessary to ensure proper
initiali zation of physical and human resource sto accomplish the
organi zational object ives.
In the work of Alfred and Betty “planning is the thinking process,
the organi zed foresight the vision, based on facts and experience that is
required for intelligent action”.
George Terry stated that “Planning is the selecting and relating of
facts and making and using of assumptions regarding the future in the
visuali zation and formulation of proposed activities believe necessary to
achieve the desired results”.
Hence, planning is concerned with deciding in advance the future
course of action. It is needed in all areas and at all levels.
2. Organizing:
Organizing is one of the basic functions of management. It is a
process of integrating and coordinating the efforts of manpower and
material resources for the accomplishment of certain objectives . Louis
Allen states that organizing is a process of identifying and grouping the
work to be performed defining and delegating authority and responsibility
and establishing relationship sto accomplish objectives.
George Terry defines organi zing as “The es tablishing of effective
authority relationship among selected work, persons and workplaces for a
group to work together effectively”.
Organizing involves the following aspects
1. Identification and classification of activities that are required to
achiev e organi zational objectives.
2. Grouping of the activities into workable units for achieving
objectives.
3. Assigning duties and responsibilities to subordinates to achieve the
tasks assigned.
4. Delegating authority necessary and useful for the accompl ishment of
assigned tasks.
5. Establishing asuperior -subordinate relationship.
6. Providing a system of coordination for integrating the activities of
individual sand departments.munotes.in

Page 12

123. Staffing:
Staffing is one basic function of management and occupie s a key
position in the management process staffing refers to manpower or human
resources required for the execution of a business plan. Staffing is the
process of filling positions in the organi zation with adequate and qualified
personnel. “Right man for the right job” is the basic principle in staffing.
Mcfarland stated that “staffing is the function by which managers
build an organi zation through the recruitment, selection ,and development
of individuals as capable employees”. Thus, staffing provides pr oper
personnel who are competent qualified ,and with the essential skills to
perform the job efficiently. Staffing involves: -
1. Manpower planning.
2. Job Analysis.
3. Recruitment, selection ,and placement.
4. Training and development.
5. Remuneration.
6.Performance appraisal.
7. Promotions and transforms.
8. Motivation.
9. Mentoring and counseling.
10. Retirement of employees.
4. Directing:
It is one of the most important functions of management. When
people are available in the organi zation, they mu st know what they are
expected to do in the organi zation. Directing means explaining the
company’s plans to its employees the managers should inform the
subordinate by giving information about the plans, objectives of the
organi zation and instruct the peop le that they know what is expected of
them. Directing includes: -
Communicating: -cleanly transfer of information from one person to
another.
Leading :-to lead the people and to create an interest among them to
do the work for attainment and designed ob jectives.
Motivating: -Subordinates should be motivated by the superior by
providing incentives so that they work with dedication and sincerely to
achieve thegoals of the organi zation.
5. Coordinating:
It is one of the key functions of management. Co ordination means
integrating all the activities of an organi zation. Coordination is a
managerial function in which different activities are properly adjusted,
integrated ,or inter -linked to achieve well -defined objectives. Such
coordination among the diffe rent activities and department is essential. It
is like bringing unity among diversity. Coordination gives one commonmunotes.in

Page 13

13direction to all departments and employees functioning in the
organi zation. Coordination is essential at levels of management -
The top -level coordinates the activities of the middle level.
The middle level coordinates the activities of the lower level.
The lower -level managers coordinate the activities of the
subordinates.
6. Decision Making:
Decision -making is animportant function of management.
Decision -making play san important role inits effectiveness and also
excellence. The concept of decision making is defined as “The selection
from among alternatives of course of action”. Decision -making is
necessary forall management function s.
Oxford Dictionary defines decision making means “The action of
carrying out or carrying into effects”.
James Stoner states that -Decision making is the process of identifying
and selecting a course of action to solve a specific problem.
TheDecision -making process includes the following steps -
a.Defining the problem or situation.
b.Forming analternative solution.
c.Evaluating alternative solutions.
d.Selection of the best alternative.
e.Implementation of alternative.
f.Review of performance.
7.Controlling:
Controlling is the end function of management. Controlling is the
core of themanagement process. An organi zation cannot work without an
effective control mechanism. Controlling is a regular activity. It is rightly
treated as the soul of themanagement pro cess. It is true that without
planning there will be nothing to control. Along with this, it is equally true
that without control planning will be useless.
In simple words to control means to check that the actual
performance conforms to the standard and if any variance is observed, to
find out the reasons for the same. It includes verifying the actual execution
against the plans to ensure that execution is being done following the
plans. The purpose of controlling is to ensure that everything occurs in
conformities with the standards. Controlling has following
Steps: -
a.Setting standards or targets.
b.Implementation of Tasks.
c.Measuring actual performance.
d.Comparing actual performance with plans or targets.
e.Finding out causes of deviations.munotes.in

Page 14

14f.Listing o ut various corrective measures.
g.Selecting the appropriate corrective measures.
h.Implementation and review of corrective measures.
1.7NEW HORIZONS IN MANAGEMENT
It is the latest development in the field of management. Many
developed countries have adopte d new horizons in their industries to
manage business activities and thereby to improve organi zational
efficien cy and productivity. Large firms from developing countries also
introduced new horizons in managing their activities. At present ,it is
essential to all firms’ especially large firms to emphasize theintroduction
of new horizons in the field of management to improve overall
organi zational efficien cy and to accomplish their objectives.
1.7.1 New horizons in the management include: -
Flat organi zation structure.
Virtual organi zation.
Strategic business units.
Knowledge management.
Intra p erineurial culture within the organi zation.
Management by exception.
Management information system.
Total quality management.
Six sigma technique.
Value engineering etc.
1.7.2 Factors Responsible for New Horizons of Management
1. Globalisation:
Globali zation is one of the important factors responsible for new
horizons in management. Due to globali zation ,international business
needs to expand their business to me et the global challenges. Like as
expansion diversification, foreign direct investment global wagers and
take one and research and developments. To face such challenges at the
global level and also to achieve the growth of business at aninternational
level many business firms must have to adopt modern techniques of
organi zation and management.
2. Policies of the Government:
After 1990, most of the government sin the developing countries
has introduced new business policies, which favors liberali zation,
privati zation ,and globali zation. Govt. has deserved the public sector,
delicensing of the industries, direct foreign investment ,etc. Such policies
are favoring the private sector enable them to participate in theeconomic
and social development of the co untry. This has resulted in the expansion
of business of private sector enterprises. To handle the expansion of
business and to manage it effectively business firms now, have to givemunotes.in

Page 15

15importance to introducing new techniques in the field of management and
business.
3. Competition:
Due to globali zation, liberali zation ,and privati zation, there is still
competition among the firms within and outside the country. Every firm
from the developed and developing countries needs to face competition.
This leads to theintroduction or use of modern techniques of management
in the field of business to gain competitive advantages.
4. Technological Developments:
Technological Development is a factor responsible for use of new
horizons in management and business. Theuse of thelatest and updated
technology is one of the important aspect sof functional management
which is essentially require dto manage the business and managerial
activities successfully. Therefore the business firms need to use modern
technology new system sin the field of business management.
5. Customer expectations:
Now adays, customer expectations are growing. They want anew
and better product at the right prices. Due to this business firms must have
to give importance to the use of new techn iques in the field of production
and management to provide better and quality product sand services to
meet the needs and expectations of customers. At present emphasis is
given on total quality management, inventory control management
customer satisfactio n surveys ,etc.
6. Dynamic environment:
The b usiness environment has become very dynamic. It charges
very quickly. People who like to take initiative and come out with
solutions are likely to succeed in adynamically changing environment.
The o rgani zation recognizes managers who find their way and came to
their niche. Taking initiative rather than waiting for instructions or
solutions is avery important skill that is required when you work across
the globe.
7. Shareholders expectations:
At present s hareholders have more expectations from their
companies. They expect the right information, higher dividend, best
corporate governance practice ,etc. Due to this business firms need to give
more importance to the introduction of new techniques in the field of
business and management which helps to improve theoverall efficiency of
the organi zation. At present the business firms have to introduce/uses total
quality management techniques, flat organi zation structure, and six sigma
techniques.
8. Employees e xpectations:
Employees 'expectations areanother important factor responsible
for new horizons in management. At present employees expect moremunotes.in

Page 16

16freedom, empowerment, good working condition, better mgt. workers
relations ,etc. to meet such growing expectat ion of the employees and for
the interment of the organi zation, business firms must have to give
importance to the introduction ofmodern techniques of management in the
field of production and other areas of business.
8. Growth and expansion strategies:
Due to globali zation, liberali zation ,and privati zation ,the business
firms use different growth and expansion strategies like internal growth
strategies, external growth strategies which includes product development,
market development, market penetrat ion, diversification internal wagers ,
take ones, joint ventures ,etc. to manage such growth and expansion
strategies a business firm may have t adopt modern techniques of
management and organi zation.
Check Your Progress:
1.Explain the following functions of Management:
a.Controlling
b.Directing
c.Decision Making
d.Coordinating
e.
2.Explain the following Principles of management :
a.Scalar Chain
b.Centralization
c.Unity of Direction
d.Unity of Command
e.Division of Work
f.Equity
3.Enlist the New horizons in the management.
1.8MANAGEMENT SKILLS AND COMPETENCIES IN
21ST CENTURY
To perform various management functions effectively, managers
must possess certain skills. Skill refers to expertness, practical ability ,or
facility in action or doing something. Robert L. Katz iden tified three kinds
of skills and made them more popular. Skills required by the managers
are:-munotes.in

Page 17

171.Technical skill:
Technical skills are concerned with what is done. These certain to
knowledge and proficiency in activities involving methods and
proce dures. These involve working with specific tools and techniques.
Such skills are learned by accountant s,engineers .Technical skills are
required at all level sin the enterprise.
2.Conceptual skills:
Conceptual skills mean theability to see the enterp riseas a whole
and recognize how the various functions of the enterprise depend on one
another. It is the ability to understand concepts, develop ideas and
strategies. It helps the managers to identify the causes of the problem and
not the symptoms. It he lps him to solve the problems for the benefit of the
entire centralized . Such conceptual skills are more require dby the top -
level because they spend more time in planning and decision making.
3.Human skills:
It is also called interpersonal skills. It is also reformed as human
relations skills. It involve sworking effectively with others on a person -to-
person basis and building up cooperative group relations to accomplish
enterprise objectives. Such skill helps the managers to understand,
communicate , motivate ,and lead the people in the enterprise. It also helps
to build up team spirit in the enterprise.
4.Other skills
Other than these three basic skills the managers also possess the
following skills: -
Communication skills :-Such type of skill require seffective
communication with the people in the enterprise to communicate plans
policies, objectives, strategies, problems ,and so on.
Administrative skills: -Such skills are required at the top -level
management. Top -level managers need to have th e ability to formulate
plans and policies. They should be able to coordinate the various
activities of the enterprise.
Decision -making skills :-Such skills are required at all level sof
management. A manager must be able to take a quick decision and
also he must be able to implement the decision wisely and quickly to
solve the problem.
Design skills :-It refers to problem -solving skills. Managers should
not just identify a problem but design the best solution to solve the
problem.
Leadership skills :-Good managers need to be good leaders. They
should be able to lead and motivate the employees or subordinates to
work for the b etterment of themselves and the enterprise. A good
manager must possess certain qualities and leadership.munotes.in

Page 18

181.9EVOLUTION OF MANAGEME NT THOUGHTS
1.9.1 Introduction
The evolution of management thought has originated when man
started living in groups. The principles of management were used in the
organization of the Roman Catholic Church and the organization of
military forces in ancie nt Greece. These principles were practiced in
different parts of the world since the dawn of civilization. After the
industrial revolution, the structure of industry became extremely complex
and this gave rise to modern management thought and a formal theo ry of
management came into practice.
Stages in Evolution
The stages in theEvolution of management thought -can be given
as follows –
A.Pre-scientific management period.
B.Classical Approach / Scientific management -
i)Taylor’s scientific management theory
ii)Fayol’s principles of management
iii)Bureaucratic model of Max Webber
C.Neo-classical Theory or Human Relations / Behavioral Approach
D.Modern Theory or Systems Approach.
A.Pre-scientific management period: Industrial Revolution
revolutionalised the methods of pr oduction, tools & equipment ,
organization of labour ,and methods of raising capital. To manage the
business became complex and complicated. All these changes ,in turn,
brought about changes in the field of management, Traditional,
conventional or customary ideas of management were slowly given up
and management came to be based on scientific principles. Certain
pioneers such as Prof. Charles Babbage, James Watt Jr, Robert Owens
introduced new ideas and approaches to management -for taking
decisions and sol ving business problems with the help of following -
1)Use of science and mathematics principles for taking decisions and
solving business problems.
2)Improving working conditions and industrial relations
3)Combination of principles of engineering and economics to
improve industrial productivity.
4)Need for labour welfare schemes for improving industrial
relations.
B.Classical Approach / Scientific management -The use of scientific
management started during the last decade of the 19thcentury. During
this period, the advocates of classical theory such as F.W. Taylor, and
Henry Fayol are generally regarded as the founders of scientific
management.munotes.in

Page 19

19i)F.W. Taylors scientific management theor y
He is known as the founder of scientific management as he was the
first to recognize and advocate the need for adopting a scientific approach
for managing any business enterprise. He studied the causes of low
efficiency in industry and he observed and came to the conclusion that
waste and inefficiency aredue to the absence of or der and system in the
management of thebusiness. He noticed that the quota system was absent
and the best methods of doing the jobs. He , therefore, advocated that the
managers should make use of the‘scientific method’ for achieving higher
efficiency.
The scientific method should consist of the following aspects of
management.
1)Management isbased on ascientific approach and not rules of thumb.
2)Cordial relations among workers and management
3)Understanding and co -operation between the management and t he
workers.
4)Emphasis on improving efficiency and productivity by division of
work & specialization.
5)Imparting training to workers to achieve their development.
6)Planning the work
7)Using the best tools, equipments & machinery
8)Time, motion & fatigue study.
9)Differential wage system
10)Use of scientific selection of workers.
11)Providing proper working conditions to achieve standard performance
such as ventilation, safety measures ,etc.
12)Profit -sharing among the workers.
The following are the benefits of scientifi c management advocated by
F.W. Taylor:
1)Wider scope for specialization
2)Emphasis on planning the work
3)Use of standardized methods
4)Higher efficiency & productivity
5)Better quality of output.
6)Lower costs, minimum wastage of materials, time ,and energy
7)Cordi al relations between management and workers.
However, there are certain arguments against the use of scientific
management which can be given as follows -munotes.in

Page 20

201)Due to specialization and division of work, the workers can face the
monotony of work.
2)No scope f or workers’ initiative, innovativeness ,and creativity.
3)Reduction of employment opportunities.
4)Lesser importance to trade unions as important issues of wages and
working conditions are decided by the management.
5)The e xploitation of workers.
6)Need for he avy investment in business
7)Unsuitable for small scale firms
ii)Henry Fayol’s principles of management
Henry Fayol is considered the father of themodern theory of general
and industrial management. The following are the principles of
management advocated b y Henry Fayol:
1)Division of work or specialization -Division of work or
specialization can improve overall efficiency and productivity because
it makes a worker specialized to carry out a particular activity.
2)Authority and responsibility -Authority an d responsibility are the
two sides of the same coin. If any person is assigned a responsibility to
complete a particular job, he also should be given thenecessary
authority to help him to perform the job.
3)Discipline -Every employee should follow rules, regulations, policies ,
and procedures. There must be penalties /punishment for non -
obedience or indiscipline. Any organization cannot function smoothly
without discipline.
4)Unity of Command -Every employee of an organization should
receive orders and ins tructions only from one superior to avoid
confusion and conflicts.
5)Unity of direction -Every employee should work in one direction
only and that is to achieve organizational objectives.
6)Subordination of Personal interest -Organisation’s interest is
supreme. Personal interest can be fulfilled only if theorgani zation’s
interest is achieved.
7)Remuneration -Workers work in an organization for getting
remuneration. Fair pay with non -financial incentives can motivate
workers for better performance.
8)Centralization -There must be a good balance between centralization
and decentrali zation of authority. Over or under centralization should
be avoided.munotes.in

Page 21

219)Scalar chain -Organisation structure consists of steps / a chain or
hierarchy of levels of management fro m the top to the bottom. All
members of the organization are linked to each other with the scalar
chain.
10)Order -Every activity in an organization should be performed with
order and system. There has to be a standard procedure for performing
routine acti vities.
11)Equity -An organization should treat all the parties connected to it in
a fair or just manner.
12)Stability of Tenure -Every employee in an organization should be
given security and stability of job within a certain period.
13)Spirit of Co -operat ion-An organization works better when there is
cooperation or team spirit among the employees.
14)Initiative -Managers should encourage their subordinates to take
initiative and develop innovativeness while performing the job.
Thus the functions of man agement involving planning, organizing,
directing, coordination ,and controlling are based on the principles of
management advocated by Henry Fayol.
iii)Bureaucratic model –
It was developed by Max Weber. It is a rigid model of an
organization involving rules, regulations, thehierarchy of authority, work
procedures, division of labo ur,and so on. The h uman element is absent in
this model. It is suitable where change is not anticipated or where therate
of change can be predicted. It is followed particul arly in government
organization s.
C.Neo-classical Theory or Human Relations / Behavioural Approach
This theory is an extension of classical theory. The c lassical theory
focused on the job and improving efficiency and productivity whereas this
theory gi ves importance to individual and group relationships in the
workplace. It is interdisciplinary in approach and involves the study of
sociology and psychology to understand the individual and group
behavio ur of the workers.
Elton Mayo’s Hawthorne experimen ts
In 1927, Elton Mayo and a group of researchers of the Harvard
Business School were given a project to study the Hawthor ne Plant of
Western Electric Company at Chicago. They believed that behavioral
science played an important role in the management o f the business
organization. In this experiment, the researchers tried to find out the
relation between output and sufficient light, physical conditions length ofmunotes.in

Page 22

22the working day, rest hours, workers’ attitudes towards work, working
conditions, and supervi sion and group behavior. It was observed that the
efficiency and productivity of employees depend more on employee’s job
satisfaction than the physical conditions of the work.
The important features of the Hawthorne Experiment are–
1)A business organizat ion is a socio -economic system.
2)An employee is a human being and his behavior is influenced by his
emotions, feelings ,and attitudes. An employee has to be motivated by
using both monetary and non -monetary incentives.
3)Management should co -operate with wo rkers.
4)Productivity is the effect of employee satisfaction in any business
organization.
5)While managing business, management should make use of sociology
and psychology to understand individual and group behaviour.
6)Management should have communication sk ills to get employee
participation.
7)Developing high morale is very important to achieve organi zational
goals.
1.10 MODERN MANAGEMENT APPROACH
1.10.1Meaning / Concept
The m odern theory considers any business as asocio -economic
organization. Accord ing to this theory, any business organization operates
under the influence of various environmental factors such as social,
political, economic, technological ,and so on and it has to adjust itself as
per the changes taking place in environmental factors /forces. The m odern
theory is called Systems approach because any organization is a set of
interconnected and interrelated elements or components to achieve certain
goals. Any organization is coordinated efforts of shareholders, creditors,
suppliers, managem ent, employees, customers, society ,and so on. So it
requires considering theinterests of all these groups while achieving
organizational objectives /goals.
1.10.2Peter Drucker’s Dimensions of Management :
Peter Drucker is known as the father of Moder n Management. He
has developed leadership terms and strategies that are still used today. In
his book, ‘The Principles of Management, he has defined management as
it is a multi -purpose organ that manages thebusiness and manages
managers and manages worker s and work.
Peter Drucker’s management theory includes many modern
concepts which can be given as follows -munotes.in

