Unit No.

1:
Introduction To Management Concepts And Managerial Skills
Introduction:
 Management is the art of getting work done through people with satisfaction for employer,
employees and public.
 It is the process of designing and maintaining an environment in which individuals,
working together in groups, effectively accomplish selected aims.
 All organizations need management for directing and unifying the group efforts through
collective action towards a common objective.

 The block diagrams given below are representing the working of an organization without
management and with management.

Management is the process of effectively utilizing resources like manpower, money, materials and
machinery to achieve goals of enterprise through proper methods.
1.1 Definitions of Management, Role And Importance of Management:
As it is very difficult to define management through a single definition, listed below are a few
definitions provided by renowned experts.

1. Mary Parker Follet :

Management is the art of getting things done through people.
2. George R Terry:
Management is a process consisting of planning, organizing, actuating and controlling performed to
determine and accomplish the objectives by the use of people and resources.
3. Ralph C Devis :
Management is the function of executive leadership anywhere”.
4. William Spriegal :
Management is that function of an enterprise which concerns itself with the direction and control of
various activities to attain business activities.
5. Peter Ferdinand Drucker:
Management is a multipurpose organ that manages a business and manages managers and manages
workers and work.
6. Donald J Clough:
Management is the art and science of decision making and leadership.
7.Joseph L Massie:
Management is the process by which a cooperative group directs actions towards common goals.
8. F.W. Taylor:
Management is the art of knowing what you want to do and then seeing that it is done in the best and
cheapest way.

9.John F Mee:
Management is the art of securing maximum results with minimum efforts so as to secure maximum
prosperity for employer and employee and give the public the best possible service.
10. Harold Koontz:
It is the art of getting the work done through and with people in formally organized groups.

Role of Management
In any organizational unit, whether it is a company or a section in a company, the manager
stands between the organization and its environment. The role of the management is to ensure
that the goals of the organization are achieved.
Today, the society has become very complex and a change in one part generates changes in
other parts. These changes are reflected in both tangible and intangible forms.
Tangible changes are concerned with changes in technology, size of organization,
specialization of work and theories which affect the society. Intangible changes are changes in
attitude, human values, culture, etc. The challenge of changes can be met by management
only.
Management ensures that all the activities are designed effectively such that the working of
each individual employee will contribute to the attainment of the organizational goals.

Importance of Management:

