UNIVERSITY OF CALICUT

SCHOOL OF DISTANCE EDUCATION

B.COM

(1st SEMESTER)

Core Course: BCIB01

BUSINESS MANAGEMENT

(2019 ADMISSION ONWARDS)

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 BUSINESS MANAGEMENT

STUDY MATERIAL

1st SEMESTER

Core Course: BCIB01

B.COM

(2019 ADMISSION ONWARDS)

UNIVERSITY OF CALICUT
SCHOOL OF DISTANCE EDUCATION
Calicut University- PO, Malappuram,
Kerala, India - 673 635
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 UNIVERSITY OF CALICUT
SCHOOL OF DISTANCE EDUCATION
STUDY MATERIAL FIRST SEMESTER

B.COM
(2017 ADMISSION ONWARDS)

Core Course: BCIB01

BUSINESS MANAGEMENT

PREPARED BY:
RAJAN P
Assistant Professor of Commerce
School of Distance Education
University of Calicut

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4
 CONTENTS

MODULE PAGE No

Module 1 1 - 26

Module 2 27 -67

Module 3 68 - 88

Module 4 89 - 116

Module 5 117 - 127

5
 MODULE 1
NATURE AND SCOPE OF
MANAGEMENT

Managing is essential in all organized co-operation, as well

as at all levels of organization in an enterprise. It is the function
performed not only by corporation President and the army general
but also of the shop supervisors and the company commander.
Managing is equally important in business as well as non business
organizations. During the last few decades, Management as a
discipline has attracted the attention of academicians and
practitioners to a very great extent. The basic reason behind this
phenomenon is the growing importance of management in day to
day life of the people.
Because of the divergent views, it is very difficult to give a
precise definition to the term “Management”. It has drawn
concepts and Principles from economics, sociology, psychology,
anthropology, history, and statistics and so on. The result is that
each group of contributors has treated Management differently.
Management is invariably defined as the process of “getting things
done through the effort of others”, getting from where we are to
where we want to be with the least expenditure of time, money
and efforts, or co-ordinating individual and group efforts, or co-
ordinating individual and group efforts towards super-ordinate
goals.
Harold Koontz defines management in a very simple form
where he states that “Management is the art of getting things
done through and with the people in formally organized groups”.
Dalton E. McFarland defines Management as “Management
is defined for conceptual, theoretical and analytical purposes as
that process by which Managers create direct, maintain and
operate purposive organization through systematic co-ordinated
co-operative human effort.”

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NATURE AND SCOPE OF MANAGEMENT
The study and application of Management techniques in
managing the affairs of the organization have changed it‘s nature
over the period of time. The nature of Management can be
described as
1. Multi disciplinary
Management integrates the ideas and concepts taken from
disciplines such as psychology, sociology, anthropology,
economics, ecology, statistics, operation research, history etc.
and presents newer concepts which can be put in practice for
managing the organizations. Contributions to the field of
management can be expected from any discipline which deals
with some aspects of human beings.
2. Dynamic Nature of Principles
Principles are a fundamental truth which establish cause and
effect relationship of a function. Based on practical evidences,
management has framed certain principles, but theseprinciples
are flexible in nature and change with the changes in the
environment in which an organization exists. In the field of
Management, organization researches are being carried on to
establish principles in changing society and no principles can be
regarded as a final truth.
3. Relative, Not Absolute Principles
Management Principles are relative, not absolute and they
should be applied according to the need of the organization. Each
organization may be different from others. The difference may
exist because of time, place, socio-cultural factors etc. A particular
management Principles has different strength in different conditions
and therefore Principles of Management should be applied in the
light of the prevailing conditions.
4. Management, science or Art
Science is based on logical consistency, systematic
explanation, critical evaluation and experimental analysis. It is a
systematized body of knowledge. Management, being a social
science may be called as an inexact or pseudo science. The
7
meaning of art is related with the bringing of desired result through
the application of skills. It has to do with applying of knowledge
or science or of expertness in performance. Management can be
considered as an art and a better manager is one who knows
how to apply the knowledge in solving a particular problem.
5. Management as a Profession
The word profession may perhaps be defined as an
occupation based upon specialized intellectual study and training,
the purpose of which is to supply skilled service or advice to
others for a definite fee or salary. Profession is an occupation for
which specialized knowledge, skills and training are required and
the use of these skills is not meant for self satisfaction , but these
are used for the larger interests of the society and the success of
these skills is measured not in terms of money alone. Management
possess certain characteristics of profession, while others are
missing. Therefore, it cannot be said to be a profession, though it
is emerging as a profession and the move is towards management
as a profession.
6. Universality of Management
There are arguments in favour and against the concept of
universality. The arguments in favour of universality are:-
[a]management as a process and the various process of
management are universal for all organizations
[b]distinction between management fundamentals and
techniques [c]distinction between management fundamentals and
practices. The arguments against universality are:-
[a]management is culture bound
[b]management depends upon the objectives of an enterprise
EVOLUTION OF MANAGEMENT
Creative, dynamic management is a driving force behind
the success of any business. In today‘s marketplace, change is
rapid and managers are expected to deal with a broad set of
issues and needs. How they address those issues is very different
today than it was a hundred years ago. Times have changed,
labor has changed, and, most importantly, management
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philosophies have changed. The management philosophies of
yesterday are valuable tools for managers to use today. The
development of management thought has been evolutionary in
nature under the following four parts:-
1.Pre- Scientific Management Era [Before 1880] 2.Classical
Management Era [1880-1930]
3.Neo-Classical Management Era[1930-1960] 4.Modern
Management Era [1950 onwards]
During pre-scientific management era, valuable contributions
were made by Churches, Military organizations and writers like
Charles Babbage and Robert oven. A school of thought emerged
in this era is known as pre-scientific management school.
The earliest management philosophy, the classical
perspective, emerged in the 19th and early 20th century in
response to a problem businesses grapple with today: how to
make businesses efficient operating machines. In the factory
system, managers had the challenge of coordinating a huge,
unskilled labor force, complex production systems, and an
expansive manufacturing operation. The classical theorists like
F.W.Taylor and Henri Fayol concentrated on organizational
structure for the accomplishment of organizational goal.
Frederick Winslow Taylor‘s solution was the Scientific
Management approach which proposed that productivity could
be improved only by a series of precise procedures developed
from a scientific observation of a situation. This approach
standardized labor and training, employee hiring, and tied
compensation to increased productivity. While highly successful,
this approach did not take into consideration the diversity of abilities
and needs within the workforce.
The neo classical writers like Elton Mayo and Chester I.
Barnard tried to improve upon the theories of classical writers.
They suggested improvements for good human relations in the
organization. A crucial shift in management philosophy came in
the 1920s with a new emphasis on human behaviours, needs
and attitudes in the workplace over the economy and efficiency
9
ofproduction. This new way of thinking led the way for the human
resource perspective, which saw workers as a resource to be
fully utilized, as opposed to tools from which to extract utility. It
suggested that beyond the need for worker inclusion and
supportive leadership, organizations should design jobs to meet
the higher needs of their employees and utilize their full potential.
This perspective paved the way for the role that human relations
departments play in organizations today.
The modern management thinkers like Robert Schlaifer and
Herbert Simon define organization as a system. They also consider
the impact of environment on the effectivenss of the organization.
The social system school, the decision theory school, the
quantitative management school, the systems management school,
etc. are the contributions of modern management era.
To sum up
(A) Early management approaches which are represented by
scientific management, the administrative management theory
and the human relations movement
(B) Modern management approaches which are represented
by scientific management, the administrative/management
science approach, the systems approach and the contingency
approach
SCHOOLS OF MANAGEMENT THOUGHT
The development of thought on Management dates back to
the days when people first attempted to accomplish goals by
working together in groups.With the work of Frederic Taylor
and Henri Fayol, there was serious thinking and theorizing about
managing many years before.
In the early 19th century , industrialization and the factory
system saw the advent of assembly line operation and costing
systems. Management Principles in business were adopted in
the latter half of nineteenth century.As the concept of management
evolved, various schools of management thought emerged. Thus
there came a myriad ways of classifying management theories.
One such classification was given by Koontz, who classified the
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theories into the following six groups: The management process
school The empirical school The human behavioural school The
social systems school The decision theory school The
mathematical school
The purpose of this article is to identify the various schools
of management theory, indicate the source of the differences,
and to provide some suggestions for disentangling the management
theory jungle. Koontz describes six schools of management
theory as follows.
1. The Management Process School
The management process school views management as a
process of getting things done with people working in organized
groups. Fathered by Henri Fayol, this school views management
theory as a way of organizing experience for practice, research
and teaching. It begins by defining the functions of management.
2. The Empirical School
The empirical school views management theory as a study
of experience. Koontz mentions Ernest Dale’s comparative
approach as an example which involves the study and analysis of
cases. The general idea is that generalizations can be drawn from
cases that can be applied as guides in similar situations. As such
it is also known as case approach or management experience
approach. According to this school, management is considered
as a study of managers in practice. It is a study of success and
failures in the application of management techniques by managers
in their practice. Theories of management can be developed by
studying large number of experiences because some sort of
generalizations can be possible.
3. The Human Behaviour School
The central thesis of the human behaviour school is that since
management involves getting thing done with people, management
theory must be centered on interpersonal relations. Their theory
focuses on the motivation of the individual viewed as a socio-
psychological being. This approach can be divided into two groups
; interpersonal behaviours approach and group behaviours
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approach.
4. The Social System School
The members of the social system school of management
theory view management as a social system. March and Simon’s
1958 book Organizations published by Wiley is used as an
example, but Koontz indicates that Chester Barnard is the spiritual
father of this school of management. The social system school
identifies the nature of the cultural relationships of various social
groups and how they are related and integrated. Barnard’s work
includes a theory of cooperation which underlies the contributions
of many others in this school. Herbert Simon, and others
expanded the concept of social systems to include any cooperative
and purposeful group interrelationship or behaviour. According
to this approach, the organization is essentially a cultural system
composed of people who work in co-operation. As such, for
achieving organizational goals, a co-operative system of
management can be developed only by understanding the
behaviour of people in groups.
5. The Decision Theory School
The decision theory school of management concentrates on
the rational approach to decisions where alternative ideas or
courses of action are analyzed. The decision is the central focus.
This approach looks at the basic problem of management around
decision making – selection of suitable course of action out of
the given alternatives Major contribution to this approach has
come from Simon, March, Cyert, Forrester, etc. The major
emphasis of this approach is that decision making is the job of
every manager. The manager is a decision maker and the
organization is a decision making unit. Therefore the basic problem
in managing is to make rational decision.
6. The Mathematical School
The mathematical school of management views management
as a system of mathematical models and processes. This includes
the operations researchers and management scientists. But Koontz
points out that in his view mathematics is a tool, not a school.
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Frederick Taylor and Scientific Management
Frederick Winslow Taylor is generally acknowledged as “the
father of scientific management.”His experiences as an apprentice,
a common labourer, a foreman, a master mechanic
, and then the Chief Engineer of the Steel company gave
Taylor ample opportunity to know at first hand the problems and
attitudes of workers and to see the great opportunities for
improving the quality of Management.
Taylor principal concern throughout most of his life was that
of increasing efficiency in production, not only to lower costs
and raise profits, but also to make possible increased pay for
workers through their higher productivity. Taylor saw productivity
as the answer to both higher wages and higher profits, and he
believed that the application of Scientific methods, instead of
custom and rule of thumb, could yield the productivity without
the expenditure of more human energy or effort.
Taylor‘s famous work entitled the “The Principles of Scientific
Management” was published in 1911.Scientific Management is
not any efficiency device, in its essence, scientific management
involves a complete mental revolution on the part of the working
man in any particular establishment or industry – and is equally
complete mental revolution on the part of those on the management
side. The great mental revolution that takes place in the attitude
of two parties is that together they turn their attention towards
increasing the surplus than dividing the surplus.
The fundamental Principles that Taylor was underlying the
Scientific approach of Management may be summarized as
follows:-
1. Replacing rules of thumb with science.
2. Obtaining harmony in group action, rather than discord
3. Acheiving co-operation of human beings, rather than chaotic
individualism.
4. Working for maximum output rather than restricted output.
5. Developing all workers to the fullest extent possible for their
own and their company‘s highest prosperity.
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Contributions of Henry Fayol
Henri Fayol (Istanbul, 29 July 1841–Paris, 19 November
1925) was a French mining engineer, director of mines, who
developed independent of the theory of Scientific Management,
a general theory of business administration also known as
Fayolism. His contributions are generally termed as operational
management or administrative management.
He was one of the most influential contributors to modern
concepts of management. Fayolism is one of the first
comprehensive statements of a general theory of management
developed by Fayol. He has proposed that there are six primary
functions of management and 14 principles of management. The
Primary function of management are forecasting planning
organizing commanding coordinating and controlling.Fayol‘s
contributions were first published in the book form titled as
“Administration Industrielle at Generale‘ in French language , in
1916.Fayol looked at the problems of managing an organisation
from top management point of view. He has used the term
administration‘ instead of management‘ emphasising that there
is unity of science of administrator. For him, administration was
common activity and administrative doctrine was universally
applicable. Fayol found that the activities of an industrial
organisation could be divided into six groups.
1. Technical [relating to production]
2. Commercial [buying, selling and exchange]
3. Financial [search for capital and its optimum use]
4. Security [protection of property and person]
5. Accounting [including statistics] and
6. Managerial [planning, organisation, command, coordination,
and control]
Pointing out that these activities exist in business of every
size, Fayol observed that the first five were well known, and
consequently he devoted most of his book to analyse the sixth
one, that is, managerial activity. Fayol has divided his approach
of studying management into three parts;[1] managerial qualities
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and training [2]general principles of management and [3] elements
of management
[1 ]Managerial qualities and training
Fayol was the first person to identify the qualities required
in a manager. According to him, there are six types of qualities
that a manager requires.these are as follows:
1. Physical[health, vigour and address]
2. Mental[ability to understand and learn, judgement, mental
vigour, and adaptability
3. Moral [energy, firmness, initiative, loyalty, tact, and dignity]
4. Educational [general acquaintance with matters not belonging
exclusively to the function performed]
5. Technical [peculiar to the function being performed] and
6. Experience [arising from the work]
General Principles of Management
Fayol has given fourteen principles of management. He has
made distinction between management principles and management
elements. While management principle is a fundamental truth and
establishes cause-effect relationship, management element
denotes the function performed by a manager. Henry Fayol
strongly felt that managers should be guided by certain principles
while giving the management principles, Fayol has emphasised
two things.
1. The list of management principles is not exhaustive but
suggestive and has discussed only those principles which
he followed on most occasions.
2. Principles of management are not rigid but flexible.
Fayol evolved 14 general principles of management which
are still considered important in management. These are:
1. Division of work:
This principle suggests that work should be assigned to a
person for which he is best suited. Work should be divided up to
that stage where it is optimum and just. This division of work can
be applied at all levels of the organization. Fayol has advocated
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division of work to take the advantages of specialization
2. Authority and responsibility:
Responsibility means the work assigned to any person, and
authority means rights that are given to him to perform that work.
It is necessary that adequate authority should be given to discharge
the responsibility.Authority includes official authority and personal
authority. Official authority is derived from the manager‘s position
and personal authority is derived from the personal qualities. In
order to discharge the responsibility properly, there should be
parity of authority and responsibility.
3. Discipline:
This principle emphasizes that subordinates should respect
their superiors and obeys their orders. On the other hand,
superiors‘ behaviour should be such that they make subordinates
obedient. If such discipline is observed, there will be no problem
of industrial disputes. Discipline is obedience, application, energy,
behaviour and outward mark of respect shown by employees.
Discipline may be of two types; self imposed discipline and
command discipline. Self imposed discipline springs from within
the individual and is in the nature of spontaneous response to a
skilful leader. Command discipline stems from a recognized
authority.
4. Unity of command:
Subordinates should receive orders from one superior only.
If he receives orders from more than one person, he can satisfy
none. The more completely an individual has a reporting
relationship to a single superior, the less is the problem of conflict
in instructions and the greatest is the feeling of personal
responsibility for results.Fayol has considered unity of command
as an important aspect in managing an organization.
5. Unity of Direction:
Each group of activities having the same objective must have
one head and one plan. In the absence of this principle, there
may be wastage, over expenditure and useless rivalry in the same
organisation. Unity of direction is different from Unity of command
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in the sense that former is concerned with functioning of the
organization in respect of its grouping its activities or planning
while later is concerned with personnel at all levels in the
organization in terms of reporting relationship.
6. Subordination of individual to general interest:
While taking any decision, the general interest, i.e., the interest
of the organization as a whole should be preferred to individual
interests. Individual interest must be subordinate to
general interest when there is a conflict between the two.
Superiors should set an example in fairness and goodness.
7. Remuneration:
Management should try to give fair wages to the employees
and employees should have the satisfaction of being rightly paid.
Remuneration must give satisfaction to both the employers and
employees.
8. Centralization:
Everything which goes to increase the importance of
subordinate‘s role is decentralization and everything which goes
to reduce it is centralization. When a single person controls the
affairs of an organization, it is said to be complete centralisation.In
small concerns, a single manager can supervise the work of the
subordinates easily, while in a big organization, control is divided
among a number of persons. Thus centralization is more in small
concerns and it is less in big concerns. Fayol‘s opinion was that
the degree of centralization should be fixed on the basis of
capabilities of the persons.
9. Scalar Chain:
This is the chain of superiors from the highest to the lowest
ranks. The order of this chain should be maintained when some
instructions are to be passed on or enquiries are to be made It
suggests that each communication going up or coming down must
flow through each position in the line of authority. It can be short
circuited only in special circumstances when its rigid following
would be detrimental to the organization. For this purpose, Fayol

17
has suggested gang Plank which is used to prevent the scalar
chain from bogging down action.
10. Order:
This is a principle relating to the arrangement of things and
people. In material order, there should be a place for everything
and everything should be in its place. In social order, there should
be right man in the right place. Placement of men and materials
should be properly made. Proper space should be made available
where materials can be kept safely. Each man should be provided
the work for which he is best suited.
11. Equity:
This principle requires the managers to be kind and just so
that loyalty can be won from the subordinates. Equity is a
combination of justice and kindness. The application of equity
requires good sense, experience, and good nature for soliciting
loyalty and devotion from subordinates.
12. Stability of Tenure:
Employees should be selected on the principles of stability
of employment. They should be given necessary training so that
they become perfect. There should not be frequent termination
of employees. Stability of tenure is essential to get an employee
accustomed to new work and succeeding in doing it well.
13. Initiative:
Within the limits of authority and discipline, managers would
encourage their employees for taking initiative. Initiative is
concerned with thinking out and execution of a plan. Initiative
increases zeal and energy on the part of human beings.
14. Esprit de Corps:
This is the principle of Union is strength‘ and extension of
unity of command for establishing team work. Managers should
infuse the spirit of team work in their subordinates.
Fayol made it clear that these principles can be applied to
most organizations, but these are not absolute principles.
Organizations are at liberty to adopt those which suit them or to
delete a few according to their needs.
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 MANAGEMENT AS A SCIENCE AND AN ART
The controversy with regard to management, as to whether
it is a science or art is very old. Specification of exact nature of
management as science or art or both is necessary to specify the
process of learning of management. Management is not easy. It
is not an exact science. In fact, it is seen as an art that people
master with experience.. When viewed as an art, management is
remarkable, but natural expression of human behaviour. It is
intuitive, creative and flexible. Managers are leaders and artists
who are able to develop unique alternatives and novel ideas about
their organizations needs. They are attuned to people and events
around them and learn to anticipate the turbulent twists and turns
around them.
However, artistry in management is neither exact nor precise.
Artists interpret experience and express it in forms that can be
felt, understood and appreciated by others. Art allows for
emotion, subtlety and ambiguity. An artist frames the world so
that others can see new possibilities.
Science is extraordinary. It is a method of doing things. It is
the organized systematic expertise that gathers knowledge about
the world and condenses the knowledge into testable laws and
principles. When science is done correctly, it can advice us in all
of our day to day decisions and actions. The Process of scientific
theory construction and confirmation can be viewed as involving
the following steps:-
1. The formulation of a problem or complex of problems based
on observation.
2. The construction of theory to provide answers to the problem
or problems based on inductions from observations
3. The deduction of specific hypothesis from the theory.
4. The recasting of the hypothesis in terms of specific measures
and the operations required to test the hypothesis.
5. The devising of the actual situation to test the theorem; and
6. The actual testing in which confirmation does or does not
occur
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Management as an art
The artistic talents of the manager can be enriched by the
usage of scientific tools. The artist in any manager definitely has
an edge. His creativity and productivity can be magnified by using
the correct scientific methods. The art of management existed
long before automation. Without doubt, the science has made
the management easier. But focusing only on the science may
lead to shift of focus of the entire team and create overheads.
Success of managers depends on how effectively they can use
the scientific aid to enhance their artistic skills. Medicine
engineering, accountancy and the like require skills on the part of
the practitioners and can only be acquired through practice.
Management is no exception
Art is concerned with particle knowledge and personal skill
for doing out the desired results. In management, a manager should
have practical knowledge & skill. Otherwise his performance
will be adversely affected.
Management is a way of doing a specific action while doing
the function of an art is to achieve the success in a given action.
According to George R. Terry, “Art is bringing about of a
desired result through application of skill.” Thus, art has 5 essential
features.
i. Practical Knowledge
ii. Personal Skill
iii. Concrete Result
iv. Constructive Skill
v. Improvement through practice
These 5 functions of art also belong to the management.
When a manager uses his management skill then he must have
practical knowledge for solving managerial problem. A manager
also has power to face the problem to find out the result, which is
only possible when he/she has constructive skills. To improve
the managerial skill, managerial work should be done on regular
basis because regularity and practice make the work effective.
So, we can say that manager is an artist since he/she posses the
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skill of getting the work done through and with the people.
Therefore, it can be concluded that manager is an artist and
management is bound to be an art.
Management as a Science

Science refers to an organized and systematic body of

knowledge acquired by mankind though observation,
experimentation and also based on some universal principles,
concepts, and theories. Principles of science are developed
through testing & observation. With the help of concept of science
it can safely be concluded that management is also a science
because it is based upon certain principle and concerned as a
systematized body of knowledge, observation, test and
experiment is a science, however it is not exact as physics,
chemistry, biology, etc.
Before ·trying to examine whether the management. is a
science or not we have to understand the nature of science.
Science may be a described as a systematized body of
knowledge pertaining to an act of study and contains some general
truths explaining past events or phenomena. It is Systematized in
the sense that relationships between variables and limit have been
ascertained and underlying principal discovered. Three important
characteristics of science are.
1. It is a systematized body of knowledge and uses scientific
methods for Observation;
2. Its principles are evolved on the basis of continued
observation and experiment; and
3. Itsprinciples are exact and have universal applicability without
any limitations
Judging from these criteria, it may be observed that
management too is a systematized body of knowledge and its
principles have evolved on the basis of observation not necessarily
through the use of scientific methods. However, if we consider
science a discipline in the sense of our natural science one is able
to experiment by keeping all factors and varying one at a time. In
21
the natural science it is not only possible to repeat the same
conditions over and over again, which enables the scientist to
experiment and to obtain a proof. This kind of experimentation-
cannot be accompanied in the art of management since we are
dealing with the human element. This puts a limitation on
management as a science. It may be designated as ’inexact’ or
’soft science‘
MANAGEMENT PROCESS or SCOPE OF
MANAGEMENT
Briefly, there are 5 core functions that constitute Scope of
Management functions or the process of management. They are
Planning, Organizing, Staffing, Directing and Controlling.

Scope /Process of Management

1. Planning
The first management function in scope of management
functions that managers must perform is PLANNING. Within
this function plan is created to accomplish the mission and vision
of the business entity. Under the mission is considered the reason
for the establishment, while under the vision is considered where
business entity is aiming. The plan must define the time component
and to plan necessary resources to fulfill the plan. Accordingly
plan of organization is developed together with required
personnel; method of leading people is defined and controlling
instruments for monitoring the realization of plans.
Organizing is the second function manager, where he had
previously prepared plan, establish an appropriate organizational
structure in business organization. In part, it determines the ranges
22
of management, type of organizational structure, authority in the
organization, types and
ways of delegating and developing lines of communication.
The organization and its subsystems are placed under the plan,
which was created as part of functions, ie planning. Organizing
basically involves analysis of activities to be performed for
achieving organizational objectives, grouping them into various
departments and sections so that these can be assigned to various
individuals and delegating them appropriate authority so that they
can carry their work properly. In performing construction and
organization in particular must pay attention to formal and informal
lines of communication, because if these lines are not adequately
monitored the possibility of collision between them, resulting in
delays and / or even failure to achieve the goal.
2. Staffing
Staffing, as the next function of management, consists of a
selection of appropriate staff for the organization to reach a goal
/ goals easier and more efficient. According to today‘s experience
is well known that it is difficult to financially evaluate, quality and
efficient staff. Staff is one of the more valuable, if not the most
valuable resource in any successful organization. For this reason,
good planning of personnel policies, as a function of management,
and corresponding execution of that selection of high quality
people is becoming increasingly important. The task of this
management function is to set rules related to employment and
personnel policies. Staffing basically involves matching jobs and
individuals. This may require a number of functions like manpower
planning, recruitment, selection, training and development,
performance appraisal, promotion transfer, etc. The responsibility
for staffing rests on all managers at all levels of the organization.
It increases as one goes up in the organizational hierarchy. In
order to facilitate the effective performance of staffing function,
personnel department is created in large organizations.
3. Directing
Direction is an important managerial function through which
23
management initiates actions in the organization. It is a function
of management which is related with instructing, guiding and
inspiring human factor in the organization to achieve organization
objectives. It is a function to be performed at every level of
management. Direction is a continuous process and it continues
throughout the life of the organization It initiates at the top level in
the organization and follows to the bottom through the hierarchy.
It emphasizes that a subordinate is to be directed by his own
superior only. Direction has dual objectives. On the one hand, it
aims in getting things done by subordinates and, on the other, to
provide superiors opportunities for some more important work
which their subordinates cannot do.
4. Controlling
Control is any process that guides activity towards some
pre-determined goals. It can be applied in any field such as price
control, distribution control, pollution control etc.It is an element
of management process and is defined as the process of analyzing
whether actions are being taken as planned and taking corrective
actions to make these to conform to planning. Control process
tries to find out deviations between planed performance and actual
performance and to suggest corrective actions wherever these
are needed. Controlling is a forward looking function as one can
control the future happenings and not the past. Every manager
has to perform the control function in the organization. It is a
continuous process and control system is a co-ordinate integrated
system.
Performance of various managerial functions in an integrated
way ensures fair degree of co-ordination among individuals and
departments. Co-ordination is related with the synchronization
of efforts which have amount, time and direction attributes. Co-
ordination is thus treated as the essence of management.
MANAGEMENT AND ADMINISTRATION
Simply put, management can be understood as the skill of
getting the work done from others. It is not exactly same as
administration, which alludes to a process of effectively
administering the entire organization. The most important point
24
that differs management from the administration is that the former
is concerned with directing or guiding the operations of the
organization, whereas the latter stresses on laying down the policies
and establishing the objectives of the organization. Broadly
speaking, management takes into account the directing and
controlling functions of the organization, whereas administration
is related to planning and organizing function.
Basis for Comparison Management Administration
Meaning An organized way of managing people and things
of a business organization is called the Management. The process
of administering an organization by a group of people is known
as the Administration.
Basis for Management Administration
Comparison
Meaning An organized way of The process of
managing people and administering an
things of a business organization by a group
organization is called of people is known as
the Management. the Administration.
Authority Middle & Lower Level Top level
Role Executive Decisive
Concerned with Policy Policy Formulation
Implementation
Area of It works under It has full control over
operation administration. the activities of
the organization.
Applicable to Profit making Government offices,
organizations, i.e. military, clubs, business
business organizations. enterprises, hospitals,
religious and educational
organizations.
Decides Who will do the work? What should be done?
And How will it And When is be done?