Page 23

231)Decentrali zation -Managers should decentralize their authority and
responsibilities among their subordinates. It helps in creating a sense
of responsibility and belongingness among the employees. However, if
the decision is related to key areas of the business operations that is
involving more funds and affecting thegoodwill and reputation of the
organization, then it is generally taken at ahigher level of the
management.
2)Knowledge work -Knowledge workers do jobs requiring handling or
using information, such as engineers or analysts. According to P.F.
Drucker, “The workers who solve problems and work creatively are
valuable.
3)Management by obje ctives -Peter Drucker developed the concept of
‘Management -by Objectives. It is a process in which goals &
objectives are set, employees are encouraged to work together to
achieve the targets, their performance is evaluated and employees are
rewarded as per their performance. While setting objectives, care has
to be taken to see that they are specific, measurable, achievable,
relevant ,and time -bound.
He advocated that management should give topmost priority to
business ethics and morals while managin g business activities.
1.10.3Indian Ethos in Management
Indian Ethos in management refers to the values and practices that
the culture of India can contribute to service, leadership ,and management.
These values and practices are rooted in Sanathana Dharma (the eternal
essence) and have been influenced by various strands of Indian
philosophy.
Work values that can be derived from the culture of India are:
1.Paropakaartham Idam Shareeram -The body is meant for serving
others or for the higher common g ood,
2.Atmano mokshartham Jagat Hitayacha -Endeavors should be made
considering the well -being of the world too while considering the
spiritual well -being of oneself.
3.Trikaranasuddhi -To consider work as a means to grow oneself in
‘Purity and Unity’ of T hought, Word ,and Deed.
4.Yognaya Charatha Karma -To engage in work as a sacred offering.
Various texts of India are useful for deriving aspects related to
management -theory and practice such as Autobi ography of a Yogi,
Thirukkural, Vedas, Upanishads , Manusmiriti, Arthashastra,
Mahabharatha, Ramayana ,and Bhagavad Gita
As per Indian ethos, Indians believe in accommodative attitude,
self-control, fulfillment of duties, advancement in spirituality, team
achievement, protection of the surrounding env ironment, respect of
elderly, and the belief in trust.munotes.in

Page 24

24Indian Ethos in management can be applied for undertaking
business activities fairly and equitably . The management can follow
ethical principles in carrying out various business functions such as
production, marketing, finance ,and also Human Resources Management.
It guides the management to put in their best efforts for the organization
without having any selfish interest. It emphasizes giving due respect to
everyone associated with the organization and performing duties to the
best of one’s abilities, Indian ethos places emphasis on apositive attitude
and having good thoughts and actions. It strongly believes that good
thoughts lead to good feelings, emotions ,and attitude which ultimately
results in good actions and good actions bring success to the organization.
It teaches us to perform duties towards society’s well -being. It helps the
organization to undertake activities for achieving socio -economic
objectives.
Significance of Indian ethos in M anagement:
1. Creates strong relation :
Organizations following Indian ethos consider humanity as
supreme. This provides a strong bond with internal as well as external
customers, resulting in an improved performance.
2. Inward considerations:
Indian et hos focuses on ‘if a person is good then the whole world
is good’. Any organization which follows the above ethical thought
automatically get converted into an ethical organization with less conflicts
and hindrances.
3. Avoids unethical aspects:
As India n ethos is a principle derived from Upanishads, Bhagwat
Gita and Puranas, where the performance is always ethical .
4. Balanced values:
Indian ethos promotes a person to live a life of materialism and
spirituality by maintaining a balance between spiritual values and secular
values.
5. Improves performance:
Indian ethos impacts the performance of business by emphasising
on the concept like sacrificing individual desires in favour of social
benefits, preferring long -term benefits.
6. Improves quality:
Self-motivation and self -development helps a lot in development
of business and its quality .
7. Management Attitude:
Top management having firm belief in value -oriented holistic
management. Profit is earned through service and satisfaction of allmunotes.in

Page 25

25stakeholde rs–employees, customers, shareholders and citizens.
Fulfillment of social responsibility must be ensured.
8. Welfare:
Indian ethos teaches welfare of all (yagna spirit). “Atmano
Mokharth Jagat Hitay Cha” (serve your personal interest but do not forget
others). This philosophy is needed in modern times.
9. Unique Work Culture:
Indian ethos helps in development of unique work culture. Work is
considered as duty or Sadhana and there is no difference between
Karma(work) and Dharma(religion). The term Dhar ma does not indicate
any particular religion. Dharma is a duty to be performed in a given
situation. Thus, Dharma is possible through Karma only.
1.11SUMM ARY
After the above discussion is summarized as Management means
doing various activities it is acontinu ousprocess having the features like
continuous activity dealing with people, goal -oriented activity, system
activity, it is innovative, activity having different operation levels,
dynamic, universal and having professional and multi -disciplinary
approach.
A business cannot survive without management because
management is its means of support. Management is concerned with
maximum prosperity with minimum efforts. Management is essential
wherever group efforts are required to be directed towards achie vements
of common goals.
Henry Fayol’s fourteen principles of management have been a
significant influence on modern management theory which are as follows:
-Division of work, Authority ,and responsibility, Discipline, Unity of
command, Unity of Directio n, Subordination of Individual to General
Interest, Remuneration, Centralisation, Scalar chain, Order, Equity,
Stability of Tenure, Initiative, Esprit de corps. Planning ,Organ izing,
Staffing ,Directing ,Coordinating ,Reporting , and Budgeting are the main
functions of management .
Due to globalization, increased competition, growing demands of
the customers ,and innovations in technology various new horizons are
entered in tothe management process.
Management information system, or MIS, broadly refers to a
computer -based system that provides managers with the tools to organize
evaluate ,and efficiently manage departments within an organization. To
provide past, present ,and prediction information, aManagement
Information System can include software that helps in decision making,
data resources such as databases , the hardware resources of amunotes.in

Page 26

26system, decision support systems ,people management ,and project
management applications , and any computerized processes that enable the
department to run efficiently.
Management by exception is the practice of examining the
financial and operational results of a business and only bringing issues to
the attention of management if results represent su bstantial differences
from the budgeted or expected amount. The purpose of the management
by exception concept is to only bother management with the most
important variances from the planned direction or results of the business.
1.12QUESTIONS
1.12.1Multiple Choice Questions
1.Management is the _____________ of getting thing sdone through
people
a)Art b) Science c) Commerce e) Technique
2.Management is a ___________ Pr ocess
a)Continuous b) Temporary c) Permanent e) Slow
3.___________me ans dividing the total work into small divisions a
department under the departmental head a manager
a)Division of Work b)Division of Time c)Division of Company d)
Division of Money
4.As per ______________ Principle of Management the employees
shoul d work as per the Rules and Regulations of the organisation
a) Scalar Chain b) Authority & Responisibility c) Discpline d)
Direction
5.Principle of Espirit de Corps means ___________
a)Company’s Unity b) Team Spirit c)Employer’s Spirit d) Strength.
6.___________ Is the primary function of Management
a) Staffing b) Directing c) Controlling d) Planning
7.____________ ia a decision making process
a) Staffing b) Directing c) Controlling d) Planning
8.“Right Man for the Right Job” is the Pri nciple of __________
a)Staffing b) Directing c) Controlling d) Planning
9. __________ means integrating all the activities of an organizatio n
a) Staffing b) Directing c) Coordinating d) Planning
10.____________ is a factor responsible for use of new horizons in
management and business.
a)Customer Expectations b)Government Policies c)Technological
Develpment d)Competitionmunotes.in

Page 27

2711. ___________ skills is known as interpersonal skills
a)Human Skills b)Administrative Skills c) Conceptual Ski lls d)
Leadership Skills
12.___________ is the ability to understand the concepts
a) Administrative Skills b) Conceptual Skills c) Human Skills d)
Leadership Skills
13.____________ is called as the father of Modern Management
a)Peter F. Drucker b)Henry Fayol c) F.W.Taylor d) None of the
above
14.____________ is called as the father of Scientific Management
a) Peter F. Drucker b) Henry Fayol c) F.W.Taylor d) None of the
above
15. _______________ Principle states that Every employee should work
in one direction only
a) Scalar Chain b) Authority & Responisibility c) Unity of Direction
d) Direction
16. ____________ refers to the values and practices that the culture of
India can contribute to service, leadership, and management .
a)Indian Ethos b) US Ethos c) Chinese Ethos d) None
17.________is a management style that where managers only intervene
when employees fail to meet their standards of performance
a) Autocratic b) bureaucratic c)Management by Exception d)
None
1.12.2 Theory Q uestions
1.Define Management. Explain the features /nature of Management.
2.Discuss the functions of management.
3.Explain the stages in the evolution of Management Thought.
4.What are the factors responsible for the New Horizons of
management?
5.Write short notes:
a.Importance of Management
b.Management by Exception
c.Management Skills
d.Indian Ethos in management
e.Elton Mayo’s Hawthorne experiments
f.F.W. Taylors scientific management theory
g.Peter Drucker’s Dimensions of Management
h.Henry Fayol’s principles of managem ent
munotes.in

Page 28

282
PLANNING
Unit Structure
2.0 Objectives
2.1 Introduction
2.2 Meaning and Definitions
2.3 Nature or Features of Planning
2.4 Importance of Planning
2.5 Steps in Planning Process
2.6 Components of Planning
2.7 Co-Ordination
2.8 Management by Objectives (MBO)
2.9 Management Information System (MIS)
2.10 Management by Exception
2.11 Summary
2.12Questions
2.0 OBJECTIVES
After studying the unit, the students will be able to:
To understand the features of Planning
To know planning and its importance
To do the planning perfectly
To understand the procedure for MBO and its advantage
To Give suggestions for effective MBO
2.1 INTRODUCTION
The concept of planning is as old as history and has become very
common in today’s life. It is essential in every walk of life. It is not only
important in human beings life but also business units life. Its importance
has grain up since the sy stematic study of management hasbeen
undertaken by the business. It is the most important aspect of every
activity to complete it accurately and in an expert manner.
2.2 MEANING & DEFINITIONS
Meaning:
Planning is deciding in advance what is to be done. I t is the
determination of a course and action for achieving the desired result. It ismunotes.in

Page 29

29to look ahead and chart out the future course of a ction. This is undertaken
to identify the alternatives and select the best alternatives from the
available ones. It is a lsoknown as a blueprint of our actions. It is an
intellectual process wherein the planner goes through certain steps and
then comes to a perfect conclusion. That is what he's planning. As per
Fayol’s opinion, it is action at once and at sometime the resul t envisaged.
It is the future picture wherein proximate events are outlined with certain
distinctness. Therefore, to plan one needs imagination foresight and sound
judgment planning involves problem -solving and decision making.
Planning is the first function of management without planning no
business unit can survive, stare or progress and its passion will be like a
blind person who is searching for something in the dark. Here planning
helps management to set the objectives, decid es how to achieve them,
and guide it to what exactly it has to accomplish and how best to go
about it.
In short, we can conclude that planning is nothing but deciding in
advance what to do how to do when to do were to do with whom to do,
what will be th ec o s to fi t ,e t c .i na n o t h e rw o r d answering all W and H
questions related to the business activity for its successful completion is
known as planning.
Definitions of planning:
1)“Planning is the process of setting goals and establishing methods or
paths r eaching them” Gray and Smeltzer.
2)“Planning is the selecting and relating of acts and the making and using
of assumptions regarding the future in the visualization and
formulation of proposed activities believed necessary to achieved
desired results”. “ George R Terry.
3) “Planning is deciding in the present what to do in the future. It is the
process whereby companies reconcile their resources with their
objectives and opportunities” Philip Kotler.
2.3NATURE / FEATURES OF PLANNING
1. Planning is a process:
It is not a single activity; or one-shot function. To perform, it
needs lots of things that means it involves so many sub -activities with
which it gets completed.
2.It is result -oriented:
Planning has no meaning if there is no gain or result without
result it becomes mental exercise.
3.It is an intellectual process:
Because the quality of planning will be decided as well as it varies,
according to the planner's caliber or intellectual capacity.munotes.in

Page 30

304.Continuous:
Planning should be continuous. It should continuously collect,
evaluate, and select data for scientific investigation and analysis of the
possible alternative course of action.
5.Planning is all -pervasive:
It is the prime function of management. It is conc erned with all
functions of management without a plan no management function is
performed by any level of management. So it is all -pervasive
6.It aims at co -ordination:
Because of planning all management functions are co -ordinate and
executed properly.
7.Thee l a s t i c i t yo fi np l a n n i n g :
The planning should be flexible. It should be changed as per
the situation demands. If it is not, then that plan never became a
success.
8. Planning directs efficiency economy and accuracy:
A good plan always gives these three things with this a planner
reconciles all company's research well, and it will be easy to complete
the good.
2.4IMPORTANCE OF PLANNING
Planning is a systematic and orderly approach to management. It
is a basic func tion of management; it has wide significance in
management. This will be explained with the help of the following
points
1.Planning is a primary function:
It is the primary function and management. Without planning there
will be nothing to organize, direct, coordinate, and control. All these
functions are interrelated and independents so to have a smooth function
of all these is a need of planning.
2.Pervasive:
Planning is all -pervas ive, it means it touches considers to all aspect of the
business. It is necessary at all levels of management,The only difference
between top -level management planning function lower -level management
planning function is that the earlier one is strategic p lanning in native and
later are is operational planning.
3.Planning is an intellectual process:
Planning is an intellectual process of decision -making. It
involves thinking capacity, foresight, and vision for that one needs brain
capacity. Planning cannot be done on the balls of guess or it, not a work of
common people those who are lacking vision forecasting, no thinking
capacity.munotes.in

Page 31

314.It is realistic and objectives oriented:
Planning is realistic it means it is based on facts & figures. If we put
proper inpu ts then the result is ought to be planning is always directed at a
particular object If the objectives are attained then it will call planning
otherwise it is not planning.
5.Planning raises accuracy, economy, and efficiency:
With the plan, abusiness can do an activity better, systematically and
with low detects. As it has been planned activity, all sub -activities are in a
particular order & sequences, therefore low wastages are incurred. Its
benefits are there is increased efficiency and low cost of operation.
6.Planning is the link between past -present -future:
While preparing a plan, the planner at first use to consider the post
records its consequences, then he thinks about the present position of
the planning activity, and how it would be in the future, in what way it
will be considered in the future are assured and accordingly planned.
Therefore, with the consideration of these the planning becomes perfect.
To make a plan very successful & beneficial to the organization
planner sh ould keep certain things in his mind while preparing the plan.
These things are known as the essentials of a good plan.
Essentials of a good plan
I Simplicity
ii Clear objectives
iii Suitability
iv Flexibility
v Continuity
vi Unity of purpose & direction
vii Realistic and acceptable
2.5STEPS IN PLANNING PROCESS
Planning may be done at the corporate level or departmental level.
It may be short -term as well as long -term. Whatever may be the nature of
planning, it involves the following steps.
1.Analysis of external environment:
The manager must carefully analyze the external environment as
these environmental uses one not controllable. He has to see factors of
external environment like social, economical, and political nature of
competition exist si nt h er e g i o no rc o u n t r ya n da c c o r d i n g l yp r e p a r ea
plan, policies or programs as per the need of The business unit.
2.Analysis of internal environment:
Internal environment factors are residing within the business and are
controllable. Here manager needs to adjust them as per plans policies
programming and accordingly go for planning. Generally, internalmunotes.in

Page 32

32environmental factors consist of men, machines materials, fiancé,
methods of production know -how,etc
3.Establishing object ives:
After having analyzed the internal and external environmental forces, the
planner needs to set objectives for the entire enterprise, and every
department's objectives are the endpoints, which shows what is to be
achieved. These objectives are at theroot of the planning process
course of action and shape the future policies while planning objectives are
to be set in multiple objectives in different areas of the business.
4.Determining the planning premises (forecasting):
Planning premises are nothing but assumptions and predictions
about the business situation. These premises supply relevant facts,
information, or data to businesses based on business use to lay down the
specific course of action. Forecasting is an assessment of the future. It
is asystematic attempt to know probable events to provide against the future
itworks in relation to the activities and working of an enterprise. There
are three types of premises do exist in business
i)Controllable premises
ii)Sem-controllable premises
iii)Uncontrollable premises
5.Determining alternatives plans:
Here the planner must prepare and keep ready alternative plans,
which are suitable for business under different situations. And the best one
is to be used for actual execution. The preparation o f an alternative plan is
essential as one plan is not sufficient or adequate for business under
different conditions. Therefore business units prepare certain plans.
Generally, thepreparation of alternative plans is subject to the availability
andcollect ion of data i.e. primary and secondary data. It data is enough
and good related to a different business situation. Then more
alternatives plans can be prepared.
6.Evaluating alternative plans:
After seeking out alternative courses and examining. Their strong and
weak point, the next step is to weigh them in light of premises and goals.
One alternative plan may appear to be most suitable and profitable but at
the same time, it may require home amounts of funds. Another one may
require low funds but not p rofitable and may have risk. Here proper
evolution is to be done and then suitable plans need to be accepted.
7.Selecting the best plan:
It is the real point of decision -making. Once the evaluation is over
the best & fittest plan is to be selective. It is to be done in The light of
objectives and planning premises.munotes.in

Page 33

33
8. Preparing derivative plans:
Derivative plans are related to different department plans and are
supporting to main plan of the business. It is important to easy execution
of the whole plan
9. Formulating the plans:
For the implementation of plans, managers have to perform managerial
functions, like organizing, directing, and controlling. Proper duties &
responsibilities are to be assigned to employees with proper
communication & explanation of the plan. then the manager has to after
follow -up. It gives a periodical review of the execution process. It also
helps to understand actual progress and deficiencies in the process of
execution of the plan. this also helps to adopt suitabl er e m e d i a l
measures as & when required.
2.6 COMPONENTS OF PLANNI NG
In the planning process, several plans are prepared. These plans are
arranged in a hierarchy within the organization. These are known as
elem ents or components of planning and are classified into two board
categories.
Components of plan
1. Standing plans 2. Single -use-plans
a)Mission a) Programmes
b)Objectives b) budgets
c)Policies c) schedules
d)Procedures d) projects
e)Rules e) standards
f)Strategies
g) Forecasting
1. Standing Plans or Repeated -use plans:
Standing plan is also known as one time plans once it is prepared then it
will be used by business in future as & when it required. They are used over a
long period, therefore, it is known as long term plans. Components of
standing plans are:
a)Mission:
The mission is the basic or fundamental reason for the existence of
an organization. Every business must havea definite mission to undertake
and make the organization meaningful. Mission also points out the
beliefs and philosophy of the management. It give sal o n g -run
commitment to the organization.munotes.in

Page 34

34b)Objectives / goals:
Objectives are the end points of not only planning but also all
functions of management. It provides a basic foundation to build -up
plans. They help in achieving consistency in decision -making in the long
run. They help in measuring the efficiency of the individuals working in
the enterprise. They prevent the people from deviating from the
positions they have set for them.
c) Policies:
The policy is verbal written or implied statements, whi ch are
followed as a guide to action by managers and employees of an
organization policies guide managers and provide stability to an
organization. They are like well -prepared solutions to identical problems.
Policies are intended to pre -decide the issu e, avoid repeated analysis and
give a unified structure to other types of plans. Policies define and delimit
the area within which the subordinate managerial personnel can take a
decision, permitting them to exercise their judgment and initiative.
d)Proced ures:
Procedures indicate the specific manner to handle a situation. It is
closely related to policies and useful for systematically conducting
activities.
It avoids the burden on lower staff as it lay down a standard path
to be followed to action rather than thinking. They detail the exact
manner in which a certain activity must be accomplished its essence is
chronological action required.
e)Rules:
It is the simplest and most specific type of standing plan. It
guides what may or may not be done. A rule demands as p e c i f i ca c t i o n .I ti s
more rigid than policy rules which are on the administrative area of a
procedure. Rules demand strict compliance.
F) Strategies:
The term strategy is used in military science andis an art of a
military General leading on army strategy means a plan based on the
anticipated moves of the opponent.
Incorporate, strategy means the preparation of a comprehensive
plan, which will enable the company to meet any type of situation
effectively. Here competitors' plans are used as a background for the
preparation of a strategy. The strategy is necessary as future events in
business are unpredictable strategies will help management to win the
race in the competitive market.
g) Forecasting
A forecast is a prediction. It is the estimate of probable events.
Fore casting does not involve decision -making but helps in decision -
making by providing tips about what is likely to happen in the future. Inmunotes.in