1. Optimum utilisation of resources:

Management brings all the available resources -men, money, machines, materials and methods together
for optimum utilization.
2. Expansion and diversification:
Management helps the organization to achieve its goals efficiently, systematically,easily and quickly.
It helps the organization to face competition to grow, expand and diversify.
3. Reduction of employee’s absenteeism and turnover:
Management motivates people. It provides different incentives to the employees which include positive,
negative, monetary and non-financial incentives. These incentives increase the willingness and
efficiency of the employees.
This increases the productivity and profitability of the organization. Management also develops team
spirit and increases the efficiency within the organization. It reduces labour turnover and absenteeism.
4. Utilization of the benefits of science and technology:
Management utilizes the advancements made in the field of Science and Technology to provide
industries with the latest machines and the consumers with the latest products.
5. Encouraging initiative and innovation:
Management encourages initiative from employees and inspires them to give their suggestions for the
growth of the organization. Initiative gives satisfaction to the workers and success to the organization.
Management also encourages innovation. It brings innovative ideas, modern methods,and latest
techniques to the organization.
6. Minimizing wastage:
Management minimizes the wastage of materials, men and monetary resources by doing work through
proper arrangement, manufacturing and control. Managers motivate subordinate to reduce wastage.
Reduction in wastage brings a higher return to the firm.
7. Team work:
Management always builds a team spirit in the organization. The combined effort of work and unity lead
 to the prosperity within the Organization. Team work plays an important part in the success of
Organization.
8. Motivation:
Management motivates employees by sharing the profits in the form of bonus. It also provides many
incentives to the employees. This motivates the employee to work harder, which results in higher
efficiency in production.
9. Reduction in labour turnover:
 Employee turnover takes place when some employees leave the organization and others join in their
place. Frequent labour turnover increases the selection and training cost.
Management creates a sense of responsibility among the employees and helps to reduce labour
turnover in the organization.
10. Higher efficiency:
Proper management ensures that the efficiency of the organization is high with higher return at minimum
investment.
11. Improving the quality of life of the workers:
Management offers bonus and incentives to the employees for their work. It provides a healthy work
environment. It also provides medical and insurance faculties to worker and their families. It provides a
financial stability which helps in boosting the workers’ lives.
12. Cordial industrial relations:
Management ensures industrial peace. It gives more importance to the ‘Human Element’ in business. It
applies positive motivation. All this improves the relations between the employees and the employers.
13. Corporate image:
Efficient and effective management maintains a good image and goodwill of organization. This is because
of quality of products and services offered by the organization and also due to the social responsibility of
organization towards society.
14. Promotes national development:
Management is regarded as a key to the economic development of nation. It puts resources to the
optimum use. It leads to capital formation and technological advancement. It generates handsome
revenue for government.
It increases national income and standard of living of people. Thus, it leads to development across all
sectors, and significant growth throughout the nation.
15. It helps society:
For any organization, profit is not the only objective. It provides the society with a regular supply of
good quality goods and services at reasonable prices.
It provides employment opportunities to people. It pays taxes to the government which is used for
developing the nation. As part of Corporate Social Responsibility, many organizations use their profits
to build hospitals, schools, colleges, etc. In this way it contributes towards the uplift of society.
1.1 Management Characteristics
1. Universal
 The principles and concepts of management are applicable to every type of industry. All
the organizations, whether profit-making or not, require management for managing their
activities. Hence it is universal in nature.
 However, the practice of management may vary from one organization to another
according to their nature.
2. Goal Oriented:
All organizations have objectives that are laid down. Management achieves the
organizational goals by coordinating the efforts of the personnel.
3. Continuous process:
The process of management consists of functions like planning, organizing,
directing and controlling the resources to ensure that resources are used to the best
advantages of the organization. Management involves continuous planning,
organizing, directing and controlling.
4. Multi-dimensional:
Management is not confined to the administration of people only, but it also manages
work, processes and operations, which makes it a multi- dimensional. It is the unifying
force which integrates human and other resources to obtain the desired objectives.
5. Group activity:
 An organization consists of various members who have different needs, expectations
and beliefs. Every person joins the organization with a different motive, but after
becoming a part of the organization, he works for achieving the same goal.
 This requires supervision, teamwork and coordination, and it is achieved by,
management.
6. Dynamic function:
 Management is not static. Over a period of time new principles, concepts and
techniques are developed and adopted by management. It changes according to the
social changes.
 The working of an organization depends upon various factors like social, political,
legal, technological, economical, etc. A slight change in any of these factors will affect
the organization’s growth and performance. To overcome these changes, management
formulates strategies and implements the
7. Authority
 Management represents a system of Authority – a hierarchy of command and control.
Managers at different levels possess varying degrees of authority.

Figure 4- Principles of Management

Principles of Management
Taylor’s Principles of Scientific Management
F.W. Taylor is regarded as father of Scientific Management. His principles of scientific
management are-
1. Science, Not Rule of Thumb: This means using scientific methods to study work and
determine the most efficient way of performing specific tasks instead of working by "rule
of thumb" or habit.
2. Development of each and every person to his or her greatest efficiency: Employees
should be scientifically selected and placed depending upon their skills, capabilities and
aptitudes. They should be provided proper training to learn the best method of doing a job.
3. Harmony, Not Discord: Harmony means there should be complete agreement on ideas and
opinions between workers and management. Discord or difference in opinion will lead to
conflicts.
4. Cooperation, Not Individualism: This lays stress on mutual cooperation between workers
and the management. Cooperation, mutual confidence, sense of goodwill should prevail
among both, managers as well as workers. It will replace internal competition with
cooperation.
5. Maximum output in place of restricted output: By maximizing the production
efficiency, the earnings of employees and employers will also increased.
6. Financial Incentives: According to this principle the wages paid should be as per
performance of the worker. An efficient worker should be paid more than an inefficient
worker. This will motivate the workers to become more efficient.
Henry Fayol’s Principles of management