25
 should be done?
Work Putting plans and Formulation of plans,
policies into actions. framing policies
and setting objectives
Focus on Managing work Making best possible
allocation of limited
resources.
Key person Manager Administrator
Represents Employees, who work Owners, who get a
for remuneration return on the capital
invested by them.
Function Executive and Legislative and
Governing Determinative
A clear distinction may be made between administration
and management in the following way:
1. Administration is concerned with policy making, whereas
management with policy implementation.
2. Functions of administration are legislative and largely
determinative, while that of the management are executive
and governing.
3. Broadly speaking, administration is concerned with planning
and organizing, but motivating and controlling functions are
involved in management.
4. Board of directors of any company is normally concerned
with administration, whereas personnel below that level are
in charge of management
Management By Objectives (MBO)
MBO is both a philosophy and approach of management.
It isa process whereby superiors and subordinates jointly identify
the common objectives, set the results that should be achieved
by the subordinates, assess the contribution of each individuals,
and integrate individuals with the organization so as to make he
best use of organizational resources. Thus MBO is a system for
integrating managerial activities.
26
 According to Koontz and O‘ Donnel, “MBO is a
comprehensive managerial system that integrates many key
managerial activities in a systematic manner, consciously directed
towards the effective and efficient achievement of organizational
objectives”
Features of MBO
The following are the important features of MBO
1. MBO is an approach and philosophy to management and
not merely a technique.
2. MBO gives emphasis opn objectives.
3. MBO is concerned with the participation of concerned
managers I objective setting and performance reviews.
4. MBO reviews performance periodically.
5. Objectives in MBO provide guidelines for appropriate
systems and procedures. MBO establishes a community of
interest and a shared sense of vision among all the managers.
Process of MBO
The following are the stages involved in the MBO process
1. Setting of organizational objectives
The first step in MBO is the definition of organizational
objectives and purpose. Usually the objective setting starts at
the top level of organization and moves downward to the lowest
managerial levels. The setting objective include defining the
purpose of organization, long range and short range organizational
objectives, divisional or departmental objective an d individual
manager‘s objectives.
2. Identification of Key Result Areas
Organizational o0bjectves provide the basis for the
identification of Key Result Areas(KRAs). KRAs are derived
from thr expectations of various stakeholders and they indicate
the priorities for organizational performance such as profitability,
market standing, innovation, productivity, social responsibility etc.
3. Setting subordinates‘ objectives
The achievement of organizational goals is only possible
through individuals. So each individual manager must know in
27
advance what he is expected to attain. Every manager in the
managerial hierarchy is both superior and subordinate (except
the managers at top and bottom level). The process of objective
setting begins with superior‘s proposed recommendations for his
subordinate‘s objectives. In turn, the su8bordinate state his own
objectives as perceived by him. Thereafter the final objectives
for the subordinates are set by the mutual negotiation between
superiors and subordinates.
4. Matching resources with objectives
Resource availability is an important aspect of objective
setting because it is the proper application of resources which
ensures objective achievement. So there should be a matching
between objectives and resources.
5. Appraisal
Appraisal tries to measure whether subordinate is achieving
his objective or not. Appraisal is undertaken as an on-going
process with a view to find out deficiency in the working and
also to remove it promptly in order to attain the objectives of
organization.
6. Recycling
Though appraisal is the last aspect of MBO process, it is
used as an input for recycling objectives and other actions.
Recycling process include setting of objectives at various levels,
action planning on the basis of those objectives and performance
review. Each of these three aspects gives base for others. This
process goes on a continuous basis.
Benefits of MBO
The benefits of MBO can be seen as follows
1. MBO helps in better managing the orgaisational resources
and activities.
2. Since organizational objectives are defined very clearly in
MBO, they help in relating the organization with its
environment.
3. MBO provides greatest opportunity for personnel satisfaction
because opf their participation in objective setting and
28
 rational performance appraisal.
4. MBO stimulates o9rganisational change and provides a
frame work and guidelines for organizational change.
Problems and Limitations of MBO
Each organization is likely to encounter specific problems
in MBO practice but some of the common problems are as follows
1. MBO is a time consuming and costly process
2. Manager‘s failure to teach MBO philosophy
3. Problems in objective setting
4. more emphasis on short term objectives
5. Danger of inflexibility in the organization in a dynamic
environment
6. MBO creates frustration among managers
In spite of thee obstacles and problems in MBO, it continues
to be a way of managing organization.
MANAGEMENT BY EXCEPTION
Management by Exception is an employee empowerment
and management style, policy or philosophy wherein managers
intervene only when their employees fail to meet their performance
standards or when things go wrong. The idea behind it is that
management’s attention will be focused only on those areas in
need of action. If the personnel are performing as expected, the
manager will take no action. MBE normally involves substantial
delegation by the manager to his team.
The MBE is similar to the vital signs monitoring systems in
hospital critical care units (ICUs). When one of the patient’s vital
signs goes outside the range programmed into the machine, an
alarm sounds and staff runs to the rescue. If the machine is quiet,
it’s assumed that the patient is stable, and they will receive only
regular staff attention. Management by Exception (MBE) is a
“policy by which management devotes it’s time to investigating
only those situations in which actual results differ significantly
from planned results”. The concept of MBE was propounded
by: Frederick Winslow Taylor.

29
 Attention and priority is given only to material deviations
requiring investigation and correction. It is a part of motivational
and control techniques. Its objective is to facilitate management
focus on really important tactical and strategic tasks.
Significance of MBE:
• Proper and timely decision making and appropriate flow of
action and employees’ activities.
• Better utilization of managers’ time by bringing to their
attention only those conditions that appear to need
managerial action.
• Easy identification of discrepancies.
• Benefit to customers since MBE makes it easier for the
business to grow and improve its service rather than use
valuable resources on routine tasks.
Types of Exceptions: There are two types of exceptions
which are identified and managed through MBE: Problems Below
Opportunities Above standard performance and results. and
results. Need to be strategized and Need to be identified and
solved in time. tapped.
Process of MBE:
1. Identifying and specifying Key Result Areas (K.R.A.s)
2. Setting standards and outlining permissible deviations,
especially for K.R.A.’s
Comparing actual results with the standards
3. Computing and analyzing deviations
4. Identifying non - permissible, that is, critical deviations in
K.R.A.s
5. Strategizing and taking corrective actions
MANAGEMNT BY MOTIVATION
Motivation in management describes ways in which
managers promote productivity in their employees.
The definition of Motivation
Often, people confuse the idea of ‘happy’ employees with
‘motivated’ employees. These may be related, but motivation
30
actually describes the level of desire employees feel to perform,
regardless of the level of happiness. Employees who are
adequately motivated to perform will be more productive, more
engaged and feel more invested in their work. When employees
feel these things, it helps them, and thereby their managers, be
more successful. It is a manager’s job to motivate employees to
do their jobs well. So how do managers do this? The answer is
motivation in management, the process through which managers
encourage employees to be productive and effective.
Methods for motivating employees
The following methods are used by management to motivate
employees
I. Management use rewards and incentives to motivate them.
Rewards are of two forms, they are intrinsic and extrinsic.
Intrinsic rewards are derived from within the individual.
Extrinsic rewards pertain to rewards that are given by
another person.
Incentive is an act or promise for greater action, which is
given in addition to wages to an employee in recognition of
achievement or better work.
1. Monetary incentives ; Providing reward in terms of rupees.
2. Non monetaryincentives ; the incentives which cannot be
measured in terms of money.
• Job security
• Praise or recognition
• Promotion opportunities
• Suggestions scheme
• Challenging jobs
3. Using spot awards. Its given to employees as soon as the
praise worthy performance is observed.
MANAGEMENT BY PARTICIPATION
It is one of the motivational techniques aimed at activating
and engaging employees, and at the same time meeting their higher
order needs. Employee is incorporated into the management
31
process and has an influence on the decision making process.
Employee participation can also have financial dimension.
Depending on the adopted criterion we can distinguish following
types of participation: formal, informal, direct, indirect, active and
passive. In theory the management there are two kinds of
participation models an American and a German. First is
characterized by trust and tolerance, domination of managers
and less formal contacts. In the German model important role is
played by co-decision, negotiation and legal regulations.
Workers’ participation in management is an essential
ingredient of Industrial democracy. The concept of workers’
participation in management is based on Human Relations
approach to Management which brought about a new set of
values to labour and management. Traditionally the concept of
Workers’ Participation in Management (WPM) refers to
participation of non- managerial employees in the decision-
making process of the organization. Workers’ participation is
also known as ‘labour participation’ or ‘employee participation’
in management. In Germany it is known as co-determination
while in Yugoslavia it is known as self-management. The
International Labour Organization has been encouraging
member nations to promote the scheme of Workers’
Participation in Management.
According to Keith Davis, Participation refers to the mental
and emotional involvement of a person in a group situation which
encourages him to contribute to group goals and share the
responsibility of achievement.
According to Walpole, Participation in Management gives
the worker a sense of importance, pride and accomplishment; it
gives him the freedom of opportunity for self- expression; a feeling
of belongingness with the place of work and a sense of
workmanship and creativity.
Forms of Participation
Different forms of participation are discussed below:
• Collective Bargaining: Collective bargaining results in
collective agreements which lay down certain rules and
conditions of service in an establishment. Such agreements
32
 are normally binding on the parties. Theoretically, collective
bargaining is based on the principle of balance of power,
but, in actual practice, each party tries to outbid the other
and get maximum advantage by using, if necessary, threats
and counter threats like; strikes, lockouts and other direct
actions.
• Works Councils: These are exclusive bodies of employees,
assigned with different functions in the management of an
enterprise. In West Germany, the works councils have
various decision-making functions. In some countries, their
role is limited only to receiving information about the
enterprise. In Yugoslavia, these councils have wider
decision-making powers in an enterprise like; appointment,
promotion, salary fixation and also major investment
decisions.
• Joint Management Councils and Committees: Mainly these
bodies are consultative and advisory, with decision-making
being left to the top management. This system of participation
is prevalent in many countries, including Britain and India.
As they are consultative and advisory, neither the
managements nor the workers take them seriously.
• Board Representation: The role of a worker representative
in the board of directors is essentially one of negotiating the
worker’s interest with the other members of the board. At
times, this may result in tension and friction inside the board
room. The effectiveness of workers’ representative at the
board depend upon his ability to participate in decision-
making, his knowledge of the company affairs, his
educational background, his level of understanding and also
on the number of worker representatives in the Board.
• Workers Ownership of Enterprise: Social self-management
in Yugoslavia is an example of complete control of
management by workers through an elected board and
workers council. Even in such a system, there exist two
distinct managerial and operative functions with different sets
33
 of persons to perform them. Though workers have the
option to influence all the decisions taken at the top level, in
actual practice, the board and the top management team
assume a fairly independent role in taking major policy
decisions for the enterprises, especially in economic matters.
Levels of Participation
Workers’ participation is possible at all levels of
management; the only difference is that of degree and nature of
application. For instance, it may be vigorous at lower level and
faint at top level. Broadly speaking there is following five levels
of participation:
1. Information participation: It ensures that employees are able
to receive information and express their views pertaining to
the matters of general economic importance.
2. Consultative participation: Here works are consulted on the
matters of employee welfare such as work, safety and health.
However, final decision always rests at the option of
management and employees’ views are only of advisory
nature.
3. Associative participation: It is extension of consultative
participation as management here is under moral obligation
to accept and implement the unanimous decisions of
employees.
4. Administrative participation: It ensure greater share of works
in discharge of managerial functions. Here, decision already
taken by the management come to employees, preferably
with alternatives for administration and employees have to
select the best from those for implementation.
5. Decisive participation: Highest level of participation where
decisions are jointly taken on the matters relation to
production, welfare etc. is called decisive participation.
Performance Management
Performance management (PM) includes activities that
ensure that goals are consistently being met in an effective and
efficient manner. Performance management can focus on the
34
performance of an organization, a department, employee, or even
the processes to build a product or service, as well as many
other areas.
This is used most often in the workplace, can apply wherever
people interact — schools, churches, community meetings, sports
teams, health setting, governmental agencies, and even political
settings - anywhere in the world people interact with their
environments to produce desired effects.
Armstrong and Baron defined Performance Management
as a “strategic and integrated approach to increasing the
effectiveness of organizations by improving the performance of
the people who work in them and by developing the capabilities
of teams and individual contributors.”
It may be possible to get all employees to reconcile personal
goals with organizational goals and increase productivity and
profitability of an organization using this process. It can be applied
by organisations or a single department or section inside an
organisation, as well as an individual person. The performance
process is appropriately named the self-propelled performance
process (SPPP)
Advantages of performance management
1. Performance based conversations
Managers get busy with day-to-day responsibilities and often
neglect the necessary interactions with staff that provide the
opportunity to coach and offer performance feedback. A
performance management process forces managers to discuss
performance issues. It is this consistent coaching that affects
changed behaviours.
2. Targeted Staff Development
If done well, a good performance management system can
be a positive way to identify developmental opportunities and
can be an important part of a succession planning process.
3. Encouragement to staff
Performance Appraisals should be a celebration of all the
wonderful things an employee does over the course of a year
35
and should be an encouragement to staff. There should be no
surprises if issues are addressed as they arise and not held until
the annual review.
4. Rewards staff for a job well done
If pay increases and/or bonuses are tied to the performance
appraisal, process staff can see a direct correlation between
performance and financial rewards.
5. Underperformers identified and eliminated
As hard as we try, it is inevitable that some employees just
won‘t “cut the mustard” as they say. An effective performance
management process can help identify and document
underperformers, allowing for a smooth transition if the relationship
needs to be terminated.
6. Documented history of employee performance
It is very important that all organizations keep a performance
record on all employees. This is a document that should be kept
in the employee‘s HR file.
7. Allows for employee growth
Motivated employees value structure, development and a
plan for growth. An effective performance management system
can help an employee reach their full potential and this is positive
for both the employee and manager. A good manager takes pride
in watching an employee grow and develop professionally.
Disadvantages of Performance Management
1. TimeConsuming
It is recommended that a manager spend about an hour per
employee writing performance appraisals and depending on the
number of people being evaluated, it can take hours to write the
department‘s performance appraisal but also hours meeting with
staff to review the performance appraisal.
2. Discouragement
If the process is not a pleasant experience, it has the potential
to discourage staff. The process needs to be one of
encouragement, positive reinforcement and a celebration of a

36
year‘s worth of accomplishments. It is critical that managers
document not only issues that need to be corrected, but also the
positive things an employee does throughout the course of a year,
and both should be discussed during a performance appraisal.
3. Inconsistent Message
If a manager does not keep notes and accurate records of
employee behaviour, they may not be successful in sending a
consistent message to the employee. We all struggle with memory
with as busy as we all are so it is critical to document issues
(both positive and negative) when it is fresh in our minds.
4. Biases
It is difficult to keep biases out of the performance
management process and it takes a very structured, objective
process and a mature manager to remain unbiased through the
process.
Fill in the blanks
1. ———— is regarded as one of te major contribution made
by peter F drucker to the management discipline
2. —————— is the world’s most sought after business
guru and strategist
3. ————— are the series of experiments that studies the
relationship of productivity and work conditions.
4. The management principle which says that the authority and
responsibility flows………..
5. ————— Principles says that there should always exist
one head and one plan for group of activities having the
same objectives.
6. The concept of job enrichment is a contribution and offspring
of ——————
Answer
1. MBO
2. Mkichael porter
3. The hawthorne studies
4. Scalar chain
37
5. Unity of direction
6. Herzberg
1. According to —————— approach, management is a
logical process and it can be expressed in terms of
mathematical symbols and relationship
a. Empirical
b. Management science
c. Contingency
d. Operational
2. ……….. approach of management heavily concentrates on
people aspect of management
a. Human relations
b. System
c. Empirical
d. Management science
3. —————— is the art of knowing exactly what you want
men to do and then seeing that how they do it in the best
and cheapest way.
a. General management
b. Scientific management
c. Administration
d. None
4. —————— is introduced to secure the benefits of
division of labour or specialization at the supervising level
under scientific management.
a. Operating management
b. Functional foremanship
c. Either a or b
d. None
5. —————— helps to determine a fair days work and
rest period to complete it
a. Work study
b. Time study
38
c. Motion study
d. All of these
6. The main objective of ————————— study is to
determine and eliminate unnecessary and wasteful movement
a. Work study
b. Time study
c. Motion study
d. All of these
7. The author of the famous book “General and industrial
management “ is
a. Henry fayol
b. Fw taylor
c. Henry gantt
8. According to fayol, the principles of management are ——
a. Rigid
b. Flexible
c. A or B
d. None
9. ————— comprehensive managerial system that
integrates many key management activites in a systematic
manner, consciously directed toward the effective and
efficient achievement of organizational objectives.
a. MBE
b. MBO
c. WPM
d. Kaizen
10. …………. Encourages the involvement of stakeholders at
all levels of an organization in the analysis of problems,
development of strategies, and implementation of solutions
a. MBE
b. WPM
c. MBO
d. KAIZEN
39
Short answer type questions
1. Define management
2. What does profession mean
3. Name three functional areas of management
4. What does financial management mean
5. What does personal management mean
6. Define administration
7. What is scalar chain
8. What is motion study
Essay question
1. Management is a trinity of art, science and profession.
Discuss
2. Discuss the concept “management as science”
3. Briefly he evolution of management thought

40
 1. MODULE II
FUNCTIONS OF MANAGEMENT

The management process involves performance of certain

fundamental functions. One useful classification of managerial
function has been given by Luther Gulick, who abbreviating them
using the word POSDCORB – Planning, Organizing, Staffing,
Directing, Co-ordinating, Reporting and Budgeting. George R
Terry has mentioned four fundamental functions of management,
Planning, Organizing,Actuating and Controlling. In short, different
scholars in the field of management have their own classification
of functions of management. Some scholars add few functions
and delete some other functions. The Important functions of
management are discussed below: -
PLANNING
Meaning
Planning is the most crucial and foremost function of
management. It is defined as the process of setting goals and
choosing the means to achieve those goals. A sound planning is
inperative for the successful achievement of the goals in the desired
direction. It is rightly said “well plan is half done”. It involves
setting of objectives and goals, designing appropriate strategy
and cource of action, and framing plans and procedure etc for
execution of the proposed activities under the project.
Definitions
According to George R Terry, “Planning is the selecting and
relating of facts and making and using of assumptions regarding
the future in the visualization and formulation of proposed activities
believed necessary to achieve desired results.”
According to Henry Fayol, “Planning is deciding the best
alternatives among others to perform different managerial
operations in order to achieve the predetermined goals.”
Generally speaking, planning is deciding in advance what is
41
to be done, that is, a plan is a projected course of action.
Features of Planning
1. Planning is looking in to the future
2. It involves predetermined lines of action
3. Planning is a continuous process
4. Planning integrates various activities of an organization
5. Planning is done for a specific period
6. It discovers the best alternatives out of available alternatives
7. Planning is a mental activity
8. Planning is required at all levels of Management
9. It is the primary functions of Management]
10. Growth and prosperity of any organization is depends upon
planning
Objectives of Planning
Planning in organization serve to realize the following
objectives:
1. To reduces uncertainty
2. To bring co-operation and co-ordination in the organisation
3. To bring economy in operations
4. Helps to anticipate unpredictable contingencies
5. To achieve the pre determined goals
6. To reduce competition.
Advantages of Planning
Planning helps the organization to achieve its objectives
easily. Some of the advantages of planning are given below:
1. It helps the better utilization of resources
2. It helps in achieving the objectives
3. It helps in achieving economy in operations
4. Itminimizesfuture uncertainties
5. Itimproves competitive strength
6. It helps effective control

42
7. It helps to give motivation to the employees
8. It develop rationality among management executives
9. It reduces red tapism
10. It encourages innovative thought
11. It improves the ability to cope with changes.
12. It create forward looking attitude in Management
13. It helps in delegation of authority
14. It provide basis for control
Planning premises
The process of planning is based upon estimates and
predictions of the future. Though past guides the plans in present,
plans achieve the goals in the future. Therefore, the forecast of
future events leads to efficient plans. Since future events are not
known accurately, the assumption is made about these events.
These events may be known conditions (even changes in
the tax laws as announced in the budget) or anticipated events
which may or may not happen (entry of a competitor in the same
market with the same product).
Though these assumptions are primarily based on scientific
analysis and models, managers also use their intuition and judgment
to make assumptions about future events. By identifying the
factors (assumptions) that affect plans is called premising and
the methods used for making premises are called forecasting.
The done forecast or the assumptions about the future which
provide a base for planning in present are known as planning
premises. This is the expectation or forecasts made for achieving
the goals.
Planning Process
It is not necessary that a particular planning process is
applicable for all organization and for all types of plans because
the various factors that go into planning process may differ from
plan to plan or from one organization to another. This can be
presented by using the following diagram.

43
 Perception of Opportunities:- It is the beginning of
planning process. ThisProvides an opportunity to set the
objectives in real sense. It helps to take the advantage of
opportunities and avoid threats. Once the opportunities are
perceived, the other steps of planning are undertaken.
1. Establishing the objectives:- This stage deals with the
setting of major organisational and unit objectives. The
organizational objectives should be specified in all key areas.
Once organizational objectives are identified, objectives of
lower units can be identified in that context.
2. Establishing planning premises:- It means deciding the
condition under which planning activities will be undertaken.