Page 35

35short, forecasting is a systema tic attempt to investigate the by inference
from known facts.
2. Single -Use-Plans (Non -repetitive plans):
As its title suggests that it is prepared for a single activity. Once the
activity gets over plan becomes null & void. It cannot use for other
activities. Therefore there are formulated to meet unique, novel, and non -
repetitive situations.
a)Programs:
A program is a sequence of activities designed to implement
policies and accomplish objectives. The programs may be minor.
Generally, programs are a complex of goals, policies, procedures rules, steps
to be taken resources to be employed, and other necessary elements to
carry out a given course of action. Programs are supported by budgets.
b)Budget:
Ab u d g e ti sa ne s t i m a t i o no fe x p e c t e di n c o m ea n d
expenditure. It may be for cash, revenue, or capital expenditure. The budget
provides a standard to the activity by setting a standard and in any variation.
Then it will be checked. Therefore it is also known as a planning instrument
and controllable device.
c)Schedule:
A schedule is a timetable of work. It is a process of establishing the
sequence of work to be done schedule prescribes the exact time require
by an activity to complete and start it. Scheduling helps to honor the
delivery of goods. It helps to maintain inventory too.
d)Projects:
It is a scheme for investing resources. It can be evaluation an
independent unit. It is a workplan established through scientific
investigation and analysis.
e) Standards:
Standar d is a criterion against which a program is compared and
evaluated. It is a guide for performance evaluation. A company may
set up a variety of standards expressing the anticipated results of the plans.
There are two types of standards known as
i)Qualitativ e standards
ii)Quantitative standards.
2.7CO-ORDINATION
2.7.1 Meaning
Co-ordination means integrating or being together with all the
activities of an organization. It is done for achieving the goals of an
organization. There must be proper coordi nation throughout the
organization. The functions of management i.e. planning, organizing,munotes.in

Page 36

36directing, controlling, staffing need to be coordinated to achieve
organizational objectives. Also, different levels of management and
employees of the organization are required to coordinate.
2.7.2 Importance of Coordination
The need and importance of co -ordination can be given with the help
of following points.
1.It helps in developing team spirit
It encourages employees to work as a team by improving
communication and cordial relations among them.
2.It gives proper direction
Co-ordination brings together various activities of the organization for
achieving the common goals or objectives of the or ganization. So it acts as
a direction to all the departments of the organization.
3.It leads to motivating employees
By improving interpersonal relations, it leads to motivating employees
through various monetary and non -monetary incentives.
4.It facili tates optimum utilization of resources :
Proper coordination helps in optimum utilization of resources such as
machinery, materials, money, manpower, and management by avoiding
wastages of all types.
5.It leads to the achievement of organizational object ives:
Co-ordination helps to achieve cordial relations among employees of
the organization and thereby it facilitates the smooth working of the
organization. So it leads to the achievement of organizational objectives.
6.It can develop good relations in t he organization:
Coordination among different activities/functions of the organization
can be achieved by effective communication among employees of the
organization and it helps to develop team spirit and cordial relations
among employees.
7.It leads to higher efficiency
As coordination helps in optimum utilization of resources, it leads to
higher efficiency by reducing costs, labour, and time involved in doing the
jobs in the organization.munotes.in

Page 37

378. Co -ordination improves goodwill of the organiz ation:
Co-ordination helps the organization to sell good quality products
at reasonable prices and also to provide efficient after -sales service and
thereby it leads to improving the goodwill and reputation of the
organization.
Check Your Progress
1.“Planning is a basic function of management having wide
significance”. Explain.
2.Define the following terms:
a)Planning
b) Standing plans
c) Single -use plan
d) Mission
e) Policies
f) Strategies
g) Schedule
h) Standards
3.Enlist the features of Planning.
4. What are the steps in the planning process?
5. What is the importance of Coordination
2.8 MANAGEMENT BY OBJECT IEVES ( MBO )
2.8.1 CONCEPT OF MBO:
Management by Objective term is developed by Peter Drucker in
the year 1954 in the “The practice of management”. The concept of
MBO is very closely connected with planning. It is a dynamic
system of management. Its core meaning is working together, with ea ch
other’s involvement, and attaining The pre -decided goal by superior and
subordinate. This type of work is needed to integrate The individuals’
needs and organizational needs. MBO insists to the manager to be very
clear about his objectives before he sta rts a task If he is not sure about
The task to be attained, Then there would not success of MBO. Its process
starts from Top level management and is passed on to the middle and down
level of management.
In the short whole idea of MBO is based on the assump tions that
collaboratively set objectives to elicit subordinates commitment, which
leads to improved or increased performance. In other words, it is themunotes.in

Page 38

38establishment of goals by managers and their subordinates and assigning
authority for achieving the goa ls with constant performance monitoring
Definitions:
1.MBO is regarded “As a system for improving performance
both the individual managers and enterprises as a whole by the setting of
objectives at the corporate, department and individual manager’s level.
Peter ducker.
2.“MBO is a result -centered, non -specialist, operational managerial
process for the effective utilization of material, physical and human
resources of the organization by integrating the individual with the
organization and the organization with the environment.”
Prof. S. K. Chakravarty.
2.8.2 STEPS IN MBO / PROCESS OF MBO:
MBO is a process that consists of certain steps which are as follows.
1. Setting of organizational goal:
In the process of MBO, the first step is to set up the organizational
goals which need to be verifiable; this is generally decided by top
management with the consultation of other managers. The goals should be
set up in “Key -Result areas” (KRA) in a clearly defined manner and it
should be made known to each & every member those who one involved
in the process. Here the term “Key -Result -Area” means which are
considered critical to the firm’s long -term success. These areas also affect
business survival & growth too. For example, reducing wast ages of raw
material by certain percentages (say 4%) leads to its survival, or increasing
production by certain % age. Generally, key areas are included profitability,
market standing, productivity Financial & physical resources, manager’s
&w o r k e r ’ sp e r f o rmances, and innovations research & development.
2. Matching goals & resources:
Management should think of the resources available and the goals
to be accomplished and according to the allocation of resources is to be
made. For example, if the goal has b een set in the production area then, the
resources like raw material, should be of quality and inadequate quality, here
management’s responsibility is to see whether this is available with the
organization then set goals. In some way, it should happen with tools
equipments, and machinery.
3. Manager –subordinate involvement:
The success of MBO is depended upon the involvement of
managers and subordinates in the chosen task. They both are loyal toward
their authority and responsibility. The task will complete without any
hurdles.
4. Developing action plan:
After objectives are set, action plans must be developed. Action plans
focus on the methods or activities required or necessary to reac hmunotes.in

Page 39

39objectives. In other words, it suggests that how, when, What, Where, and
with whom the task is to be complete. It also focuses on production
planning and control.
5.Establishing check -up plains/standards of performance:
In the process of MBO, periodic mee tings between managers and
subordinates are required to review the progress for accomplishing the
organization's goal. In this case superior uses to establish certain paints to
check the subordinate’s performance These paints are defined
quantitatively.
6.Implementation of the plan:
After developing an action plan and establishing check -uppoints,
the task is to undertake or start implementing while working on whenever
subordinate felt/faces difficulties, they can seek guidance or clarification
on particular points from the superior.
7.Periodic Review of progress:
The superior must make a periodic review of the progress in
achieving subordinate’ s objectives and as & when needed to guide them
so that the whole work can move smoothly & smoothly.
8.Feedback:
Feedback is last but not least important stage in MBO. Here
superior gives comments on subordinates' performance based on their
evaluation. Som etimes the superior use to make changes in the MBO
program with the consultation of top management.
2.8.3 ADVANTAGES OF MBO:
MBO’s core concept is to together, Share responsibility and
accomplish the organizational goal. It is also known as management by
task. While implementing it in the organization gives benefits to the
organization, and employees. This will be made clear with the help of
the following points.
1.Participation and collaboration:
In MBO, The departmental objectives are consistent with
organizational objectives. Here every participant by clarifying, his role
and responsibility, and knowing his contribution needed by the business,
participate and involved in the process. There is no need for that superior
to keep on insisting the employee do the work. That is way is beneficial of
organization.
2.Better management of Resources:
MBO is important as in MBO resources are put in such a way that
they give food results.
3.MBO is a result -oriental approach:
It is important because practically it r esults oriental. It does not
favor management by crisis. Here individual and common goals are
developed and executed well.munotes.in

Page 40

404.Definite and clear goals:
In MBO, the goals are clearly defined and they are veritable and
measurable. General they focus on problem atic areas.
5.Higher productivity:
MBO leads to higher productivity because it always concentrates on the
important task of increasing productivity, decreasing costs, and minimizing
waste.
6.Personal leadership:
MBO is important because in this process the individual leadership is
developing to a large extent. Every individual has been given the freedom
to think express and work. Here conceptual skill is also developed among
the subordinates.
7.Efficient Communica tion:
In the process of MBO frequent interaction between superiors and
subordinates workplace, leads to mutual faith and understanding between
them.
8.Performance appraisal:
MBO provides objectives yardsticks for the evaluation of
performance. Also, superi ors use to have a periodic review of
subordinates' performance. This enables the subordinate to know how well
they are doing.
2.9 MANAGEMENT INFORMATION SYSTEM ( MIS )
2.9.1Meaning:
Information is the lifeblood of an enterprise. The information can
be d efined as the knowledge communicated by others or obtain from
investigation or study. The senior firms need to have up -to-date
knowledge about customers, dealers, suppliers, investors, and other as
well as should have updated information about political, e conomic, social,
technological, and legal changes. This information is required to take
timely decisions. The flow of information is made regular by an
information system, commonly known as a management information
system (MIS).
Kennevans defines MIS as “An enterprise method of providing,
past, present and projected information relating to internal operations and
external intelligence.
H. Weihrich and H. Koontz define MIS as a formal system of
gathering, integrating, comparing, and entrails and dispe rsing information
internal and external to the enterprise in a timely effective, and efficient
manner.munotes.in

Page 41

41Thus MIS can be defined as the system providing needed
information to each manager at the right time, in the right form and
relevant form one which aids his understanding and stimulates his action.
2.9.2Features:
Some of the features of MIS are as under -
1. Systematic process:
MIS involves a systematic process of gathering, integrating comparing,
and centralizing information for effective decision mak ing. It is a process
of:-
Data collection about interval.
Classification of data into different categories.
Integrating or combining data
Comparing data
Analyzing the data
Transmitting the data
2. MIS is a continuous process.
Management is an on -going process as the management starts at
the formation of the company and ends when the company dissolves.
Management starts with the setting up of objectives for the organization
which is followed by planning for achieving those objectives .
3. Scope of MIS :-
The scope of MIS includes: -
Decision support system.
Human Resource Management.
Enterprise resource planning.
Enterprise performance management.
Supply chain management.
Customer relationship management.
Project management.
Data retrieval applications.
4. Computer -Based System:
MIS is a computer -based system. It uses computers for storing
centralized and supply information. It also uses microfilms for storing
information.
5. Unified and centralized system:
MIS involves data collection processing st oring and transmission.
All these activities must be integrated into a unified system. The unified
system must be managed in a 41centralized place.munotes.in

Page 42

426. Used by all levels:
MIS is used by all three levels of management. i.e. top, middle,
and lower. It is used for making business plans, policies, and strategies. It
also helps to solve business -related problems and to take advantage of
business opportunities.
7. Professional Approach:
In MIS, data must be collected analyzed classified
combined/comp ared, and transmitted to managers by well -educated,
qualified, and trained staff. The managers and MIs staff must be well
trained and are unable to take various decisions relating to production
finance, marketing, and human resources.
8. Components of MIS :-
It includes: -
1.Hardware.
2. Software.
3. Procedures (Rules or guidelines for the use of MIS).
4. Personnel (Expert people).
5. Data (Information for decision making).
9. MIS is future -oriented:
It provides information for solving future problems.
10. MIS Helps in decision making:
MIS supplies up -to-date and accurate information. It helps
managers to take quick and right decisions.
2.9.3 ADVANTAGES OF MIS
1.Decision -making.
2.Identifies strengths and weaknesses.
3.Identification of opportunities and threats.
4.Facilitates planning and control.
5.Helps to recognize trends.
6.Integration of information.
7.Optimum use of resources.
8.Accomplishment of an organizational objective.
2.9.4 Components of MIS :
A management info rmation system is made up of five major
components namely people, business processes, data, hardware, and
software. All of these components must work together to achieve business
objects.
1. People
These are the users who use the information system to re cord the
day to day business transactions. The users are usually qualifiedmunotes.in

Page 43

43professionals such as accountants, human resource managers, etc. The ICT
department usually has the support staff who ensure that the system is
running properly.
2. Business Proced ures
These are agreed -upon best practices that guide the users and all
other components on how to work efficiently. Business procedures are
developed by the people i.e. users, consultants, etc.
3. Data
The recorded day -to-day business transactions. For a bank, data is
collected from activities such as deposits, withdrawals, etc.
4. Hardware
hardware is made up of computers, printers, networking devices,
etc. The hardware provides computing power for pr ocessing data. It also
provides networking and printing capabilities. The hardware speeds up the
processing of data into information.
5. Software
These are programs that run on the hardware. The software is
broken down into two major categories namely sy stem software and
applications software. System software refers to the operating system i.e.
Windows, Mac OS, and Ubuntu, etc. Applications software refers to
specialized software for accomplishing business tasks such as
aPayroll program, banking system, point of sale system, etc .
2.10MANAGEMENT BY EXCEPTION
Meaning:
Management by exception is a management style that where
managers only intervene when employees fail to meet their standards of
performance.
Management by exception is a management technique by which
manager focus only on activities which deviate significantly from
standards. Management by exception is one important and useful principle
of managerial control. This principle is based on the well -accepted
practical belief that any attempt to control everything results in controlling
nothing. Management by exception is a policy by which management
devotes its time to inverting ling only those situations in which actual
results are different signifi cantly from the planned result.
According to the principle of management by exception, only
exceptional deviations from the standards decided should be brought to the
notice of the higher -level management. as long as actual performance is
within the accep table range of deviation from the standards decided, it
need not be reported to higher -level management for follow -up action asmunotes.in

Page 44

44such action is not necessary. However, if the deviation is major as
compared to be standards set. It should be brought to the no tice of the
higher -level management for suitable remedial measures.
The concept of management by exception is used in a large
number of production units and organizations and is proved more practical
and result orientated. It is also used in the financial department of the
organization. The basic purpose of management by exception concept is to
refer only most serious deviation to the level management to find out
remedial measures towards the serious deviations. Thus the concept of
management by exception implies that top management should
concentrate its attention, time, and effort on critical deviat ion only. The
other deviation should be handled by the lower level of management.
2.10.1Advantages/Benefits of Management By Exception:
1. Management by exception is a focus as productive work. Managers can
focus on policy matters rather than focusing on routine daily work.
2. Management by exception saves the time of managers as they have to
deal only with exceptional matters, rather than routine matters.
3. The basic advantage of management exception is that it enables the
managers to use their tale nt and skills and attention to solve major
problems or serious problems rather than normal problems or routine
problems.
4. Management by exception facilitates delegation of authority within the
organization. Top management concentrates on strategic decis ions and
delegates certain authority to middle and lower -level management to make
certain operational decisions.
5. Management by exception helps to motivate the employees to perform
their activities in the best possible manner to fulfill the organization al
objectives.
6. Optimum use of resources: -Management by exception enables the
organization to use the available resource in the best possible manner
because all the employees of the organization are highly motivated to
perform their responsibilities i n the best possible manner to reduce the
defects and also minimize the wastages.
7. Management by exception enables the firm to take a competitive
advantage because management by exception enables the employees to
take more interest and initiative in perf orming their activities. The
employees come up with innovative ideas to develop new products, new
processes, new schemes with minimizing the risks and wastage.
8. Management by objective enables a firm to achieve higher performance.
The employees of the organization work with zeal and interest and tryingmunotes.in

Page 45

45to produce defect -free products or schemes. This facilitates the
improvement of the image of the firm in the minds of the stakeholders.
Thus management by exception enables the firm to build up a corporat e
image.
9. Management by exception enables the firm to achieve the growth and
expansion of the business.
2.11SUMMARY
Management planning is the process of assessing an organization's
goals and creating a realistic, detailed plan of action for meeting those
goals. The basic steps in the management planning process involve
creating a road map that outlines each task the company must
accomplish to meet its overall objectives. Planning is one of the most
important project management and time management techniques.
Planning is preparing a sequence of action steps to achieve some specific
goal. When following a plan, you can always see how much you have
progressed towards your project goal and how far you are from your
destination. Knowing where you are is essential for making good
decisions on where to go or what to do next.
Management by objectives (MBO) is a systematic and organized
approach that allows management to focus on achievable goals and to
attain the best possible results from available resources. Here the
organization has to define its objectives clearly that are agreed to by both
management and employees. A key tenet of management by objectives is
theestablishment of a management information system to measure
actual performan ce and achievements against the defined objectives.
The major benefits of MBO are that it improves employee motivation
and commitment, and ensures better communication between management
and employees.
2.12QUESTIONS
2.12.1Multiple Choice Questions
1.___________ is deciding in advance what is to be done.
a) Staffing b) Directing
c) Controlling d)Planning
2.___________ is the link between past -present -future.
a) Staffing b) Directing
c) Controlling d)Planning
3._____________ is controllable in nature
a)Internal Environment b) External Environment
c) Natural Environment d) Any Environmentmunotes.in

Page 46

464._____________ is not controllable in nature
a) Internal Environment b)External Environment
c) Natural Environment d) Any Environment
5. __________ plans are related to different department plans and are
supporting to main plan of the business.
a)Derivative b) Important
c) Departmental d) None
6._____________ plans are also known as One Time plans
a)Standing Plans b) Sleeping Plans
c) Single Use Plans d) None
7._____________ plans are Long term plans
a)Standing Plans b) Sleeping Plans
c) Single Use Plans d) None
8._____________ p lans are also known as Repeated Use Plans
a)Standing Plans b) Sleeping Plans
c) Single Use Plans d) None
9.In __________ plans Once the activity gets over plan becomes null &
void
a) Standing Plans b) Sleeping Plans
c)Single Use Plans d) Any
10. __________ planis prepared for a single activity
a) Standing Plans b) Sleeping Plans
c)Single Use Plans d) Any
11. ____________ is a sequence of work to be done
a)Schedule b) List
c) Entry d) None
12. __________means integrating or being together with all theactivities
of an organization.
a)a) Staffing b) Directing
c) Controlling d)Co-Ordination
13._____________ is the lifeblood of an enterprise
a)Information b) Employees
c) Workers d) None of Above
14.___________ is a continuous Proces
a) MBO b)MIS
c) Evaluation d) Controlling
15. ___________ is a Component of MIS
a) Internal Environment b)Hardware
c) MBO d) External Environmentmunotes.in