Figure 5 Fayol’s 14 Principles of Management

Henry Fayol presented 14 principles of management as general guides for
Management process and management practice. They are:

1. Division of work:
 According to this principle, work should be divided among workers according to their
personal aptitude and skills.
 Division of work leads to specialization which is necessary for efficient utilization of
labour. This will result in increased efficiency and productivity.
2. Authority and Responsibility:
 Managers need to have the authority (and with it responsibility) to command their
teams. When managers have teams reporting to them they are usually responsible for
the team's performance.
 Authority and Responsibility should go hand in hand and must be related to one
another. An executive can do justice to his responsibility only when he has authority.
Responsibility without Authority or vice versa is meaningless.
3. Discipline:
 Discipline is absolutely necessary for efficient functioning of all sections of an
organization.
 Discipline is described as “respect for agreements that are directed at achieving
obedience, application, and the outward marks of respect”.
 Fayol declares that discipline requires good superiors at all levels, clear and fair
agreement and judicious application of penalties.
4. Unity of command:
 This principle relates to the functioning of personnel. According to this principle, an
employee should receive orders and instructions from one superior only.
 This principle is useful to avoid confusions, mistakes and delays in work.
5. Unity of direction:
This is a broader concept than unity of command. It deals with the functioning of the
body corporate. According to this principle, each group of activities having the same
objective must have one head and one plan.
6. Subordination of individual interest to general interest:
In any organization, the interest of the organization should be above that of the
individual. This is necessary to maintain unity and avoid friction among employees.
7. Remuneration of personnel:
 Remuneration is the price paid by the organization to its employees for the services
rendered by them.
 The remuneration and methods of payment should be fair and provide maximum
satisfaction to employee and employer.
8. Centralization:
 Centralization means the concentration of authority with top management. In
a centralized organization, power is held by head office or a small number of managers,
whereas decentralized organizations allow departments and individuals to make
decisions.
 According to Fayol, it is important to have a balance between centralization and
decentralization for proper working. The appropriate level of centralization will depend
on the organizational structure and objectives.
9. Scalar chain:
 The unbroken line of authority from the highest level to the lowest levelis calledscalar
chain.
 Managers are regarded as ‘Chain of Superiors” from the highest to the lowest ranks and
the unbroken line of command and authority should be maintained.
 However the chain may be short-circuited when scrupulous following of it would be
detrimental for the organization
10. Order:
According this principle, everything(material)and everyone (human being), has a
specific place in the organization. They should be arranged such that right material/right
person should be located at the right place for effective functioning.
11. Equity:
 According to this principle, managers should treat all employees/subordinates with
fairness, kindness and justice.
 This will make the employees to be more loyal and devoted towards the organization.
12. Stability of tenure of personnel:
 Stable and secure work force is an asset to an enterprise. Stability of tenure means
ensuring that employees do not leave the company.
 Instability is a result of bad management and increases the costs of unnecessary labour
turnover.
13. Initiative:
 Initiative is conceived as thinking and execution of a plan. It is one of the keenest
satisfactions for an intelligent employee.
 Managers should encourage and motivate the employees to take initiative which will
help the organization to improve.
 Employee initiative can include employee suggestions, new ideas, solutions to a
problem and dealing with situations without being asked to do so.
 14. Esprit de corps:
 This principle of management emphasizes the need for team work, i.e. harmony and
understanding among the employees and shows the importance of communication in
obtaining such team work.
 “Union is strength” is the essence of this principle.

Levels of Management and their functions

 People in an organization are arranged in hierarchy and they all have the relationship
of superior-subordinates.
 The term “Levels of Management’ refers to a line of demarcation between various
managerial positions in an organization. The number of levels in management
increases when the size of the business and work force increases and vice versa.
 The level of management determines a chain of command, the amount of authority &
status enjoyed by any managerial position.
 Every manager in an organization performs all five management functions. The
relative importance of these functions varies along the managerial levels. There may
be as many levels in the organization as the number of superiors in a line of command.
Some of these levels are merged into one on the basis of nature of functions performed
and authority enjoyed.
 Management may be broadly classified as top level, middle level and lower level
management.