44
 Planning premises may be external or internal. The nature
of planning premises differs at different levels of planning.
3. Identification of alternatives:- This point says that a
particular objectives can be achieved through various actions.
Since all alternatives cannot be considered for further
analysis, it is necessary for the planner to reduce the number
of alternatives.
4. Evaluation of alternatives: - Various alternatives which
are considered feasible may be taken for detailed evaluation.
It is evaluated on the basis of contribution of each alternative
towards the organizational objectives in the light of its
resources and constraints.
5. Selection of alternatives: - After the evaluation, the most
fit one is selected. At the same time a planner must be ready
with alternatives, normally known as contingency plans,
which can be implemented in changed situation.
6. Developing supporting plans: - After formulating the basic
plan, various plans are devised to support the main plan.
These plans are known as derivative plans.
7. Establishing activities:sequence of - After formulating
basic and derivative plans, the sequence of activities is
determined, so that plans are put in to action.
8. Devising a mechanism of Project monitoring and
Evaluation.
Types of Plans
A manager is required to develop a number of plans to
achieve the organizational objectives. Three major types of plans
can help managers to achieve their organizational goals.
1. Operational Plans
2. Tactical Plans
3. Strategic Plans
1. Operational Plans: It is one that a manager uses to
accomplish his or her job responsibilities. In other words, it
is the plan used to achieve operational goals. Operational

45
 goals are the specific result expected from the departments,
work groups and individuals. Operational plans may be single
use plans or ongoing plans.
a. Single use plans: It is applied to those activities which do
not recur or repeat. Aspecial sales programme is an example
of single use plan, because , it deals with the who, what,
where, how and how much of an activity. It includes:
(i) Budget: It is a statement of expected results expressed
in quantitative terms for a definite period of time. It is
prepared keeping in view the objectives , resources and of
the enterprise. It is a useful control device and helpful in co-
coordinating the activities. It predicts sources and amounts
of income and how much they are used for a specific project.
(ii)Programme: It is a sequence of activities to be
undertaken for implementing the policies and achieving the
objectives of an organization. It tells what is to be done to
achieve the goals.
b. Continuing or ongoing plans: These are usually made
once and retain their

value over a period of years while undergoing periodic revision

and updates. The following plans are included in this category.
(i) Policy: It provides broad guidelines for managers to
follow when dealing with important areas of decision making.
It is basically a general statement that explains how a
manager should attempt to handle routine management
responsibilities. They are standing answers to recurring
questions.
(ii)Procedures: A procedure is a set of step by step direction
that explains how activities or task are to be carried out. An
established procedure ensures uniformity of action. Most
organization has procedures for purchasing supplies and
equipments. By defining steps to be taken and the order in
which they are to be done, procedures provide a
standardized way of responding to a repetitive problem.
46
 (iii) Rules: It is an explicit statement that tells an employee,
what he or she can and cannot do. Rules are definite and
rigid. Rules are “do” and “don‘t” statements put into place
to promote the safety of employees and the uniform
treatment and behaviour of employees. For eg. Rules about
absenteeism permit supervisors to make discipline decision
rapidly and with a high degree of fairness.
2. Tactical Plans: These are plans which usually span one
year or less. It is concerned with what the lower level units
within each division must do, how they must do it, and who
is in charge at each level. Tactics are the means needed to
activate a strategy and make it work.
3. Strategic Plan: It is an outline of steps designed with the
goals of the entire organization in mind, rather than with the
goals of specific divisions. It look ahead over the four, five
or even more years to move the organization from where it
currently to where it wants to be. Top managements strategic
plan for the entire organization becomes the frame work
and sets dimension for the lower level planning.
Contingency Plan: These plans are used when the original
plan proves inadequate because of changing circumstances.
Limitations of Planning
Following are the limitations of Planning
1. Time consuming: The management cannot prepare any plan
without taking much time . A number of steps are required
to complete planning process.
2. Costly: It is considered as an expensive process. A lot of
money is to be spent for collection, analysis and editing of
data.
3. False sense of security: The management people think that
there is security, if planning is properly adhered. But this is
not true in practice.
4. Technological changes: The management is not in a position
to change its policies according to technological changes. It
will affect the planning process.
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5. Political climate: A change in the political climate leads to a
change in the policy and attitude towards different financial
aspects. It will affect the planning process.
6. Lack of reliable data: The success of all the plans are based
on the availability of reliable data. It is very difficult to procure
reliable data.
7. Initiative: Planning compels everyone to work as per plan.
It reduces the scope for initiation from the part of employees
and they will become more mechanical.
8. Limitations of forecasts: Planning is fully based on forecasts.
If there is any defect in forecasts, the planning will lose its
value.
ORGANISING
Meaning and Definition
The process of organizing involves establishing an intentional
structure of roles for the staff at all levels of hierarchy in the
organization. It is the function of identifying the required activities,
grouping them into jobs, assigning jobs to various position holders,
and creating a network of relationship, so that the required
functions are performed in a co-ordinated manner, leading to the
accomplishment of desired goals.
According to Koonts O Donnel.”Organizing involves the
grouping of activities necessary to accomplish goals and plans,
the assignment of these activities to appropriate departments,
and the provision of authority delegation and Co-ordination.”
According to GR Terry, “Organizing is the establishing of
effective behavioural relationship among persons so that they may
work together effectively and gain personal satisfaction in doing
selected tasks under given environmental conditions for the
purpose of achieving some goal or objectives.”
Steps in Organizing
The logical sequence of steps in organizing is mentioned
below:-
1. Establishing objectives

48
 2. Designing Plans and Policies
3. Identifying specific activities
4. Grouping activities according to available resources
5. Delegating the authority necessary to perform the
activities.
6. Tying the groups together through authority relationship
and communication.
Functions of Organisation
The following are the important functions of organization
1. Determination of activities:- It includes the deciding and
division of various activities required to achieve the objectives
of the organization. The entire work is divided into various
parts and sub parts.
2. Grouping of activities :- Here, identical activities are
grouped under one department.
3. Allotment of duties to specified persons:- For the
effective performance, the grouped activities are allotted to
specified persons.
4. Delegation of authority:- Assignment of duties should be
followed by delegation of authority. It is difficult to perform
the duties effectively, if there is no authority to do it.
5. Defining relationship:- When a group of person is
working together for a common goal, it is necessary to define
the relationship among them in clear terms.
6. Co- ordination of various activities:- The delegated
authority and responsibility should be co-ordinated by a
responsible person.
Principles of Organisation
The following are the important Principles to be followed
by management for the success of an organization.
1. Principle of definition: - It says that, it is necessary to
define and fix the duties, responsibilities and authority of
each work. In addition to that the organizational relationship
of each worker with others should be clearly defined.
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2. Principles of Objectives:- The objectives of different
departs should be geared to achieve the main objective of
the organization.
3. Division of work:- A work should be assigned to a person
according to his educational qualifications, experience, skill
and interest. It will result in attaining specialization in a
particular area.
4. Principles of continuity: It is essential that there should
be a re operation of objectives, re adjustment of plants and
provision of opportunities for the development of future
management. This process is taken over by every
organization periodically.
5. Principles of Span of Control: This principles determines
the number of subordinates a superior can effectively manage.
6. Principles of Exception: Here, all the routine decisions
are taken by the subordinates; senior managers will only
deal with exceptional matters. It is known as management
by exception.
7. Principles of flexibility: The organizational set up should
be flexible to adjust to the changing environment of business.
8. Principles of Unity of Direction: All departmental goals
are tuned to achieve common goal. So there should be co-
ordination of all the activities.
9. Principles of Balance: There are several units functioning
separately under on organizational set up. So, it is essential
that the sequence of work should be arranged scientifically.
10. The scalar principle: It says that each and every person
should know who is his superior and to whom he is
answerable.
11. Principle of efficiency: The work should be completed
with minimum members, in less time, with minimum resources
and with the right time.
12. Delegation of Authority: Authority should be delegated
to the subordinate for the successful completion of assigned
job.
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13. Principles of responsibility: Each person is responsible
for the work completed by him. So the responsibility of the
subordinates should be clearly defined.
14. Principles of Uniformity: The work distribution should
be in such a manner that there should be an equal status and
equal authority and powers among the same line officers.
15. Simplicity and Accountability: The structures of the
organization should be simple and the higher authorities are
accountable for the acts of their subordinates
Classification of Organization
1. Formal Organisation: It is an organizational structure which
clearly defines the duties, responsibilities, authority and
relationship as prescribed by the top management. It
represents the classification of activities within the enterprise,
indicate who reports to whom and explains the vertical flow
of communications which connects the chief executive to
the ordinary workers.
1. Informal Organisation: It is an organizational structure
which establishes the relationship on the basis of the likes
and dislikes of officers without considering the rules,
regulations and procedures. The friendship, mutual
understanding and confidence are some of the reasons for
existing informal organization.
Differences between formal and informal
Organisation:
Formal Organisation Informal Organisation
1. It is created deliberately 1. It is spontaneous.
2. Authority flows from top 2.Informal authority flows from
to bottom top to bottom or horizontally.
3. It is created for 3.It arises from man‘s
technological purpose quest for social satisfaction
4. It is permanent and stable 4. There is no such permanent
nature and stability
5. It gives importance to terms 5. It gives importance to
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 of authority and function. people and their relationship.
6. It arises due to delegation 6.It arises due to social
of authority interaction of people
7.Duties and responsibilities of 7. No such written rules
workers are given in writing and duties.
8. Formal organization may 8.Informal organisation
grow to maximum size tends to remain smaller.
ORGANISATION STRUCTURE
Organisation is designed on the basis of principles of division
of labor and span of management. The success of the organization
depends upon the competence and efficiency of the officers. It is
necessary to chalk out line of authority among the people working
in an organization.
Types of Organizational Structure
A brief explanation of the important types of organizations
is given below:-
LINE ORGANISATION
Under Line organization, each department is generally a
complete self contained unit. In this type of organization, the line
authority flows from top to bottom vertically. It clearly identifies
authority, responsibility and accountability at each level,
departmental heads are given full freedom to control their
department. This type of organization is followed in the army on
the same pattern. So, it is also called military organization.
Features of Line organization
1. It consist of vertical direct relationship
2. Authority flows from top to bottom
3. Operations of this system is very easy.
4. It facilitate to know from whom one should get orders and
to who one should give orders
5. Existence of direct relationship between superior and
subordinates
6. The superior will take decisions within the scope of his
authority.
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 LINE AND STAFF ORGANISATION
In this type of organization Line officers have authority to
take decisions and implement them, but the staff officers will assist
them while taking decisions. The function of staff officers are
only an advising one. They should advise and help line managers
to take proper decisions. In the fast developing industrial world,
the line officers are not in a position to acquire all the technical
knowledge, which are necessary for taking right decisions. That
gap may be bridged with the help of staff officers. The staff officers
may be experts in a particular field.
Features of Line and Staff Organisation
1. Authority flows from top to bottom
2. Line Officers will takes decisions on the basis of suggestions
given by staff officers
3. Staff officers have no power to take decisions and no control
over subordinates.
4. The workers get the instructions only from the line officers
Advantages of Line and Staff Organisation:
1. A line officer can take sound decisions on the basis of proper
advice from the staff officer.
2. The work load of line officers would be reduced to some
extent,
3. It promote the efficient functioning of the line officers
4. The principles of unity of command are followed in the line
and staff organization.
5. A very good opportunity is made available to the young
person to get training.
6. It facilitates the workers to work faster and better.
7. It enables the organization to effectively utilize the staff
officer‘s experience and advice.
Disadvantages of Line and Staff Organisation
1. If the powers of authority is not clearly defined , it will lead
to confusion though out the organization.
2. The line officers may reject the advice from staff officers
53
 without assigning any reason.
3. The staff officers may under estimate the powers of line
officers.
4. The staff officers are not involved in the actual implementation
of the programme.
5. The staff officers are not responsible if favorable results are
not obtained.
6. The difference of opinion between line officers and staff
officers will defeat the very purpose of specialization.
7. The line officers may misunderstand the advice given by
staff officers.
FUNCTIONAL ORGANISATION
In this type of organizations, specialists are appointed in top
position through out the organization. Various activities of the
enterprise are classified according to functions and functional heads
will give directions related to his functions. Workers, under
functional organization, receive instructions from various
specialists.
Characteristics of Functional Organisation
1. The work is divided according to specified functions.

2. Authority is given to specialists to give orders and instructions

in relation to specific functions.
3. The decision is taken only after making consultations with
the functional authority relating to his specialized area.
4. The executives and supervisors discharge the responsibilities
of functional authority.
ADVANTAGES OF FUNCTIONAL ORGANISATION
The following points will explain the benefits of functional
organization.
1. Benefit of specialization:- In this type of organization, each
work is performed by a specialist. It helps to enhance the
efficiency of the organization.
2. Reducing work load: Each person is expected to look after
54
 only one type of work. It reduces the unnecessary work
allotted to them.
3. Relief to line executives: Under functional organization, the
instructions are given by the specialists directly to the actual
workers. Hence, the line executives do not have any problem
regarding the routine work.
4. Mass production: Large scale production can be achieved
with the help of specialization and standardization.
5. Flexibility: Any change in the organization can be introduced
without any difficulty.
DEPARTMENTATION
Departmentation refers to grouping of jobs, identified earlier,
into work units on some logical basis. Every level in the hierarchy
below the apex (the Board of Directors and the (EO) is
departmentalised and each succeeding lower level involves
departmental differentiate Different systems use different words
to denote departmentation. In the military organisation, group,
company, and battalion are used; in the government, department,
branch, and section are used; and in the private sector department,
divisions, sections, cells or projects are used. Departmentation
is a part of the organization process. It involves the grouping of
common activities on the basis of a function of the organization
under a single person’s control. Departmentation means the
process by which similar activities of the business are grouped
into units for the purpose of facilitation smooth administration
at all levels.
Definition
Departmentation refers to the classification of activities on
operations of an undertaking into functionalized categories. It is
created in product wise, process-wise or area wise. It ensures
proper direction to and control on them.
Process of Departmentation
1. Identification of work.
2. Analysis of details of each work.

55
3. Description of the function of the organization.
4. Entrusting the function to a separate person who has
specialized in the respective field.
5. Fixing the scope of authority and responsibility of the
departmental heads.
Need and Importance of Departmentation
1. It increases the operating efficiency of the employees.
2. It makes the executive to be alert and efficient in his duties.
3. It increases the prestige and skill of the departmental heads.
4. It makes the departmental heads efficient.
5. Further expansion of the organization is possible.
6. It gives advantages like facilitating budget preparation,
effective control of expenditure, attaining specialization,
better coordination etc.
Methods of Departmentation
The following are the basis of dividing responsibility within
an organisation structure:
1. Functional Departmentation.
2. Product wise Departmentation.
3. Territorial or Geographical Departmentation.
4. Customer wise Departmentation.
5. Process or Equipment wise Departmentation.
6. Combined or Composite Form of Departmentation.
1. Functional Departmentation:
It refers to grouping the activities of an enterprise on the
basis of functions such as production, sales, purchase, finance,
personnel, etc. The actual number of departments in which an
enterprise can be divided depends upon the size of establishment
and its nature. To begin with, we may have three or four main
departments. With the growth in the size of the business, more
departments and sub-departments may be created.
2. Product Wise Departmentation:
The grouping of activities on the basis of products is very
popular with large organisations having distinct type of products.
56
Under this method, all activities related to one type of product
are put together under one department under the direction of a
production manager. An electronic company, for instance, may
have different departments dealing in television sets, radios and
transistors, computers, agro-dairy instruments, etc.
Product wise departmentation is also known as
multi¬functional product departmentation, because each product
department handles all the functions concerning it.
3. Territorial or Geographical Departmentation:
When several activities of an enterprise are geographically
dispersed in different locations, territorial or geographical
departmentation may be adopted. All activities relating to a
particular area or zone may be grouped together under one zonal
manager or head.
4. Customer Wise Departmentation:
A business house may be divided into a number of
departments on the basis of customers it serves, viz., large and
small customers ; industries and ultimate buyers ; government
and other customers. The peculiar advantage of customer wise
departmentation is that it ensures full attention to different types
of customer and their different needs, tastes and requirements
can be read effectively.
5. Process or Equipment Wise Departmentation:
An enterprise where production is carried through different
processes may adopt process wise departmentation to enable
continuous flow of production. Similarly, where work is carried
on machines which are common, departments may be created
on the basis of equipment, such as
milling departments, grinding departments, lathe department
etc. The main advantage of this method is that it avoids duplication
of equipment in various activities.
6. Combined or Composite Method of Departmentation:
In practice, it may not be advisable to create departments
on the basis of any one of the above mentioned methods. An
enterprise may have to combine two or more of the methods of
57
departmentation to make best use of all of them. Such a method
is known as combined or composite method of departmentation.
DELEGATION OFAUTHORITY AUTHORITY
It is the power to make decisions which guide the actions of
others. In other words, it is the power to give orders and make
sure that these orders are obeyed. In order to finish the work in
time, there is a need to delegate authority and follow the principles
of division of labour.
Definitions
According to Koonts and O‘Donnell, “ Authority is the
power ot command others to act or not to act in a manner deemed
by the possessor of the authority to further enterprise or
departmental purposes.”
According to Luis Allen,”It is the sum of powers and rights
entered to make possible the performance of the work delegated.”
RESPONSIBILITY
It is the obligation to do something. In other words, it is the
obligation to perform the tasks, functions, or assignments of the
organization. The essence of responsibility is obligation. If a person
is entrusted with any work, he should be held responsible for the
work that he completes
Definitions
According to Davis, “Responsibility is the obligation of
individual to perform the assigned duties to the best of his ability
under the direction of his executive leader.”
In the words of Theo Haimann,” Responsibility is the
obligation of subordinates to perform the duty as required by his
superior.”
DELEGATION OF AUTHORITY
Delegation is a process which enables a person to assign a
work to others with adequate authority to do it. The authority
can be delegated but not the responsibility. Delegation of authority
is considered to be one of the most important methods of training
subordinates and building morals. It is acknowledged that
58
delegation of authority is one of the surerest and best methods of
getting better results.
PRINCIPLES OF DELEGATION
The following are the important principles of delegation.
1. Delegation to go by results: The superiors should clearly
know what he expects from the subordinates before
delegation of authority. It should be noted that the objective
of the organization are to be accomplished in time.
2. Non-delegation of responsibility: Assigning duties does
not mean delegation of responsibilities. A superior can
delegate authority but not responsibility.
3. Parity of authority and responsibility: Responsibility
without authority will make a person an inefficient one. So
there should be a proper balance between authority and
responsibility.
4. Unity of command: Asubordinate should be assigned duties
and responsibilities only by one superior and he is
accountable only to the concerned superior.
5. Definition of limitation of authority: There should be a
written manual which help a person to understand the
authority in right direction.
STEPS IN SUCCESSFUL DELEGATION PROCESS
The following steps will help the successful delegation of
authority.
1. Deciding the goals to be achieved: The purpose of
delegation is to enable efficient accomplishment of
organizational objectives. If it is not clearly defined, the
subordinate may hesitate to accept the authority.
2. Establishment of definite responsibility: The authority
and responsibility of each subordinate should be clear in
terms. It helps to avoid duplication of authority.
3. Determining what to delegate: This will necessitate the
evaluation of the capacity of the individual and needs of the
organization.
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4. Training: Subordinate should be properly trained in
handling delegated work.
5. Control system: There should be a suitable control system
to keep a careful watch over the performance of the
subordinates.
TYPES OF DELEGATION
A brief explanation of the different types of delegation is
given below:
1. General delegation: It means granting authority to the
subordinate to perform various managerial functions and
exercise control over them.
2. Specific delegation: Here, orders or instructions are
delegated to a particular person specifically.
3. Written delegation: When authority is delegated in written
words it is known as written delegation.
4. Unwritten delegation: If authority is delegated on the basis
of custom or usage etc, it is known as unwritten delegation.
5. Formal delegation: If duties and authority are shown in
the organizational structure of the enterprise, then it is called
formal delegation.
6. Informal delegation: If a person exercising authority
without getting it from the top management in order to
perform his assigned duties, it is a case of informal delegation.
7. Downward delegation: It is a case where the superior
delegate duties and authority to his immediate sub ordinate.
8. Sideward delegation: A person delegate authority to
another person who is also in the same rank as he is in the
organization.
CENTRALISATION AND DECENTRALISATION
Centralization: It means concentration of decision making
authority at the top level management. All the decision are taken
by the top management without delegating to the subordinate.
As far as a big organization is concerned, it is not possible to run

60
the organization for long period without delegating the authority.
Decentralization: In decentralization, each section has its
own workers to perform activities within the department.
According to Allen,” Decentralisation refers to the systematic
efforts to delegate to the lowest levels all authority except that
which can only be exercised at central point.”
Advantages of Decentralization
1. It saves the time of top executive and give relief to the top
executive
2. Decentralisation gives the subordinates the freedom to act
and make some decisions. It gives him a feeling of status
and recognition.
3. It helps to coordinate the activities of the organization in a
better way.
4. It helps to take prompt and quick action at the earliest.
5. It is a best devise to develop future business executives
Disadvantages of Decentralisaiton
1. It is suitable only to a big business enterprise.
2. It creates problem of co-ordination among various levels
3. There is a chance to miss the uniformity in policies and
procedures.
SPAN OF CONTROL
Span of management or Span of control means the number
of people managed efficiently by a single officer in an organization.
It is an accepted truth that large number of subordinates cannot
be supervised and their efforts coordinated effectively by a single
executive. Only limited numbers of persons are allocated to the
executive for dividing the work. The limit of number of members
for span of control may be increased or decreased according to
the levels of management.
According to Urwick, the ideal number of subordinates is
four in case of higher level management and eight to twelve in
case of lower level management.

61
Factors affecting the span of Control
The following are some of the factors which influence the
span of control.
1. Nature of work: If the works are repetitive in nature, the
supervisor can control a large number of subordinates and
vice versa.
2. Leadership qualities of the supervisor: If the supervisor
has more skill and capacity to control the subordinates, the
span of management may be increase and vice-versa.
3. Capacity of the subordinates: If the subordinates have
enough talent to perform the work assigned to them, the
manager or the supervisor can control more number of
subordinates.
4. Delegation of authority: If the authority delegates the
powers of decision making, planning and execution to the
subordinates, the span of control may be increased.
5. Level of supervision: Depending up on the requirement
of supervision needed, the span of control may vary. In other
words degree of span of control can be increased at bottom
level and decreased at top level.
6. Fixation of responsibility: In case the responsibility of
subordinate is clearly defined, then the superior can supervise
large number of subordinates.
7. Communication methods: The methods used for
communication is very important. If new and modern
techniques are used, then lesser time is required to control
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 and vice-versa.
8. Using of standards: If standards are used to detect the
errors, then the executives can control more number of
subordinates.
STAFFING
Staffing may be defined as a process of recruiting and
equipping the people to handle various positions and perform
assigned tasks in line with the structure and the overall goals of
the organisation. It is the managerial function which involves
managing the organisation structure through proper and effective
selection, appraisal and development of the personnel to fill the
roles assigned to the employers/workforce.
In the words of Benjamin, “It is the process involved in
identifying, assessing, placing, evaluating, and directing individuals
at work place.”
Staffing Function
Staffing function involves Man power planning, Recruitment,
Selection, Training and Development and PerformanceAppraisal.
MAN POWER PLANNING
Meaning and Definition
Planning of man power resources is a major managerial
Responsibility to ensure adequate supply of personnel at the right
time both in terms of their quality, quantity and aptitude Man
power planning, which is also called HR Planning consists of
putting right number of people at the right place, right time doing
the right things for which they are suited for the achievement of
goals of the Organisation.
Man power planning is carried out in a set of procedures.
The procedure is as follows:
a. Analyse the current man power inventory
b. Marketing future man power forecasts
c. Developing employment programme
d. Design training programme.

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RECRUITMENT AND SELECTION
Recruitment is the process of finding the apt candidate and
inducing them to apply for the job in an organisation. The success
of any recruitment depends upon the procedure followed by the
company while recruiting the members.
Definition
According to McFarland, “The term recruitment applies to the
process of attracting potential employees of the company.”
In the words of Edwin B Flippo, “It is the process of
searching for prospective employees and stimulating them to apply
for the job in the organisation.”
Sources of Recruitment
Sources of recruitment may be external or internal.
External sources: - It includes
a. Advertisement
b. Employment agencies
i.Public Employment Exchanges
ii.Pvt. Employment agencies
c. Campus recruitment
d. Deputation
e. Employee recommendations
f. Labour unions
g. Gate Hiring
h. Un solicited applications
i. Jobbers and Contractors
j. Walk in interviews Internal Sources: It includes
1. Transfers
2. Promotion and Demotion
SELECTION
It is the process adopted by an organisation to select
adequate number of persons who are fit for the job. Selection
procedure starts with the end of recruitment. Since it is a process
of rejecting the application of a candidate who is not suitable for
the job, selection is described as negative process.
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TRAINING
It refers to a Programme that facilitates an employee to
perform the job effectively through acquiring increased knowledge
and skills.
According to Edwin B Flippo,” Training is the act of
increasing the knowledge and skills of an employee for doing a
particular job.”
Types of Training
The training may be of
I. On the Job Training
II. Off the Job Training
I. On the Job Training: It refers to the learning while
actually performing a particular work or job. This type of training
is more suitable to every type of employees. It includes:
a. On specific job training
b. Rotation of position /job rotation
c. Special projects
d. Apprenticeship training
II. Off the Job Training: Under this method, a trainee is
removed from his normal working place and spends his full time
for training purpose in any other place. It includes:
a. Special course and lectures
b. Conference
c. Case study
d. Role playing
e. Management games etc
DIRECTION
Directing is the process of integrating the people within the
organisation so as to obtain their willing co-operation towards
meeting the pre determined goals.
According to Theo Haimann,” Directing consists of the
process and techniques utilized in
issuing instructions and making certain that operations are

65
carried on as originally planned.”
Principles of Direction:
The following are the basic principles of directing:
1. Integration of individual and organizational goals: This implies
that the individuals contribute to the organizational goals to
their maximum capabilities and at the same time satisfy their
personal needs.
2. Participative decision making: Effective direction can be
achieved by involving individuals and groups in decision
making process.
3. Delegation of Authority: The subordinates should be
delegated with adequate authority in order to facilitate
decision making.
4. Effective communication: The managers should ensure free
flow of communication at all levels of organizationalhierarchy.
5. Right type of leadership: The management should develop
leadership quality among the employees.
6. Unity of Command: This principle states that the
subordinates should get directives from one superior only
and should be accountable to one superior only.
7. Appropriateness of direction techniques: The direction
techniques selected should be according to the situation.
8. Follow up: The management should see that whether the
direction issued by them is carried out or not.
In simple words, direction can be described as providing guidance
to workers for doing work.
Techniques of Direction
There are mainly three techniques are used for direction:
1. Consultative direction: Under this method, the supervisor
has consultation with his subordinates before issuing a
direction. The consultation is made to find out the feasibility,
enforceability and nature of problem.
2. Free rein direction: Under these techniques, the subordinate
is encouraged to solve the problem independently. The
subordinate should take initiative to solve the problem.
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3. Autocratic direction: It is opposite to free rein direction.
The supervisor commands his subordinates and has close
supervision over them.
MOTIVATION
Motivation is the process of channelling a person‘s inner
drives so that he wants to accomplish the goals of the organization.
Motivation concerns itself with the will to work. It seeks to know
the incentives for the work and tries to find out the ways and
means whereby their realization can be helped and encouraged.
Motivation is a Latin word which means to move‘. Human
motives are internalized goals within individuals. Motivation may
be defined as those forces that cause people to behave in certain
ways.
According to Louis Allen, “motivation is the work of a
manager performs to inspire, encourage and impel people to take
required action”
In the words of William G Scott, “motivation means a
process of stimulating people to action to accomplish desired
goals”
Thus motivation is a process by which a need or desire is
aroused and a psychological force within our mind sets us in
motion to fulfill our needs and desires. An unsatisfied need
becomes the motive for a person to spend his energy in order to
achieve a goal.
Characteristics of Motivation
The following are the important characteristics and nature
of motivation
1. Motivation is an internal feeling – Motivation is a
psychological phenomenon which is a force within an
individual that drives him to behave in a certain way.
2. Motivation produces goal-directed behaviour – An
individual‘s behaviour is directed towards a goal.
3. Motivation is related to needs – Needs are deficiencies
which are created whenever there is a physiological or

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 psychological imbalance.
4. Motivation can be positive or negative – Positive or incentive
motivation is generally based on rewards. Negative or fear
motivation is based on force and fear.
5. Motivation is a continuous process – Satisfaction of human
needs is a never ending process. It is a continuous process.
So motivation is also a continuous process.
6. Motivation is dynamic – Needs of a person today may be
different from needs of tomorrow. So motivation is highly
dynamic.
Importance and benefits of Motivation
Motivation is an effective device in the hands of a manager
for inspiring the work force and creating confidence in it. By
motivating the work force, management can achieve the
organizational goals. The various benefits of motivation are
1. A manager directs or guides the workers‘ actions in the
desired direction for accomplishing the goals of the
organization by motivating the workers.
2. Workers will try to be efficient as possible by improving
upon their skills and knowledge so that they are able to
contribute to the progress of the organization.
3. Ability to work and willingness to work are necessary for
performing any task. These two things can be created only
by motivation.
4. Motivation contributes to good industrial relations in the
organization.
5. Motivation is the best remedy for resistance to changes. If
the workers of an organization are motivated, they will accept
any change whole-heartily for the organizational benefits.
6. Motivation facilitates the maximum utilization of all the factors
of production and thereby contributes to higher production.
7. Motivation promotes a sense of belonging among the
workers.
8. Motivation leads to lower turnover and absenteeism because

68
 a satisfied employee will not leave the organization.
Theories of Motivation
There are many internal and external variables that affect
the motivation to work. Behavioural scientists started to search
new facts and techniques for motivation. These are called as
motivation theories. The most important theories are
1. McGregor‘s Theory X and Theory Y
2. Herzberg‘s Two Factor Theory
3. Maslow‘s Need Hierarchy Theory
4. McClelland‘s Achievement Theory
McGregor’s Theory X and Theory Y
The style adopted by a manager in managing his subordinates
is basically dependent upon his assumption about human
behaviour. Theory X is negative, traditional and autocratic style
while theory Y is positive, participatory and democratic. Thus
these two theories are contrasting set of assumptions about human
behaviour.
Theory X – This is the traditional theory of human behaviour
which makes the following assumptions
1. The average human being has an inherent dislike of work
and will avoid it if he can.
2. He lacks ambition, dislikes responsibility and prefers to be
directed.
3. He is inherently self-centered, indifferent to organizational
needs.
4. He is by nature resistant to change.
5. Working method of the people is generally traditional and
hence there is little scope for the development and research.
6. People would be passive without active intervention by
management. Hence they must be persuaded, rewarded,
punished and properly directed.
7. He is gullible, not very bright.
Theory Y – As a result of many psychological and social
researches McGregor developed an opposing theory- theory Y.
69
according to McGregor, Theory Y is based on the following
assumptions
1. Work is natural as play or rest, provided the conditions are
favorable. The average human being does not inherently
dislike work.
2. External control; and the thrust of punishment are not the
only means for bringing about efforts towards organizational
objectives. Man will exercise self direction and self control
in the service of objectives to which he is controlled.
3. Commitment to objectives is a result of the rewards
associated with their achievement.