Page 47

472.12.2Theory Questions
1. Define the term planning and bring out its importance.
2. What are the components of the plan? Explain it in detail.
3. What are the essentials of a good plan?
4. What are the Features of MIS?
5. What are the Components of MIS?
6. What do you mean by MBO? Explain the importance of MBO.
7. Discuss the steps involved in MBO.
8. Explain the meaning and Importance of Coordination.
9. Write short notes:
a.MBO
b.Components of planning
c.Standing Plans or Repeated -use plans
d.Single -use plans
e.Co-ordination



munotes.in

Page 48

483
DECISION MAKING
Unit Structure
3.0 Objectives
3.1 Introduction
3.2 Meaning & Definition of Decision Making
3.3 Essentials of Good Decision Making
3.4 Steps / Process of Decision Making
3.5 Techniques of Decision Making
3.6 Impact of Technology on Decision Making
3.7 Summary
3.8 Questions
3.0 OBJECTIVES
After studying the unit the students will be able to:
Define the term Decision Making.
Explain the essentials of sound Decision Making.
Understand the process of Decision Making.
Discuss the techniques of Decision Making.
3.1 INTRODUCTION
Decision Making is a very important aspect of business
management, rather it is important in human beings' life. It is needed
every walk of the individual as well as corporate life. It is sold that no
business can survive without decision -marking. Further, it is stated that a
manager’s life is filled with making decisions and decisions.
Therefore in every business managers are always wasted or spending
their more time on this activity. I t is an integral part of management.
Without decision no planning, no controlling, no coordinating or no
organizing, and no directing. it works at all levels of management
continuously .M a n a g e r s ,w i t h o u tm a k i n gd e c i s i o n s , are unable to lank
means and ends, which means they can’t accomplish their objectives well.
Therefore every manager or anyone who is involved in this process has to
take certain decisions.munotes.in

Page 49

493.2 MEANING & DEFINITION S OF DECISION
MAKING
Decision -making is nothing but choosing a course of action from
several alternative courses of action. The word decision is derived from
the Latin word ‘decision, which means cutting away or cutting off or in a
practical sense to conclude .I ti sap r o c e s so fs e l e c t i n gt h ec o u r s eo f
action which needs to take in other words it is part of planning. So it is
called a step in planning. A decision is something that takes place before
the actual performance of a course of action that has been chosen.
As per Peter Druckers'opinion decision means “whatever a manager
does” because he does through making decisions. It is a course of action
that is consciously chosen for achieving a desired result or goal. It relates
to the end or means or both. For example, in some cases end may be
given and the mana ger has to decide. It considers all functions of
management. Therefore it is stated that no business can survive
without effective decision making.
Definitions:
1)As per Haynes and Massie’s opinion, “A decision is a course of
action which is consciously ch osen for achieving the desired result”.
2)The oxford dictionary defines the term decision making is, “ The
action of carrying out or carrying into effect.”
3.3 ESSENTIALS OF SOUND DECISION MAKING
While taking decisions the manager needs to conscious alert
about some aspects of decisions. With the consideration of it if it is
taken then the decision becomes more reliable or perfect. The
following points should be considered as essential of decision
making.
1.Availability of alternatives:
For a perfect decision, there is a need for the availability of
various alternatives. If it is the decision -maker can choose the right,
which is very much suitable and beneficial in the given situation. If it
happens then that decision will be more effective.
2.Diagnosing the problem:
It is in other words, identifying and defining the problem. If the
proper identification and its diagnosis have done, then the manager
can make a better decision. Like a health doctor, before treatment use to
diagnose the disease and then give medicine to the patient.munotes.in

Page 50

503.Rationality:
Decision -making is the manager’s central job. His ability and capacity
are judged based on the quality of the decision he has taken. So whenever
he decides that time he should have to be rational. Rational means by
knowing all pros and cons of the situation as well as the means and
ends, the decision is to be taken.
4.Use Communication:
The taken decision should be communicated, that too, on time, to
the concerned parties so that it would be executed well by them. If it
happens then only that decision can stand as the best decision, otherwise,
its effect will be lower, or sometimes no effect.
5.Use of creativity and consider new sources of information:
Decisions are mostly based on the information required on the
specific problem. If relevant information is gathered accurately by using
new means, or sources of information, sources, with newly developed
technologies then it will be more reliant on information and the decision
based on it would be the perfect decision. While taking decisions it
should be logically suiting to the arisen situation and should to some other
relevant activity, it should be an indifferent way.
6.Integration of intere st:
In the organization, two types of interests are existing. One is
personal interest and the second is organizational interest. Manager, while
taking decisions gives priority to organization interest as computer to
personal interest. Then definitely that decision becomes more
effective and beneficial to an organization.
7.Stress on feedback:
Feedback is a process of telling the manager that how you feel
about the decision taken by managers. If feedback is good then the manager
feelss o m e h o wi ti sa g a i n s to rn e g a t i v et h e ni t may lead to chances of
confusion and resentment.
3.4 STEPS / PROCESS OF D ECISION MAKING
Decision -making is a very important aspect of
management. It is said that the manager takes many decisions in a day.
Some are routine and some are very crucial. So while taking such
decisions he needs to be very cautious and alert so that he can make the
perfect decision that will helpful and beneficial to the organization.
While taking perfect or rational decision -maker shou ld go through the
following stepsmunotes.in

Page 51

511. Identifying the problem
2.Analysing the problem
3.Developing alternative solutions
4. Selecting the best solution
5.Convertising Decision into action
6. Follow up of Action taken
1. Identifying the problem:
The decisions are taken only when there is a p roblem difficulty or
undesirable situation. So the decision -maker should understand that what is
exact problem and where and what he wants to do something good or
better, so that business activity can run softly and smoothly and there will
be a favorable atmosphere (environment) to the business when he does
sothen it is known as identification of the problem, for example, it the
business sales is declining day by day, then managers need to identify
why the sales are declining. Whether is because of non -quality product,
on the efficiency of the sales force or lack of promotion.
Defining the problem is a later step. After identifying
manager should have defined, the problem which means he has to go up to
the root cause of the problem. For example, if sales are declined by the
inefficiency of the sales force the way sales forces are inefficient what are
the reasons for etc.
2.Analyzing the problem:
After properly diagnosing or identifying and defi ning the problem,
the next step comes, is analyzing the problem. Analyzing means
considering problems in depth, sort out various aspect of the problems
like who will take decisions regarding different aspects of the problem,
who is supposed to inform about its decision, what would be the scope of
the decision taken and its impact, and how it helps to achieve an overall
organizational goal, etc, All these parts are to examine minutely and
according to get ready to have a fruitful decision, this is known as
analysis of the problem. The analysis will be made based on collecting
relevant data, that too reliable, true data, which will help to conclude the
solution of the problem this data gives clarity to the problem's solution.
3.Developing alternative Solution:
Here the decision -maker first specifies the objectives that are to be
achieved and based on it, he has to develop alternative solutions.
Developing or generating alternative solutions means findinga
different way to solve the problem and finally picking up the bestmunotes.in

Page 52

52solution for implementation for example suppose there is declining in
organizational sales. Now, this could be because of either lower quality of
a product, higher price, lack of warranty lacking in a promotional activity
of may be due to inefficiency of the intermediaries Nowhere to increase
sales manager must see all These aspects and according he has to do some
select one beneficial in every area and boost the sale of the company.
4.Selecting the Best Solution :
Once you have weighed all the evidence, you are ready to select
the alternative that seems to be the best one for you. You may even choose
a combination of alternatives. Your choice in Step 4 may very likely be
the same or similar to the alternative you placed at the top of your list at
the end of Step 3
5.Converting Decision into Action:
After developing and selecting the best alternative solution, the
next step is to convert the selected decision into effective action. Here the
manager has to convert or put his skilled leadership and his loyal
subordinates. If it happens then only there is the use of that decision
otherwise it may remain as a simple academic exercise.
6.Follow up of Action Taken:
It is last but not least an important step in decision making. Its
simple meaning is to see that whatever is decided, is implemented and the
objectives are achieved what activities were decided are taken are
justifying through their result or not. Here for this purpose manager need
to set up or establish a feedback chain, and continuously, be informed, and
whenever and where ever there is a need according to take corrective
steps so that the taken decision will execute well.
Check Your Progress:
1.Give the definitions of Decision Making.
2.Draw the chart showing the steps in the process of Decision Making.
3. “While taking decisions the manager needs to conscious alert about
some aspect of decisions”. Discussmunotes.in

Page 53

53
3.5 TECHNIQUES OF DECISION MAKING
The techniques of decision making are classified into two broad
categories
A)Traditional techniques and
B)Modern Techniques
A) Traditional techniques:
Traditional techniques are also known as non -
programmed decision techniques. In other words, these techniques are
not based on adequate and reliable information, There is no structured
format or predetermined guidelines to make the decision. These
decisions are complex and require unusual solutions. Here creativity
past & experience is a vital ingredient in successful decision making.
Following are the same techniques
i)Creativity techniques
ii)Quality listing techniques
iii)Brainstorming techniques
iv)Delphi techniques
v)Nominal group techniques
B) Mode rn techniques:
Modern techniques are routine, repetitive, and are complex .T h e s e
decisions are made with the reference to a predetermined set of
procedures, rules, and guidelines.
These decisions are more precise, accurate, reliable, and scientific.
There decision help to manager in the basic tool used is mathematical
modeling these techniques are also known as operation Research”, and
includes the following techniques
1)Linear programming
2)Probability decision theory
3)Pay off matrix
4)Decision tree etc
The above noted two types of techniques of decision making are shown
as under and explained
Techniques of Decision Making
1. Programmed Decisions 2. Non -Programmed
Discussions
( Modern Techniques ) (Traditional Techniques)
a)Decision Tree a) Brain Storming
b)Game theory b) Delphi
c)Linear Programming c) Heuristics
d)Networking Techniques d) Nominal Group
e)Queuing Technique e) Quality Circlesmunotes.in

Page 54

54A. Programmed Decisions (Modern Technique) 1.
Decision tree:
The decision tree is a diagrammatic or graphical
representation of the decision -making problem. It displays the information at
a glance in a more easily understandable way. This diagram indicates
the number of future chance events which affect decision -making. The
value of the events arrived at for predicted outcomes of each possible
decision and the decision which has the highest value graphical devices
are based on the cour se of action available to him. It is being a
mathematical tool, it enables the manager to take the decision tree as it
shaped in tree form This tree is in horizontal instead of vertical form.
Suppose a company wants to sell its product in the market. Then it
has to alternative options available one is by appointing sole selling agents
and second is by undertaking the direct sale of the product in the market in
this situation every option has high or low market penetration and market
share. Here the selecti on of the best option will be based on its desired
results. This will be made clear with the help of the following diagram.
Here every option has its value. If sole selling options have a
high value 06. & low val ue 0.4 then its total will be 88.0. it is arrived
at by multiplying by 100%.
Then in the case of direct sale, the market penetration value is
0.8 at Rs 60 & low market penetrate value is 0.4 Rs 50 so here its pay
off value is 68.0
2.Game Theory:
It is a mathematical theory that deals with the general features of
the competitive situation. Generally, there are two types of factors
residing during competitive situations known as zero -sum games and
non-zero -sum games. This emphasizes the decision -makingmunotes.in

Page 55

55process of the adversaries. It is like placing strategies and counter -
strategies so that eventually winning strategy is decided.
3.Linear Programming:
This also a mathematical technique of determining the best
combination of limited resources with a qu antified and measured set of
objectives of the business e.g. while allocating jobs to limited machinery.
Here every job has varied time to be ready. So manager use to use the
machinery as per the job time requirement i.e. less time requirement job
will be take up fine and so on and a good combination of attainment
ofobjects as well as machinery.
4. Queuing Theory (Waiting line):
This technique is useful for determining the optimum number of
services facilities booking big lone on cash counter in the bank etc.
Here in this case the problem is in balancing services and costs incurred
in regards.
For example, if banks open a new counter for remittance of
money, hereby open a new counter how much benefit the bank has, is to
see. If the expenses ne wc o u n t e r sa r em o r e then it the services give benefit
then it is not advisable to open new counter.
5. Network Technique:
These techniques are used for project planning and control that
too of a complex nature and involving considerable time and cast. Her et h e
sequence of activities is arranged in such away. The cost & time will be a
minister and the project will complete in time or before time PERT AND
CPM are two important techniques used in this method.
A. Non -Programmed Decision (Traditional techniques):
These techniques are on novel and non -repetitive problems.
These problems are more complicated & challenging and need to be taken
urgently in these techniques something different is done There is creativ ity
and original thinking is required. So here managers need to be open -minded.
These techniques are generally used by top -level management. These
techniques include
1. Brain Storming Techniques:
Brainstorming techniques were developed by Alex F. Osborn.
Under this technique, a group of persons/managers is given a
complicated problem and they are asked and encouraged to
suggest whatever solutions come to their mind Again there will be a
discussion on the given solution hill The very fair idea/solutions gain .I n
brainstorming criticism is not allowed, but peoples/ managers are allowed
& ask to generate as many as solutions they can do.
a.The brainstorming technique encourages the group members to
think independently on complex problems and give creative
soluti ons. For purposeful brainstorming session, attention should be
given to the following points:munotes.in

Page 56

56b.Encouragement to a group member for suggesting new
ideas/solutions.
c.Critic on a solution is to be avoided.
d.Stress should be given tothe quality or uniqueness of ideas.
e. The Final idea should be accepted by all members.
2.Delphi Technique:
This technique is similar to the brainstorming technique. Here the
difference is the members are not having face -to-face c ommunication.
They are residing in different places and connected with the help of the
Internet, video conferencing, etc. The information will be collected in the
form of responses to the questionnaires. This has been sent to each
member for reaction and r eassessment. This process will continue till the
new solution emerges.
3.Heuristic Techniques:
This is a trial and error technique of decision -making. Here certain
rules of thumb (Heuristic) are developed to take the decision. It is used
only when the prob lem under consideration is complex and adequate
information is not available. The environment for rational decision -making
is extremely uncertain and may prove wrong in the future. For example,
consumer durable companies sell on an installment basis on the assumption
thatpeople can regularly pay in installments rather than in lump -sum at
one time. However, it is not a scientific technique of decision -making. So
it is used rarely in the decision -making process.
4.Nominal Group Technique (NGT):
This is another technique of decision -making with the help of
group members. Here in the group, one person is acting as a group leader
and he explains the problem to the group members. Then each group
member writes his/her i deas or solution independently and presents them
to all. In addition to this, there will be a group discussion. The purpose of
this technique is to give more chances to members to think independently
and contribute to decision -making. The interaction betwe en group
members will take place only after ideas are presented. So every group
member has given the chance to creative ideas and then these creative
ideas are integrated.
5.Quality Circle:
This concept is popularised by Dr. Ishikawa Kaoru in the early
1960s in Japan. A quality circle is a small group of employees from the
same department. The group members are meeting regularly to identify,
analyze, and solving work -related problems. These members
gave suggestions to management to improve efficiency or to give solutions
to the problems. Therefore it is known as democratic and progressive
decision -making techniques.munotes.in

Page 57

573.6 IMPACT OF TECHNOLOGY ON DECISION
MAKING
Decision -making is one of the most significant functions of
management. It is a complicated and long process. It involves developing
alternative courses of action and selecting the best alternative after taking
into consideration the objectives, resources, and environment of the
business. So sound decision -making involves getting correct and required
information and its analysis. Information technology helps the
management in decision -making in the following manner.
1.Data availability: It helps in searching for the required information
for decision -making from the huge amount of data available.
2.The data is made available faster so it saves time in getting the
required information.
3.The data warehouse has data mining tools that computerize the process
of dec ision -making.
4.Information Technology enables a group of employees to make quick
and correct decisions by using a group decision support system.
5.The decision support system can be used in decision -making when the
problem is not structured.
Artificial Int elligence can be used to supplement human thinking and
behavior
3.7 SUMMARY
Decision -making is a mental process of selecting a course of
action from a set of alternatives. There is no exception to the decision. The
corporate decision -making process is th e most critical as an effective and
successful decision makes profit to the company and unsuccessful ones
make losses.
In the process of decision -making, we may use many tools,
techniques, and perceptions. Decisions are taken by using the proper
technique .T h et e c h n i q u e sa r ec l a s s i f i e da sM o d e r nt e c h n i q u e sa n d
Traditional techniques. Modern techniques include Decision Tree, Game
Theory, Linear programming, Network Techniques, Queuing technique.
Traditional Techniques include Brainstorming, Delphi, Heuristi cs,
Nominal group, Quality circles*
3.8 QUESTIONS
3.8.1Multiple Choice Questions
1.___________ is choosing a course of action from several alternative
courses of action.
a)Decision Making b) Directing c) Controlling d) Planningmunotes.in

Page 58

582.___________ isthe first step of Decision Making
a) Analysing the Problem b) Selecting the Solution c) Follow Up
d)Identifying the problem
3.___________ is the Last step of Decision Making
a) Analysing the Problem b) Selecting the Solution c) Follow Up
d) Identifying the problem
4._____________ techniques are also known as non-programmed decision
techniques.
a) Modern b) Traditional c) New d) Any
5. _____________ techniques are also known as programmed decision
techniques.
a)Modern b) Traditional c) New d) Any
6.Game Theory is a _____________ Technique
a)Modern b) Traditional c) New d) Old
7.Decision Tree is a _____________ Technique
a)Modern b) Traditional c) New d) Old
8.Brain Storming is a _____________ Technique
a) Modern b) Traditional c) New d) Old
9.Delphi Technique is a _____________ Technique
a) Modern b) Traditional c) New d) Old
3.8.2 Theory Questions
1.Point out the importance of decision -making.
2.Define decision making. Explain the steps involved in decision -
making.
3.What are the techniques of decision -making? Enlist and explain.
4.Discuss the essentials of sound decision -making.
5.Explain the advantages of sound decision -making.
6.Write short note on “Impact of Technology on decision making”
7.Write short notes:
a.Traditional Techniques of decision making
b.Modern techniques of decision making
c.Essentials of sound Decision Making
munotes.in

Page 59

594
ORGANIZING I
Unit Structure
4.0 Objectives
4.1 Introduction
4.2 Meaning and Definition , Steps of Organization
4.3 Organization Structure
4.4 Types of Organizations
4.5 Departmentation
4.6 Summ ary
4.7 Questions
4.0OBJECTIVES
After studyi ng the unit the students will be able to:
Define the term Organization .
Explain the structure of theOrganization .
Discuss the types of organizations .
Know the meaning of Departmentation.
Explain the bases of departmentation in detail.
4.1INTRODUCTION
Three important factors organization management and
administration are considered essential for the success of any business .
Plans and policies are designed in the administration while the work of
their execution is of the management, the decision about wh ich work
should be done by whom in the process of execution is the work of
organization there are different opinions about the organization.
Accordingly ,the organization is found in two ways :
1.Formal organization and
2.Informal organization.
According to some authors ,theorganization is a process while
other ssay that it is a system of directing business.
We are going to see the meaning of o rganization from all these
views in this unit .Different organs in our body are supplementary to each
other and theultimate aim of all ofthem is one. Such type of work goes on
in the business.munotes.in

Page 60

604.2MEANING AND DEFINITION OF ORGANIZATION
4.2.1Meaning:
The term “organization” is derived from the word “organism”
which means arranging the ways and means for theexecution of a
business plan. To conduct any activity -business or non -business there is a
need for an organization if there is no organization; it is not possible to
conduct activities. It is a ninternal process of management organization is
the structure wh ere all people work collectively to achieving certain
objectives.
It is thesecond step of management .Aftertheplanning m anager
focuseson the arrangement oforganizing resources. An organization
Deals with anumber of theinternal part which define therelationship
between the number of a group the continuity andsuccess of management
depend upon strong organization only.
4.2.2Definitions:
F. kart andS Rosenweing define theorganization as a structure
“organization structure is the established pa ttern relationship among the
components or part of an organization.”
Louis Allendefines anorganization as “the process of identifying
and grouping of the work to be performed defining and delegating
authority andresponsibility andestablishing a patte rnof relationship to
enable people to work most effectively together in accomplishing objects ”.
4.2.3 Steps involved in Organizing:
The main steps involved in organizing can be given as follows:
1.Understanding of plans and objectives of the organization -It is
required to consider the objectives and short term and long term plans
of the organization before starting organizing activities of the
organization.
2.Deciding on the work activities which are required to be undertaken
for achieving the objectives .
3.After knowing the activities to be undertaken, the next step is to group
or classify them into interrelated functional areas or departments.
4.When the activities are grouped or classified as per their general
nature, then they can be assigned to the rig ht people to perform
them . The people are also required to be given appropriate authority to
help them to perform the given jobs.
5.The last step is to establish a hierarchy of authority and
responsibility in the organization . The highest authority and
responsibility is the Board of Directors Middle -level authority and
responsibility consist of Middle -level divisional managers and lowermunotes.in