Figure 6 Levels of Management with Functions

1. Top Level Management

It consists of Board of Directors, Chief Executives, Managing Directors, General
managers and Owners. The top management is the ultimate source of authority and it
manages goals and policies for an enterprise.
It devotes more time on planning and coordinating functions.
The functions of the top management can be summarized as follows -
 a. To lay down the objectives and broad policies of the enterprise.
b. To issue necessary instructions for preparation of department budgets, procedures,
schedules etc.
c. To prepare strategic plans & policies for the enterprise.
d. To appoint the executives for middle level i.e. departmental managers.
e. To control& coordinate the activities of all the departments.
f. To maintain a contact with the outside world.
g. To provide guidance and direction.
h. To be responsible towards the shareholders for the performance of the enterprise.
i. To design/redesign the organization system
j. To shoulder financial responsibilities and related functions.

2. Middle Level Management

 This level comprises of branch managers and departmental managers like marketing
manager, production manager, HRD manager, R&D manager, etc.They are responsible to
the top management for the functioning of their departments.
 They devote more time to organizational and directional functions. In small organization,
there is only one layer of middle level of management but in big enterprises, there may be
senior and junior middle level management.
 Their functions are -
a. To execute the plans of the organization in accordance with the policies and
directives of the top management.
b. To establish the organization.
c. To make plans for the sub-units of the organization.
d. To participate in employment & training of lower level management.
e. To interpret and explain policies of top management to lower level.
f. To coordinate the activities within the division or department.
g. To send important reports and other important data to top level management.
h. To evaluate performance of junior managers.
i. To inspire lower level managers towards better performance.
3. Lower Level Management
 This level is also known as supervisory level or operative level of management. It
consists of Supervisors, Foremen, Section officers, Superintendents, Inspectors,
etc.
 Supervisory management refers to those executives whose work has to be largely
with personal oversight and direction of operative employees. They are concerned
with direction and controlling function of management.
 Their functions are -
a. To assign jobs and tasks to various workers.
b. To guide and instruct workers for day to day activities.
c. To be responsible for the quality and quantity of production.
d. To be responsible for maintaining good relation in the organization.
e. To act as a link between top management and workers.
f. To communicate workers problems, suggestions, and recommendatory appeals etc. to the
higher level and higher level goals and objectives to the workers.
g. To solve the grievances of the workers.
h. To supervise & guide the sub-ordinates.
i. To provide necessary training to the workers.
j. To arrange necessary materials, machines, tools etc for getting the things done.
k. To prepare periodical reports about the performance of the workers.
l. To ensure discipline in the enterprise.
m. To motivate workers.
Management, Administration and Organization
Management:
 It is defined as an art of managing people and their work, for achieving a common goal by
using the organization’s resources.
 It creates an environment under which the manager and his subordinates can work
together for the attainment of objectives of organization.
 Management brings together 5M’s of the organization, i.e. Men, Material, Machines,
Methods, and Money for achieving the desired output.
 The main functions of management are planning, organizing, staffing directing and
controlling
Administration:
Administration relates to top level of management.
They are the either owners or business partners who invest their capital in starting the
business. They get their returns in the form of profits or as a dividend.
The functions of administration are legislative and largely determinative. It does not need
technical ability.
It makes policies and decides the goals of an enterprise to be achieved. It is not directly
concerned with the implementation of the policies.
It frames the organizational structure and exercises control over the enterprise.
It is mainly concerned with decision making, policy making and making necessary
adjustments
It coordinates finance, production and distribution.

Organization:
Organization is the framework of management. It is the function of putting together the
different parts of an enterprise into working order.
Management carries out the policies of Administration through the frame work of
organization.
It is the foundation upon which the whole business is built. Without efficient
organization, no management can perform its function smoothly. Strong organization
contributes greatly to the continuity and the success of an enterprise. A poor
organization structure makes good performance impossible, no matter how good the
individuals are.
 It is a structure of relationships among the individuals working together for a common
goal.
Organization is concerned with the building, developing and maintaining of a structure
of working relationships in order to accomplish the objectives of the enterprise.
Organization means the determination and assignment of duties to individuals and also
the establishment and the maintenance of authority relationships among the grouped
activities.