4. The average humans being, under proper conditions learn

not only to accept responsibility but also to seek it.
5. He has capacity to exercise a relatively high degree of
imagination, ingenuity and creativity in the solution of
organizational problems in widely, not narrowly distributed
in the population.
6. Under conditions of modern industrial life the intellectual
potentialities of people are only partially utilized.
Difference between theory X and theory Y
Theory X Theory Y
1 Theory X assumes human Theory Y assumes that work
beings inherently dislike is as natural as play or rest
work and arte dissatisfied
withtowards work.
2 Theory X emphasizes that Theory Y assumes just
people do not have ambition reverse. Given
and they shrink responsibility. properconditions, people have
ambitions and accept
responsibility.
3 Theory X assumes that According to Theory Y, the
people in general havelittle creativity iswidely distributed
capacity for creativity. in the population.
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 4 According to Theory X, In Theory Y people are self
people lack self motivation directed and creative and
and require be externally prefer self control.
controlling and closely
supervising in order toget
maximum output.
5 Theory X emphasizes upon Theory Y emphasizes the
centralization of authority in decentralization and greater
decision making process participation in decision
makingprocess.
Herzberg’s Two Factor Theory (Motivation – Hygiene
Theory)
The motivation – hygiene theory was proposed by Fredrick
Herzberg, a well known psychologist, in 1959. According to
Herzberg, there are two separate factors that influence motivation.
They are
(i) hygiene or maintenance factors and (ii) motivational
factors.
Hygiene Factors – They are also called as dissatisfiers. The
presence of these factors will not motivate people in an
organization. Otherwise dissatisfaction will arise. Herzberg called
these factors as maintenance factors because they are necessary
to maintain a reasonable level of satisfaction in the employees.
Any increase beyond this level will not provide any satisfaction
to the employees; however, any cut below this level will dissatisfy
them.
Motivation Factors – These factors are satisfiers. These
are a set of job conditions which operate primarily to build strong
motivational factors. According to Herzberg, the six motivational
factors motivate the employees are achievement, recognition,
advancement, challenging work, possibilities for growth and
responsibility.
However, Herzberg model is not applied in all conditions.
The classification as maintenance and motivating factors can only
be made on the basis of level of persons‘ need satisfaction and
relative strength of various needs.
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Maslow’s Need Hierarchy Theory
Abraham Harold Maslow, an eminent US psychologist, gave
a general theory of motivation known as Need Hierarchy Theory
in 1943. According to him, there seems to be a hierarchy into
which human needs are arranged. The needs are as follows
1. Physiological Needs – these needs are related to the
survival and maintenance of life. These include hunger, thirst,
shelter, sex and other bodily needs.
2. Safety or Security Needs – These consist of physical
safety against murder, fire accident, security against
unemployment etc.
3. Social or Love Needs – these needs are also called as
affiliation needs. These consist of need for love, affection,
belonging or association with family, friends and other social
groups.
4. Esteem or Ego Needs – The esteem needs are concerned
with self respect, self confidence, feeling of personal worth,
feeling of being unique and recognition. Satisfaction of these
needs produces feeling of self confidence, prestige, power
and control.
5. Self Actualization or Self Fulfillment Needs – Self
actualization is the need to maximize one‘s potential,
whatever it may be. It is the need to fulfill what a person
considers to be his real mission in life. It helps in individual
to realize one‘s potentialities to the maximum.
McClelland’s Achievement or Need Theory
David C McClelland, a Harvard psychologist, has proposed
that there are three major relevant motives, most needs in work
place situations. According to him, the motives are
1. The Need for Achievement i.e., strives to succeed.
2. The Need forAffiliation i.e., warm relationship withothers.
3. The Need for Power i.e., controls other people.
According to McClelland, every motive is acquired except
striving for pleasure and avoiding pain. He proposed that people

72
acquire these needs for achievement, power and affiliation through
experiences over the time. On the job, people are motivated by
these needs, and the manager can learn to recognize these needs
in workers and use them to motivate behaviour.
McClelland used the Thematic Apperception Test (TAT) to
study human needs. The TAT process involves asking respondents
to look at pictures and write stories about what they see in the
pictures. The stories are then analysed to find certain themes that
represent various human needs.
LEADERSHIP
Leader
A leader is someone who has the capacity to create a
compelling vision that takes people to a new place, and to
translate that vision into action. Leaders draw other people to
them by enrolling them in their vision. What a leader does is inspire
people and empower them. Thus a leader is a person who has a
vision, a drive and a commitment to achieve that vision, and the
skills to make it happen.
LEADERSHIP
Leadership is an activity on the part of the managers to get
something done by others, willingly and not by compulsion.
Leadership is a process of influence on a group. Leadership is
the ability of a manager to induce subordinates to work with
confidence.
In the words of Koontz and O‘ Donnel, “leadership is the
ability of a manager to induce subordinates to work with
confidence and zeal.”
According to Chester I Bernard, “leadership refers to the
quality of the behaviour of
individual whereby they guide people on their activities in
organized efforts”
According to Luis AAllen, “a leader is one who guides and
directs other people. He gives
the efforts to his followers a direction and purpose by
influencing their behaviour”
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 Thus leadership is a psychological process of influencing
followers and providing guidance, directing and leading the people
in an organization towards attainment of the objectives of the
enterprise.
Nature or Characteristics of Leadership
1. A leader should have followers
2. leadership is basically a personal quality
3. leadership involves a community of interest between the
leader and his followers
4. leadership is a process of influence
5. leadership is the function of stimulation
6. A leader ensures absolute justice
7. Leadership is a continuous, dynamic and ever evolving
process.
Importance of Leadership
Without a good leader, organization cannot function
efficiently and effectively. The leader guides the action of others
in accomplishing the organizational goals. A good leader motivates
his subordinates, creates confidence and increases the morale of
workers. The importance of leadership can be discussed as
follows
1. Leadership is the process of influencing the activities of an
individual or a group towards the achievement of a goal.
2. An effective leader motivates the subordinates for higher
level performance.
3. Leadership promotes team spirit and team work which is
quite essential for the success of any organization
4. Leadership is an aid to authority as it helps in the effective
use of formal authority.
5. Leadership creates confidence in the subordinates by giving
them proper guidance and advice.
Functions of a Leader
The functions of a leader can be detailed as follows
1. Taking the initiative –Aleader initiates all the measures which
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 are necessary for the purpose of ensuring the health and
progress of the undertaking in a competitive economy.
2. He identifies group goals
3. he represents the organization
4. He acts as an arbitrator
5. To assign reasons for his actions
6. To interpret the objectives of organization
7. To guide and direct the organization
8. To encourage team work
9. He manages the organization
Leadership Styles
The term leadership styles can be defined as a leader‘s
behaviour towards group members. It refer to the pattern of
behaviour which a leader adopts in influencing the behaviour of
his subordinates in the organizational context. Different leadership
styles can be categorized as follows.
1. Autocratic Leadership
Autocratic leadership is also known as authoritarian,
directive, leader centered or monothetic style. Under this style,
leader concentrates all authority in himself, instructs a subordinate
as to what to do, how to do it, when to do it etc. He also exercises
close supervision and control over his subordinates. There are
three categories of autocratic leaders
a. StrictAutocrat –Astrict autocrat relies on negative influence
and gives orders which the subordinates must accept. He
may also use his powers to disperse rewards to his group.
b. BenevolentAutocrat – The benevolent is effected in getting
high productivity in many situations and he can develop
effective human relationship. His motivational style is usually
positive.
c. Manipulative Autocrat – A manipulative autocrat leader
is one who makes the subordinates feel that they are
participating in decision making process even though he has
already taken the decisions.
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2. Participative Leadership
This style is also called as democratic, consultative, group
centered or ideographic style. A participative leader is one who
consults and invites his subordinates to participate in decision
making process. Under this style, subordinates are freely allowed
to communicate with the leader and also with their fellow
subordinates and take their own initiative.
3. Laissez Faire or Free-rein Leadership
Under this style of leadership, the leader largely depends
upon the group and its members to establish their own goals and
make their own decisions. The leader is passive and assumes the
role of just another member in the group. Only very little control
is exercised over group members. This style is also known
permissive style of leadership. This style is suitable to certain
situations where the manager can leave a choice to his groups.
Qualities of a successful leader
The following are the major innate qualities in a successful
leader.
1. Physical features like height, weight, health and appearance
2. Intelligence
3. Emotional stability
4. Human relations
5. Empathy
6. Objectivity
7. Motivating skills
8. Technical skills
9. Communicative skills
10. Social skills.
LEADERSHIP THEORIES
Leadership is the process of influencing others towards
the accomplishment of goals. Recent efforts by behaviourists
have shown a trend towards integrating the numerous theories of
leadership. A number of theories and approaches to study
leadership have been developed. There are broadly three theories
of leadership.

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 • Trait Theory
• Behaviour Theory
• Contingency Theory
(a) Trait Theory
This theory of studying leadership is taken into consideration
to analyze the personal, psychological and physical traits of strong
leaders. The assumption made in this theory was that some basic
traits or set of traits differentiates leaders from non-leaders. For
example, the leadership traits might include intelligence,
assertiveness, above average height, self- confidence, initiative
and understanding of interpersonal human relations. The existence
of these traits determines the importance of leadership. Possession
of these traits helps the individuals to gain possession of leadership.
Since all individuals do not have these qualities, only those
who have them would be considered potential leaders.
(b) Behaviour Theory
The behavioural theory assumed that effective leaders
behaved differently from ineffective leaders. It also identified the
need of consistency of behaviour of good leaders. This theory
can be more clearly understood with the help of following case
studies.
• The Michigan Studies:
Researchers at the University of. Michigan, led by
RensisLikert, began studying leadership in the late 1940s.
Depending on broad discussions with both the managers and
sub-ordinates, the Michigan studies identified two forms of
leadership behaviour. They are discussed as below:
Job-centered leadership behaviour :
The first was called job-centered leadership behaviour,
which focuses on performances and efficient completion of the
assigned tasks. A job-centered leader interacts with group
members to explain task procedures and oversee their work.
Employee centered leadership behaviour:
The second behaviour was identified as employee centered
leader behaviour, which focuses on, high performance standards
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to be accomplished. This can be done by developing a cohesive
work group and ensuring that employees are satisfied with their
jobs. Thus, the leader’s primary concern is the welfare of the
ordinates. The Michigan researchers thought a leader could
show signs of one kind of behaviour, but not both.
• The Ohio State Studies:
At about the same time, a group of researchers at Ohio
State also began studying leadership. The Ohio State leadership
studies also identified two major kinds of leadership behaviours
or styles, which are as follows:
Initiating-structure behaviour:
In initiating-structure behaviour, the leader clearly defines
the leader-subordinate roles so that everyone knows what is
expected. The leader also establishes formal lines of
communication and determines how tasks will be performed.
Consideration behaviour:
In consideration behaviour, the leader shows concern for
subordinates feelings’ and ideas. He attempts to establish a warm,
friendly and supportive.
(c) Contingency Theory
The main assumption of contingency theory is that the
behaviour of an appropriate leader varies from one situation to
another. The motive of a contingency theory is to identify
key situational factors and to specify how they interact to
determine appropriate behaviour of a leader. The three most
important and widely accepted contingency theories of leadership
are as follows:
• The LPC theory:
The first contingency theory of leadership is Fred Fielder’s
Least Preferred Co- worker (LPC) Model. Fielder identified
two types of leadership: task-oriented and relationship- oriented.
Fielder believes that a leader’s tendency to be task-oriented
or relationship oriented remains constant. In- other words, a
leader is either task-oriented or relationship- oriented while
leading his group members. Fielder used the Least Preferred Co-
worker (LPC) scale to measure the type of leadership. A leader
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is asked to describe characteristics of the person with whom he
or she is least comfortable while working. They can do this by
marking in a set of sixteen scales at each end, by a positive or
negative adjective. According to Fielder, the contingency factor
favours the situation from the leader’s point of view. This factor
is determined by leader-member relations, task-structure and
position-power, which are discussed as below:
• Leader-member relations:
A Leader-member relation refers to the nature of relationship
between the leader and his work group. If the leader and the
group enjoy mutual trust, respect, confidence and they like
one another, relations will remain good
•Task-structure:
Task-structure is the degree to which the group’s task is
clearly defined. When the task is routine, easily understood,
and unambiguous and when the group has standard
procedures, the structure is assumed to be high. When the
task is non-routine, ambiguous, complex, with no standard
procedures and precedents, structure is assumed to be low. .
•Position-power:
Position-power is the power vested in the position of a
leader in an organization. If the leader has the power to assign
work, administer rewards and punishment, recommend
employees for promotion or demotion, position-power is
assumed to be strong. If the leader does not have required powers,
the position-power is weak. From the leader’s point of view,
strong position power is favourable and weak position power
is unfavourable.
(d) The Path-Goal theory
The path-goal model of leadership was introduced by Martin
Evans and Robert House. Path-goal theory says that a leader
can motivate subordinates by influencing their expectations.
Leaders can motivate sub-ordinates by making clear what they
have to do to get the reward they desire. The path-goal model
assumes that leaders can change their style or behaviour to meet
the demands of a particular situation.
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 This model identifies four kinds of leader behaviour:
directive, supportive, participative and achievement-oriented.
According to this model managers can adjust their behaviour to
include any four kinds of leadership behaviour mentioned above.
For instance, while leading a new group of sub-ordinates, the
leader may be directive in giving guidance and instructions to
them. He may also adopt supportive behaviour to encourage
group cohesiveness, to look after their needs and ensuring that
they get the rewards and benefits. As the group becomes more
familiar with the task and as new problems are taken into
consideration, the leader may use participative behaviour by which
he can participate with employees in making decisions and take
their suggestions as well. Finally, the leader may use achievement-
oriented behaviour to encourage continued high performance of
sub-ordinates.
Managerial grid theory
At conception, the managerial grid model was composed
of five different leadership styles. These styles were a relation
between a manager’s concern for people, concern for production
and his motivation. The motivation dimension really provides the
underlying motive of the leader behind a successful leadership
style. Thus the managerial grid model categorizes leaders into
one of 81 possible categories. Later, two additional leadership
styles were added as well as the element of resilience.

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1. The Indifferent or Impoverished (1,1)
These leaders have minimal concern for people and
production. Their priority is to fly under the radar while they
content to seek solutions that won’t bring any negative focus to
themselves or their department. Preserving their employment,
position as well as their seniority is what drives their elusive and
evading behaviours. In short, the indifferent leaders are ineffective
and are sorely lacking in any of the traits that can be attributed to
successful and effective leaders.
2. The Country Club or Accommodating (1, 9)
These leaders will go above and beyond to ensure that the
needs and desires of his employees are met. These leaders are
making the assumption that their staff will yield maximum results
as they are likely to be self-motivated when they are lead in such
environment. These leaders will have behaviours that will yield
and comply with the needs of their staff. The productivity of the
group however, can suffer from the lack of attention on tasks.
3. The Status Quo or Middle-of-the-Road (5, 5)
These leaders balance out the needs of their staff with those
of the organization, while not adequately achieving either. These
leaders will balance and compromise their decisions, often
endorsing the most popular one. They dedicate minimal efforts
towards facilitating the achievements of their staff or the
production results in average or below average levels.
4. The Dictatorial or Produce, Perish or Control (9, 1)
Similar to autocratic leader
These leaders focus all of their attention to production-related
matters and very little towards the needs of their employees. These
leaders will direct and dominate while holding the belief that
efficiency gains can only be achieved through rigid disciplines
especially those that don’t require human interaction. Employees
are considered expendable resources. Productivity is usually short
lived as high employee attrition is unavoidable. The dictatorial
style is inspired by the McGregor X theory.

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5. The Sound or Team (9, 9)
According to Dr. Robert R. Blake and Dr. Jane Srygley
Mouton (and I agree), the sound leader is the most effective
leadership style. These leaders will contribute and are committed,
can motivate and are motivated while holding the belief that trust,
respect, commitment and employee empowerment are essential
for fostering a team environment where team members are
motivated, thus resulting in maximum employee satisfaction as
well as the most efficient productivity. This sound leadership style
is also inspired by the McGregor Y theory.
COMMUNICATION
Communication is a process in which Information, Ideas,
Thoughts and Feeling exchanges within two or more person.
It is a process of sending and receiving information between
two or more people. The person who is sending message referred
to as the sender, while person who is receiving information is
known as receiver.
Types of Communication
People communicate with each other in different ways that
depends on the message. There are two types of communication
are:
1. Verbal Communication
2. Non Verbal Communication
Verbal Communication
Verbal communication refers to that communication in which
message is transmitted verbally. It can be done by the words of
mouth and a piece of writing. When we talk to others, we assume
that others understand what we are saying because we know
what we are saying. But this is not the case. Usually people bring
their own attitude, perception, emotions and thoughts about the
topic and hence creates barrier in delivering the right meaning.
It can be divided into two forms: Oral Communication
Written Communication
Oral Communication
Oral Communication is that communication which formed
orally like spoken of words. It includes face-to-face conversation,
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speech, telephonic conversation, videos, radio, television. It can
be influenced by pitch, volume, speed and clarity of speaking.
Written Communication
Written communication has great significance in today’s
business world. It is an innovative activity of the mind. Effective
written communication is essential for preparing worthy
promotional materials for business development. Speech came
before writing. But writing is more unique and formal than speech.
Effective writing involves careful choice of words, their
organization in correct order in sentences formation as well as
cohesive composition of sentences. Also, writing is more valid
and reliable than speech.
Nonverbal Communication
Nonverbal communication is the sending or receiving of
wordless messages. We can say that communication other than
oral and written, such as gesture, body language, posture, tone
of voice or facial expressions, is called nonverbal communication.
Nonverbal communication is all about the body language of
speaker.
Nonverbal communication helps receiver in interpreting the
message received. Often, nonverbal signals reflect the situation
more accurately than verbal messages. Sometimes nonverbal
response contradicts verbal communication and hence affects
the effectiveness of message.It involves appearance, body
language, and Sound.
There are two types of communication are:
1. Formal Communication
2. Informal Communication
Formal Communication
In formal communication, certain rules, conventions and
principles are followed while communicating message. Formal
communication occurs in formal and official style. Usually
professional settings, corporate meetings, conferences undergoes
in formal pattern. In formal communication, use of slang and foul
language is avoided and correct pronunciation is required.
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Authority lines are needed to be followed in formal
communication.
Informal Communication
Informal communication is done using channels that are in
contrast with formal communication channels. It’s just a casual
talk. It is established for societal affiliations of members in an
organization and face-to-face discussions. It happens among
friends and family. In informal communication use of slang words,
foul language is not restricted. Usually. Informal communication
is done orally and using gestures. Informal communication, Unlike
formal communication, doesn’t follow authority lines. In an
organization, it helps in finding out staff grievances as people
express more when talking informally. Informal communication
helps in building relationships. Informal channel of communication
is also known as Grape wine.
Downward communication
Communication which flows from the superior to
subordinates is referred as downward communication. It is
needed,
• To get things done
• To prepare for changes
• To discourage misinformation and suspicion
• To let the people feel the price of being relatively well
informed.
Upward communication
It flows from a subordinate position to superior position.
That I s, the subordinate work performance report, their opinions,
ideas and suggestions, complaints and grievances of subordinates,
etc.,.
PROCESS OF COMMUNICATION
Communication is a process of exchanging verbal and non
verbal messages. It is a continuous process. Pre-requisite of
communication is a message. This message must be conveyed
through some medium to the recipient. It is essential that this

84
message must be understood by the recipient in same terms as
intended by the sender. He must respond within a time frame.
Thus, communication is a two way process and is incomplete
without a feedback from the recipient to the sender on how well
the message is understood by him.
1. Sender / Encoder – Sender / Encoder is a person who
sends the message. A sender makes use of symbols (words
or graphic or visual aids) to convey the message and produce
the required response. For instance – a training manager
conducting training for new batch of employees. Sender may
be an individual or a group or an organization. The views,
background, approach, skills, competencies, and knowledge
of the sender have a great impact on the message.
2. Message –Message is a key idea that the sender wants to
communicate. It is a sign that elicits the response of recipient.
Communication process begins with deciding about the
message to be conveyed. It must be ensured that the main
objective of the message is clear.
3. Medium – Medium is a means used to exchange / transmit
the message. The choice of appropriate medium of
communication is essential for making the message effective
and correctly interpreted by the recipient. This choice of
communication medium varies depending upon the features
of communication. For instance – Written medium is chosen
when a message has to be conveyed to a small group of
people, while an oral medium is chosen when spontaneous
feedback is required from the recipient as misunderstandings
are cleared then and there.
4. Recipient / Decoder – Recipient / Decoder is a person for
whom the message is intended / aimed / targeted. The degree
to which the decoder understands the message is dependent
upon various factors such as knowledge of recipient, their
responsiveness to the message, and the reliance of encoder
on decoder.
5. Feedback – Feedback is the main component of
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 communication process as it permits the sender to analyze
the efficacy of the message. It helps the sender in confirming
the correct interpretation of message by the decoder.
Feedback may be verbal (through words) or nonverbal (in
form of smiles, sighs, etc.). It may take written form also in
form of memos, reports, etc.
Most Common Barriers to Effective Communication
1. Physical Barriers: this has to do with poor or outdated
equipment used during communications, background noise,
poor lighting, temperatures that are too hot or too cold.
2. Attitudes: emotions like anger or sadness can taint
objectivity. Also being extremely nervous, having a personal
agenda or “needing to be right no matter what” can make
communications less than effective. This is also known as
“Emotional Noise”.
3. Language: this can seem like an easy one, but even people
speaking the same language can have difficulty understanding
each other if they are from different generations or from
different regions of the same country. Slang, professional
jargon and regional colloquialisms can even hurt
communicators with the best intentions.
4. Physiological Barriers: ill health, poor eyesight or hearing
difficulties, pain.
5. Problems with Structure Design: companies or institutions
can have organization structures that are not clear, which
can make communications difficult. Also to blame for faulty
communications are bad information systems, and lack of
supervision or training of the people involved.
6. Cultural Noise: people sometimes make stereotypical
assumptions about others based on their cultural background.
7. Lack of Common Experience: it’s a great idea to use
examples or stories to explain a point that is being discussed.
However, if the speaker and the audience cannot relate to
these examples because they do not have the same
knowledge or have not shared the same experiences then
this tool will be ineffective.
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8. Ambiguity and Abstractions Overuse: leaving things half-
said, using too many generalizations, proverbs or sayings,
can all lead to communications that are not clear and that
can lend themselves to misinterpretations.
9. Information Overload: it takes time to process a lot of
information and too many details can overwhelm and distract
the audience from the important topics. Keep it Simple,
Sweetie.
10. Assumptions and Jumping to Conclusions: This can make
someone reach a decision about something before listening
to all the facts.
11. Psychological barriers can be described as the cause of
distorted communication because of human psychology
problems. Psychological barriers may be ; Attitude and
opinions, Emotions, Filtering and distortion of message,
Status difference, In attention, Closed mind, Fields of
experience.
CO-ORDINATION
It is a process of integrating the interdepartmental activities
as unified action towards the fulfilment of the predetermined
common goals of the organization.
According to Henry Fayol, “ To co-ordinate is to harmonize
all the activities of a concern so as to facilitate its working and its
success. In a well co-ordinated enterprise, each department or
division, works in harmony with other and is fully informed
of its role in the organization. The working schedule of various
departments is constantly turned to circumstances.”
Features
1. It is not a separate function of management.
2. I t is necessary to all levels of management.
3. It is a continuous and dynamic process.
4. Group efforts are more relevant than individual efforts.
5. Unity of action is the heart of co-ordination.
6. It is a system concept.
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Types of Co-ordination
The following are the important types of co-ordination.
1. Vertical co-ordination: - It refers to co-ordination between
activities of a manager and his subordinates
2. Horizontal co-ordination:- It refers to co-ordination
among peers – ie employees working at the same levels in
organizational hierarchy and among various departments.
3. Diagonal co-ordination: It is co-ordination among the
users and between users and service personnel, which is
achieved through understanding, negotiation and voluntary
effort.
Principles of Co-ordination:
In order to ensure effective co-ordination, the co-ordination
should be based on certain principles:
1. Personal contact: Effective co-ordination can be achieved
through personal contact. Personal contact avoids
controversy and misunderstanding.
2. Reciprocal relationship: This principle says that all factors
in a situation are reciprocally related. Each factor influences
other factor.
3. Dynamism: Co-ordination is modified according to the
external and internal actions and decisions ie co-ordination
should be a dynamic one.
4. Continuity: It says that co-ordination is a continuous
process.