Page 61

61level of authority and responsibility lies with departmental managers
and their subordinates.
4.3ORGANIZATION STRUCTURE
4.3.1Meaning of organization structure :
Organi zation structure refers to a pattern of relationships among
individuals anddepartments in an organization.
F. Kast and s Rosenweing define s organization structure as
“Structure is the established patter n of relationship among the components
or part of an organization ”.
4.3.2Factors determining organization structure:
Organization structure isdivided into two part s, viz. formal and
informal organization .Every business organization helps the management
in achieving the business goals andobjectives . The factors determining the
organization structure have explain edwith the help of thefollowing chart:
1. Management philosophy:
Management philosophy directly affect sthe organizatio n's
structure .Every organization 'sstructure broadly depends on the
management philosophy . Small scale organizations some of the line
organization structure. The work by levels of management. Top -level to
lower level in the other hand large scale organiza tions follow by
decentralized organization structure t ocarry the business activities with
principle of delegation of Authority,Extent of
CentralisationManagement
Philosophy
StrategyFactorsdetermining
Organization
StructureSizePeopleEnvironmentObjectivesNature
Of business
Technologymunotes.in

Page 62

622. Nature of business:
Abusiness organization isdivided into several parts, nature of the
business directly influence s/affected theorgani zation structure. A large -
scale business organi zation followed by the staff of matrix organi zation. A
small size business organization followed by aline organization. So the
nature of business directly define the structure of theorganizat ion
3.Goal’s -/ common objectives:
Every organization exists to achieve certain goal’s The overall
goals of the organization are decided by top -level management. All the
business organization set their own goals if the goals are limited the
management m ay adopt aline organization structure so goals play an
important role i ndefining organizational structure.
4. Environment:
Every organization depends on the internal as well as theexternal
factor of the environment. Some of the small organization whic h
manufacturing & producing routine products may be less affected by the
environmental factors but large organization followed by thedecentralized
structure they largely depend on the external environment alfactor.
5. People:
The people is one of the m ost important factor sin the business
organization all the business activities aredone through people. Alarger
number of individual s& group sdevelop the structure of theorganization
e.g. line, line & staff or, matrix organization structure. So it is an
important factor indetermining internal organizational structure.
6.Technology:
Business firms must constantly monitor changes in the technology,
it may have an impact. This is because impact a technology change may
have an impact on form business thr ough the research anddevelopment
the organization come swith new method s, new machines ,and
technologies. This can be effectively used for business activities
technological factor play an important role in developing line staff &
matrix organization struc ture
7. Size:
The organization structure depends on the size of the organization
generally larger size of theorganization, their level of management more
& large number of departments & units therefore, in alarge organization,
line & staff or matrix structure can be followed in another hand small
organization follow line organization structure.munotes.in

Page 63

638. Strategy/ planning:
Business firms plan to achieve certain aims & objectives. In alarge
firm,top-level manager sformulate specific plans & policies to o btain the
objectives of theorganization strategy internal part of management. It
would work on organizational tasks & choice of technology th esefactors
mostly use in the planning process to determining organizational structure
strategy use to find out thestrength & weaknesses of the organization .
9.Extent of centralization :
Organization of structure divided into two parts such as centrali zed
& decentrali zed structure when the organization is more centrali zed it may
follow line organization structure in other hands. If the organization is
more decentrali zed then they follow line & staff organization structure
most of the large -scale firms are decentrali zed structure s.
4.4TYPES OF ORGAN IZATIONS
The many types of organization sare observed. However ,the right
type of organization is selected after taking into account the size of the
undertaking kind and need. So many changes are observed in
organization alstructure in modern days. Also, the basic concept of
organization is seen changed very much accord ing to the situation. The
organi zation structure can be classified into thefollowing types
1.Formal and informal organization
2.Line organization
3.Line and staff organization
4.Matrix organization
5.Virtual organization
1.Formal and informal organization :
Inany set -up the existence of therelationship, which may be
formal or informal or both. The same concept applies also to the
classification of theorganization and accordingly ,theorganization may be
aformal organization and informal organization. The fo rmal organization
isanofficial form whereas informal organizations are unofficial and
operate along with the formal organization.
A.Formal organization:
Meaning:
If the management has created a big industrial organization
inspired bya particular objec tive then all the activities in that formal
organization are run with the help of inspiration of that particular
objective. According to Chester Barnard “An organization is formal when
two or more persons consciously co-ordinate toward a common objective.munotes.in

Page 64

64Features:
The features of formal organizations are as follows.
i) All the policies and objectives in this organization are predetermined
ii)The rights, duties of everyone are properly defined and therefore
everyone can make their work maximum efficient separat ely due to
it.
iii)The place of a person in the organization is fixed and clear
indications are given regarding which how much, in what way and
the work has to be performed by each employee
iv)The mutual relations among the employee in the organization are
indica ted regarding which responsible to whom who has to report to
whom and who is eligible to order whom.
v)Each one is related tohis present work, which is related tothe
ultimate objective of the business. The employee can’t interfere in
other matters leaving their work in it
vi)The organization has its own set of rules and regulations. These rules
are to be followed by the people working in the organization .
B.INFORMAL ORGANIZATION :
Meaning:
Informal organization structure refers tothe pattern of activities,
interactions ,and human relationships developed spontaneously due to
social & p sychological force soperating at the workplace. All these
employees are not bounded by any rules or policies in it according to
Keith Davis “Informal organization is a network of personal and social
relations not established or required by the formal organization but arising
spontaneously as people associate with one another”
Features:
The features of anInformal organization are as follows
i)Informal organization is self -inspired and voluntarily created
ii)There is agood communication system in this organization to inspire
human power
iii)Such type of organizations fulfill the social need satisfactorily
iv)Itexists within a formal organization and reflects human relationships
v)It brings p eople together to realize common interests, however ,its
membership is voluntary
vi)There areno questions of granting authority and no need for a system
of coordination.munotes.in

Page 65

65III) Formal v/s informal organizations
Point Formal Organization Informal
Organization
I)meaning: - It is a planned structure
in which works rights
duties and
responsibilities areIt is an organi zation
created with self -
inspiration and
voluntarily
ii)objective: - It exists to achieve well
defined and particular
objectivesThe main purpose is to
develop personal and
social relations.
iii) Motivation: - Economic motivation
such as promotions,
increase in wages ,etcFulfillment of social
and personnel needs
and acquiring self -
satisfaction.
iv) Relationship : - The superior -sub-
ordinate relat ionship is
clearly defined and existThe superior -
subordinate
relationship is absent
v) Responsibility: - There is a balance
between authority and
responsibilityThere is no
responsibility in this
form.
vi) communication: -The communication is
normally through
formal channels of
communicationThe communication is
normally through a
grapevine form of
communication.
vii) stability: - Formal organization is a
stable type of
organi zation StructureThere is no stability to
informal organizations.
viii) Re ward and
punishmentIt is in the form of
monetary and non -
monetary, whereas
punishment is for
breaking rules.The r eward is a
continuation of group
membership whereas
punishment may be
removed from the
group.
Ix) Termination: - It may be terminated by
organizational processIt is difficult to
terminate by the
organizational process
of when relationships
become sour
2. Line Organization :
Meaning:
Line organization is thesimplest & oldest form of organization. It
is also called a military scalar organi zation or vertical organization
structure there is adirect flow of authority from thetop-level in the
organization. All the major decision saretaken by the top management &munotes.in

Page 66

66then process pass theorder to their subordinates, the subordinates in the
turn directly responsible to the manager this type of structure is
application / suitable in any in small scale organizations. The following
diagram indicates line organization.
munotes.in

Page 67

67a.Direct flow of authority :
There is adirect downward flow of authority f romtop-level to
lower levels in this type of organization all authority andorder send by the
top-level manager to lower levels subordinates so it is called thedirect
flow of authority all the organization decision taken by thetop-level
manager andsub-ordinate in turn are directly responsible to the superior
every small scale organization follow the structure of line organization
b.Clear responsibility:
Inline anorganization every manager is responsible forthe
business board of directors pass responsibil itytothegeneral manager th en
after thegeneral manager pass to another different head of manager and
final authority andresponsibility passed to general subordinate. They are
responsible for scheduling work the top management has the responsibility
totrain andmotivate every subordinate.
c.Unity command :
Inline organization sfollow the principle of unity of command very
effectively. A subordinate should receive anorder from only one superior.
In turn ,thesubordinate should report to anyone superior. The principle
provides aproper guideline to manager sandsubordinate s.I tenables to
improve the superior andsubordinate relationship.
d.Suitability:
The line organization is suitable forthesmall -scale organization.
The structure of line organization i s small because production capacity is
low as compare dtothesharp conduct of thelarge organization. The
manager sharply conducts ass activities in theorganization. They easily
send authority to subordinate s.
e.Co-ordination:
It refers to the integratio nof activities or actions of the
subordinates by superior there is aneed for coordination in the line
organization coordination is thebasic responsibility of the manager. The
top-level manager isresponsible to coordinate the activities of the
subordina te. It is asmall organization so themanager easily conducts all
the activities.
f.Relationship :
Inline anorganization there is a chain of relationships among the
different part softhedepartment. There is a need for arelationship
between superior sandsubordinates various level saffect therelationship
to improve the corporate image andgrowth of theorganization. It plays a
great role in raising themoral eof subordinate successful organization
largely depends on the superior/subordinates relationshipmunotes.in

Page 68

68g.Growth andexpansion :
Lien organization is restricted in its growth andexpansion. This is
because of limitation of capital, lack of managerial skill of adoption ,and
traditional approach that are necessary for the expanding line organization
manager f ind difficulty in expansive and growth because of limited
organization structure.
h.Decision making :
Quick decision making is possible, however, the quality of
decision without consulting others in the line organization, themanager
gives clear authority t o delegate work, sometime sthere is often delay in
decision making but line quality of decision making is superior.
i.High employee Moral :
Line organization increase smoral eamong the staff. This because
ofagood relationship between superior sand subordi nates sometime s
subordinates carry the business activities in trust of superior it enables
raising themoral eof the subordinates andthey work effectively.
3. Line and Staff Organization:
Meaning:
Line & staff organization is a combination of two systems to avoid
defects & to achieve the common organizational objectives this type of
organization structure is suitable forlarge -scale organizations. The line
Managers decide on the advice or recommendation of the staff officer.
Definition:
Accordi ng to Louis Allen “line refers to those position elements of
the organization which ha sresponsibility & authority & are accountable
fortheaccomplishment of primary objectives staff elements are those
which have responsibility & authority for providing a dvice & service to
the line in theattainment of objectives.”
Features:
a.Systematic planning and control:
Line and staff organization structure applies only to large -scale
firms. The staff experts are planning activities. They set up plans and
policies f or the organization. the implementation of that’s plans and
policies systematically the line manager effective control over the plans
and policies when the plans are well defined & clear it would be easy to
organize resources and to take proper control by line manager.munotes.in

Page 69

69
b.Systematic planning andcontrol :
Line and staff organi zation structure applies only tolarge -scale
firms. The staff experts are planning activities. They set up plan sand
policies for t he organi zation . the implementation of that’s plan s and
policies systematically the line manager effective control over the plans
andpolicies when the plans are well defined & clear it would be easy to
organize resources andto take proper control by line manager .
c.Sound decision making (quality decision ):
It is a sound decision -making organi zation. This is because of line
manager take a quality decision after receiving opinion andview from
staff specialist. The specialist staff provides accurate information about
feature problem s. In quality decision m aking they use thedemocratic
method.
d.Suitability :
Line & staff organi zation structure is suitable forlarge -scale firms.
In large firm sthere production capacity is higher. This type of
organi zation line executive isThe decision -makers he takes the pos itive
decision whereas the staff ismembers are planning the activity it is useful
in expanding the business.
e.Specialization / scope for specialization :
This type of organi zation specialize sin nature the staff
concentrates on theformulation of plan & a lso play the role of advisors
the line manager focus on taking decision & implementation of plans &
policies. It is a combination of two structure of organi zation play
significant role in the development of large scale organi zation.munotes.in

Page 70

70f.Authority & Responsibi lity:
This type of organi zation follow sthe principle of authority &
Responsibility. The line Manager has to follow the principle significant ly.
The staff officers are planning the activities anddelegation of work is
given to theline manager here line m anager get sclear Responsibility for
the work so both organi zation sfollow this principle.
g.Possibility of conflict :
Conflicts between staff & line manager sare quite common in this
organi zation the line managers are not responsible forthe advice offered
by staff experts. Secondary aware that line managers lack knowledge of
new view & ideas. This leads to arise in the problem of conflicts.
h.Overdependence of staff :
Inline & staff organi zation line manager largely depends on the
staff expert. The staff f ocus on the Research & planning elements of
business activities. They play important role in theformulation of plans &
policies of business sometimes theline manager depends o nstaff experts
forminor problem sof business so depende ncy of line managers a rises, it
creates conflicts in theorgani zation.
i.Crisis management:
The line & staff organi zation play asignificant role in crises
management both organi zation handle the crisis effectively. The staff
officers providing proper & valuable advice to theline manager to solve
these crises . Then line manager take sanappropriate decision in solving
this situation. In this way ,both organi zation smanage difficult situation sin
the organi zation.
j.Confusion :
This type of organi zation line & staff conflicts is common due to a
lack of communication between both the line & staff organi zation. They
both do not follow the principle of authority & Responsibility. There is a
possibility of confusion in the organi zation, confusion arises due to line
manager overdepende nce on staff experts & staff provides increases
incorrect advice to the line manager.
3. Matrix Organization
Meaning:
The concept of matrix organi zation was first introduce di n 1960 in
theaerospace industry in theUSA. This form of structur e combines the
functional organi zation with that project organi zation. This project can
alsocalla Multi -project organi zation.munotes.in

Page 71

71Depts
ProjectsDept. A
ManagerDept. B
ManagerDept. C
ManagerDept. D
Manager
Project A
Manager
Project B
Manager
Project C
Manager
Project D
Manager
Project E
Manager
When there are several projects to be completed .Then the project
manager takes the help of staff to complete the project. The employee
Received anorder from both managers & similarly they have report ed
functional as well as project Manager.
Definition:
According to Kenneth Knight ,“matrix organi zation is a balanced
compromise between departmentation based on functions &
departmentation based on aspecific product to be completed ”.
Features :
a.Hybrid / Comprom ise Structure:
This type of organi zation iscombined between functional
organi zation & project organi zation. Both organizations work inasingle
organi zation is known as amatrix organi zation. The goals & objectives of
both organi zation sare equal They beep ateach other for achieving a
common target.
b.Responsibi lity / Role of project managers:
The p roject manager play saneffective role in conduct the
administrative t asks project manager has a responsibility to coordinat e the
activity of thefunctional department & also other activities. Related to the
project they set up/ prepare aschedule of project work. He has Authority
to central administrative aspects of the project.
c.Responsibility/Role of Functional Managers :
The f unctional manager has a Responsibility to control functional
aspects of the project they play asignificant role in thetechnical part of
the project & they aregiven theresponsibility to handle the entire matrix
organi zation. They set up thetimeta ble of subordinate sto project work.munotes.in

Page 72

72d.Suitabi lity:
Matrix is a complex organi zation but is suitable forlarge scale
business organi zation in this type of organi zation attempts to solve
complex problems With high -quality solutions it is mostly used for alarge
construction project that construct sserver building in different areas
different constructive side managed by thedifferent project manager with
the support of thefunctional department .
e.Specialization :
Matrix organi zation facilitates specifi cation. The functional
heads /manager focus on the technical parts of the project whereas the
projects manager fours on all the administrative tactic /aspect of the project
both organi zation specialize in our area & play asignificant role in the
department ofamatrix organization.
f.Development skill :
In the matrix organi zation ,employee sdevelop their skill &
knowledge proper training of managers & subordinates is essential for the
effective working of matrix organi zation the process of job rotation
facilitates self -development both the managers play important role in
proper training to theemployee.
g.Problem of unity of command :
Internal operations under matrix organi zation are difficult &
complicated this is due to rules & procedures are not foll owed uniformly
in all departments employees received order from functional heads as well
as project manager This leads to increase theproblem of theunity of
command in theorgani zation.
h.Need foreffective communication :
The matrix organi zation uses two or more co -existing structure sin
this organi zation need of effective communication for thedevelopment of
organizational structure effective communication between manager to
subordinates leads to increase proper work in firms.
i.Inter -departmental c o-operation :
Due to vertical & horizontal communication ,the project manager
co-operate smany inter -department aspect sof a particular project this co -
operation leads to effective control over theoperation.
4. Virtual Organization:
The m eaning of virt ual organi zation is a temporary alliance
between two or more organi zations that come together to active specificmunotes.in

Page 73

73objectives . The participants in avirtual organi zation are interdependence
to each other in this type oforgani zation participants may changing day by
day, It can be composed differently every day.
It is a project organi zation formed for aparticular project, it gets
winding up once the target active. It may remain functional as long as
consumer demand exists fortheir collaborative benefi t.
Definition :
The v irtual organi zation refers to a new organizational form
characterized by a temporary or permanent collection.
Features of virtual organization:
a.No separate entit y:
Participating organi zations haven’t clear rules contrasting toa
traditional organi zation. It will have neither acentral officer nor an
organizational chart that is dependent on information communication and
technology.
b.Interdependence:
Avirtual organi zation is mostly interdependence in nature it is a
tempo rary alliance between two or more organi zation that iscome
together to achieve a specific objective the participants in avirtual
organization are interdependence to each other making it possible to
deliver a product collaboratively all the alliance partn ers used combining
working method for proper development of the organization .
c.Temporary in nature:
A vi rtual organization is generally temporary it is a project
organization formed for aparticular project it gets winding up once the
target achieve. It may remain functional as long as consumer demand
exists their collaborative beneficial limited duration required to thevirtual
organization for complication of theproject so. This organization is
always temporary.
d.Information & communication technol ogy:
Avirtual organization largely depends on the ICT for developing
& diversification of organization informational networks will provide for
flanged companies to link up work together from start to finish it is
possible to communication within few sec onds a worldwide net so, it is
covered geographical border easily.
e.Changing participants :
In this type of organization, participants may chang eday by day it
can be composed differently every day one day some organizations maymunotes.in