Relation between Management and Administration

The major differences between management and administration are given below:
1. Management is a systematic way of managing people and things within the organization.
Administration is defined as an act of governing the whole organization by a group of people.
2. Management is an activity of business and functional level, whereas Administration is a
high-level activity.
3. Management focuses on policy implementation; policy formulation is performed by the
Administration.
4. Functions of administration include legislation and determination. Functions of
management are executive and governing.
5. Administration takes all the important decisions of the organization while Management
makes decisions under the boundaries set by the Administration.
6. A group of persons, who are employees of the organization is collectively called
Management. Administration represents the owners of the organization.
7. Management can be seen in profit making organizations like business enterprises.
Administration is found in government and military offices, clubs, hospitals, religious
organizations and all non-profit making enterprises.
8. Management is all about plans and actions, but Administration is concerned with framing
policies and setting objectives.
9. Management plays an executive role in the organization. Administration’s role is decisive
in nature.
10. The manager looks after the management of the organization, whereas administrator is
responsible for the administration of the organization.
11. Management focuses on managing people and their work. Administration focuses on
making the best possible utilization of the organization’s resources.
The differences between Management and Administration can be summarized under two
categories: -

1. Functions
2. Usage / Applicability
On the Basis of Functions: -
Basis Management Administration

Meaning Management is an art of getting things Administration is concerned with

done through others by directing their formulation of broad objectives,
efforts towards achievement of pre- plans & policies.
determined goals.

Nature Management is an executing function. Administration is a decision-making

function.

Process Management decides who should do the Administration decides what is to be

activities assigned by Administration& done & when it is to be done.
how he should do them.

Function Management is a doing function because Administration is a thinking

managers get work done under their function because plans & policies
supervision. It is productive. are determined under it. It is non
productive.

Skills Mainly requires technical and humanskills Mainly requires conceptual and
human skills

Level Middle & lower level function Top level function

On the Basis of Usage: -

Basis Management Administration

Applicability It is applicable to business concerns i.e. It is applicable to government, military

profit-making organization. organizations, schools, hospitals etc.

Influence Management decisions are influencedby Administration is influenced by public

the values, opinions, beliefs &decisions opinion, govt. policies, religious
of the managers. organizations, customs etc.

Status Management constitutes the employees Administration represents owners of the

of the organization who are paid enterprise who earn return on their capital
remuneration (in the form of salaries & invested & profits in the form of dividend.
wages).
 1.2 Functions of Management
There are basically five primary functions of management.

Figure 7 Functions of Management

1. Planning
 It is the first step of management function.
 Planning is deciding in advance what to do, how to do, when to do, who will do and
where to do.
 Planning is essential for utilizing all available resources in the best way to achieve
goals, to develop and establish the enterprise.
 It is a process by which a manager anticipates the future and discovers alternatives to
get the work done. Then he decides how best to achieve goals, profit and applying best
strategies.
 Without proper planning, the activities of the enterprise will become confused and
ineffective.
2. Organizing
 Organizing is the second function of management. It follows planning. It is the process
by which structure and allocation of jobs is done.
 Organizing refers to the relationship between people, work and resources to achieve
goals.
 This involves dividing the work into convenient tasks, and grouping them properly
into departments and sections. Then the jobs are allotted to proper people with the
necessary amount of authority and responsibility.
3. Staffing
 Staffing is a process of recruitment, selection, acquiring, training, appraising
employees. It is a continuous process.
 Employees are the most important resources of any organization. The right staff is
very important for a company because they can change and ensure the organization’s
success.
4. Directing
Directing is a process in which the managers instruct, guide and overview the performance of
the workers to achieve the company’s goals.
It includes functions like Leadership, communication, motivation and supervision.
Leadership: It is the quality of the manager to inspire confidence and trust in his subordinates,
get maximum cooperation from them and guide their activities to create an organized effort.
Communication: It is the process by which ideas are transmitted, received and understood by
others for producing desired results. It may be verbal or written orders, reports, instructions,
etc. Ineffective communication leads to confusion, misunderstanding and dissatisfaction.
Motivation : Motivation means inspiring the subordinates to do work or to achieve company
objectives efficiently.
Supervision: Supervision is necessary to ensure that work is going on as per the established
plan and the workers are doing work as they were directed to.