5. Self co-ordination: According to this principle, the function

of one department affects other departments and in turn, is
affected by the function of other departments.
6. Clear cut objectives: As per this principle, the departments
heads should know clearly the objectives of the organization.
7. Effective communication: Effective communication is very
necessary for the proper co- ordination.
8. Early stage of starting: The co-ordination should be
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 started even from the planning function of management.
TECHNIQUES OF EFFECTIVE COORDINATION IN
ORGANIZATION
Some of the techniques that are used to achieve effective
coordination are given below:
1. Direct Contact: One of the most effective means of
achieving coordination is direct contact. Written
communication, modern electronic, mechanical devices, etc.,
can also be used.
2. Group Meetings: Group meetings are said to be an
effective means of achieving coordination. At the time of
meeting, superior comes into personal contact with those
connected with the actual problems. Such meetings
encourage the people to integrate their efforts. Coordination
can be achieved through regular meetings of superiors and
subordinates.
3. Organizational Structure: Coordination can be achieved
only when the authority and responsibility of each and every
person are clearly defined. In other words, the organizational
structure should be designed properly so as to permit
coordination among various activities along the line itself.
4. Effective Communication: In achieving coordination,
effective communication plays a vital role. Communication
greatly helps in coordination. The purpose of communication
is to promote deep understanding among members by
bringing and maintaining coordination in order to achieve
the ultimate goals.
5. Committees: In order to coordinate the various activities,
various types of committees may be appointed. Committees
provide the means for synchronizing various efforts.
Committees develop better understanding and morale
among the members. They are greatly advisory in nature
and make use of the best efforts of the members.
6. Staff Meetings: Staff meetings at regular intervals helps in
achieving effective coordination because such meetings
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 provides opportunities for frank discussions and better
exchange of ideas of people from different sections. This
infuse a feeling of unity among the members which makes
them to jointly work for the organization.
7. Effective Leadership: Leader inculcates a feeling of
collectivism in the employees and forces them to work as a
team. Individuals within the group, may possess varied
interests and multiple goals. Leader reconciles these
conflicting goals and restores equilibrium. A good leader
can achieve coordination at all stages. Hence, effective
leadership is essential for achieving coordination.
8. Informal Coordination: Many organizations adopt informal
means of coordination through processes of social, unofficial
interactions, relationship and mutual adjustments. They are
very often more effective than formal means.
CONTROLLING
The Control function is closely related with all other functions
of management. The management control is the process of
ensuring that the actual plan implementation matches with the
original plan. It is an on-going and dynamic function and linked
with other function of the management in a circular relationship.
Definition
According to KoontsO‘Donnel, “Controlling is the
measurement of accomplishment against the standards and the
correction of deviation to assure attainment of objectives
according to plan.”
Steps in Control Process
The control process involves four basic steps as mentioned
below:-
1. Establishing standards:- Standard represents criteria of
performance. This implies the statement of goals and
objective envisaged under the planning process are stated
in clear and measurable terms along with specific milestones.
The standard should have some characteristics to produce
effective performance.
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2. Measurement of performance against standards: The
measurement of performance is an on- going process.
Several techniques are used by the management to measure
the performance.
3. Comparing the actual performances with standards:
The measured results are compared with the project and
standards. In case the performance meets the standards,
then it would mean that the performance or activity is
progressing in the desired direction.
4. Taking corrective action: In the situations when
performance does not confirm to the specified criteria of
the standards, then it is necessary to take corrective
measures to deal with the observed deviations in the
performance.
CONTROL TECHNIQUES
Financial controls
Financial audits, or formal investigations, are regularly
conducted to ensure that financial management practices follow
generally accepted procedures, policies, laws, and ethical
guidelines. Audits may be conducted internally or externally.
Financial ratio analysis examines the relationship between specific
figures on the financial statements and helps explain the significance
of those figures:
Liquidity ratios measure an organization’s ability to generate
cash. Profitability ratios measure an organization’s ability to
generate profits. Debt ratios measure an organization’s ability to
pay its debts.
Activity ratios measure an organization’s efficiency in
operations and use of assets.
Budget controls
A budget depicts how much an organization expects to spend
(expenses) and earn (revenues) over a time period. Amounts are
categorized according to the type of business activity or account,
such as telephone costs or sales of catalogs. Budgets not only
help managers plan their finances, but also help them keep track
of their overall spending.
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 A budget, in reality, is both a planning tool and a control
mechanism. Budget development processes vary among
organizations according to who does the budgeting and how the
financial resources are allocated. Some budget development
methods are as follows:
Top down budgeting. Managers prepare the budget and
send it to subordinates.
Bottom up budgeting. Figures come from the lower levels
and are adjusted and coordinated as they move up the hierarchy.
Zero based budgeting. Managers develop each new budget
by justifying the projected allocation against its contribution to
departmental or organizational goals.
Flexible budgeting. Any budget exercise can incorporate
flexible budgets, which set “meet or beat” standards that can
be compared to expenditures.
Break Even Analysis
Break Even Analysis or Break Even Point is the point of no
profit, no loss. For e.g. When an organisation sells 50K cars it
will break even. It means that, any sale below this point will cause
losses and any sale above this point will earn profits. The Break-
even analysis acts as a control device. It helps to find out the
company’s performance. So the company can take collective
action to improve its performance in the future. Break-even
analysis is a simple control tool.
PERT and CPM Techniques
Programme Evaluation and Review Technique (PERT) and
Critical Path Method (CPM) techniques were developed in USA
in the late 50’s. Any programme consists of various activities and
sub-activities. Successful completion of any activity depends upon
doing the work in a given sequence and in a given time.
CPM / PERT can be used to minimise the total time or the
total cost required to perform the total operations.
Importance is given to identifying the critical activities. Critical
activities are those which have to be completed on time otherwise
the full project will be delayed.
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 So, in these techniques, the job is divided into various
activities / sub-activities. From these activities, the critical activities
are identified. More importance is given to completion of these
critical activities. So, by controlling the time of the critical activities,
the total time and cost of the job are minimised.
Management Audit
Management Audit is an evaluation of the management as a
whole. It critically examines the full management process, i.e.
planning, organising, directing, and controlling. It finds out the
efficiency of the management. To check the efficiency of the
management, the company’s plans, objectives, policies,
procedures, personnel relations and systems of control are
examined very carefully. Management auditing is conducted by a
team of experts. They collect data from past records, members
of management, clients and employees. The data is analysed and
conclusions are drawn about managerial performance and
efficiency.
Management Information System (MIS)
In order to control the organisation properly the management
needs accurate information. They need information about the
internal working of the organisation and also about the external
environment. Information is collected continuously to identify
problems and find out solutions. MIS collects data, processes it
and provides it to the managers. MIS may be manual or
computerised. With MIS, managers can delegate authority to
subordinates without losing control.
Computers and information controls
Almost all organizations have confidential and sensitive
information that they don’t want to become general knowledge.
Controlling access to computer databases is the key to this area.
Increasingly, computers are being used to collect and store
information for control purposes. Many organizations privately
monitor each employee’s computer usage to measure employee
performance, among other things. Some people question the
appropriateness of computer monitoring. Managers must carefully
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weigh the benefits against the costs—both human and financial—
before investing in and implementing computerized control
techniques.
Return on Investment (ROI)
Investment consists of fixed assets and working capital used
in business. Profit on the investment is a reward for risk taking. If
the ROI is high then the financial performance of a business is
good and vice-versa.
ROI is a tool to improve financial performance. It helps the
business to compare its present performance with that of previous
years’ performance. It helps to conduct inter-firm comparisons.
It also shows the areas where corrective actions are needed.
Multiple Choice Questions
1. Luther Qullick described functions of management as ——
a. PODSCORB
b. POSDCORB
c. POCSCROB
d. PODSORB
2. ———————— is the basic function of management
a. Organizing
b. Directing
c. Controlling
d. Planning
3. —————— are the goals, aims or purposes that
organization wish to achieve over varying periods of time
a. Objectives
b. Policies
c. Rules
d. Procedures
4. —————— is a sequence of activities to be undertaken
for implementing the polices and achieving the objectives of
organization.
a. Programmes

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b. Policies
c. Rules
d. Procedures
5. ————— is an organizational structure which clearly
defines duties, responsibilities and authority
a. Formal
b. Informal
c. Natural
d. None of these
6. ——— organization arises voluntarily or due to social
interaction of people
a. Formal
b. Informal
c. Line organization
d. All of the above
7. Authority is the right to give —————————— and
the power to exact obedience
a. Information
b. Orders
c. Money
d. None of these
Short answer type questions
1. What is organization
2. What is formal organization
3. What is scalar chain
4. What is chain of command
5. Define authority
6. What is centralization
7. What is decentralization
8. What is departmentation

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 1. MODULE III
BUSINESS ETHICS

Ethics, also called moral philosophy, the discipline concerned

with what is morally good and bad and morally right and wrong.
The term is also applied to any system or theory of moral values
or principles.
At its simplest, ethics is a system of moral principles.
They affect how people make decisions and lead their lives.
Ethics is concerned with what is good for individuals and
society and is also described as moral philosophy.
The term is derived from the Greek word ethos which can
mean custom, habit, character or disposition.
Ethics covers the following dilemmas:
how to live a good life our rights and responsibilities the
language of right and wrong moral decisions - what is good and
bad?
Our concepts of ethics have been derived from religions,
philosophies and cultures. They infuse debates on topics like
abortion, human rights and professional conduct.
Approaches to ethics
Philosophers nowadays tend to divide ethical theories into
three areas: metaethics, normative ethics and applied ethics.
Meta-ethics deals with the nature of moral judgment. It
looks at the origins and meaning of ethical principles.
Normative ethics is concerned with the content of moral
judgments and the criteria for what is right or wrong.
Applied ethics looks at controversial topics like war, animal
rights and capital punishment
Definitions
The concise oxford dictionary defines ethics as the treating
of moral questions. Chambersdictionary defines ethics as “a code
of behavior considered correct”.
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 Simply put, ethics involves learning what is right or wrong,
and then doing the right thing- but “the right thing” is not nearly as
straightforward as conveyed in a great deal of business ethics
literature.
Features of ethics
1. The concept of ethics deals with human beings.
2. It is the study of a set of systematic knowledge about moral
behavior and conduct. So it is social science.
3. Ethics seeks to determine the nature of the norms, ideal or
standard and seeks to enquire into the fitness of human action
to this standard.
4. It is an area dealing with moral judgment requires moral
standards by which to judge human conduct.
5. Ethics tries to set the standard for the ultimate and or the
highest goal is pursed. So, ethics separates goods and bad,
right and wrong, fair and unfair, moral and immoral and
proper and improper human action.
6. Ethics is about what is right and what is wrong and law is
about what is lawful and what is unlawful.

A moral standard refers to the norms which we have about

the types of actions which we believe to be morally acceptable
and morally unacceptable. Specifically, moral standards deal with
matters which can either seriously harm or seriously benefit human
beings. The validity of moral
standards comes from the line of reasoning that was taken
to back or support them, and thus are not able to be formed or
changed by particular bodies of authority.
Ethics and Morality
Morals are the social, cultural and religious beliefs or values
of an individual or group which tells us what is right or wrong.
They are the rules and standards made by the society or culture
which is to be followed by us while deciding what is right. Some
moral principles are:

Do not cheat Be loyal 97

Be patient
Always tell the truth Be generous
what is morally correct may not be objectively correct.
Ethics is a branch of philosophy that deals with the principles
of conduct of an individual or group. It works as a guiding
principle as to decide what is good or bad. They are the standards
which govern the life of a person. Ethics is also known as moral
philosophy. Some ethical principles are:
Truthfulness Honesty Loyalty Respect Fairness Integrity
Personal and professional ethics
Personal ethics refers to the ethics that a person identifies
with in respect to people and situations that they deal with in
everyday life.
Professional ethics refers to the ethics that a person must
adhere to in respect of their interactions and business dealings in
their professional life.
In some cases, personal and professional ethics may clash
and cause a moral conflict. For example:
A police officer may personally believe that a law that he is
required to enforce is wrong. However, under the Code of
Conduct for the New Zealand Police, he is required to obey all
lawful and reasonable instructions to enforce that law unless there
is good and sufficient cause to do otherwise.
A doctor may not personally believe that the course of
medical treatment chosen by a patient is the right one. However,
under the Code of Ethics for the New Zealand Medical
Association, she must respect the rights, autonomy and freedom
of choice of the patient.
Theories of ethics
Theories are a set of assumption, propositions, or accepted
facts that attempt to provide a plausible or rational explanation
of cause and effect relationships among ta group of observed
phenomenon. The word’s origin stresses the act that all theories
are mental models of the perceived reality. The English word
theory was derived from ancient greek philosophy theories. It
means a looking at, viewing , beholding and referring to

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contemplation or speculation or opposed to action. Theory is a
set of principles thoughtfully devised to explain a group of facts
or phenomena. These principles are repeatedly tested and widely
accepted by the universe. Theory explains how some aspects of
human behavior or performance is organized. It thus enables to
make predictions about that behavior. The components of theory
are concepts and principles. A principle expresses the relationship
between two or more concepts or constructs.
Relevance of theory of business ethics
Theory of business ethics helps
1. To provide us a framework for moral decisions and for
assessing their rightness or wrongness.
2. To serve and guard business interest.
3. To accomplish the expectations of stakeholders to the
maximum possible extent.
4. To thwart damages and harm to the society due to the
operations of business.
5. To contribute the well being of the society by discharging
benevolent and social welfare activities.

Types of Teleological Ethical Theories

Ethical Egoism: The ethical egoism is a teleological
theory that posits, an action is good if it produces or is likely to
produce results that maximize the person’s self-interest as defined
by him, even at the expense of others. It is based on the notion
that it is always moral to promote
one’s own good, but at times avoiding the personal interest
could be a moral action too. This makes the ethical egoism different
from the psychological egoism which holds that people are self-
centered and self-motivated and perform actions only with the

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intention to maximize their personal interest without helping others,
thereby denying the reality of true altruism (sacrificing one’s
personal interest in the welfare of others).
Utilitarianism: The Utilitarianism theory holds that an
action is good if it results in maximum satisfaction for a large
number of people who are likely to get affected by the action.
Suppose a manager creates an annual employee vacation
schedule after soliciting the vacation time preferences from all
the employees and honor their preferences, then he would be
acting in a way that shall maximize the pleasure of all the
employees.
Eudaimonism: Eudaimonism is a teleological theory which
posits, that an action is good if it results in the fulfillment of goals
along with the welfare of the human beings. In other words, the
actions are said to be fruitful if it promotes or tends to promote
the fulfillment of goals constitutive of human nature and its
happiness. Suppose manager enforce employee training and
knowledge standards at work, which are natural components of
human happiness
Theory of virtue ethics
The virtue ethical theories hold that ethical value of an
individual is determined by his character. The character refers to
the virtues, inclinations and intentions that dispose of a person to
be read to act ethically. Virtue ethics is broad term for theories
that emphasize the role of character and virtue in moral philosophy
rather than either doing one’s duty or acting in order to bring
about good consequences. A virtue ethicist is likely to give this
kind of moral advice: “ act as a virtuous person would act in your
situation” virtue ethics has roots in plato and Aristotle, and is
agent centered rather than act centered.
The word virtue has interpreted differently by many
philosophers. The important examples of virtues are honesty,
loyalty, duty, patience, perseverance, temperance etc. honesty is
a virtue of a person. But we cannot call a person honest who

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speaks the truth only once, but who speaks the truth as his or her
general practice.
Aristotle thought that there were two overriding virtues,
intellectual and moral. The intellectual virtues claimed by him were
acquired by inheritance and education and the moral ones through
the imitation of practice and habit. The highest virtue, according
to Aristotle was intellectual thought. Aristotle published his major
work on ethics in 350 bc and dedicated to his son nocomachus.
His ethics is known as nicomachean ethics.
The virtues that he lists in his nicomachean ethics are:-
1. Courage
2. Temperance
3. Liberality
4. Magnificence
5. Magnanimity
6. Patience
7. Truthfulness
8. Wittiness
9. Friendliness
10.Shame
11.Justice
Strengths of Virtue Ethics
1. Character Traits
Virtue Ethics deals with a person’s virtues and how he or
she uses them in making the lives of other people better. If a
person has virtues, he or she can act morally and will be able to
treat others with respect, compassion and love. These virtues
prompt a person to do good things to others because these are
innate in him or her, as opposed to the theory of Kant where
people are forced to do good deeds out of duty.
2. Better People
Virtues such as generosity, honesty, compassion,
friendliness, assertiveness and the like are already present in
people and should be practiced in everyday living. The theory of
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Virtue Ethics makes it possible for people to be better individuals
and members of society who are willing to help other people,
thinking of others first over personal interest. With these virtues,
people become better persons.
3. Broad and Holistic
Having no particular criteria, Virtue Ethics encompasses
different virtues which are important live in harmony with other
people. It also does not attempt to worsen the complexity of
things by categorizing what are moral acts or not nut instead had
developed throughout the years. Also, as compared to other
ethical theories which can be a threat to morality and are confusing,
Virtue Ethics is a holistic approach that it considers the totality of
a person, including the skills, character traits and emotions.
4. Agent-centered
Another powerful attribute of Virtue Ethics is its centeredness
or focus on the character of the moral agent and not concerned
on consequence and duty or obligation. This also makes it flexible
since it allows an individual to decide depending on his or her
moral values and not just by simply following the law.
5. Sense of Community
Virtue Ethics motivates an individual to have high regard to
personal relationships and encourage or motivates a person to
be sensitive of others and take care of other people.
6. Preservation of Goodness
According to Tacitus, people can be easily corrupted with
power and luxury which can impede liberty. Having said this,
Virtue Ethics serves as a shield against polluting the minds of
individuals and making them bad people. Instead, this approach
makes it possible for an individual to preserve and make better
the life he or she already has and enjoy it rather than dream of a
life with luxury and power.
Weaknesses of Virtue Ethics
1. Without Focus
Critics of virtue ethics say that this theory lacks focus when
it comes to determining the types of actions that are morally
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acceptable and permitted from the ones that should be avoided.
Instead, it concentrates more on the qualities an individual has to
enhance or improve in order to become a good person. Virtue
theorists can consider murder as an immoral act which makes it
unsuitable to be used as a moral act when it comes to legislation,
say in court. It is also considered to be not action-guiding.
2. Nature of Virtues
Another weakness attributed to virtue ethics is the difficulty
in determining the nature if virtues. This is due to the difference in
opinions and perspectives of people who are inherently different
from each other and came from diverse cultures and societies.
These aspects lead to differences on what is morally right or
wrong for people. Thus, it is hard to identify these virtues.
3. Self-centeredness
According to opponents of virtue ethics, it deals with a
person’s own character when it is supposed to be how the actions
of an individual affect other people. Other theory of ethics expects
a person to think or regard other people instead of personal gain
and interest.
4. Misguidance
Those who are not in favor of virtue ethics find this theory
to be misguiding when it comes to educating or motivating people.
This is because it leads people to rely on luck when it comes to
attaining moral maturity. Also, this can result to people asking
why others are luckier to have achieved moral maturity while
there will be those who are not lucky enough even if this is not
brought about by their own doings.
5. Limited
Since Virtue Ethics concentrate on only a limited number of
virtues, it is not able to help the population but only an individual.
This is one of the weaknesses seen by opponents, saying that
this theory is not concentrating on the bigger picture.
BUSINESS ETHICS
Business ethics is nothing but the application of ethics in
business. Business ethics is the application of general ethical ideas
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to business behaviour. Ethical business behaviour facilitates and
promotes good to society, improves profitability, fosters business
relations and employee productivity. The concept of business
ethics has come to mean various things to various people, but
generally it‘s coming to know what it right or wrong in the
workplace and doing what‘s right
- this is in regard to effects of products/ services and in
relationships with stakeholders. Business ethics is concerned with
the behaviour of a businessman in doing a business. Unethical
practices are creating problems to businessman and business units.
The life and growth of a business unit depends upon the ethics
practiced by a businessman. Business ethics are developed by
the passage of time and custom. A custom differs from one business
to another. If a custom is adopted and accepted by businessman
and public, that custom will become an ethic. Business ethics is
applicable to every type of business. The social responsibility of
a business requires the observing of business ethics. A business
man should not ignore the business ethics while assuming social
responsibility. Business ethics means the behavior of a
businessman while
conducting a business, by observing morality in his business
activities. According to Wheeler Business Ethics is an art and
science for maintaining harmonious relationship with society, its
various groups and institutions as well as reorganizing the moral
responsibility for the rightness and wrongness of business conduct.
Characteristics of business ethics
The following are the important features of business ethics:-
1. Business ethics are the principles, which govern and guide
business people to perform business functions and in that
sense business ethics is a discipline
2. It is considered both as a science and an art.
3. It continuously test the rules and moral standards and is
dynamic in nature
4. It is based on theological principles such as sincerity, human

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 welfare, service, good behavior etc.
5. It is based on reality and social customs prevailing in business
environment.
6. It studies the activities , decisions and behavior which are
related to human beings
7. It has universal application because business exists all over
the world
8. Many of the ethical principles develop the personal dignity
9. Business ethics keeps harmony between different roles of
businessman, with every citizen, customer, owner and
investors
IMPORTANCE OF BUSINESS ETHICS
There may be many reasons why business ethics might be
regarded as an increasingly important area of study, whether as
students interested in evaluating business activities, or as managers
seeking to improve their decision making skills. It is generally
viewed that good business ethics promote good business.
1. The power and influence of business in society is greater
than ever before. Business ethics helps us to understand
why this is happening, what its implications might be, and
how we might address this situation.
2. Business has the potential to provide a major contribution
to our societies, in terms of producing the products and
services that we want, providing employment, paying taxes,
and acting as an engine for economic development and
thereby increases the goodwill.
3. Business malpractices have the potential to inflict enormous
harm on individuals, on communities and on the environment.
Through helping us to understand more about the causes
and consequences of these malpractices, business ethics
helps to create mutual trust and confidence in relationship.
4. The demands being placed on business to be ethical by its
various stakeholders are constantly becoming more complex
and more challenging. Business ethics provides the means