Page 74

74be a part of a network formulating virtual organizations along with others
networks the following day virtual organizations could be composed of
other organizations .
f.Excellence :
In the virtual organization, each partner brings its core competence
to the joint efforts th esefacilities increase efficiency in the organization
virtual organization can provide excellen tperformance in a particular
project or product every feature & process or the product may be world -
class something that no single company could probably achieve its
generates teamwork in the organization .
g.Trust & Respect :
Mutual trust & respect play important role in thedevelopment of a
virtual organization all the partners need to have complaint strust each
other atthe same time the alliance member must r espect everyone 's
expansion & modification of virtual organization largely depends on the
trust of the members to each other.
Challenges of vertical teams :
a.Challenges of diverse technological skills :
Avirtual organization is often associated with such terms as virtual
teams vertical teams face several challenges it explain swith the help of
thefollowing points.
b.Challenges o f Diverse Technological Skills:
It is one of the most important challenges faced by virtual teams.
Diverse technological skills unable increases conflict among the team a
member that is virtual teams primary fours in improve teamwork in the
organization proper training develop trust & teamwork unable virtual
organization achieve the goals & ta rgets .It may be agreat impac t on the
expansion & modification of theorganization .
c.Challenges of leadership :
Leadership play sasignificant role in thedevelopment of the virtual
organization it is analliance of two or more teams so here appropriate
leadership can result in th e failure of avirtual team the leadership problem
arises due to lack of communication therefore team members focus on
exception were & co -ordination away the team members it may solve the
problem of leadership.
d.Challengers of communication:
The membe rs of avirtual team may not be located in one country
however they can discuss each other through themedium of informationmunotes.in

Page 75

75technology devices such communication always quick but in case ofpoor
communication among the team of theorganization so it is thebiggest
challenges that any virtual team face sproper communication easily solve
this challenges.
e.Challenges of incompetent team member :
It is a nalliance of two or more team so here the experienced team
member isanimportant factor in successful organization project are more
time in fail uredue to lack of coordination among member & incomplete
knowledge about the project it may negative lyaffect the other team
maintain sproper team weak maintain proper team weak lyare an
important challenge of thevirtual team.
f.Challenges of developing Trust:
Trust and mutual understanding are two basic requirements of
successful functioning of virtual team’s absence of coordination with the
team affect the speed and orderly execution of the project very team
primary focus on to build trust among the team members. Trust unable to
Reduce conflict among the teams so it is animportant challenge forthe
virtual teams.
g.Challenges of decision –making:
Every virtual team can take strategic decision sandplan for business
expansion activities based on theproject because of proper decision -
making. When it is difficult to build trust andto manage conflict when
team member stake poor decision sso, decision -making by virtual teams
can be a great challenge for its me mbers.
h.Challenges of time zones:
The members of thevirtual team communicate through portable
communication tools including video conferencing meetings are arranged
quick lyif the need arises , however, there are different time zones it
becomes difficu lttocoordinate andto hold avirtual meeting. Therefore, it
directly impacts the work ofaproject time zones are great challenges of
virtual teams.
4.5DEPARTMENTATION
4.5.1 Meaning of Departmentation:
Departmentation is a systematic process of div iding an
organization into smaller units called departments. It includes a grouping
of activities, tables and processes, and resources. Departmentation is
useful in all types of business organizations. It creates the principle of
division of work.munotes.in

Page 76

76Defini tion of departmentation :
According to Pearce & Robinson, “Departmentation is the grouping of
Jobs, Process & resources into logical units to perform some
organizational task”
According to Koontz and O’Donnell , “A department is a distinct area,
division or branch of an enterprise over which a manager has authority for
the performance of specified activities.”
It can be defined "as the process by which activities or functions of
an enterprise are grouped homogeneously into different groups."
4.5.2 Bases of departmentation:
Departmentation play important role in the development of a
business organization. Such bases include function performed
development of area production patter number of customers & time
activities.
The bases of departmentation are shown with the following chart.
1. Departmentation by Functions:
It is the most common means of departmentation function plays the
significant role in subunits of departments such as finance, production,
marketing person, etc. this is shown in the following tastemunotes.in

Page 77

77
Benefits of departmentation by function:
It is a logical method
Facilities effective control & co -ordination
It Facilitates optimum utilization of resources
2. Departmentation by process:
In this type, the organization is divided i nto basic of the process of
manufacturing units. For example in the textile mill, the process can be
spinning, weaving, dyeing, bleaching & printing.
Merits / Benefits of Departmentation by process:
1)It is an easy & suitable process for manufacturing p roducts.
2)It enables maximum utilization of resource
3)It requires costly equipments but gives more benefits in manufacturing
products.
3. Departmentation by -product:
Most multinational companies or large industries dealing with the
number of products tim e or types of brands. Departmentation largely
depends on the types of products of brands.
In this type of organization different mange work on different
products the entire manager getting responsibility for the kind of product.
munotes.in

Page 78

78Merits / Benefits of dep artmentation by -product :
1)It can generate competition between the firms' brands
2)It enables the organization to get maximum profit
3)Encourages companies corporate image
4. Departmentation by / Geographical area / Location:
This is the most important me thod undertaken by the
departmentation in these method business activities covered by
geographical areas.
In India, the government banking sector has several departments
such as a national bank, state bank, district bank, schedule bank & so on.
This is sh own in the following chart:
General Manager
National level State level District level
Merits & benefits are:
1)It improves the standard of living of people
2)Development of bank word areas & also an expansion of business to
various part of the nation.
5. Departmentaion by Customer:
All types of the department directly & indirectly depend upon the
nature of customer for an instant a cloths product supplying firm may be
divided the organization all the bans.
General Manager
Roadways Railways Airlines
Benefits are:
1)It helps an organization to earn maximum profits & improve
corporate image
2)Customer get maximum satisfaction
6. Departmentation by Time :
Most of the private sector departments use this means of
departmentation. It inc ludes a financial institution, educational institution,munotes.in

Page 79

79hotels, etc. in which means the Nature of work depends on the clock or
specific Time. Every organization sets up a particular time for the work.
Manager /Supervisor
Morning shift’s Day shift’s Night shift’s
7. Departmentation by Task Force:
This means of departmentation involves the assigning of a project
to a specific team of a subordinate. The group of a subordinate is known
as Task Force. Each task has its own leader.
4.5.3 Advantages of Departmentation :
1. Division of work:
Division and specialization of work resulting in increasing overall
efficiency.
2. Co -ordination :
Autonomy to departments for raising efficiency supplemented by
coordination among different dep artments.
3. Responsibility:
Targets can be assigned to departments and fixation of responsibility
on departmental heads.
4. Management Development :
It leads to management development as executives can have self -
development
5. Resources utilization :
Departmentation ensures optimum utilization of resources.
4.5.4 Limitations of Departmentation :
1. Costly:
Departmentation is costly as it raises the administrative and
operative costs of the organization. This is due to duplication of work,
equipment facilities, and staff.munotes.in

Page 80

802. Co -ordination and control difficulties:
Departmentation creates a new problem of establishing effective
coordination and control over the departments created, which affects the
overall efficiency of the organization.
3. The autonomy given to departments may prove to be dangerous.
4.6SUMM ARY
Organizational structure is a system used to define a hierarchy
within an organization .This structure is developed to establish how an
organization operates and assists in obta ining its goals .The base of
organization alstructure is thedistribution of work. The distribution can be
formal or informal .Formal organization al structures are categori zed as
Line organization al structure ,Staff or functional authority organization al
structure ,Line and staff organization al structure, Committee
organization al structure ,Divisional organization al structure, Project
organization al structure ,Matrix organization al structure ,and Hybrid
organization al structure.
A line organization has onl y direct, vertical relationships between
different levels in the firm. Anorganization where staff departments have
authority over line personnel in narrow areas of specialization is known as
afunctional authority organization .In the Line andStaff Organ ization al
Structure ,there are direct, vertical relationships between different levels
and also specialists responsible for advising and assisting line managers.
Most large organization s belong to this type of organization al
structure. A project organizat ionis a temporary organization designed to
achieve specific results by using teams of specialists from different
functional areas in the organization .
4.7QUESTIONS
4.7.1 Multiple Choice Questions
1.________ refers to a pattern of relationships amo ng individuals and
departments in an organization
a)Organization Structure b)Salary Structure c)Rules d)Regulations
2.Organization Structure is divided into Two Parts Formal & _________
a)Abnormal b)Normal c)Immortal d )Informalmunotes.in

Page 81

813.__________ _exists to achieve well defined and particular objectives
a)Formal O rganization b)Informal Organization
c)Matrix Organization d)Line Organization
4.In_____________ The superior subordinate relationship is absent
a) Formal Organization b) Informal Organization c)Matrix
Organization d) Line Organization
5. _____________ is the simplest & oldest form of organization .
a) Formal Organization b) Informal Organization c) Matrix
Organization d) Line Organizati on
6.In __________ All the major decisions are taken by the top
management & then process pass the order to their subordinates
a) Formal Organization b) Informal Organization c) Matrix
Organization d) Line Organization
7._____________ also called as a Multi -project organization
a) Formal Organization b) Informal Organization c) Matrix
Organization d) Line Organization
8.__________ type of organization is combined between functional
organization & project organization
a) Formal Organization b) Inform al Organization c) Matrix
Organization d) Line Organization
9.__________ organization is a temporary alliance between two or more
organizations that come together to active specific objectives
a) Formal Organization b) Informal Organization c) Virtual
Organization d) Line Organization
10.__________ is a systematic process of dividing an organization into
smaller units called department.
a)Departmentation b) Decentralization c) Division of Work
d) Division of La bourmunotes.in

Page 82

824.7.2 Theory Questions
1)What are the factors determining organization structure?
2)Explain the features of formal andinformal organization .
3)Distinguish between formal andinformal organization .
4)What are the feathers of line organization ?
5)Explain the challenges of virtual teams.
6)What is meant by organization structure? state the types of internal
organization structure.
7)What are the bases of Departmentation?
8)Explain the steps involved in Organizing
9)Write notes on the following
a.Line and staff organization
b.Organization structure
c.Matrix organization
d.Virtual organization

munotes.in

Page 83

835
ORGANISING II
Unit Structure
5.0 Objectives
5.1 Introduction
5.2 Meaning and Features of Span of Management
5.3 Factor’s influencing Span of Management
5.4 Tall and Flat Organisation
5.5 Delegation
5.6 Decentralisation
5.7 Summary
5.8 Questions
5.0OBJECTIVES
After studying the unit the students will be able to:
Define the concept of Span of Management and explain the features
of Span of control.
Explain the factors included in the span of management and the
advantages of the span of control.
Discuss the concept of Delegation, its process, advantages
principles, and barriers.
Distinguish between Tall & Flat Organization
Distinguish between Centralization & Decentralization
Factors Influencing Decentralization.
5.1INTRODUCTION
In an organization, several activities are performed. These
activities are required to be coordinated. The organization structure is
designed for the division of tasks, the grouping of activities, and
coordinating and controlling the tasks of the organization. A detailed study
of all components and dimensions of organizational structure is required
for the creation of an efficient and stable struct ure. Well, designed
organizational structure facilitates the smooth functioning of the
organization. The four design decisions related to Division of labour,
departmentation, the span of control, and delegation of authority results in
a structure of an org anization.munotes.in

Page 84

84‘Span of control’, is also known as ‘Span of Management’, ‘Span
of supervision’ and ‘Span of responsibility’ .An organization performs
different types of activities. These activities have to be performed
efficiently to achieve organizational obj ectives. Therefore, the executives
in charge of executing the activities of the organization have to perform
them efficiently. However, the executives are human beings and they have
limited physical, psychological, and intellectual abilities and capacities to
management or supervise subordinates directly. Therefore, it is necessary
to determine the optimum number of subordinates under one executive,
which is known as Span of Management.
More precisely, the term ‘Span of Management’ refers to the
number of subordinates who can be effectively and efficiently supervised
directly by a superior. The span of management is the range of direct
reporting by subordinates to a superior above them. The span of
management determines the shape of organizational structure. If the span
of management is smaller the number of managerial levels will be more
and if the span of management is large the number of levels will be small.
Grouping of activities into departments is a necessary part of the
process of setting up an organization, whenever an enterprise expands
beyond the size that cannot be effectively managed by one person.
Departments and levels emerge from the grouping of activities.
In every organization, managers are assigned a lot of work and
managers alone cannot perform all the work. He divides the work among
different individuals working under him according to their qualifications
and gets the work done from them. The manager begins by sharing his
responsibilities with his subordinates. He deliberately passes some of his
responsibilities to his subordinates. After passing the responsibilities the
manager also shares some of his authority, i.e., the power to decide with
his subordinates so that the responsibilities can be carried on proper ly. To
make sure that his subordinates perform all the work effectively and
efficiently in an expected manner the manager creates accountability and
this whole process is known as delegation.
5.2 MEANING AND FEATURES OF SPAN OF
MANAGEMENT
5.2.1Meaning o f Span of Management :
A span of Management refers to the number of subordinates that
can be supervised or managed effectively Sir Lan Hamilton Introduces the
concept of span of control. Later on, it was popularised by V.A Graicunus
& Lyndall Urwick.
It is a universal process, in this process number of subordinates are
managed by a single person. Here the number of subordinates should not
be too large or too small if the number of subordinates is too large, Personmunotes.in

Page 85

85cannot supervise effectively and it en ables one to lose management of the
subordinates. If the number of subordinate too small result in strict
management on the members and its enable to reduce the efficiency of the
subordinate (worker).
5.2.2Features:
Features of Span of Management :-
Global application
All pervasive
Applicable to all level’s of Management
Applicable to any size of business
Time Tested principle
The factor of Span of Control
Benefit’s of Span of Control
1. Global Application: Universal applicable:
The principle of span of Management has global application. This
principle applies to all types of organizations. It playsa significant role in
countries' developing condition span of Management enables increase
efficiency of the manager or worker.
2. All pervasive -/ Applicable to all:
It applies to public sector organizations as well as to private sector
organizations. The different fields of organization commonly use the
principle of spa n of management so it is an important principle of
management.
3. Important Principle of Organising :
The span of management play the important role in organizing this
principle provides appropriate information about how to supervise/manage
the number of subordinate in a particular time. It plays a great role in the
lever of management from the top level to the lower level of management.
An effective span of management enables raising the morale of the
management to subordinate.Span
of
Management
Features
munotes.in

Page 86

864. Applicable at all le vels of Management:
The principle of span of Management applicable at all levels of
management. It is applicable at the top level, middle level,and lower level.
The member of top -level depends on middle level & vice versa. So the
principle of span of mana gement more effective in all levels of
management.
5. Applicable to any size of business:
The principle of span of management applies to a sole trader to a
Joint Stock Company. It’s directly affected to any size of the organization.
E.g. A smaller organ ization employing about so needs to have various
section & each section follow the concept of span of management also a
large organization employing over a thousand of employees needs to adopt
the concept of span of management for the effective span of Management
of the business.
6. Time Tested Principle:
The principle of span of management is time tested all the business
& non -business organizations have used the principle of management. It
includes educational institutions, hospitals, hotels, etc. in which Means the
nature of work depends on the specific Time.
5.2.3Advantages of Span of Management :
The concept of span of Management plays curtail role in an organization.
Some of the benefits are as follow:
1)Improvement in a superior -subordinate relationship
2)Optimum utilization of resources.
3)Improvement of goodwill and reputation of organiza tion
4)Reduce absenteeism
5)Property motivated employee
6)Development of leadership ability
5.3FACTOR’S INFLUENCING SPAN OF
MANAGEMENT
The factor of the span of management plays a significant role in
developing the principle of the span of management process. Some factors
are affected directly and some indirectly. We can understand with the help
of the following diagram.munotes.in

Page 87

871. Nature of Work:
Nature of work divided into two parts such as routine repetitive
nature & complex nature of the work is of routine & repetitive nature the
span of management may be more other band work performed by
subordinates is complying, there should be fewer subordi nates. So routine
method directly affected the principle of span of control.
2. Experience & Capacity of Superior:
Normally more the experiences of the superior the more are the
span of management if the manager is capable & experienced be easily
handle the number of subordinates he gives respect from subordinates &
also improve the standard of living of subordinates. Thus the span of
management depends on the experience & capacity of the superior.
3. Subordinated abilities:
The span of management depends on the ability of subordinates it
includes the nature & experiences of subordinates if the subordinates are
well trained & experienced. They require less time for supervision &
therefore the superior can have more span of management experience
subordin ate enable the increases the efficiency of the worker.
4. Training and Faith on subordinates:
Trained subordinates can do the work quickly. Ultimately the span
ofmanagement is more proper training enable subordinates work is proper
position right time if the manager has faith and trust in subordinates the
span can be wider if the positive relationship between manager to
subordinates enable the span of management can be made wider.Nature of Work
Faith in
SubordinatesExperience of Superior
SubordinatesabilitiesIncentives
offeredHigh MoralExtend of
delegationRelationship
TechnologyUsedFactor’s
Influencing Span
ofManagement
munotes.in

Page 88

885. Use of Communication Technology:
It is one of the most important fac tors to determining principle of
span of management electronic devices &equipments help in increasing
the span of management manager use proper electronic devices in daily
work to ultimately subordinate can do work effectively in an organization.
6. Incen tives offered:
Incentives are one of the prime factors to determining span on
management if the manager offered good incentives of management more
number of subordinate similarly due to the incentives offered. The
subordinates are easily motivated & incre asing working habits of
employees.
7. High Moral:
Proper working conditions& incentives offered to enable raising
the morale of the subordinate manager always focus on the expectation of
the subordinate it increasing the working habits of employees.
8.Effective delegation of Authority:
When a manager delegates clear specific and adequate authority to
his subordinates it becomes possible to increase the span of control.
9. Relationship:
In a direct relationship between manager and subordinate, the
manager may be in a position to supervise and management the number of
subordinates. However, if the inverse relationship between manage and
subordinate the span of management is low.
5.4 TALL AND FLAT ORGANISATIO N
Tall Organisation Flat Organisation
1.Meaning
A tall organization refers to the
organization in which there are
more levels in the management
hierarchy. In this type of
organization, each manager has
very few people /subordinates
working under him.Flat organization refers to the
organization in which there are
fewer levels i n the management
hierarchy. In this type of
organization, each manager has
more people/subordinates working
under him.
2.Manager / Subordinate Relationship
As in Tall Organisation, every
manager has a few people working
under him the relationship between
manager and his subordinates is
informal.As in a flat organization, the
manager has many subordinates
working under him, the relationship
is generally formal.munotes.in

Page 89

893.Span of Control
In a tall organization, the span of
management is narrow, as vary few
subordinates report to the manager.In a flat organization, the span of
management is wider, as many
subordinates report to the manager.
4.Discipline
In a tall organization, the manager
manages a few subordinates, so
there can be better discipline among
the subordinates.In a flat organization, the manager
manages many subordinates so it
may not be possible for him to
maintain discipline among
subordinates.
5.Cost:
A tall organization may be costly
due to many levels in the
management hierarchy.A flat or ganization may be less
expensive due to fewer levels in the
management hierarchy.
6.Decision making:
As a tall organization has many
levels decision -making may take a
longer time.Due to the fewer levels, in a flat
organization, decision -making can
befaster.
7.Co-ordination & Control
The manager in a tall organization
can achieve better coordination and
management among his
subordinates.Whereas the manager in a flat
organization, may not achieve
proper coordination and
management among his
subordinat es.
5.5DELEGATION
5.5.1Meaning and Definition of Delegation:
Meaning:
Delegation of authority is one of the vital organizational processes,
it is a process by which a superior transfers authority to his subordinate.
Delegation means assigning certain responsibilities along with the
necessary authority by a superior to his subordinate manager. It is a
universal process applicable to all.
Definition:
1. According to F.C. Moore “Delegation means assigning work to the
other & giving them authority to do so.”
2. John Pearce & Richard Robinson define delegation of authority as “ A
process by which a manager assigns tasks & authority to subordinates who
accept responsibility for those jobs.”munotes.in