5. Controlling
It is a continuous process which measures the current performance and guides it towards
the predetermined goal. This process helps the managers evaluate the company’s performance
and know whether any change is needed.
Controlling involves the following steps:
Setting up or establishment of standards:
Measuring the actual performance
Comparing the actual performance with established standards
Take corrective actions if needed
1.3 Types of planning
Planning can be classified on the basis of coverage of activities, importance of contents in
planning, approach adopted in planning process, time dimension and degree of formalization
in planning process.
1. Coverage of activity: Corporate and functional planning
2. Importance of contents: Strategic and tactical/operational planning
3. Time period involved: Long term and short term planning
4. Approach adopted: Proactive and reactive planning
5. Degree of formalization: Formal and Informal planning

Corporate and functional planning:

Corporate planning:

The planning activities at the corporate level which cover the entire organizational activities
are called corporate planning.
The focus in corporate planning is to determine long term objectives as a whole and to
generate plans to achieve these objectives bearing in mind the probable changes in dynamic
environment. Corporate planning is the basis for functional planning.
Functional planning:
It is derived from corporate planning. Itis undertaken for each major function of the
organization like production, marketing, finance etc.,
As functional planning is derived out of corporate planning, it contributes to the
corporate planning.

Strategic, Tactical and Operational Planning:

Strategic Planning:

Strategic planning is a process in which the top management determines its vision for
the future and identify the goals and objectives for the organization.
It sets the directions in which the organization wants to proceed in future.
Strategic planning involves a time span of more than one year and for most of the
organization it ranges from the next 3 and 5 years.
It takes into account all the external factors, strengths and weaknesses, risks,etc and
makes a long term policy for the organization.
Examples of strategic planning may be diversification of business into new lines, new
products, planned grown rate in sales etc.
Tactical planning:
It is an extension of strategic planning. Tactical plans are created for all levels of
organization. It is concerned with the integration of various organizational units. It
involves how the resources should be used to achieve the strategic goals.
Operational planning:
This planning is done by lower level management. It is concerned with day to day
operations of the organization. It is detailed and specific and usually based on past
experiences. It covers functional aspects like finance, production human resources, etc.
The time span for operational planning is less than one year.
The examples of operational planning may be adjustment of production within available
capacity, increasing the efficiency of the operating activity by analyzing past performance.
Long and short term planning:
The long term planning is strategic in nature and involves more than one year period and
can extend to 15 to 20 years or so.
Short term planning usually covers one year. Short term plans are made with reference to
long term plans because short term plans contribute to long term plans.
Proactive and reactive plans:
Planning is an open system approach and hence it is affected by environmental factors which
keep on changing continuously. The organization’s response to these changes differs. Based
on these responses planning may be proactive and reactive.
Proactive planning involves designing suitable courses of action in anticipation of likely
changes of environment.
Managers adopting proactive changes do not wait for environment to change, but take
action in advance of environmental changes. For this, continuous scanning of
environment is necessary.
Reactive planning:
In reactive planning response comes after environmental changes take place. By the time
organization responds to change in environment there may be further change in
environment.
Hence this type of planning is suitable in the environment which is fairly stable over a
long period of time.
Formal and informal planning:
Formal Planning:
Large organizations undertake planning in a formal way. Generally a separate corporate
planning cell is formed at higher level. The cell is staffed by people of different
backgrounds like engineers, economists, statisticians etc., depending upon the nature. The
cell continuously monitors the environment. When environment shows some change, the
cell analyses the environment and suggest suitable measures to take the advantage of the
changing environment. This type of planning is rational, systematic, regular and well
documented and called formal planning.
Informal planning:
Informal planning is undertaken generally by small organizations. This planning process
is based on manager’s experience, intuitions rather than based on systematic evaluation
of environmental changes.
This planning process is part of manager’s regular activity and is suitable for small
organizations.
Steps in planning
The planning process is different from one plan to another and one organization to another.
The steps generally involved in planning are as follows:
1. Establishing goals/objectives