105
 to appreciate and understand these challenges more clearly,
in order that firms can meet these ethical expectations more
effectively.
5. Business ethics can help to improve ethical decision making
by providing managers with the appropriate knowledge and
tools that allow them to correctly identify, diagnose, analyze,
and provide solutions to the ethical problems and dilemmas
they are confronted with.
6. A business can prosper on the basis of good ethical standards
and it helps to retain the business for long years.
7. Business ethics can provide us with the ability to assess the
benefits and problems associated with different ways of
managing ethics in organizations.
8. In the age of complexity in business fields , competition is
increasing day by day Good ethical standard helps the
business to face the challenges.
BASICS OF BUSINESS ETHICS
1. Honesty. Ethical executives are honest and truthful in all their
dealings and they do not deliberately mislead or deceive
others by misrepresentations, overstatements, partial truths,
selective omissions, or any other means.
2. Integrity. Ethical executives demonstrate personal integrity
and the courage of their convictions by doing what they
think is right even when there is great pressure to do
otherwise; they are principled, honorable and upright; they
will fight for their beliefs. They will not sacrifice principle for
expediency, be hypocritical, or unscrupulous.
3. Principle of proportionality: This principle suggests that one
should make proper judgment before doing anything so that
others do not suffer from any loss or risk of evils by the
conducts of business.
4. Non co-operation in evils: It clearly points out that a business
should not co-operate with any one for doing any evil acts.
5. Co-operation with others: This principles state that business
should help others only in that condition when other deserves
for help.
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6. Commitment to excellence. Ethical executives pursue
excellence in performing their duties, are well informed and
prepared, and constantly endeavor to increase their
proficiency in all areas of responsibility.
7. Leadership. Ethical executives are conscious of the
responsibilities and opportunities of their position of
leadership and seek to be positive ethical role models by
their own conduct and by helping to create an environment
in which principled reasoning and ethical decision making
are highly prized.8. Universal value: According to this
principle the conduct of business should be done on the
basis of universal values.
8. Human dignity: As per this principle, man should not be
treated as a factor of production and human dignity should
be maintained.
9. Non violence: If businessman hurts the interests and rights
of the society and exploits the consumer by overlooking
their interests this is equivalent to violence and unethical act.
STRUCTURE OF ETHICS MANAGEMENT
Every one who is entrusted to manage ethics in this
organization is bound to prepare a sound ethical programme which
should include the following components:-
1. Formal code of conduct
2. Ethics committee
3. Ethical communication
4. An Ethic office with Ethical officers
5. Ethics Training Programme
6. A disciplinary system
7. Establishing an ombudsperson.
8. Monitoring
1. Code of conduct
Several organizations that have undertaken to implement
ethical behaviour at their workplaces have started the process
with developing and implementing codes of conduct for their
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employees. Codes of conduct are statements of organizational
values. It comprises of three elements such as a code of ethics, a
code of conduct and statement of values. a code of conduct is a
written document, inspirational in contents and specifies clearly
what is acceptable or unacceptable behavior at workplace and
beyond ,when the employees represent their organizations
outside. In general the code should reflect the managements desire
to incorporate the values and policies of the organization. The
statement of values envisages by the management to serve the
public and normally addresses the stakeholders groups.
Code of Ethics
Every time a new business is launched anywhere in the world
, whether a one man operation or a full blown brick – and- mortar
corporate enterprise, the owners must adopt a code of ethics for
the business. For small businesses the code is usually unwritten.
And sometimes not even discussed and decided upon, but still a
code exists. Larger businesses often have written codes of ethics
and employees are twined in them and required to adhere to the
code. A code of ethics is a buzzword to employees to observe
ethical norms and forms the basis for rules of conduct. It is
comprehensive enough to cover the entire scheme of
organizational ethics expected to be followed by everyone in the
company. It usually specifies methods for reporting violations,
disciplinary action for violations and a structure of the due process
to be followed. A code of ethics must summarize the beliefs and
values of the organization. Codes of ethics vary among businesses,
and also from one country to another,. When business grows
large enough to expand its operations into other countries, It is
critical to hire talent to assist in training existing personnel with
regard to the integrity, understanding, responsibility, and cultural
norms of the country where the new operation is located. All
employees must be treated equally, and any issues of inequality
must be dealt with quickly, fairly, and in a manner that is
satisfactory to all.
2. Ethics committee
Ethics committee is formed in many organizations. They are
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wholly devoted at work places. These committees can rise
concerns of ethical nature; prepare or update code of conduct,
and resolve ethical dilemma in organizations. they formulate ethical
policies and develop ethical standards. The committee evaluates
the compliance of the organization with these ethical norms. The
members of the ethical committee should be selected from those
persons who have knowledge in their industry, their code of ethics
and community standards. The committee members are also
conscious about the corporate culture and ethical concise of the
organization.
The following committees are to be formed:-
i. Establishing an ethics committee at the board level
The committee would be charged to oversee development
and operation of the ethics management programme.
ii. Establishing an Ethics Management committee
Ethics Management committee would be charged with
implementing and administrating an ethics management
programme, including administrating and training about policies
and procedures, and resolving ethical dilemmas. The committee
should be comprised of senior officers.
3. Ethical communication system
The next step is the establishment of an effective ethical
communication system. Ethical communication system place an
important role in making an ethics programme successful. It
should allow employees to make enquiries , get advice if needed
or report wrong doing. Ethical communication system is a
necessity to educate employees about the organizations ethical
standard and policies. It has the following objectives
1. to communicate the organizations‘ values and standards of
ethical conduct or business to employees
2. to provide information to the employees on the company‘s
policies and procedure regarding ethical conduct of business.
3. to help employees to get guidance and resolve questions
regarding compliance with the firms standards of conducts
and values.
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4. to set up the means of enquiry such as telephone hotlines,
suggestion boxes and email facilities for employees to
contact with and get advice from competent authorities.
Along with these means of communication there are other
ways, that can be used to communicate an organization‘s moral
standards to its employees. Top management can communicate
the ethical standards to lower level managers and they can
communicate it to operational levels. Sometimes the organization
publishes newsletters. It can be used to expose company‘s code
or ethics. If an organization has briefing and management meeting,
these can be used as a means of communicating values. Certain
companies use attractive multi colored posters to publicize their
codes and ethics, these posters are placed in most visible places
of the organization premises.
4. Ethics office and officers
Ethics offices are to be established to communicate and
implement ethics policies among employees of the organization.
For this purpose an ethics officer is to be appointed. The ethics
officer should develop a reputation for credibility, integrity,
honesty and responsibility through establishment of such ethics
monitoring bodies.
Functions of the ethics officers
1. Ethics officers are responsible for assessing the needs and
risks that an organization-wide ethics programme must
address.
2. To develop and distribute a code of conduct or ethics
3. To conduct ethical training programme for employees
4. To establish and maintain a confidential service to answer
employees questions about ethical issues.
5. To ensure that the organization is in compliance with
governmental regulations
6. To monitor and audit ethical conduct
7. To take action on possible violations of the company‘s code
8. To review and update code in time

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5. Ethics Training Prog.ramme
To ensure a good ethical behaviour in the organization the
employees are to be given training. For this purpose a corporate
ethical training programme is to be devised. The main objective
of an ethical training program is to offer assistance to employees
to understand the ethical issues that are likely to arise in their
work place. When new employees are to be recruited, the
induction training should be arranged for them. This training will
help to familiarize with the company‘s ethical code of behaviour.
Importance of abiding code should be dealt with at the induction
meeting. A well developed and proper training programme will
help the employees to understand the organizations policies and
expectations, important and relevant rules, bye laws and
regulations which are to be complied in the organization by the
employees. For the success of the training programmes , the
senior executive from every department must involve fully in the
training programme.
6. Disciplinary system
Code of conduct or ethical behaviour codes should be
properly enforced in the organization to achieve the organization‘s
objectives. A disciplinary system should be established to deal
with ethical violations promptly and severely. If unethical
behaviour is not properly dealt with, it will threaten the entire
social system that supports the ethical behaviour of the
organization. While enforcing disciplines to ensure ethical conduct,
companies should be consistent. ,i.e., the company should adopt
a fair attitude towards every one without any discrimination or
bias.
7. Establishing an ombudsperson
The ombudsperson is responsible to help coordinate
development of the policies and procedures to institutionalize
moral values in the workplace. This position usually is directly
responsible for resolving ethical dilemmas by interpreting policies
and procedures.

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8. Monitoring
To become an ethical programme fruitful and successful, an
effective monitoring committee is to be formed. It can be
monitored through keen observation by ethics officers, internal
audits, surveys, investigations and supporting systems.
SCOPE OF BUSINESS ETHICS
Ethics in Compliance
Compliance is about obeying and adhering to rules and
authority. The motivation for being compliant could be to do the
right thing out of the fear of being caught rather than a desire to
be abiding by the law. An ethical climate in an organization ensures
that compliance with law is fuelled by a desire to abide by the
laws. Organizations that value high ethics comply with the laws
not only in letter but go beyond what is stipulated or expected of
them.
Ethics in Finance
The ethical issues in finance that companies and employees
are confronted with include:
• In accounting – window dressing, misleading financial
analysis.
• Related party transactions not at arm’s length
• Insider trading, securities fraud leading to manipulation of
the financial markets.
• Executive compensation.
• Bribery, kickbacks, over billing of expenses, facilitation
payments.
• Fake reimbursements
Ethics in Human Resources
Human resource management (HRM) plays a decisive role
in introducing and implementing ethics. Ethics should be a pivotal
issue for HR specialists. The ethics of human resource
management (HRM) covers those ethical issues arising around
the employer-employee relationship, such as the rights and duties
owed between employer and employee.
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 The issues of ethics faced by HRM include:
• Discrimination issues i.e. discrimination on the bases of age,
gender, race, religion, disabilities, weight etc.
• Sexual harassment.
• Affirmative Action.
• Issues surrounding the representation of employees and the
democratization of the workplace, tradeization.
• Issues affecting the privacy of the employee: workplace
surveillance, drug testing.
• Issues affecting the privacy of the employer: whistle-blowing.
• Issues relating to the fairness of the employment contract
and the balance of power between employer and employee.
• Occupational safety and health.
Ethics in Marketing
Marketing ethics is the area of applied ethics which deals
with the moral principles behind the operation and regulation of
marketing. The ethical issues confronted in this area include:
• Pricing: price fixing, price discrimination, price skimming.
• Anti-competitive practices like manipulation of supply,
exclusive dealing arrangements, tying arrangements etc.
• Misleading advertisements
• Content of advertisements.
• Children and marketing.
• Black markets, grey markets.
Ethics of Production
This area of business ethics deals with the duties of a
company to ensure that products and production processes do
not cause harm. Some of the more acute dilemmas in this area
arise out of the fact that there is usually a degree of danger in any
product or production process and it is difficult to define a degree
of permissibility, or the degree of permissibility may depend on
the changing state of preventative technologies or changing social
perceptions of acceptable risk.

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• Defective, addictive and inherently dangerous products and
• Ethical relations between the company and the environment
include pollution, environmental ethics, and carbon emissions
trading.
• Ethical problems arising out of new technologies for eg.
Genetically modified food
Factors influencing business ethics
1. A man’s personal code of ethics that is what one considers
moral is the foremost responsible factor influencing his
behaviour.
2. It is already stated that the Government will intervene and
enact laws only when the businessmen become too unethical
and selfish and totally ignore their responsibility to the society.
3. Laws support Government regulations regarding the working
conditions, product safety, statutory warning etc. These
provide some guidelines to the business managers in
determining what are acceptable or recognized standards
and practices.
4. When a company grows larger, its standard of ethical
conduct tends to rise. Any unethical behavior or conduct
on the part of the company shall endanger its established
reputation, public image and goodwill.
5. Social forces and pressures have considerable influence on
ethics in business. If a company supplies sub-standard
products and get involved in unethical conducts, the
consumers will become indifferent towards the company.
Sometimes, the society itself may turn against a company.
6. The firms, which strictly adhere to the ethical code, can
retain its position unaffected in its line of business. If the
company’s performance is below than other companies, in
the same industry, it cannot survive in the field in the long
run.
Arguments Supporting Business Ethics
• Ethics applies to all human activities.

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• Business cannot survive without ethics.
• Ethics is consistent with profit seeking.
• Customers, employees, and people in general care about
ethics.
• Studies suggest ethics does not detract from profits and
seems to contribute to profits.
• To meet demands of business stakeholders
• To enhance business performance
• To promote personal morality
Arguments Against Business Ethics
• In a free market economy, the pursuit of profit will ensure
maximum social benefit so business ethics is not needed.
• A manager’s most important obligation is loyalty to the
company regardless of ethics.
• So long as companies obey the law they will do all that
ethics requires.
• An ethical company cannot be competitive and viable.
• Employees, as “loyal agents,” - obligated to serve their to
advance the employer’s self interest.
Environmental Issues That Affect Business
Key environmental issues affecting business include industrial
waste, sustainable development of raw materials and water and
air emissions. These issues affect business because laws require
businesses to change equipment and procedures to meet imposed
standards, which costs businesses money. Many businesses
undertake stricter changes in an effort to preserve the environment
and “do what’s right.” These businesses pay for the protective
and proactive environmental measures and attempt to recoup
the expenses through consumer good will or the added consumer
base gained from an environmentally friendly policy.
Waste: Businesses that manufacture products create, at
some point in the manufacturing process, manufacturing waste.
Environmental laws and good environmental citizenship prohibit
the indiscriminate dumping of manufacturing byproduct, so
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businesses must decide how best to dispense with it. Many
implement recycling programs, others sell what they can of the
waste to other manufacturers who use it in their own manufacturing
processes as raw material. Either way, the effect is additional
cost to the business in man hours, procedures, equipment and
handling all specific to moving the waste products out of the
business’s manufacturing process and facilities.
Sustainable Development of Raw Materials: All
manufacturers use raw materials to put together their goods. When
these raw materials are natural, such as wood, laws and good
environmental citizenship require that the business take measures
to replace what it uses. Christmas tree farms are a prime example,
as sellers buy from growers who harvest and replant in order to
keep from depleting entire forests of naturally occurring pine
trees. Again, the affect on business is cost in terms of higher raw
materials costs, which usually include the supplier’s cost to
“replant” or “restock” the natural raw materials.
Emissions: Manufacturing processes often generate air and/
or water emissions, which include particle or chemical-filled
smoke, ash and particles and chemicals that seep into ground
water through run-off. Environmental protection laws require
businesses to protect the environment from exposure to these
emissions. Remedial process include placing screens of specified
gauges over smoke stacks, filtration of waste water and lining of
retention ponds with clay and polyliners. New regulations are
implemented frequently that require retrofitting of manufacturing
facilities with increased protections, such as screens of even finer
gauges and pond liners of newer and safer materials. All of these
measures are costly to business and affect businesses first by
decreasing profit margins.
Pollution: Pollution is one of the world’s biggest
environmental problems, as it tends to be a typical by product of
modern life. Air pollution, for instance, is the result of fossil fuel
combustion, as well as various gases and toxins released by
industries and factories.
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 Climate change: Climate change is a global problem with
grave implications: environmental, social, economic, political and
for the distribution of goods. It represents one of the principal
challenges facing humanity in our day. If present trends continue,
this century may well witness extraordinary climate change and
an unprecedented destruction of ecosystems, with serious
consequences for all of us.
Multiple Choice Questions
1. Ethics is a system of …………… principles
a. Moral
b. Guiding
c. Value
d. None of the above
2. ………….. mean a code of conduct
a. Principles
b. Values
c. Ethics
d. None of the above
3. A document prepared to guide organization members when
encountering ethical dilemmas is
a. Code of conduct
b. List of rules and responsibilities
c. Code of ethics
d. Outline of expected behaviors
4. The form of ethics that endeavors to help professionals decide
what to do when they are confronted with a case or situation
that raises an ethical question or moral problem kis referred
to as
a. Professional ethics
b. Organizational ethics
c. Business ethics
d. None of the above

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5. ……….. is a problem, situation, or opportunity requiring
an individual, group, or organization to choose among
several action that must be evaluated as right or wrong.
a. Crisis
b. Ethical issue
c. Condemnation
d. Fraud
6. ……….. ethics is study of human behavior as a
consequence of beliefs about what is right or wrong.
a. Normative
b. Meta
c. Applied
d. Moral
7. The word “ethics” is derived from greek word ………….
a. Ethios
b. Ethikos
c. Etheos
d. None of these.
8. Ethics is a ……….
a. Pure science
b. Normative science
c. Inexact science
d. None of these.
9. Ethics means…………..
a. Character
b. Manner
c. Customs
d. All of these
10. …………. Deals with the right actions of individuals.
a. Sincerity
b. Rules
c. Ethics

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d. All of these
11. The word moral is derived from the latin word……………
a. Moralis
b. Moralitics
c. Monatics
Short Answer Type Questions
1. Define ethics
2. Define business ethics
3. What is meta ethics
4. What is applied ethics
5. What is moral ethics
6. What is globalization

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 MODULE IV
CORPORATE SOCIAL RESPONSIBILITY
(CSR)

Corporate social responsibility (CSR) is a self-

regulating business model that helps a company be socially
accountable — to itself, its stakeholders, and the public.
By practicing corporate social responsibility, also called
corporate citizenship, companies can be conscious of the
kind of impact they are having on all aspects of society
including economic, social, and environmental. To engage
in CSR means that, in the normal course of business, a
company is operating in ways that enhance society and
the environment, instead of contributing negatively to
them.
Core characteristics of CSR
The core characteristics of CSR are the essential
features of the concept that tend to be visible in CSR
practice. Few, if any, existing definitions will include all
of them, but these are the main points of focus around
which the practice of CSR manifest itself. Six core
characteristics are summarised below:
(i) Voluntary
Scholars define CSR to be a representative of all set of
corporate initiatives which are discretionary and extend beyond
what the law has prescribed. The views of government and other
stakeholders in all developing countries emphasis this
characteristics (Crane et al, 2008). Many companies are by now
familiar and more willing to consider responsibilities beyond the
legal minimum, and in fact the development of self-regulatory
CSR initiatives from corporate bodies is often seen as a way of
reducing or avoiding additional regulation through compliance

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with societal moral norms. Critics of CSR, therefore, tend to see
the element of voluntarism as CSR
really be focused and maximisation of shareholders wealth
should be the main organisational objective.
(ii) Internalizing or managing externalities
Externalities in CSR refers to all sort of factors that has
impact on different stakeholders rights are not directly taken care
of in the decision making process of a business organisation.
Environmental degradation is typically regarded as an externality
since the general public feel the impact of the production process.
Regulation can force firms to internalise the cost of the
externalities, such as pollution fines, but CSR remain as a viable
discretionary approach of managing externalities like taking more
safety measures and reduction of pollution by going green. Much
CSR activity deals with externalities involving workers rights,
minimisation of rationalisation impact, good stakeholder
relationship management to reduce unsatisfied legitimate claims
pile up and discarding production process and products that are
not demanded, harmful or classified as dangerous products
(Husted & Allen, 2006). For example, Unilever as an MNC
joined with Oxfam to conduct a study on the impacts of business
on living conditions of the Indonesian people. The main objective
of the study is to address the major externalities facing MNCs
operating in Asian countries (Clay, 2005). The unexpected
occurrence of catastrophic events or natural disaster prompt
managers towards introduction of CSR initiatives which are
humane and for assistance like the corporate response to the
Asian tsunami disaster (Fernado, 2007), the crises can also be a
social and economic type (Okpara & Wynn, 2012; Newell,
2005) reduction of prevalent cases of HIV/AIDS in some African
countries (Dunfee, 2006) or industrial accident causing a disaster
like the Bhopal 1984 disaster in India (Shrivastava, 1995)
(iii) Multiple stakeholder orientation
The central theme of stakeholder management is to identify
stakeholders orientations based on the three attributes which
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defines their power, legitimacy of claim and urgency. Subsequently,
defining stakeholder orientations helps in identification and
prioritisation of stakeholders through the adoption of a step by
step approach starting with internal preparations, appointing the
internal leadership team of internal stakeholders for marketing,
communication, operational unit, human resources, investor
relations and environmental/government affairs etc, limiting
expectations to a realistic level, training on communication skills,
stakeholder research, collective bargaining and good industrial
relations, adequate knowledge on crisis and risk management,
public relations, adopting a suitable technique of managing multiple
stakeholder orientations, accommodations for possible
unavoidable mistakes and finally comparing stakeholder
expectations with
organisational performance (Ahmad et al, 2014). CSR
involves considering a range of interests and impacts among a
variety of different stakeholders other than just shareholders. The
assumption that firms have responsibilities to shareholders is
usually not contested, but the point is that because corporations
rely on various other stakeholders such as consumers, employers,
suppliers, and local communities in order to survive and prosper,
they do not only have responsibilities to shareholders. Whilst
many disagree on how much emphasis should be given to
shareholders in the CSR debate, and on the extent to which other
stakeholders should be taken into account, it is the expanding of
corporate responsibility to these other groups which
characteristics much of the essential character of CSR.
(iv) Alignment of social and economic responsibilities
This balancing of different stakeholder interests leads to
another core feature. Whilst CSR may be about going beyond a
narrow focus on shareholders and profitability, many also believe
that it should not, however, conflict with profitability. Although
this is much debated, many definitions of CSR from business
and government stress that it is about enlightened self-interest

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where social and economic responsibilities are aligned. This
feature has prompted much attention to the
„business case for CSR – namely, how firms can benefit
economically from being socially responsible. (Edmondson and
Carroll, 1999) conducted a research on Managers of African
American businesses and came to the conclusion that economic
and ethical responsibilities comes first before legal responsibility
and philanthropic comes last in terms of priority. But it was
observed in this study that philanthropy obtained a high weight
level of score than in previous studies. This study also brings into
lime light the application of racial consideration in CSR studies.
Consumers in China attach importance to CSR orientations and
revealed that they are more concerned with economic
responsibility than ethical and legal but philanthropy is highly
valued (Ramasamy & Yeung, 2009).
(v) Practices and values
CSR is clearly about a particular set of business practices
and strategies that deal with social issues, but for many people it
is also about something more than that – namely a philosophy or
set of values that underpins these practices. This perspective is
evident in CSR initiatives of communitarian or collectivistic
societies valuing traditions and cultural practices of their local
communities (Lei, 2011). The values dimension of CSR is part
of the reason why the subject raises so much disagreement– if it
were just about what companies did in the social arena, it would
not cause so much controversy as the debate about why they do
it. Duarte (2010) explored the perception of managers with
respect to the influence of personal values towards their work.
The study examined the relationship between personal values
and CSR initiatives of managers. The study concluded that to a
greater extent CSR practices are influenced or affected by the
personal values of managers, because they formulate the CSR
policies of the business organisation and their personal attitude is
part of their individualistic characteristics which affects the way
they behave.
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(vi) Beyond philanthropy
In some regions of the world, CSR is mainly about
philanthropy – i.e. corporate discretionary responsibility or
voluntarism towards the general public. CSR is currently a
mandatory practice backed by regulations and accepted
international standard which is shifting from altruistic to
instrumentality or strategic CSR. It is no longer altruistic in nature
only but more than just philanthropy and community development
projects, because of the impacts it has on profitability, human
resource management, marketing, and logistic support which are
all part of the core functions of business organisations. CSR
extends beyond philanthropy because of its viability to be
instrumental or strategic in satisfying stakeholder expectations
and its potential capability to achievement of organisational
objectives. This debate rests on the assumption that CSR needs
to be regulated and institutionalised into normal business practice
rather than being left simply to discretionary activity. The attempt
to consider how CSR might be integrated to the core business
functions of firms is in contrast to the notion of it serving simply
as an ordinary added value to the business organization
HISTORY
Corporate Social Responsibility is know by many other
names. These include corporate responsibility, corporate ethics,
corporate accountability and corporate citizenship just to name
a few. A key point to note is that Corporate Social Responsibility
or CSR has no universal definition; however, it generally refers
to clear business practices with respect to ethical values,
compliance with Legal requirements and respect for economic
values. CSR goes beyond making profits, companies and
stakeholders are responsible for their impact on people and planet.
Increasingly, stake holders should expect that companies should
be more responsible both socially and environmentally in their
conduct of their business. The World Business Council for
Sustainable Development has described CSR as the business
contribution to sustainable economic development.
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A Brief History of Corporate Social Responsibility
The history of CSR dates back many years and in one
instance can even be traced back 5000 years in Ancient
Mesopotamia around 1700 BC, King Hammurabi introduced a
code in which builders, innkeepers or farmers were put to death
if their negligence caused the deaths of others, or major
inconvenience to local citizens. In Ancient Rome senators
grumbled about the failure of businesses to contribute sufficient
taxes to fund their military campaigns, while in 1622 disgruntled
shareholders in the Dutch East India Company started issuing
pamphlets complaining about management secrecy and “self
enrichment”. With industrialisation, the impacts of business on
society and the environment assumed an entirely new dimension.
The “corporate paternalists” of the late nineteenth and early
twentieth centuries used some of their wealth to support
philanthropic ventures. By the 1920s discussions about the social
responsibilities of business had evolved into what we can
recognise as the beginnings of the “modern” CSR movement.
“The phrase Corporate Social Responsibility was coined in 1953
with the publication of Bowen’s Social Responsibility of
Businessmen”(Corporate watch report, 2006). The evolution of
CSR is as old as trade and business for any of corporation.
Industrialization and impact of businesses on the society led to a
complete new vision. By 80’s and 90’s CSR was taken into
discussion, the first company to implement CSR was Shell in
1998. (Corporate watch report, 2006) With well informed and
educated general people it has become a threat to the corporate
and CSR is the solution to it. In 1990 CSR was standard in the
industry with companies like Price Waterhouse Copper and
KPMG. CSR evolved beyond code of conduct and reporting,
eventually it started taking initiative in NGO’s, multi stake holder,
ethical trading. (Corporate watch report, 2006).
Implementing Corporate Social Responsibility
There are no generic CSR methods, each method is based
on the individual firm needs and circumstances. Each method
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will vary in its attentiveness of CSR issues and how much work
needs to be done with respect to the approach. CSR can be
utilized integrated into a firm’s core decision making, management
processes, strategy and activities, be it over a period of time or
systematically. Most companies already possess policies with
respect to the handling customers, community, employees and
the environment. These can be perfect starting points for firm-
wide CSR approaches.
What follows below is a framework for the development
and implementation of a CSR approach that builds on current
existing policies as well as experience and knowledge of other
fields, such as economic and environmental. The broad
framework follows a familiar “plan, do, check and improve”
model. This framework has been designed with the intention to
be flexible so that firms would be able to mold and adapt it as
appropriate for their organization.
Corporate citizenship
Corporate citizenship is the term used to describe the
contribution a business or organization makes to the local
community or society as a whole. These contributions include
not only the company’s core business activities, but also its
investments in the local community. An organization’s long-term
success depends on having favorable corporate citizenship. For
this to happen, the company must successfully engage with its
employees, shareholders, business partners, customers, the
government, and the rest of the community. These relationships
are vital for a business that wants to have successful financing
and social standings within the community. Corporate citizenship
is often referred to as corporate social responsibility or corporate
governance.
Businesses need to treat their stakeholders ethically and with
respect by believing in corporate citizenship, in which they show
commitment to ethical behavior by balancing stakeholders’ needs
and protecting the environment. Did you know that Microsoft
has been awarded a top corporate citizenship award? According
to Forbes magazine, a major factor of Microsoft’s
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 success in this arena is their employees’ passion for
supporting their communities and causes through charitable giving
and volunteering. In 2012, 93% of employees felt that Microsoft
is a good corporate citizen around the world.
Many other companies, such as Fun Town Amusements,
have also embraced the idea of corporate citizenship and focusing
on their stakeholders. In this lesson, you will learn the definition
and stages of corporate citizenship. Fun Town defines corporate
citizenship as corporate community relations. The definition might
have a slightly larger definition of citizens depending upon where
a company conducts business. For example, a global company
would refer to their community as the entire world. Fun Town
shows their commitment to corporate citizenship by:
Hiring disabled and other individuals who need work by
supporting a diverse workforce Supporting non-profits in helping
community members find jobs, keep towns clean and donate to
charities across the nation
Providing accessibility to community stakeholders through
installing handicap entrances, ride restraints, holding open door
meetings and asking for customer feedback daily
Benefits of Corporate Citizenship
I’m sure that from the introduction you can clearly see the
benefits of corporate citizenship to the stakeholders. What you
might not realize is that there are many benefits for Fun Town
Amusements to adopt the philosophy of corporate citizenship,
as well. The benefits are:
Excellent employee relations by increasing company morale,
participation, productivity and retainment: Fun Town
accomplishes this by treating their employees and community
ethically. In fact, Fun Town is smart enough to realize that their
employees are the community and look for ways to have them
act as ambassadors throughout the town. For instance, employees
are participating in numerous charity events, such as Habitat for
Humanity, donating to local food pantries and providing
engineering workshops on ride design to area high schools.
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 Improved customer relations by treating their customers
ethically and listening to their wants, needs and feedback: Fun
Town conducts constant surveys in their park and in town to find
out consumer opinions. They also offer customer appreciation
days with ‘throwback’ park prices to $10 to enter the park.
Corporate Social Responsibility and Corporate Citizenship
The main elements of corporate citizenship are not very
different from the concept of CSR i.e., legal requirements, societal
obligations, voluntary actions, values and ethics are integrated
along with a stakeholder view of the firm although environmental
responsibility which the key theme of CSR and sustainability are
missing. The issues of implementing a consistent set of universal
hyper norms seem to be glossed in the literature.
A multinational corporation must be seen to be insightful to
local cultures. At the same time it is required to implement a
universal code of conduct, the assumption being that the company
can adapt its hyper norms to suit local custom without violating
them. It is still not clear how this strategy will address the issue of
environmental and social problems. A good corporate citizen is
obliged to fulfil- the obligations but it is not legally enforced. The
major shortcoming of CSR, corporate citizenship is that there is
an absence of any enforcement mechanism to meet the
obligations. At a global level, the complexities of legal systems
also enable multinational corporations to develop innovative and
creative accounting practices that, while being perfectly legal,
have uncertain outcome.
The problematic nature of citizenship, when applied to
corporations, need to be looked into. The use of the term citizen
to denote corporate identity is related to the legal notion of the
corporation as a natural citizen. The rights of the corporation are
guaranteed and protected but the problem is that the
responsibilities remain unrestricted. The term corporate citizen
extends the legal fiction of corporate personhood even further
because a corporation cannot satisfy key cannons of citizenship
such as voting or holding public office, which are inalienable rights
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held by individuals. Corporate citizenship also does not provide
a critical analysis of power dynamics between individuals, groups
and corporations. Citizenship rights of corporations are limited
to certain activities like the right to vote furthermore the economic
power of corporations to influence electoral results through
campaign contributions cannot be ignored.
There have been notions of corporate citizenship that bring
in the legal fiction argument of the corporation in order to create
a soul for the body corporate run the danger of conflating
citizenship with personhood. A corporation cannot be a citizen in
the same way a person can. A corporation can be considered a
person as far as its legal status is concerned. The conflation of a
corporation with an individual citizen obscures the gaps between
individual citizen rights and corporate rights. There are concerns
that corporate citizenship discourses could have the effect of
reducing governmental scrutiny of corporate practices because
they promote self-governance. Corporate strategies of responding
to social and environmental concerns have led to array of codes
of conduct on various issues which are not enforceable.
So to conclude rather than uncritically applying concepts of
citizenship to the business firm, it is important to contest current
notions of corporate citizenship. The limitations of applying
superficial concept of citizenship to corporations attempt to
develop a broader conceptualization of corporate citizenship
based on notions of liberal citizenship in political science.
Corporate citizenship becomes relevant in an era dominated by
neoliberal doctrine because, while corporations may not be the
same as individual citizens, they are taking the roles and activities
normally associated with the government. When the state is not
the sole guarantor of citizenship rights and corporations provide
services that were previously the purview of governments then it
becomes necessary to interrogate corporate roles in administering
citizenship. Thus corporate citizenship is about administering
citizenship rights for individuals rather than about whether the
corporation is or can be a citizen.