Page 90

905.5.2 Process of delegation:
There are five stages in the delegation process. This steps shows
with the help of the following chart
Process of delegation
Stage 1 – Sizing up of Total work
Stage 2 – Assign Duties
Stage 3 – Transfer of Authority
Stage 4 – Acceptance condition
Stage 5 – Creation of Responsibility
Stage 1 –Sizing up of Total work:
It is a first & important stage in process of delegation every
manager must see the sizing up of work, then he de cides how to manage
& divided working in subordinates when total work is more the need for
delegation arises every manager to focus on the nature of total work.
Stage 2 -Assigning duties:
Before delegation superior must identify the work or activity. T he
manager must select the right subordinate to delegate the activity this is
the responsibility of the manager to find out the right subordinate. The
manager must communicate clearly & discuss the duties at subordinate &
also given proper guidelines about the nature of work assigning duties
enable increasing morale of the subordinate is relation to work.
Stage 3 –Transfer of Authority:
In the third stage manager must be transferred authority to the
subordinate appropriate authority to enable the subord inate to take the
right decision at any time. It enables delegation of work effectively limited
authority will bring about only limited performance so they manage
always focus on the transfer of authority to right subordinate.munotes.in

Page 91

91Stage 4 –Acceptance / Reje ction of Delegation:
In this Fourth stage, the subordinate has to follow acceptance or
rejection of delegation of authority when the subordinates reject the
authority. The process of delegation has to be restarted again.
The subordinate may not accept delegation on the following grounds
Poor relation with the manager
Lack of self -confidence
Internal politics
Increasing responsibility to compare to other subordinates
Lack of incentives
Stage 5 –Creation of Responsibility:
In this last stage in the process is the creation of an obligation on
the part of the subordinate to perform duties & used assigned authority
properly.
In this stage manager & sub, ordinate hasthe authority to complete
the duties & responsibilities. It is the duty of the del egator (manager) to
assist the delegate (subordinate) a subordinate gives a positive reply of the
work to the manager about the work or task at this stage. Process of
delegation of authority completed.
5.5.3Barriers to Delegation:
Delegation authority o utwardly appears to be a simple process with
several benefits. Some of the barriers faced by superior & subordinate it
explains with the help of the following points.
a. Difficulties / Barrier’s on the part of Manager / Superior:
1. Fear of Competition:
The Manager may feel that the subordinate can be a threat to his
position. If the subordinate performs delegated were effective. We get a
promotion ahead of the superior. Some time superior fear about the
competition if the organization's fear of subordin ates excellence may come
few the way of delegation.
2. Fear of losing control:
Sometimes managers fear losing management over their
subordinates because of superior gives some orders to subordinates &
therefore they may not depend on the superior for he re manager face
difficulties. Concerning the delegation of were educated subordinates done
work effectively at a superior level so that’s why managers fear losing
management over a subordinate.munotes.in

Page 92

923. Fear of Subordinate excellence:
It perpetuates barriers on the part of superior some time educated
& well knowledge subordinate done were effective as compare to superior
so here clones of subordinate do well excellence that’s why superior may
feel that subordinate can be a threat to his position.
4. Lack of con fidence insubordinates:
The poor superior -subordinate relationship creates a lack of
confidence if subordinate manager may have this skill & the expertise to
take quite a decision about the particular were but he feels that his
subordinate is not competen t to deal with the problem it may reduce the
confidence of superior to subordinate the delegation of work.
5. Lack of ability to direct / inability to direct:
Every time manager delegation authority but sometimes may not
be able to do it effectively beca use of lack of ability to direct subordinate
inexperience manager lazy face this problem of the proper directing
subordinate.
6. Desire to dominate:
Managers normally have the desire to dominate their subordinates
they prefer to dominated subordinate all subject/matter of organization. So
they do not properly delegate authority they also feel that to delegation
most of the subordinates know their managerial ability.
7. Fear of being exposed:
The fear of being exposed due to personal shortcomings may cut as
an obstacle for the delegation. Delegation may expose the manager to his
corrupt practices because of where is delegated subordinate that gets
knowledge about such malpractices.
b. On the port of Subordinate
1) Fear of criticism:
Every subordina te expresses unwillingness to accept delegated
authority because of the fear of criticism. The subordinate does not
delegate work properly it may chances of criticism if they commit a
mistake.
2) Lack of Information:
Some subordinates lack information ab out delegated work it may
reduce the efficiency of the employee about particular work if a
subordinate does not get full information about work he may not accept
authority.munotes.in

Page 93

933) Lack of self -confidence:
Some subordinates take quick and wrong decisions becau se of a
lack of self -confidence about delegated work. Negative managerial
behavior may reduce own confidence of subordinates it may directly affect
the actual work.
4)Fear of losing Job:
It is an important barrier for the subordinate. Most of the
subordi nates may feel that if they do not delegate were properly be may
lose their job therefore they do not delegate authority.
5)Overdependence on superior:
Most of the subordinates are over dependent on their superior
about delegated work they do not direct ly interfere if the authority and
responsibility of the superior are to prepare to delegated work. the
subordinate is not confident about his were ability will certainly manage
the responsibility.
6)Difficulty in decision making:
Subordinate facing a problem at decision making. Most of the time
all order decisions are taken by the superior. So subordinates may not have
to use skill and experience to make a decision it may arise the problem of
delegation.
7)Poor superior -subordinate relations:
Inverse relationships between superior -subordinate may directly
impact the process of delegation of authority most of the bad things reduce
the superior -subordinate relation such as lack of communication to each
other interference by superior in subordinate w here.
8)Fear of being exposed:
Some subordinate feel that they have limited capacity to accept the
challenges which are bound to come due to delegation, therefore, they
may not accept delegation for the fear of being exposed of their
ineffectiveness.
5.5.4Principles of delegation:
Principle play important role in the process of delegation. Some of
the important principles explain with the help of the following figure.
1. Principle of Functional clarity:
Before delegation authority, the subordin ates should be made to
understand their duties and responsibilities. Sub ordinates followed rulesmunotes.in

Page 94

94& regulation & completed the work in the period they play a positive role
in this process. Sub ordinates followed the principle of functional clarity.
Functional clarity
Authority & responsibility
Unity of command
Scalar chain
Responsibility
Selection of right subordinate
Exception
Provision for incentives
Provision for Training
2. Principle of Authority &responsibility:
This principle of delegation suggests that the subordinate followed
the authority of the manager & their responsibility to complete them every
manager & subordinate are especially responsible about their work there
should be a p roper balance between authority & responsibility.
3. Principle of unity of command:
The subordinate should receive instruction & order by one superior
to undertake the delegated work. This principle suggests that all
subordinate follow order by one manag er or boss unity of command
enable every organization done the work effectively. Subordinate do
maximum work in minimum time because of unity of command in other
side reporting to more than one manager will create problems & there may
be confusion.
4. Pri nciple of scalar chain:
This principle suggests that give authority from the manager to
subordinate principle of scalar chain included three tends top level, middle
level & lower level, therefore, the order may depend on the chain the
subordinate should k now who delegates authority to whom be should
contact for matters beyond his authority.
5. Principle of absoluteness of responsibility:
This Principle of delegation suggests that it is only the authority
that is delegated & not the responsibility. Manag er always responsiblePR
I
N
C
I
P
L
E
S
munotes.in

Page 95

95about their authority manager send the order to subordinate about the work
in the time. Subordinate about the work effectively at a time responsibility
face by superior as well as subordinate not all the burden goes in the head
of the subordinate so superior always responsible about the total work.
6. Selection of Right subordinate:
The superior always select the right subordinate to delegate work
subordinate play important role in the delegation of work trained &
educated sub ordina te completed work effectively superior always focus
on that kind of subordinate they reduce the maximum burden of the other
subordinate. So the selection of subordinate important principle of
delegation.
7. Principle of exception/use of exception principl e:
The superior always delegated authority to subordinate in that time
they should interfere with work of subordinate some of the exceptional
cases the superior refocus on the working condition of the subordinate.
This is a normal method /rule applied by the superior, here they keep
subordinates about delegation of work. So it is a significant principle of
delegation of authority.
8. Provision for incentives/reward effective delegation:
In the process of delegation subordinate is always focus on n eeds
of subordinate in that needs incentives is an important part of worker they
adopt some innovative activities for raising the morale of subordinate.
9. Provision of Training:
The principle of training suggests that all subordinates provide the
right technique to delegate work training would help to improve skill &
knowledge to manage the work trained subordinate enable reduce the
burden of superior & raising working nostrils.
5.5.5Advantages of Delegation of Authority:
The following are the advantag es of the process of delegation of authority,
which answers why delegation is needed?
1. Management Function:
When the area and nature of business are very large then
management can function properly due to the delegation of authority.
2. Trust &opportu nity:
It becomes very easy and possible to the officer to get the various
works done by putting trust in the assistants. Similarly, assistants get the
opportunity to perform the work separately.munotes.in

Page 96

963. Challenging jobs:
The workload on the officers is reduced and they can concentrate
on other important functions and more challenging jobs.
4. Cordial relationships:
The superiors trust subordinates and give them the necessary
authority. The subordinates accept their accountability and this develops
cordial relationships between superior and subordinate.
5. Team Spirit:
Due to delegation effective communication develops between the
superiors and subordinates. The subordinates are answerable to superiors
and the superiors are responsible for the perform ance of subordinates.
6. Leads to the motivation of subordinates:
Subordinates are encouraged to give their best at work when they
have authority with responsibility. As result, it leads to the motivation of
subordinates.
Check Your Progress
1. Draw the figures showing:
A.Factor’s at Span of Management
B.Features of Span of control
C.Principles of Delegation
D.Process of Delegation
2. Enlist the barriers of Delegation.
3. Enlist the advantages of Delegation.
5.6 DECENTRALIZATION
5.6.1 Decentralization Meaning
Decentralization refers to the orderly delegation of authority
throughout all the levels of management in an organization. It means
allowing or assigning the managers of all levels to take decisions.
5.6.2 Factors influencing decentralization:
The following are the factors determining the degree of decentralization.
1)Importance of the decision: If the decision is related to key areas of
the business operations i.e. involving more funds and affectingmunotes.in

Page 97

97goodwill and reputation of the organization, t hen it is generally taken
at a higher level of the management.
2)Management’s attitude: The attitude of top -level management plays
a significant role in determining the extent to which authority is
delegated to lower levels. If the management’s attitude is traditional
then they do not encourage delegation of authority to a larger extent
whereas modern or professional management encourages delegation of
authority to a larger extent.
3)Size of the enterprise: Delegation of authority to a larger extent takes
place in large -sized organizations than in small -sized organizations.
4)Availability of qualified manpower: Availability of qualified
manpower and training facilities of the organization also determines
delegation of authority. An organization with more qua lified and
capable manpower and good training facilities can delegate authority
to a larger extent.
5)Impact of environmental factors: They include factors like
government control, the fiscal policy of the country, national unions,
the policy of government purchases, and so on.
Any organization can never be fully centralized or decentralized.
The above -given factors can decide the extent of decentralization in the
organization.
5.6.3 Centralisation v/s Decentralisation :
Centralisation Decentralisati on
1.Meaning
When the authority with respect to
planning and decision making is
held by the top management it is
known as centralization.When the authority with respect to
planning and decision making is
dispersed to the various
management levels, it is known as
decentralization.
2.Nature of authority
Centralization is the systematic and
consistent concentration of
authority at the higher level of
management.Decentralization is the systematic
delegation of authority to different
levels of management in an
organization
3.Size of the organization
The policy of centralization is
suitable for small -sized
organizationsThe policy of decentralization is
used in a large -sized organization.
4.The type of communication
Formal and vertical communication
exists in the centralized
organizationsOpen and free communication
exists in a decentralized
organization.munotes.in

Page 98

985.Leadership and Co -ordination
Leadership and co -ordination is
better in centralized organizationsLeadership and coordination is less
good in decentralized organizations
than the centralized organizations
6.Time is taken for decision making
Decision -making takes time in
centralized organizations as it is
done at higher -level management.Decision -making is faster in
decentralized org anizations, as the
decisions are taken much closer to
the actions.
7.Sharing of burden
In centralized organizations,
planning and decision making is
done at a higher level of
managementIn decentralized organi zations, the
burden of planning and decision -
making is shared by all levels of
management.
5.7SUMMARY
The span of management is simply the number of staff that reports
to a manager. Span of Management 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. In reality, the ideal span of
management depend s upon various factors, such as Nature of an
organization, Nature of job, Skills, and competencies of the manager,
Employees skills and abilities, The kind of interaction that takes happens
between superiors and subordinates, etc
A manager alone cannot perform all the tasks assigned to him. To
meet the targets, the manager should delegate authority. Delegation of
Authority means a 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 to achieve effective results.
Authority, responsibility, and accountability are the main principles of
Delegation of Authority
Departmentation is a part of the organizational process. It involves
the grouping of common activities based on the function of an
organization under a single person’s control. The process of the grouping
of activities into units for administration is called departmentation. The
followings are the basis of departmentation: Departmentation by Function ,
Departmentation by Product ,Departmentation by Territory or Geographic
Area ,Departmentation by Customer or Market ,Departmentation by
Processor Equipment.munotes.in

Page 99

995.8QUESTIONS
5.8.1Multiple Choice Questions
1. ________ refers to the number of subordinates that can be supervised or
managed effectively
a)Span of Management b) Decentralization c) Delegation d) Tall
Organization
2.In __________ process number of subordinates are managed by a
single person
a)Universal b) Non Universal c) Formal d) Informal
3.A ___________ refers to the organization in which there are more
levels in the management hierarchy.
a) Span of Management b) Flat Orga nization c) Delegation d) Tall
Organization
4. _____________ a process by which a superior transfers authority to his
subordinate
a) Span of Management b) Flat Organization c) Delegation d) Tall
Organization
5. _____________ is a first & important stage in process of delegation.
a)Sizing up of Total work b) Assigning Duties c) Transfer of
Authority d) Creation of Responsibility
6._____________ is the last stage in process of delegation.
a)Sizing up of Total work b) Assig ning Duties c) Transfer of Authority
d)Creation of Responsibility
7. ____________refers to the orderly delegation of authority throughout
all the levels of management in an organization
a) Span of Management b)Decentralization c) Delegation d) Tall
Organization
8. When the authority with respectto planning and decision making is held
by the top management it is known as _________
a)Centralization b) Decentralization c) Delegation d) Tall
Organization
9.When the authority w ith respect to planning and decision making is
dispersed to the various management levels, it is known as __________
a) Centralization b) Decentralization c) Delegation d) Tall
Organization
10.Decision -making is faster in ____________ organizations .
a) Centralized b) Decentralized c) Flat d) Tall
11. The policy of centralization is suitable for _________ organizations
a) Small Sized b) Medium Sized c) Large -Sized d) Anymunotes.in

Page 100

1005.8.2 Theory Questions
1.What are the features of the span of control
2.Explain the factors determining the span of control
3.State and explain the steps of delegation of authority
4.What are the principles of delegation
5.Why delegation is needed?
6.What are the obstacles to delegation?
7.Distinguish between Centralization and Decen tralization of
Management.
8.Distinguish between Tall organization and Flat Organisation
9.Write short notes on:
a.Factors influencing decentralization
b.Tall Organisation
c.Flat Organisation


munotes.in

Page 101

1016
DIRECTING & CONTROLL ING
Unit Structure
6.0 Objectives
6.1 Introduction
6.2 Motivation
6.3 Communication
6.4 Leadership
6.5 Controlling
6.6 Summary
6.7 Questions
6.0 OBJECTIVES
After studying the unit the students will be able to:
Explain what is motivation and what are the factors influencing
motivation.
What is Communication and what are the barriers to effective
communication.
Discuss the concept of Leadership and functions of a Leader
Know the different styles of Leadership
Explain the concept of controlling and Techniques of Controlling.
6.1INTRODUCTION
In an organization, several activities are performed. These
activities are required to be Directed and Controlled. The organization
structure is designed for the division of tasks, the grouping of activities,
and directing and controlling the tasks of the organization. A detailed
study of all components and dimensions of organizational structure is
required for the creation of an efficient and stable structure. Directing
refers to a process or technique of instructing, guiding, inspiring, counseling,
overseeing, and leading people towards the accomplishment of organizational
goals. It is a continuous managerial process that goes on throughout the life
of the organization .
A directing function is performed by the managers along
with planning ,s t a f f i n g ,o r g a n i z i n g ,a n dc o n t r o l l i n gt od i s c h a r g et h e i r duties in
the organization. While other functions prepare a platform for action,
directing initiates action. Directing takes place at every level of themunotes.in

Page 102

102organization. Wherever there is a su perior -subordinate relationship, directing
exists as every manager provides guidance and inspiration to his subordinates.
Controlling is one of the important functions of a manager. To seek
planned results from the subordinates, a manager needs to exercis ee f f e c t i v e
control over the activities of the subordinates. In other words, the meaning of
controlling function can be defined as ensuring that activities in an
organization are performed as per the plans. Controlling also ensures that an
organization’s r esources are being used effectively & efficiently for the
achievement of predetermined goals. Managers at all levels of management
Top, Middle & Lower –need to perform controlling function to keep control
over activities in their areas .T h e r e f o r e ,c o n t r o l ling is very much important in
aneducational institution , military, hospital, & club as in any business
organization. Therefore, the controlling function should not be
misunderstood as the last function ofmanagement .I ti saf u n c t i o nt h a tb r i n g s
the mana gement cycle back to the planning function. Control is an
indispensable function of management without which the controlling function
in an organization cannot be accomplished and the best of plans which can be
executed can go away.
6.2 MOTIVATION
6.2.1 Meaning :
The word motivation is derived from the word ‘motive’ which
means needs desires, wants or drives which encourages people to do any
particular activity to achieve the goals. At a workplace, motivation can be
defined as the willingness to put in more effort to perform a particular job.
6.2.2 Importance of Motivation:
Employee motivation is highly important for every company due
to its following benefits.
1.It helps the company to build a sense of responsibility, loyalty, and
commitment among the employees towards the organization.
2.It helps motivated employees to get job satisfaction.
3.It helps the organization to achieve employee / HR development and
the em ployees to achieve their personal career goals.
4.It helps to improve the efficiency, productivity, and thereby
profitability of the organization.
5.It helps the organization to achieve employee co -operation in
introducing organizational changes.
6.It helps th e organization to retain capable and efficient employees so it
leads to a reduction of employee turnover.
7.Motivation promotes self -discipline employees maintain orderly
behavior without any fear of punishment.munotes.in

Page 103

1036.2.3 Factors influencing Motivation:
Thefactors influencing motivation can be broadly divided into two groups
(A) Monetary factors and
(B) Non Monetary factors.
A)Monetary Factors:
Monetary factors of motivation refer to giving monetary or financial
benefits to employees to encourage the m to perform better and the factors
are:
1.Salaries or Wages: An organization must pay reasonable
salaries/wages to employees as compensation for the work performed
by them. While fixing salaries, the organization may take into
consideration certain factor s such as loss of living, the company’s
ability to pay, the capability of the employers, salaries paid by
competitors, and so on.
2.Bonus: Bonus refers to sharing of profits earned by the company
among employees of the organization. It’s a kind of incentive for
performing better in the organization.
3.Allowances: Allowances are paid over and above salaries/wages paid
to employees. Various allowances include traveling, education, house
rent, entertainment, etc. can be a pain to the employees to motivate
them.
4.Special incentives: Special incentives are given to employees who
achieve their targets within a given time.
5.Stock option: Employees are given shares on a preferential basis, thus
enabling them to share the profits of the organization.
B)Non-Monetary Incentives
They refer to encouraging employees by making use of nonfinancial
incentives and they are.
1.Security of Service: Employees can work bettering an organization if
they are given security of service.
2.Appreciation: Employees should be appreciated by their superiors for
good work done by them. Good words of appreciation can encourage
employees for better performance.
3.Worker's participation: If the employees are involved in day -to-day
decision -making, it helps to create a sense of responsibility an d
belongingness among the employees.
4.Job Enrichment: Capable employees can be promoted to higher
posts, thus motivating them to share higher responsibilities to
undertake challenging jobs.munotes.in