2.Establishing planning premises

Steps

Planning
3.Deciding the planning period
In
4.Evaluation and selection of

5.Developing derivative/supportive
Figure 8 Steps in Planning
(1) Establishing goals/objectives:
 The first step in planning process is to determine the enterprise objectives. These are
set by upper level managers after number of objectives has been carefully considered.
 The objectives set depend on the number of factors like mission of the organization,
abilities of the organization etc., Once the organizations objectives are determined, the
section wise or department wise objectives are planned at the lower level.
  Defining the objectives of every department is a very essential one; then only clear cut
direction is available to the departments. Control process is very easy if the objectives
are clearly defined.
(2) Establishing planning premises:
 This is the second step in planning. It involves the conditions under which planning
activities will be undertaken.
 Planning premises are planning assumptions or factors like the expected
environmental factors, pertinent facts and information relating to the future such as
general economic conditions, population trends, competitive behaviour etc.
 The planning premises can be classified as below:
(a) Internal and External premises.
(b) Tangible and Intangible premises.
(c) Controllable and non-controllable premises.
(3) Deciding the planning period:
 Once the long term objectives and planning premises are decided, the next task is to
decide the period of the plan.
 Some plans are made for a year and in others it will be decades. Companies generally
base their period on a future that can reasonably be anticipated.
(4) Identification of alternatives:
The next step in planning is identifying alternatives. A particular objective can be
achieved through various actions. For example an organization’s objective is to grow
further which can be achieved in several ways like expanding in the same field of
business orproduct line, diversifying in other areas, joining hands with other
organization, acquiring other organizations and so on. With each category there may
be several alternatives.
(5) Evaluation and selection of alternative:
 After the alternatives are identified, the next step is to evaluate the alternatives
according to the premises and goals, and to select the best course of action.
 This is done with the help of quantitative techniques and operations research. In
addition, software packages are available for evaluating alternatives.
(6) Developing derivative/supportive plans:
After the best plan is selected, various other plans are derived so as to support the main
plan. These may be plans for buying equipment, buying raw material etc. They are
derivative plans /supportive plans formulated to support the main plan.
(7) Measuring and controlling the process:
Managers need to check the progress of their plans so that remedial action can be
taken to make plan work or change the plan if it is unrealistic. Hence process of
controlling is a part of any plan.