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 Need for corporate social responsibility
1. Better Public Image:
Each firm must enhance its public image to secure more
customers, better employees and higher profit. Acceptance of
social responsibility goals lead to improve public image.
2. Conversion of Resistances Into Resources:
If the innovative ability of business is turned to social
problems, many resistances can be transformed into resources
and the functional capacity of resources can be increased many
times.
3. Long Term Business Interest:
A better society would produce a better environment in
which the business may gain long term maximization of profit. A
firm which is sensitive to community needs would in its own self
interest like to have a better community to conduct its business.
To achieve this it would implement social programmes for social
welfare.
4. Avoiding Government Intervention:
Regulation and control are costly to business both in terms
of money and energy and restrict its flexibility of decision making.
Failure of businessmen to assume social responsibilities invites
government to intervene and regulate or control their activities.
The prudent course for business is to understand the limit of its
power and how to use that power carefully and responsibly
thereby avoiding government intervention.
Importance of Social Corporate Responsibility
It aims at consumer protection.
It aims at protection of local and global environment . It
ensures respect for human rights.
It results in avoiding bribery and corruption.
It promotes adherence to labour standards by companies
and their business partners.

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Arguments in favor of CSR
1. Protect the interests of stakeholders:
Labor force is united into unions which demand protection
of their rights from business enterprises. To get the support of
workers, it has become necessary for organisations to discharge
responsibility towards their employees. Caveat emptor (‘let the
buyer beware’), no more holds true. Consumer today is the
kingpin around whom all marketing activities revolve. Consumer
does not buy what is offered to him. He buys what he wants.
Firms that fail to satisfy consumer needs will close down sooner
or later. Besides, there are consumer redressal cells to protect
consumers against anti-consumer activities. Consumer
sovereignty has, thus, forced firms to assume social
responsiveness towards them. Firms that assume social
responsibilities may suffer losses in the short-run but fulfilling social
obligations is beneficial for long-run survival of the firms. The
short-term costs are, therefore, investments for long-run
profitability.
2. Long-run survival:
Business organisations are powerful institutions of the society.
Their acceptance by the society will be denied if they ignore
social problems. To avoid self-destruction in the long-run,
business enterprises assume social responsibility.
3. Self-enlightenment:
With increase in the level of education and understanding of
businesses that they are the creations of society, they are motivated
to work for the cause of social good. Managers create public
expectations by voluntarily setting and following standards of
moral and social responsibility. They ensure paying taxes to the
Government, dividends to shareholders, fair wages to workers,
quality goods to consumers and so on. Rather than legislative
interference being the cause of social responsibility, firms assume
social responsibility on their own.
4. Avoids government regulation:
Non-conformance to social norms may attract legislative
restrictions. Government directly influences the organisations
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through regulations that dictate what they should do and what
not. Various agencies monitor business activities.
For example, Central Pollution Control Board takes care
of issues related to environmental pollution, Securities and
Exchange Board of India considers issues related to investor
protection, Employees State Insurance Corporation promotes
issues related to employees’ health etc. Organisations that violate
these regulations are levied fines and penalties. To avoid such
interventions, organisations have risen to the cause of social
concerns.
5. Resources
Business organisations have enormous resources which can
be partly used for solving social problems. Businesses are the
creation of society and must work in the best interest of society,
both economically and socially.
6. Professionalization:
Management is moving towards professionalism which is
contributing to social orientation of business. Increasing
professionalism is causing managers to have formal management
education and qualifications. Managers specialise in planning,
organising, leading and controlling through their knowledge and
subscribe to the code of ethics established by a recognised body.
The ethics of profession bind managers to social values and
growing concern for society. Thus, there is increasing awareness
of social responsibility. To grow in the environment of dynamism
and challenge, business concern does not decide whether or not
to discharge social responsibilities but decides how much social
responsibility to discharge. A good business anticipates
developments and acts in accordance with the currently conceived
social responsibilities to achieve the future targets.
Arguments against CSR
1. Business is an economic activity:
It is argued by the opponents of social responsibility that
basic function of a business enterprise is to look into economic

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viability of its operations. It is for the Government to look after
interests of the society. The prime responsibility of assuming social
responsibility should, therefore, be of the Government and not
of the business enterprises.
2. Quantification of social benefits:
What measures social responsibility and to what extent
should a business enterprise be engaged in it, what amount of
resources should be committed to the social values, whose interest
should hold priority over others (shareholders should be preferred
over suppliers or vice versa) and numerous other questions are
open to subjective considerations, which make social
responsibility a difficult task to be assumed.
3. Cost-benefit analysis:
Any social-benefit programme where initial costs exceed
the benefits may not be taken up by enterprises even in the short-
run.
4. Lack of skill and competence: Professionally qualified
managers may not have the aptitude to solve the social problems.
5. Transfer of social costs
STEPS IN THE IMPLEMENTATION OF CSR
ACTIVITIES
An organization implements corporate social responsibility
to to benefit the program’s recipients, its employees and the
organization as a whole. Information about the corporate effort
must be shared with stakeholders such as customers, business
partners and the community. Organizations that promote their
social efforts through news releases, social media sites,
networking events and public relations opportunities can be
positively viewed by the community. The following steps are useful
to implement CSR.
1. Conduct a CSR assessment
A CSR assessment is an evaluation of how well a company
has integrated the principles of CSR into their business. An
assessment program is a first step into an ongoing monitoring

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process. The objective of the assessment is to get a clear picture
of your Corporate Social Responsibility practices (i.e.
environment, social, ethics, supply chain). The assessment results
will enable you to understand how your company is positioned,
but you can also use the assessment results to communicate your
CSR commitment to your stakeholders.
Most companies conduct these assessments at the request
of their clients or stakeholders. When your top management do
not have an accurate overview of your corporate social
responsibility status and progress. It would be difficult and unlikely
for them to make important decisions for the future. Intelligence
gathered from the assessment can protect a firm from making an
ineffective and uncalculated CSR approach or heading in an
unsustainable direction with their business. An assessment will
also help identify CSR loopholes and potential opportunities
which
will improve the decision making process and also as a
reminder of legal obligations in business practices.
A basic assessment process is outlined below:
1. Assemble a CSR leadership team
2. Develop a working definition of CSR
3. Identify legal requirements
4. Review corporate documents, processes and activities
5. Identify and engage key stakeholders.
2. Develop a CSR strategy
A CSR strategy is a road map for moving ahead on CSR
issues. It sets the firm’s direction and scope over the long term
with regard to CSR. It allows the firm to be successful by using
its resources within its exclusive environment to meet market needs
and fulfill stakeholder expectations, CSR strategy helps to ensure
that a firm builds, maintain and continually strengthens its identity,
its market, and its relationships. Importantly, it provides the
framework for a logical business strategy based on the issues
that it and its stakeholders consider important.

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a. Build support with CEO, senior management and employees.
b. Research what others are doing, and assess the value of
recognized CSR instrument.
c. Prepare a matrix of proposed CSR actions.
d. Develop ideas for proceedings and the business case for
them.
e. Decide on direction, approach, boundaries and focus areas.
a. Build support with senior management and employees
Without the backing of a firm’s leadership, CSR strategies
have little chance of success. The personal engagement of the
CEO is usually vital The first step in developing a CSR strategy
is for the leadership team to report back to senior management
(and, where
relevant, the board of directors) about the key findings of
the assessment and to gauge interest in moving ahead. Quite likely,
the assessment will have indicated that several aspects of current
operations are vulnerable to external criticism, or that there appear
to be real opportunities for synergies or new products in certain
areas. The assessment could also have found that current decision
making on CSR issues is not well coordinated or that there is
considerable interest in specific CSR issues or pressure from
certain key stakeholders in these areas.
b. Research what others are doing, and existing CSR
instruments
Although it is possible for the CSR leadership team, working
with other members of the firm, to develop a CSR approach
entirely on its own, there is considerable value in drawing on the
experience and expertise of others. Three useful sources of
information are other firms, industry associations and CSR-
specialist organizations.
c. Prepare a matrix of proposed CSR actions
With this background it should be possible to create a matrix
of proposed CSR actions, possibly set out by environmental,
social and economic aspects, although there may be some

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overlap. The leadership team can plot current and possible CSR
activities, processes, products and impacts on the matrix, cross-
referencing them against the firm’s current activities and structure
to see how well they fit.
d. Develop options for proceeding and the business case
for them
Two broad options for proceeding at this point are to take
an incremental approach to CSR or to decide on a more
comprehensive change in direction. The evolution of the
Responsible Care program of the Canadian Chemical Producers’
Association is a good example of the former. This program started
with a broad set of principles but now includes detailed codes,
conformity assessment, public reporting and the involvement of
community and non-governmental organization representatives.
e. Decide on direction, approach and focus areas
The CSR leadership team should now have the information
it needs to ask senior management for an informed decision on
how the firm should proceed. Of immediate importance is
determining the firm’s general direction, approach and focus areas
with regard to CSR, as described below.
• Direction. This is the overall course the firm could pursue
or the main area it is aiming to address. For example, an apparel
company could decide to emphasize worker health and safety. A
pharmaceutical company could decide to look at developing
country health issues. A forestry company could decide that
environmental issues associated with logging are the focus of its
activities. A mining company could choose improving relations
with surrounding communities as its chief concern. A company
moving into new markets might decide that anti-bribery measures
are a target area, and so forth.
• Approach. This refers to how a firm plans to move in
the direction identified. For example, a firm might decide to first
revise its mission, vision, and values and ethics statements, next
put a new code of conduct in place, then communicate with and
train employees and, finally, address issues with contractors in
the supply chain.
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 • Focus areas. These should align most clearly with the
business objectives of the firm and, hence, are immediate
priorities. The focus areas may identify gaps in the firm’s
processes, attempt to capitalize on a new opportunity, or address
needs of certain key stakeholders. For example, a financial
institution could identify new protections for clients’ personal
information or the opportunities for micro-credit, while a food
retailer might decide to focus on combating obesity as an
immediate objective.
3. Develop CSR commitments
Business leaders need to speak out now about their role in
driving progress in society. For too long we have allowed people
to think that business is interested in nothing other than profit,
when in fact we see the purpose of business much more widely.
We believe that the fundamental purpose of business is to provide
continually improving goods and services for increasing numbers
of people at prices that they can afford.
CSR commitments are policies or instruments a firm develops
or signs on to that indicate what the firm intends to do to address
its social and environmental impacts.
Before developing CSR commitments, firms must
understand the range of available commitments and the distinction
between them.
1. Do a scan of CSR commitments
Before developing CSR commitments or agreeing to adhere
to third-party CSR codes or standards, it is useful to examine
the CSR commitment instruments others are using, particularly
leading firms. Importantly, firms should also research CSR
instruments developed by governments (see Appendix 5), and
intergovernmental bodies such as the UN, the ILO and the
OECD.
2. Hold discussions with major stakeholders
Developing CSR commitments or agreeing to comply with
existing codes and standards presents the firm with an opportunity
to generate organizational interest in CSR and build agreement
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about how codes and standards apply to the firm. From that
agreement, the firm can develop more practical steps towards
implementation. Throughout this guide, the importance of listening
to all stakeholder groups is stressed.
3. Create a working group to develop the commitments
The working group should be a cross-section of the
organization, from board members to senior management and
front-line employees, and could include people who are very
enthusiastic about CSR as well as those who are skeptical to
give voice to differing opinions on the issues at hand. Contractors
and others to whom the commitments apply should also be
involved.
4. Prepare a preliminary draft
CSR commitments should be plain-language statements and
should contain clear and concise obligations. It is recommended
that working group members identify who within the organization
will be responsible for implementing the commitments and involve
them in preparing the draft. Firms would also be well advised to
use existing commitment documents as base documents when
preparing their own.
5. Consult with affected stakeholders
It has been stressed above that thorough consultations with
those affected by a firm’s actions at the outset can prevent
problems later. One good approach is to start with the people
most likely to be directly affected by the CSR commitments and
who are already aware of the associated issues. Next, the working
group could have more formal discussions with groups and people
who may not be aware of the CSR initiative. A consultation plan
can be useful. It should include roles for high-profile officials within
the firm who have good communication skills and can clearly
explain the CSR commitments and receive feedback. This
feedback should go to the working group, who will discuss how
and to what extent the final draft will reflect the comments.
6. Revise and publish the commitments
Drawing on the input from the consultations, the working
group can finalize commitments to be published and shared with
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all employees as part of the implementation. Often this is done
on the firm’s Web site, or in a CSR or sustainability report, but
there are many options.
4. Implement CSR commitment
Implementation refers to the day-to-day decisions,
processes, practices and activities that ensure the firm meets the
spirit and letter of its CSR commitments and thereby carries out
its CSR strategy. If CSR commitments can be called “talking the
talk,” then implementation is “walking the walk.”
1. Develop an integrated CSR decision making structure
Although every firm is different, each has a decision making
structure in place to ensure that it can meet its commitments and
customer needs. The key question to ask here is, “given the firm’s
existing mission, size, sector, culture, way of organizing its affairs,
operations and risk areas—and given its CSR strategy and
commitments—what is the most effective and efficient CSR
decision making structure to put in place?”
2. Prepare and implement a CSR business plan
The decision making structure identifies who is responsible
for CSR decision making and action within the firm. These people
play key roles in developing and implementing the CSR business
plan, which should flow from the CSR strategy and commitments.
The CSR business plan may be separately described or included
as part of the firm’s existing overall business plan. With the
strategy, commitments and decision making structures in place,
the CSR business plan helps ensure that the words are
transformed into effective action. An excellent way of doing this
is to determine what human, financial and other resources and
activities will be required to carry out the CSR strategy and
commitments.
3. Set measurable targets and identify performance measures
Effective CSR implementation requires the setting of
measurable target for the commitments.
4. Engage employees and others to whom CSR commitments
apply
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 Following the approach set out in this guide, the input of
employees and other key stakeholders has been solicited at every
stage, from preliminary assessment, through to strategy
development and the articulation of commitments. Employees
play a central role in CSR implementation.
5. Design and conduct CSR training
Firms need to train employees directly involved in CSR
activities. This is an ongoing commitment, since training needs
will change as the CSR issues evolve. A comprehensive approach
to training, such as the one taken by IKEA, will ensure employees
have information on the firm’s CSR commitments, programs and
implementation. When the firm’s employees speak various
languages, training modules must be offered in those languages
and must consider employees’ cultural orientation. This is
particularly true when training employees in various parts of the
world. Literacy levels may also need to be assessed.
6. Establish mechanisms for addressing problematic behaviour
The very future of employees, communities, the environment
and firms can depend upon early detection of activity that is
contrary to CSR principles and commitments. Auditing and
monitoring, while revealing, can only go so far in this regard. For
this reason, it is important for firms to put in place mechanisms
and processes that will allow for early detection, reporting and
resolution of problematic activity.
7. Create internal and external communications plans
Information about CSR commitments, activities and
performance reporting should be communicated visibly and
frequently to all employees. Whether through newsletters, annual
reports, Intranet communication, meetings, training or informal
mechanisms, employees must know that CSR is a company
priority. Updates on CSR should also be put on the agenda of
meetings at all levels of the company. External communications
plans should ensure that all relevant stakeholder groups are
addressed.

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 8. Make commitments public For CSR commitments to
be most credible, they should be made public. Firms may only
wish to make public those commitments they are confident of
achieving, but nonetheless work on others quietly with no publicity.
A good external communications plan should identify the
individuals and groups that need to be aware of a particular CSR
initiative and those who should receive hard copies of CSR
documents, as well as how those individuals and groups are to
be reached.
5. Measure and assure performance
CSR team should ensure the performance of CSR activities
and it should be properly measured.
6. Assure and report on progress
Reporting is communicating with stakeholders about a firm’s
economic, environmental and ocial management and performance.
When it is done well, reporting should address how societal trends
are affecting a firm and, in turn, how the firm’s operations are
affecting society.
7. Evaluate and improve
An evaluation tracks the overall progress of a firm’s CSR
approach and forms the basis for improvement and modification.
With the information derived from verification and reporting, a
firm is in a good position to rethink its current approach and
make adjustments.
CSR and ethics in Business
It is better to find out the relationship between CSR and
business ethics. CSR is not only about responsibilities, but also
about ethics. That is ethics in dealing with customers, employees,
and the environment. Ethics come from inside a person, from
their beliefs. As every individual has different ethical belief , there
is no definition of what is ethically right or wrong, but it is a point
that managers have to keep in mind while doing business, ethics
are codes of values and principles that govern the action of a
person, or a group of people regarding what is right versus what
is wrong. Therefore, ethics set standards as to what is good or
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bad in organisaional conduct and decision making. Deals with
internal values that are a part of corporate culture and shapes
decisions concerning social responsibility with respect to the
external environment. Therefore, ethics are an important part of
the concept of CSR. Another important point is that social
responsibility reflects cultural values and traditions and takes
different forms in different societies. Organizations that adopt
CSR have moral, ethical, and discretionary responsibilities in
addition to their economic and legal obligations.
Advantages of ethical behavior in business
1. Build Customer Loyalty
Consumers may let a company take advantage of them
once, but if they believe they have been treated unfairly, such as
by being overcharged, they will not be repeat customers. Having
a loyal customer base is one of the keys to long-range business
success, since serving an existing customer does not involve
marketing costs, whereas acquiring a new one does.
2. Enhance a Company’s Reputation
A company’s reputation for ethical behavior can help it
create a more positive image in the marketplace, which can bring
in new customers through word-of-mouth referrals. Conversely,
a reputation for unethical dealings hurts the company’s chances
to obtain new customers, particularly in this age of social
networking when dissatisfied customers can quickly disseminate
information about the negative experience they had.
3. Retain Good Employees
Talented individuals at all levels of an organization want to
be compensated fairly for their work and dedication. They want
career advancement within the organization to be based on the
quality of the work they do and not on favoritism. They want to
be part of a company whose management team tells them the
truth about what is going on, such as when layoffs or
reorganizations are being contemplated.
Companies that are fair and open in their dealings with
employees have a better chance of retaining the most talented
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people. For instance, employees who do not believe the
compensation methodology is fair are often not as dedicated to
their jobs as they could be.
4. Positive Work Environment
Employees have a responsibility to be ethical from the
moment they have their first job interview. They must be honest
about their capabilities and experience. Ethical employees are
perceived as team players rather than as individuals just out for
themselves. They develop positive relationships with coworkers.
Their supervisors trust them with confidential information, and
they are often given more autonomy as a result.
Employees who are caught in lies by their supervisors
damage their chances of advancement within the organization
and may risk being fired. An extreme case of poor ethics is
employee theft. In some industries, this can cost the business a
significant amount of money, such as restaurants whose employees
steal food from the storage locker or freezer. One approach
ethical
companies take to avoid this type of behavior is to take the
time to train every member of the organization about the conduct
that is expected of them.
5. Avoid Legal Problems
At times, a company’s management may be tempted to cut
corners in pursuit of profit, such as by not fully complying with
environmental regulations or labor laws, ignoring worker safety
hazards or using substandard materials in their products. The
penalties for being caught can be severe, including legal fees and
fines or sanctions by governmental agencies. The resulting negative
publicity can cause long-range damage to the company’s
reputation that is even more costly than legal fees or fines
Advantages of Corporate Social Responsibility
As CSR adoption becomes increasingly popular all over
the world, it is safe to assume that businesses have seen great
potential in this area.