Page 104

1045.Working conditions: The organization can provide better working
conditions to help the employees for better performance such as air -
conditioning, better lighting, sanitation facilities, safety measures,
repairs and maintenance of machinery, proper plant and/or office
layout, etc.
6.Other factors such as training to empl oyees, proper job placement,
promotions and transfers, proper performance appraisal, flexible
working hours, proper welfare facilities such as canteen, recreation,
sports facilities, etc. will also motivate the employees .
6.3COMMUNICATION
6.3.1 Meani ng:
Communication at the workplace means the transmitting of
information between one person or group and another person or group in
an organization. It can include verbal and non -verbal communication
verbal communication involves the usage of spoken wor ds for giving
messages. It can be one -to-one, over the phone, or in group settings such
as conducting meetings. Nonverbal communication consists of written
communication which can be in the form of written messages, documents,
letters, text charts, emails, reports, SMS.
Good communication is an essential tool in achieving productivity
and maintaining strong waking a relationship at all levels of an
organization.
6.3.2 Importance of Communication
The following are the benefits of effective communication in an
organization.
1.It improves overall company performance by improving employees’
efficiency and productivity.
2.It helps in giving clear instructions to employees about the jobs and
other related issues.
3.It helps to build team spirit in the organization.
4.It facilitates job satisfaction.
5.It also helps to reduce absenteeism and turnover.
6.It helps to encourage employees to come up with innovative ideas.
7.It helps to manage workforce diversity.
8.It helps to solve recurring problems in the organization.
9.It helps to create a sense of loyalty and responsibility among the
employees.
10.It helps to give good customer service and maintain good relations
with several parties directly or indirectly associat ed with themunotes.in

Page 105

105organization such as shareholders, creditors, government, and the
society at large.
6.3.3 Barriers to effective communication:
The common barriers to effective communication can be given as
follows:
1.Theuse of complicated , unfamiliar, and technical terms.
2.Some people may be unable to express their feelings or emotions and
they may feel awkward to receive any communication as regards
certain topics such as politics, religion, disabilities, sexuality and sex,
racism, and so on.
3.Lack of att ention , interest, distractions, or irrelevance to the receiver.
4.Differences in perception and viewpoint.
5.Physical disabilities such as hearing problems or speech difficulties.
6.Inability to see or understand nonverbal communication such as
non-verbal cues, gestures, posture, general body language, etc.
7.Inability to understand the language and/or unfamiliar accents.
8.Bias: People sometimes hear what they expect to hear rather than what
is said and derive incorrect conclusions.
9.Cultural di fferences : The norms of social interaction may be different
in different cultures. Even emotions may be expressed differently in
different cultures.
6.4LEADERSHIP
6.4.1 Meaning and Definitions :
Leadership is an important element of the directing f unction of
management. It is an activity of influencing people to work voluntarily
towards the achievement of a common goal.
The term leadership has been defined as follows:
According to Koontz and O’ Donnell , Leadership is the ability of a
manager to induce subordinates to work with confidence and zeal.
Allford and Beaty define it as the ability to secure desirable actions
from a group of followers voluntarily, without the use of coercion.
George R. Terry defines it as the activity of influencing people to
strive willingly for group objectives.
Thus in a leadership function, the manager acts as a leader and
influences his subordinates to put in their best efforts to achieve certainmunotes.in

Page 106

106objectives A leader c an function only when he has followers A leader has
to take complete responsibility for the results. As leadership is a
personal/human activity, its style may change as per the person/situation.
6.4.2 Functions of a leader:
Following are the important f unctions of a leader.
1.Setting goals/targets: Leadership is an activity of influencing people
to work voluntarily towards the achievement of certain
goals/objectives. So a leader has to set first goals/targets for his
subordinates.
2.Assigning jobs: A leade r has to assign the jobs to his subordinates as
per their abilities. He also has to make available facilities and work
conditions to help the subordinates to perform their jobs effectively.
3.Influencing subordinates to take actions: A leader has to take
initiative and required decisions to instruct employees to perform their
jobs effectively.
4.Co-ordination: In an organization, a particular job may be performed
when many people put in their best efforts. So a leader has to
coordinate the activities of the p eople to achieve the required
performance.
5.Direction and Motivation: A leader has to direct and motivate his
subordinates to put in their best efforts to achieve the desired
goals/targets.
6.A bridge between management and subordinates: A leader has to
work as a bridge between management and subordinates. He has to
communicate the plans and policies of the management to his
subordinates and he has to put forward problems and grievances of
subordinates to the management.
6.4.3 Qualities of a good leader:
Leadership is a personal activity. A leader is required to have
certain qualities to be a successful leader. The following are the qualities
required by a good leader.
1. Truthfulness:
Truthfulness is an essential trait for great leaders. Your capacity to
be open, honest and forthright is a measure of your leadership. Telling the
truth with zero tolerance for dishonesty in others, is your hallmark.
2. Responsibility
True leadership means 100% responsibility for your actions. Total
ownership e ven when the outcome is undesirable. High scores in this
attribute gives you the most freedom as a leader.munotes.in

Page 107

1073.Accountability
In this trait we are measuring your capacity as a leader to hold
others accountable for the results they promised. Your abilit y to notice and
not walk past unmet deadlines or commitments will have the team operate
at a high level.
4.Loyalty
As a leader making decisions for the greater good where you can
put aside your personal needs or goals is Loyalty. Loyalty means the
leader serves the organisation, not the individuals in it.
5. Vision
A leader has to have a vision. Great ones are able to see
possibilities and identify opportunities but don’t stop there. Great leaders
turn ideas into action.
6.Assertiveness
Asserti veness done right has great impact on leadership. Leaders
are to express their opinions confidently, irrespective of relationship. They
are to stand up for self even in difficult situations. Good leaders know the
power of a No, when it is most necessary.
7. Ability to Talk
Good leaders enjoy talking with people. They are articulate and
have no problem expressing their opinion.
8. Ability to Listen
Employees esteem bosses who choose to give patient and
thoughtful attention to what is being presented to them. There is nothing
more attractive to a member than a leader who listens.
9. Appreciation
Appreciation is a potent source of motivation for people. A leader
is able to inspire by acknowledging others’ contribution, and by constantly
offering positive and critical feedback.
10. Empathy
Empathy is an enviable trait. One who chooses to see the world
through others’ eyes is able to provide support and build a sense of trust.
Leaders must understand differing perspectives and needs, an d work at
being socially sensitive, tactful and perceptive.munotes.in

Page 108

1086.4.4 Styles of Leadership:
Effective leadership is required to lead and guide the subordinates
so that they can perform the jobs properly. Every leader/manager makes
use of some pattern or s tyle of leading the subordinates. So such styles
differ from leader to leader from situation to situation and from
organization to organization depending upon the philosophy and values of
the leader and the organization.
Following are the different style s of leadership:
1.Autocratic Style:
In the Autocratic style of leadership, the leader takes all decisions by
himself, and subordinates are expected to follow them. He is only
responsible for all his decisions. The relations between superiors and
subordinat es are formal.
2.Bureaucratic Style:
This style of leadership is generally followed in government
organizations. The leader follows rules and regulations of the
organization. He has limited authority to make the decisions. He has to
follow the scalar chain even in the case of urgency. The relations
between superiors and subordinates are formal. In this style, there is a
delay in decision -making and taking action.
3.Consultative / Democratic Style of Leadership:
In this type, the leader consults his subordin ates before making
decisions. He considers the opinions, and views of his subordinates.
The relations between superiors and subordinates are informal.
4.Participative Style of leadership:
In this style, the leader allows his subordinates to take part in de cision -
making. The leader and his subordinates share the responsibility for
making the decision. So this type of leadership creates a sense of
responsibility and loyalty among the subordinates.
5.Laissez -faire Style:
In this style, the superior allows the subordinates to take decisions.
The superior acts as a friend, philosopher, and guide while taking
decisions.
6.Paternalistic Style:
This style of leadership creates a family atmosphere within the
organization. The le ader is respected and treated as a father figure by
the subordinates. This style is mostly followed in Japanese
organizations.
7.Sociocratic Style:
In this style, the leader is more concerned about the welfare of his
subordin ates rather than protecting organizational interests.munotes.in

Page 109

1098.Neurocratic Style:
The leader of this style is highly task -oriented and concerned about
getting the job done at any cost. He is highly sensitive about the job.
9.Situational Style:
In this style, the leader is very professional and changes / adjusts
his style as per the situation. He may use an autocratic style while
taking urgent and important decisions. He may use the consultative
style for getting co -operation and views and opinions of subordinates
and may make use of participative style when group decision making
is necessary.
6.5CONTROLLING
6.5.1 Meaning:
Controlling is the last function of management. It comes after other
functions of management such as planning, organizing staffing, and
directing. The planning function starts with setting objectives or standard
results and deciding the future course of action. Organizing staffing and
directing take care of the course of action and the organization gets results
in terms of profits, net worth, goodwill and reputation, and customer
feedback. The controlling function relates to comparing actual results with
the objectives. If the actual results are not in line with the objectives or
standard results, corrective measures can be taken to improve th e
performance.
6.5.2 Steps of Controlling:
Some of the essential steps of control are as follows:
1.Setting performance standards:
The first step in the process of controlling is fixing performance
standards. These standards are the basis for measuring actual
performance.
2.Measurement of Actual Performance:
Once the standards are fixed, the next step is to measure the actual
performa nce some of the ways for measuring the actual performance
are-
a)Appraisal reports of employees for measuring their performance.
b)For measuring financial performance various ratios like gross
profit ratio, debtor turnover ratio/return on investment, current
ratio, etc. can be used.
c)Marketing performance can be measured with the number of units
sold, increase in market share, etc.
d)Sample checking can be done to check the quality of the units
produced.munotes.in

Page 110

1103.Comparing Actual Performance with standards:
This step involves comparing the actual performance with standard
performance to find out the deviations from the standards fixed. The
manager has to find out the extent of the deviation and has to focus on
those deviations which are critical and important for busin ess. Minor
or non -important deviations can be ignored. Major deviations like
replacement of machinery appointment of workers, quality of raw
material, rate of profits are required to be studied and analyzed.
Once the deviation is identified, a manager has to analyze various
causes which have led to deviation. The cause can be wrong planning,
lack of coordination, defective implementation of plans, ineffective
supervision, etc.
4.Taking remedial actions:
Once the causes and extent of deviations are known / the manager has
to take corrective measures to improve the performance. After taking
the corrective measures, if the performance is not improved, then the
manager can revise the targets.
6.5.3 Essentials of a good control system:
The essentials of a good control system are as follows:
1.Focus on objectives:
The control system should be based on the objectives of an
organization because its primary aim is to help the organization to
achieve its objectives by identifying the weaker areas and taking
measures to improve upon them.
2.The control system should be suitable for the needs of the
organization.
3.The control system should be prompt or quick in finding out the
weaker areas. This can help the management to correct them quickly.
4.The control system should be flexible . It should change as per the
company’s plans, objectives, situations, environment, technology, etc.
5.The control system should be future -oriented . It should take into
consideration the future req uirements.
6.Economical:
The control system should be economical. This means that the cost of
the control system should not be more than the benefits.
7.Simplicity:
The control system should not be complicated. It should be easy to
understand and simple to u se.munotes.in

Page 111

1118.Motivating:
The control system should be such that it should have certain measures
to prevent mistakes as prevention is always better than cure. It should
encourage employees to perform better and attain their targets.
9.Suggestive:
The control system should not only identify the problem but also give
solutions to solve the problem.
10.Realistic:
The control system should have proper standards. The standards
should be very clear. They should be definite, verifiable, specific, and
measur able. They should not be too high or too low.
6.5.4 Techniques of Controlling:
Techniques of controlling can be grouped into two categories
A) Traditional Techniques B) Modern Techniques
1)Personal Observation 1)Return on Investment
2)Statistical Reports 2)Ratio Analysis
3)Breakeven Analysis 3)Responsibility
Accounting
4)Budgetary Control 4)Management Audit
5)PERT and CPM
6)MIS
A) Traditional Techniques
Traditional techniques refer to the techniques which are being used by
business organizations for a longer period and are still in use. Such
techniques are.
1.Personal Observation / Inspection :
Theseare the most traditional techniques of control. It he lps the
manager to collect first -hand information about the performance of the
employees. It helps to improve the performance of employees as they
become aware that they are being observed by the manager. It cannot be
used in all types of jobs as it is ver yt i m e -consuming.
2.Statistical Reports :
Statistical analysis in the form of percentages, ratios, averages, etc.
in different areas provides useful information regarding the performancemunotes.in

Page 112

112of an orga nization over some time. It facilitates comparison of
performance with the standards fixed and also with the previous year's
performance.
3.Break -even Analysis :
The sales volume at which there is no profit, no loss is known as the
break -even point. This analysis is useful to study the relationship between
costs, volume, and profits. It can show the overall picture of probable
profit/losses at different levels of sales volume while analyzing the overall
position.
4.Budgetary Control :
The budget can be de fined as a quantitative statement prepared for
a definite future period to obtain a given objective. It is also a statement
that reflects the policy of that particular period.
The common types of budgets used by an organization are as follows:
a)Sales budge t:A statement of what an organization expects to sell in
terms of quantity as well as value.
b)Production budget: A statement of what an organization plans to
produce in the budgeted period.
c)Material budget: A statement of estimated quantity and costs of
materials required for production.
d)Cash budget: Anticipated cash inflows and outflows for the budgeted
period.
e)Capital budget: Estimated spending on major long -term assets like a
new factory or major equipment.
f)Research and Development budget: Estimated spending for the
development or refinement of products & processes. It is a controlling
technique because budgetary performance/results can be compared
with actual performance/results and if there are any deviations,
necessary measures can be ta ken.
B) Modern Techniques of controlling:
Modern techniques of control are those which are new and have
been developed recently. They are
1.Return on Investment:
It is a technique for measuring whether or not invested capital has
been used effectiv ely for earning a reasonable return on investment. It
is used to control the overall performance of an organization or its
departments or divisions. Net income before or after -tax may be used
for making comparisons. Total investment is the investment made both
in working as well as fixed capital.munotes.in

Page 113

1132.Ratio Analysis :
The most commonly used ratios as a “controlling technique are
liquidity ratios, solvency ratios, profitability ratios, and turnover ratios.
3.Responsibility Accounting:
It is a technique in which the managers/heads of different sections,
divisions, and departments of an organization are made responsible for
achieving the target set for his center. Responsibility centers may be of
the following types -cost center, revenue center, profit cent er,
investment center.
4.Management Audit:
Management audit refers to a systematic appraisal of the
performance of different managerial functions during a certain period.
The aim is to assess the efficiency and effectiveness of managerial
plans and polic ies and to improve its performance in future periods.
5.PERT and CPM:
the full form of PERT is Programmed Evaluation and Review
Technique and the full form of CPM is Critical Path Method. These
are network techniques and are used while performing various
managerial functions and also while implementing and reviewing
various complex and complicated projects.
6.MIS:
Information is the lifeblood of an en terprise. The information can
be defined as the knowledge communicated by others or obtain from
investigation or study. The seniors in the firms need to have up -to-date
knowledge about customers, dealers, suppliers, investors, and others as
well as it shou ld have updated information about political, economic,
social, technological, and legal changes. This information is required
to take timely decisions. The flow of information is made regular by
an information system, commonly known as a management
informa tion system (MIS).MIS can be defined as the system providing
needed information to each manager at the right time, in the right form
and relevant form one which aids his understanding and stimulates his
action.
6.6SUMMARY
Directing has an important role to play in establishing harmony and
coordination between the objectives of both parties. Every manager of the
organization performs some function of directing. From top executives to
low-level managers all give direction to their subordinates. Direction is said
to be consisting of human factors. In simple words, it can be described as
guidance to workers who are doing work. In the infield of management,munotes.in

Page 114

114the direction is said to be all those activities that are designed to enc ourage
the subordinates to work effectively and efficiently. According to Human,
“Directing consists of process or technique by which instruction can be
issued and operations can be carried out as originally planned” Therefore,
Directing is the function of guiding, inspiring, overseeing, and instructing
people towards accomplishment of organizational goals.
Controlling is a function that brings the management cycle back to
the planning function. Thus, the controlling function act as a tool that helps
in finding out that how actual performance deviates from standards and also
finds the cause of deviations & attempts which are necessary to take
corrective actions based upon the same.This process helps in the formulation
of plans in light of the problems that were identified &, thus, helps in better
planning in future periods. So from the meaning of controlling we
understand it not only completes the management process but also
improves planning in the next cycle
6.7QUESTIONS
6.7.1Multiple Choice Questions
1.The word motivation is derived from the word _____________
a)Motive b) Motivate c) Demotivate d) None of the above
2.__________ is the willingness to put in more effort to perform a
particular job
a)Motivation b) Demotivation c) Coordination d) Communication
3. __________ factors of motivation refer to giving monetary or
financialbenefits to employees
a) Non Monetary b) Less Working Time c) Excess Authority d)
Monetary
4. _____________ is a Monetary Factor of Motivation
a)Bonus b) Job Security c) Working Conditions d) Job Enrichment
5. _____________ is a Monetary Factor of Motivation
a)Allowances b) Job Security c) Working Conditions d) Job
Enrichment
6._____________ is a Non -Monetary Factor of Motivation
a) Bonus b) Allowances c) Job Securi tyd) Salaries
7._____________ is a Non -Monetary Factor of Motivation
a) Bonus b) Allowances c) Working Conditions d) Salaries
8. ___________ Means people sometimes hear what they expect to hear
rather than what is said
a)Being Bias b) Being Interested c) Distraction d) Irrelevancemunotes.in

Page 115

1159. _________is an activity of influencing people to work voluntarily
towards the achievement of a common goal
a) Motivation b) Leadership c) Coordination d) Communication
10. In ________ style of leadership, the leader takes alldecisions by
himself, and subordinates are expected to follow them .
a)Autocratic b)Bureaucratic c) Democratic d) Participative
11. In _________ style of Leadership, leader follows rules and regulations
of the organization
a) Autocratic b) Bureaucratic c) Democratic d) Participative
12.In ________ type, the leader consults his subordinates before making
decisions
a) Autocratic b)Bureaucratic c) Democratic d) Participative
13.In _______ leadership style, the leader allows his subordinates to take
part indecision -making
a) Autocratic b) Bureaucratic c) Democratic d) Participative
14.In __________style of leadership creates a family atmosphere within
the organization
a)Paternalistic b) Sociocratic c) Neurocratic d) Situat ional
15. In ________ style, the leader is more concerned about the welfare of
his subordinates
a) Paternalistic b)Sociocratic c) Neurocratic d) Situational
16.The leader of __________ style is highly task -oriented and concerned
about getting the job don e at any cost
a) Paternalistic b) Sociocratic c) Neurocratic d) Situational
17. In _________style, the leader is very professional and changes adjusts
his style as per the situation
a) Paternalistic b) Sociocratic c) Neurocratic d) Situational
18._____ _______is the last function of management.
a)Controlling b) Demotivation c) Coordination d) Communication
19.The sales volume at which there is no profit, no loss is known as
____________
a) Break Even Analysis b) Cash Sales c) Credit Sales d) Sale at cost
6.7.2 Theory Questions
1.What is the meaning of motivation? Explain the Factors influencing
Motivation.
2.Define the term communication and explain the barriers to effective
communication.
3.Discuss the Techniques of controlling.
4.Elaborate on the different styles of leadership.munotes.in

Page 116

1165.Write short notes
a.Importance of Motivation
b.Importance of Communication
c.the function of a leader
d.Qualities of a good leader.
e.Modern Techniques of controlling
f.Traditional techniques of controlling
6.Explain the following ter ms
a.Motivation
b.Communication
c.MIS
d.Leadership
e.Autocratic style of leadership
f.Bureaucratic Style
g.Democratic Style of Leadership
h.Paternalistic Style

munotes.in