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Improves the image of a company:
CSR activities reflect positively on the image of a company.
When you implement CSR policies in your company, it increases
your goodwill. Consumers will be more willing to avail your
products/services because of the clean image of your company.
Helps attract and retain potential employees:
Companies which are involved in serious CSR activities are
more recognizable. This makes it easier for your company to
attract potential candidates who seek employment opportunities.
Also, when your company starts earning goodwill through
significant CSR activities, the employees are more likely to
continue with the company for a longer tenure.
Attracts new investors:
A company’s reputation in the market determines whether
it will receive new investments or not. With CSR programs, you
can certainly boost your company’s image. And when your
company starts to grab enough eyeballs, it also attracts a number
of investors. Be prepared to receive investment proposals from
venture capitalists, other firms, and even from the government.
A brand new way to advertise your brand:
It is often said that any publicity is good publicity. When
your company starts a CSR program, it automatically gives your
company a certain level of publicity. It won’t be wrong to call
such publicity as an advertisement. You just need to make sure
your products or services are aligned with the CSR activities
you are involved in.
Corporate social responsibility towards different sections
of the society
Social responsibilities of business to different segments of
the society can be stated as follows.
1. Corporate social Responsibility towards Owners
Owners are the persons who own the business and they
are responsible for the profit or losses and they contribute the
capital and bear the risks. The primary responsibility of the
business towards its owners is to, Should run the business
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efficiently Proper utilization of capital and resources Timely
repayment of on capital invested
2. Corporate social responsibility towards Investors
Investors provide the capital by way of investment, it is in
the form of debentures, deposits and bonds etc. without investors
companies may not be run successfully. The investors included
in this category are banks, public and financial institutions. The
responsibilities of the business towards its investors are, Providing
assurance to their investment Paying interests timely to the
investors Giving important updates to the investors Repayment
of principle amount timely
3. Corporate social responsibility towards Employees
Business needs workers or employees to work for the
organisation they put their efforts for the growth of the firm. It is
the basic responsibility of the organisation to take care of the
interest of the employees and to fulfill their needs. Employee
satisfaction leads to the achievement of the organisational goals.
The responsibilities of the organisation towards its employees or
workers include, wages and salaries should be paid timely and
regularly
Providing proper welfare amenities and working conditions
Providing better opportunities for the career prospects Providing
Job security and social security
Providing facilities like pension, provident fund, retirement
benefits, and group insurance, etc
Providing housing, canteen, transport, and creches etc
Identifying and fulfilling training and developmental needs
4. Corporate social responsibility towards Suppliers
Suppliers are the persons who supply semi finished goods,
finished goods, raw materials and other items required by the
firms. Market demand conditions can only be fulfilled on the basis
of the supply of the raw materials. So the suppliers are the part
of the success of the business. Managers should always notice
the importance of the suppliers. Certain suppliers are called as
distributors because they supply finished products to the
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consumers. The responsibilities of business towards these
suppliers are,
Giving regular orders to purchase goods Dealing with fair
terms and conditions Maintaining reasonable credit period Dues
should be paid timely
5. Corporate social responsibilities towards Customers
Business can only be survived with the support of customers.
The success of the business completely depends on the customer
satisfaction and customer loyalty. Brand image comes from these
two factors, so being responsible towards the customers not only
benefits the customers but it maximizes the revenues and makes
possible to get the market empire. The responsibility of business
towards customers is, Products and services must fulfill the needs
of the customers Qualitative Products and services must be
delivered Regularity in supply of goods and services must be
maintained Prices of the goods and services should be fixed
reasonable and affordable Procedure, advantages and
disadvantages of the product and the use of the products must
be informed to the customers Organisations must provide after
sales service Grievances of the customers must be settled quickly
Fewer quality services, under weighing the product and
adulteration must be avoided
6. Corporate social responsibility towards Competitors
Competitors always help the business in becoming more
innovative and dynamic. But it is not that much easy to face a
severe competition. Firms always try to overcome the competition
by giving discounts, by using various advertisement strategies,
and so on. To become better than their competitor’s firms
sometimes may follow unfair practices like giving sales
commissions to the agents, heavy discounts to the customers,
false advertisements, bribing the competitor’s employees to know
the business secrets etc. The responsibilities of business towards
its competitors are, Not to offer high sales commission to
distributors and agents Not to offer heavy discounts to the
customers False advertisements should not be given to defame
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the competitors Should not bribe the competitor’s employees to
copy their products and services
7. Corporate social responsibility towards Government
Firms should follow the rules framed by the government.
These guidelines are for the safety measures and for the benefit
of the society. Responsibilities of the firms towards government
are, Following the guidelines are given by the government
Fees, duties and taxes should be paid regularly and honestly
Should not follow the restrictive trade practices
Firms should follow the pollution control norms
Should not follow the corruption and other unlawful activities
8. Corporate social responsibility towards Society
In almost all activities individuals, groups, organisations and
families, etc interact with each other and dependent on each other.
A relationship exists between them which may be direct or
indirect. The increase in per capital income increases the value
of the money and national income. With the increase in national
income revenues of the business also increases. Thus it has certain
responsibilities towards the society which may be as follows,
Firms should help the weaker sections of the society
Organisations should protect the social and cultural values
Firms should generate the employment by extending their
business Should protect the environment by taking proper
measures
Natural resources and wildlife should not be harmed
Should provide assistance in the areas of research,
education, medical sciences, and technology, etc
Multiple Choice Questions
1. What is the classical view of management’s social
responsibility?
a. To create specific environment in work place
b. To maximise profits
c. To protect and improve society’s welfare

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d. All of the above
2. What does the socio - economic view of social responsibility
talk about?
a. Social responsibility goes beyond making profits to
include protecting and improving society’s welfare
b. Encourage business
c. Financial return
d. None of the above
3. What is the only concern of stock holders?
a. Financial return
b. Make profits
c. Encourage business to take up social responsibility
d. None of the above
4. Which of the following is a disadvantage of social
responsibility?
a. Possession of resources
b. Ethical obligation
c. Public image
d. Violation of profit maximization
5. __________ is when a firm engages in social actions because
of its obligation to meet certain economic and legal
responsibilities.
a. Social obligation
b. Social responsibility
c. Social responsiveness
d. None of the above
6. When social criteria is applied on investment decisions it is
called ____
a. Social responsiveness
b. Ethical obligation
c. Social screening
d. Financial return

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7. The recognition of the close link between an organization’s
decisions and activities and its impact on the natural
environment is called __________.
a. Global environment
b. Greening of management
c. Social actions
d. None of the above
8. ……………. Generally refers to transparent business
practices that are based on ethical values, compliance with
legal requirements, and respect for people, communities,
and the environment.
a. Corporate social responsibility
b. Code of ethics
c. Ethical standards
d. None of the above
9. WBCSD stands for
a. World Business Council for Sustainable Development
b. World Business Company For Sustainable Development
c. World Bank Council for Sustainable Development
d. World Business Council For Strategic Development
Short Answer type Questions
1. Define CSR
2. What is philanthropy
3. What is corporate citizenship
4. What is corporate governance

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 5. MODULE V
EMERGING CONCEPTS IN
MANAGEMENT

Management has gone through many changes and with

explosion of technology, many more are to come. Kaizen , TQM,
TPM, logistics management, etc are some of the new management
concepts introduced for the success of organisation
TOTAL QUALITY MANAGEMENT (TQM)
Total Quality Management is a management philosophy of
continuously improving product quality. TQM is a holistic
approach to long term success that view continuous improvement
in all aspects of an organization as a process. TQM is a way of
managing to improve the effectiveness, flexibility and
Competitiveness of a business as a whole.
Total Quality Management (TQM) describes a management
approach to long-term success through customer satisfaction. In
a TQM effort, all members of an organization participate in
improving processes, products, services, and the culture in which
they work.
Total Quality Management Principles: The 8 Primary
Elements of TQM
Total quality management consists of organization-wide
efforts to install and make permanent a climate in which an
organization continuously improves its ability to deliver high-
quality products and services to customers.Total quality
management can be summarized as a management system for a
customer-focused organization that involves all employees in
continual improvement. It uses strategy, data, and effective
communications to integrate the quality discipline into the culture
and activities of the organization. Many of these concepts are
present in modern Quality Management Systems, the successor
to TQM. Here are the 8 principles of total quality management:

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1. Customer-focused
The customer ultimately determines the level of quality. No
matter what an organization does to foster quality improvement—
training employees, integrating quality into the design process,
upgrading computers or software, or buying new measuring
tools—the customer determines whether the efforts were
worthwhile.
2. Total employee involvement
All employees participate in working toward common goals.
Total employee commitment can only be obtained after fear has
been driven from the workplace, when empowerment has
occurred, and management has provided the proper environment.
High-performance work systems integrate continuous
improvement efforts with normal business operations. Self-
managed work teams are one form of empowerment.
3. Process-centered
A fundamental part of TQM is a focus on process thinking.
A process is a series of steps that take inputs from suppliers
(internal or external) and transforms them into outputs that are
delivered to customers (again, either internal or external). The
steps required to carry out the
process are defined, and performance measures are
continuously monitored in order to detect unexpected variation.
4. Integrated system
Although an organization may consist of many different
functional specialties often organized into vertically structured
departments, it is the horizontal processes interconnecting these
functions that are the focus of TQM.
5. Strategic and systematic approach
A critical part of the management of quality is the strategic
and systematic approach to achieving an organization’s vision,
mission, and goals. This process, called strategic planning or
strategic management, includes the formulation of a strategic plan
that integrates quality as a core component.

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6. Continual improvement
A major thrust of TQM is continual process improvement.
Continual improvement drives an organization to be both
analytical and creative in finding ways to become more
competitive and more effective at meeting stakeholder
expectations.
7. Fact-based decision making
In order to know how well an organization is performing,
data on performance measures are necessary. TQM requires
that an organization continually collect and analyze data in order
to improve decision making accuracy, achieve consensus, and
allow prediction based on past history.
8. Communications
During times of organizational change, as well as part of
day-to-day operation, effective communications plays a large part
in maintaining morale and in motivating employees at all levels.
Communications involve strategies, method, and timeliness.
KAIZEN
Quality level improvement: After the training stage is
completed, practitioners should continue to focus on long-term
implication, widespread application, alignment with organizational
objectives and planning objectives. Management should form a
core department to carry out Kaizen evaluation and
implementation. Kaizen is a Japanese philosophy that focuses
on continual improvement throughout all aspects of life. When
applied to the workplace, Kaizen activities can improve every
function of a business, from manufacturing to marketing and from
the CEO to the assembly-line workers. Kaizen aims to eliminate
waste in all systems of an organization through improving
standardized activities and processes. By understanding the basics
of Kaizen, practitioners can integrate this method into their overall
Six Sigma efforts.
The purpose of Kaizen goes beyond simple productivity
improvement. When done correctly, the process humanizes the

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workplace, eliminates overly hard work, and teaches people how
to spot and eliminate waste in business processes.
The continuous cycle of Kaizen activity has seven phases:
1. Identify an opportunity
2. Analyze the process
3. Develop an optimal solution
4. Implement the solution
5. Study the results
6. Standardize the solution
7. Plan for the future
Kaizen generates small improvements as a result of
coordinated continuous efforts by all employees. Kaizen events
bring together a group of process owners and managers to map
out an existing process and identify improvements that are within
the scope of the participants.
The following are some basic tips for doing Kaizen:
• Replace conventional fixed ideas with fresh ones.
• Start by questioning current practices and standards.
• Seek the advice of many associates before starting a Kaizen
activity.
• Think of how to do something, not why it cannot be done.
• Don’t make excuses. Make execution happen.
• Do not seek perfection. Implement a solution right away,
even if it covers only 50 percent of the target.
• Correct something right away if a mistake is made.
Kaizen activities cover improvements in a number of areas,
including:
• Quality – Bettering products, service, work environment,
practice and processes.
• Cost – Reducing expenses and manpower, and use of
material, energy and resources.
• Delivery – Cutting delivery time, movement and non-value-
added activities

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• Management – Improving procedures, training, morale,
administration, planning, flow, information systems,
documentation and reporting.
• Safety – Decreasing hazardous situations, unsafe working
conditions, chances of resource depletion and damage to
theenvironment.
Implementing Kaizen
Typically, implementation of Kaizen occurs in three stages
in any organization:
1. Encourage participation: Awareness training sessions for all
employees are a must. To further encourage employee
involvement, promote specific Kaizen activities, and consider
distributing monetary or tangible benefits after solutions from
Kaizen activities are implemented.
2. Training and education: Focused training of associates is
required for understanding what is –
and is not – the essence of Kaizen. Team leaders should be trained
to understand Kaizen in an
organizational vision context, which needs to be followed
thoroughly in order to achieve desired business objectives.
They also must be taught about the necessity of impartial
evaluation and strategy for improving participation.
3. Quality level improvement: After the training stage is
completed, practitioners should continue to focus on long-
term implication, widespread application, alignment with
organizational objectives and planning objectives.
Management should form a core department to carry out
Kaizen evaluation and implementation.
TOTAL PRODUCTIVE MAINTENANCE (TPM)
Total Productive Maintenance (TPM) is a maintenance
program which involves a newly defined concept for maintaining
plants and equipment. The goal of the TPM program is to
markedly increase production while, at the same time, increasing
employee morale and job satisfaction.
TPM brings maintenance into focus as a necessary and vitally
important part of the business. It is no longer regarded as a non-
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profit activity. Down time for maintenance is scheduled as a part
of the manufacturing day and, in some cases, as an integral part
of the manufacturing process. The goal is to hold emergency and
unscheduled maintenance to a minimum.
TPM was introduced to achieve the following objectives.
The important ones are listed below.
• Avoid wastage in a quickly changing economicenvironment.
• Producing goods without reducing product quality.
• Reduce cost.
• Produce a low batch quantity at the earliest possible time.
• Goods send to the customers must be non defective.
The Eight Pillars
The eight pillars of TPM are mostly focused on proactive
and preventative techniques for improving equipment reliability
1. Autonomous Maintenance
2. Focused Improvement
3. Planned Maintenance
4. Quality management
5. early/equipment management
6. Education and Training
7. Safety Health Environment
8. Administrative & office TPM
MANAGEMENT INFORMATION SYSTEM
MIS is the use of information technology, people, and
business processes to record, store and process data to produce
information that decision makers can use to make day to day
decisions. MIS is the acronym for Management Information
Systems. In a nutshell, MIS is a collection of systems, hardware,
procedures and people that all work together to process, store,
and produce information that is useful to the organization.
The need for MIS
The following are some of the justifications for having an
MIS system

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 Decision makers need information to make effective
decisions. Management Information Systems (MIS) make this
possible.
MIS systems facilitate communication within and outside
the organization – employees within the organization are able to
easily access the required information for the day to day
operations. Facilitates such as Short Message Service (SMS) &
Email make it possible to communicate with customers and
suppliers from within the MIS system that an organization is using.
Record keeping – management information systems record
all business transactions of an organization and provide a reference
point for the transactions.
Components of MIS
The major components of a typical management information
system are;
• People – people who use the information system
• Data – the data that the information system records
• Business Procedures – procedures put in place on how to
record, store and analyze data
• Hardware – these include servers, workstations, networking
equipment, printers, etc.
• Software – these are programs used to handle the data.
These include programs such as spread sheet programs,
database software, etc.
Types of Information Systems
The type of information system that a user uses depends on
their level in an organization.
Transaction Processing Systems (TPS)
This type of information system is used to record the day to
day transactions of a business. An example of a Transaction
Processing System is a Point of Sale (POS) system. A POS
system is used to record the daily sales.
Management Information Systems (MIS)
Management Information Systems are used to guide tactic
managers to make semi-structured decisions. The output from
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the transaction processing system is used as input to the MIS
system.
Decision Support Systems (DSS)
Decision support systems are used by top level managers
to make semi-structured decisions. The output from the
Management Information System is used as input to the decision
support system. DSS systems also get data input from external
sources such as current market forces, competition, etc.
ISO (INTERNATIONAL ORGANISATION FOR
STANDARDISATION)
ISO originated from the union of two organisations – the
ISO (International Federation of the National Standardizing
Associations) and the UNSCC (United Nations Standard
Coordinating Committee).
In 1946 over 25 countries met at the Institute of Civil
Engineers in London to create a new international organisation,
where the objective was to ‘facilitate the international coordination
and unification of industrial standards’ From this the new
organisation ISO began operations in February 1947. The word
ISO is derived from the Greek ISOS meaning ‘equal’. As the
International Organization for Standardization would translate
differently across different languages it was decided that the
short form name for the organisation would be ISO.
ISO has published 21634 International Standards and
related documents, covering every industry, from technology to
food safety, to agriculture and healthcare. They meet on a regular
basis to further develop new and existing management standards.
Need for ISO Certification
There are three main reasons why companies adopt an ISO
management system:
• To increase success on public and private tenders
• To improve internal efficiency and reduce costs
• Subliminal marketing – by showing our logo on your
marketing you prove to your prospective clients you are credible.

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ISO 9001: 2008 Quality Management System
An ISO 9001 quality management system is a systematic
and process driven approach to managing your business. It is
designed to support the company in ensuring you meet the needs
of your customers, whilst delivering a consistent level of quality
and satisfaction.
ISO 9001:2008 specifies requirements for a quality
management system where an organization needs to demonstrate
its ability to consistently provide product that meets customer
and applicable statutory and regulatory requirements, and aims
to enhance customer satisfaction through the effective application
of the system, including processes for continual improvement of
the system and the assurance of conformity to customer and
applicable statutory and regulatory requirements.
ISO 9001:2008 will be obsolete effective September 2018
and replaced by ISO 9001:2015. 9001:2008 is the standard
that outlines the requirements an organization must maintain in
their quality system for ISO 9001:2008 certification. There are
several different documents in the ISO 9000 family of standards,
but ISO 9001 is the only ISO standard that requires certification.
ISO 14001
The ISO 14000 family of standards provides practical tools
for companies and organizations of all kinds looking to manage
their environmental responsibilities. ISO 14001:2015 and its
supporting standards such as ISO 14006:2011 focus on
environmental systems to achieve this. The other standards in the
family focus on specific approaches such as audits,
communications, labelling and life cycle analysis, as well as
environmental challenges such as climate change. ISO
14001:2015 sets out the criteria for an environmental management
system and can be certified to. It maps out a framework that a
company or organization can follow to set up an effective
environmental management system. It can be used by any
organization regardless of its activity or sector.

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ISO 9001:2015
ISO 9001:2015 specifies requirements for a quality
management system when an organization:
a) needs to demonstrate its ability to consistently provide
products and services that meet customer and applicable statutory
and regulatory requirements, and
b) aims to enhance customer satisfaction through the
effective application of the system, including processes for
improvement of the system and the assurance of conformity to
customer and applicable statutory and regulatory requirements.
All the requirements of ISO 9001:2015 are generic and are
intended to be applicable to any organization, regardless of its
type or size, or the products and services it provides.
CHANGE MANAGEMENT
Change management (sometimes abbreviated as CM) is a
collective term for all approaches to preparing and supporting
individuals, teams, and organizations in making organizational
change. It includes methods that redirect or redefine the use of
resources, business process, budget allocations, or other modes
of operation that significantly change a company or organization.
Organizational change management (OCM) considers the full
organization and what needs to change, while change management
may be used solely to refer to how people and teams are affected
by such organizational transition. It deals with many different
disciplines, from behavioral and social sciences to information
technology and business solutions.
Reasons for change
Globalization and constant innovation of technology result
in a constantly evolving business environment. Phenomena such
as social media and mobile adaptability have revolutionized
business and the effect of this is an ever-increasing need for
change, and therefore change management.
With the business environment experiencing so much change,
organizations must then learn to become comfortable with change

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as well. Therefore, the ability to manage and adapt to
organizational change is an essential ability required in the
workplace today. Yet, major and rapid organizational change is
profoundly difficult because the structure, culture, and routines
of organizations often reflect a persistent and difficult-to-remove
“imprint” of past periods, which are resistant to radical change
even as the current environment of the organization changes
rapidly.
Due to the growth of technology, modern organizational
change is largely motivated by exterior innovations rather than
internal factors. When these developments occur, the organizations
that adapt quickest create a competitive advantage for themselves,
while the companies that refuse to change get left behind. This
can result in drastic profit and/or market share losses.
Organizational change directly affects all departments and
employees. The entire company must learn how to handle changes
to the organization. The effectiveness of change management can
have a strong positive or negative impact on employee morale.
Change Management Process
The Change Management Foundation is shaped like a
pyramid with project management managing technical aspects
and people implementing change at the base and leadership setting
the direction at the top. The Change Management Model consists
of four stages:
Determine Need for Change Prepare & Plan for Change
Implement the Change Sustain the Change
Change management involves collaboration between all
employees, from entry-level to top- management
Although there are many types of organizational changes,
the critical aspect is a company’s ability to win the buy-in of their
organization’s employees on the change. Effectively managing
organizational change is a four-step process:
• Recognizing the changes in the broader businessenvironment
• Developing the necessary adjustments for their company’s
needs
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• Training their employees on the appropriate changes
• Winning the support of the employees with the
persuasiveness of the appropriate adjustments
STRESS MANAGEMENT
Our increasingly busy lives cause our minds a lot of stress.
Stress is mental tension caused by demanding, taxing or
burdensome circumstances. Stress doesn’t just affect our mental
state and mood; it affects our physical health as well. When we
are very stressed, a hormone called cortisol is released into our
bloodstream, suppressing the functioning of our immune, digestive
and reproductive systems. That is why it is so important to practice
stress management in order to keep our minds and bodies healthy.
Stress management consists of making changes to your life
if you are in a constant stressful situation, preventing stress by
practicing self-care and relaxation and managing your response
to stressful situations when they do occur.
Types of stress
1. Acute stress
Acute stress is the most common type of stress. It’s your
body’s immediate reaction to a new challenge, event, or demand,
and it triggers your fight-or-flight response. As the pressures of a
near-miss automobile accident, an argument with a family member,
or a costly mistake at work sink in, your body turns on this
biological response.
2. Episodic acute stress
When acute stress happens frequently, it’s called episodic
acute stress. People who always seem to be having a crisis tend
to have episodic acute stress. They are often short-tempered,
irritable, and anxious. People who are “worry warts” or
pessimistic or who tend to see the negative side of everything
also tend to have episodic acute stress.
3. Chronic stress
If acute stress isn’t resolved and begins to increase or lasts
for long periods of time, it becomes chronic stress. This stress is

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constant and doesn’t go away. It can stem from such things as:
poverty, a dysfunctional family, an unhappy marriage, a bad job
Chronic stress can be detrimental to your health, as it can
contribute to several serious diseases or health risks, such as:
heart disease, cancer, lung disease, accidents, cirrhosis of the
live, suicide
Managing stress
Stress affects each person differently. Some people may
get headaches or stomach aches, while others may lose sleep or
get depressed or angry. People under constant stress may also
get sick a lot. Managing stress is important to staying healthy.
It’s impossible to completely get rid of stress. The goal of
stress management is to identify your stressors, which are the
things that cause you the most problems or demand the most of
your energy. In doing so, you can overcome the negative stress
those things induce.
The Centers for Disease Control and Prevention recommend
the following to help cope with stress:
• take care of yourself, by eating healthy, exercising, and
getting plenty of sleep
• find support by talking to other people to get your problems
off your chest
• connect socially, as it’s easy to isolate yourself after a stressful
event
• take a break from whatever is causing you stress
• avoid drugs and alcohol, which may seem to help with stress
in the short term, but can actually cause more problems in
the long term
FISHBONE DIAGRAM
A fishbone diagram, also called a cause and effect diagram
or Ishikawa diagram, is a visualization tool for categorizing the
potential causes of a problem in order to identify its root causes.
Dr. Kaoru Ishikawa, a Japanese quality control expert, is
credited with inventing the fishbone diagram to help employees

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avoid solutions that merely address the symptoms of a much
larger problem.
A fishbone diagram is useful in brainstorming sessions to
focus conversation. After the group has brainstormed all the
possible causes for a problem, the facilitator helps the group to
rate the potential causes according to their level of importance
and diagram a hierarchy. The design of the diagram looks much
like a skeleton of a fish. Fishbone diagrams are typically worked
right to left, with each large “bone” of the fish branching out to
include smaller bones containing more detail. Fishbone diagrams
are used in the “analyze” phase of SixSigma’s DMAIC (define,
measure, analyze, improve, control) approach to problem solving.
How to create a fish diagram:
1. Create a head, which lists the problem or issue to be studied.
2. Create a backbone for the fish (straight line which leads to
the head).
3. Identify at least four “causes” that contribute to the problem.
Connect these four causes with arrows to the spine. These
will create the first bones of the fish.
4. Brainstorm around each “cause” to document those things
that contributed to the cause. Use the 5 Whys or another
questioning process such as the 4P’s (Policies, Procedures,
People and Plant) to keep the conversation focused.
5. Continue breaking down each cause until the root causes
have been identified.
Types of Fishbone diagram Simple Fishbone
In its basic form, the cause-and-effect diagram has no
predetermined affinities, or categories of causes, so you can
determine affinities that may be unique to your organization. For
example, a public relations firm may have affinities that wouldn’t
be found in a manufacturing operation, and vice versa.
4S Fishbone
This type of C&E diagram is commonly used in the service
industry. It organizes information about potential causes into four
common categories: Suppliers, Systems, Surroundings, and Skills.
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8P Fishbone
This type uses 8 categories: Procedures, Policies, Place,
Product, People, Processes, Price, and Promotion. This variation
is also commonly used in the service industry, but can certainly
be applied in nearly any type of business.
Man Machines Materials Fishbone
This variation, commonly used in manufacturing, allows you
to organize potential causes of a problem into these categories:
Man, Materials, Machine, Methods, Measurements, and
Environment. In some cases, two additional categories are
included: Management/Money and Maintenance.
BUSINESS ECO SYSTEM
A strategic planning model, popular since the development
of information technology, whereby a network of suppliers,
distributors, competitors and customers all work through
competition and cooperation to advance sales of products.
The network of organizations – including suppliers,
distributors, customers, competitors, government agencies and
so on – involved in the delivery of a specific product or service
through both competition and cooperation. The idea is that each
business in the “ecosystem” affects and is affected by the others,
creating a constantly evolving relationship in which each business
must be flexible and adaptable in order to survive, as in a
biological ecosystem.
The ecosystem model can also be applied to organizations
such as hospitals and universities. This term is part of a recent
trend toward using biological concepts to better understand ways
to succeed in business. Advances in technology and increasing
globalization have changed ideas about the best ways to do
business, and the idea of a business ecosystem is thought to help
companies understand how to thrive in this rapidly changing
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MEANING AND DEFINITION OF LOGISIC
MANAGEMENT
The benefits of co-ordinated logistics management appeared
around 1961, in part explaining why a generally accepted
definition of business logistics is still emerging. Therefore, it is
worthwhile to explore several definitions for the scope and content
of the subject.
A dictionary definition of the term logistics is: “ The branch
of military science having to do with procuring, maintaining,
and transporting material, personnel, and facilities.”
This definition puts logistics into a military context. To the
extent that business objectives and activities differ from those of
the military, this definition does not capture the essence of
business logistics management.A better representation of the field
may be reflected in the definition promulgated by the Council of
Logistics Management (CLM), a professional organization of
logistics managers, educators, and practitioners formed in 1962
for the purposes of continuing education and fostering the
interchange of ideas. Its definition:
“Logistics is that part of the supply chain process that plans,
implements, and controls the efficient, effective flow and
storage of goods, services, and related information from the
point of origin to the point of consumption in order to meet
customers’ requirements.”
This is an excellent definition, conveying the idea that product
flows are to be managed from the point where they exist as
raw materials to the point where they are
finally discarded. Logistics is also concerned with the flow
of services as well as physical goods, an area of growing
opportunity for improvement. It also suggests that logistics is a
Process , meaning that it includes all the activities that have an
impact on making goods and services available to customers when
and where they wish to acquire them. However, the definition
implies that logistics is part of the supply chain process, not the
entire process.
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ELEMENTS OF LIGISTICS MANAGEMENT
Logistics management consists of eight elements called wings
of logistics. These are discussed in a nutshell below.
1. Customer Order Processing
2. Location Analysis
3. Inventory Control
4. Material Handling
5. Packaging 6.Transportation 7.Warehousing
8. Customer Service

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