1.4 Types of Organization

 Organization involves identification and grouping of activities to be performed and
dividing them among the individuals and creating authority and responsibility
relationship among them for the accomplishment of organizational objectives.
  Organizing being process, consists of departmentalization, linking of departments,
defining authority and responsibility and prescribing authority relationships. The
organization structure is the result of this process.
Organization structure
 An organization structure shows the authority and responsibility relationship between
the various positions of the organization by showing who reports to whom.
 It is a set of planned relationships between groups of related functions and between
physical factors and personnel required for the achievement of organizational goal.
 A good organization structure should not be static but dynamic. It should be subject to
change from time to time in the light of changes in the business environment.
Principles of Organization:
 In order to facilitate the achievement of objectives, management thinkers have laid
down certain principles of organization.
 These principles are guidelines for planning organization structure. Therefore,
thorough understanding of the principles of organization is essential for good
organization.
 Few common principles of organization are discussed below:
1) Objectives: The objectives of the enterprise influence the organization structure. Every
part of the organization and organization as a whole should be geared to the basic objective
determined by the enterprise.
2) Specialization: Effective organization must promote specialization. The activities of the
enterprise should be divided according to functions and assigned to persons according to
their specialization.
3) Span of control: The number of subordinates that an executive or managers can supervise
directly is called span of control. A manager can directly supervise only a limited number
of workers. Hence, it is necessary to have a proper number of subordinates answerable to a
manager. A maximum of six is normally acceptable for this purpose.
Span of control may be wide or narrow depending upon many factors.
4) Exception: This principle requires that organization structure should be so designed that
managers are required to go through the exceptional matters only.All the routine decisions
should be taken by subordinates, where as problems involving unusual matters and policy
decision should be referred to higher levels.
5) Scalar principle: This is also known as chain of command. There must be clear lines of
authority running from the top to the bottom. Authority is the right to decide, direct and
coordinate. Every subordinate must know who his superior is and to whom policy matters
beyond his own authority must be referred for decision.
6) Unity of command: Each subordinate should have only one supervisor whose command
he has to obey. Dual subordination must be avoided, for it causes uneasiness, disorder, and
indiscipline and undermine of authority.
7) Delegation: Proper authority should be delegated at the lower levels of the organization
also. The authority delegated must be equal to responsibility i.e. the manager should have
enough authority to accomplish the task assigned to him.
8) Responsibility: A superior should be held responsible for the acts of his subordinates. No
superior should be allowed to avoid responsibility by delegating authority to his
subordinates.
9) Authority: Authority is the tool by which a manager is able to accomplish the desired
objective. Hence, the authority of each manager must be clearly defined. Authority and
responsibility must be coexistent in the organization.
10) Efficiency: The organization should be able to attain the mission and objectives at
minimum cost.
11) Simplicity: The organization structure should be as simple as possible with minimum
number of levels. A large number of levels of organization means difficulty of effective
communication and coordination.
12) Flexibility: The organization should be flexible, should be adaptable to changing
circumstances. It should permit expansion and replacement without dislocation and
disruptionof the basic design. A sound organization must avoid complicated procedures,
red-tape and excessive complication of control so that it may adapt itself easily and
economically to business and technical changes.
13) Balance: There should be reasonable balance in the size of various departments, between
centralization and decentralization. There must be balance in the formal structure as
regards to factors having conflicting claims.
14) Stability: It refers to the capacity of the organization to withstand the losses of key
personnel without much loss to the working.
15) Communication: It is the process of transmitting instructions, ideas, suggestions and
information within the organization and to outside customers, suppliers and all those who
are affected. Good two way communication is essential for effective functioning.
16) Unity of direction: There must be one objective and one plan for a group of activities
having the same objective. Unity of direction facilitates unification and coordination of
activities at various levels.
17) Personal abilities: As organization is a formal group of people there is need for proper
selection, placement and training. Organization structure must ensure optimum use of
human resources.
Types of organization
The common types of organization are:
1. Line, Military or Scalar Organization
2. Functional Organization
3. Line and Staff Organization
4. Project Organization
1. Line, Military or Scalar Organization
 Line organization is the simplest and oldest type of organization. It is also known as
scalar or military organization.
 This is called military organization as it resembles old military organizations where
discipline is of high order. Orders and instructions issued from the top level is
followed by the people below.
 The line organization represents the structure in a direct vertical relationship in which
authority flows vertically downward from top to bottom throughout the organization.
  As the flow of authority moves from top to bottom, this is also called line or scalar
organization.
 People at different levels know to whom they are accountable.
 The quantum of authority is highest at the top and reduces at each successive level.
 The superior communicates his decision and orders to his subordinates. The
subordinates, in turn, can communicate them to those who are immediately under
them.
 Figures below represent the structure of line organization.
Figure a represents a line organization having three main departments like production,
finance and marketing. Here the flow of authority is from general manager to each
department head, superintendent, foreman and then workers.
In figure b, the authority flows from works manager to Superintendent to foreman and
then to workers.

.
Figure 9

Works Manager

Superintendent 1 Superintendent 2

Foreman 1 Foreman 2 Foreman 3 Foreman 4

Workers Workers Workers Workers

Figure 10 Line Organization

The advantages of line organization are

1. It is simple and easy to understand.
2. Is flexible and easy to expand or contract.
3. There is a clear division of authority and responsibility, hence no scope of shifting the
responsibility.
4. There is a clear channel of communication, so there is no chance of confusion.
5. It encourages speedy action.
6. It is strong in discipline.

Disadvantages
1. There is lack of specialisation.
2. Departmental heads are over-burdened with various routine jobs, so they do not
have time for further expansion and planning.
3. It overloads a few key executives.
4. Due to lack of specialization, there may be chances of accidents, wastage of material
and man hours.
5. Chances of delay in communicating the orders of General Manager or any other
departmental head to the workers and, therefore, possibility of distortion, due to long
channel.
6. It encourages dictatorial way of working.
7. It has no means of rewarding good workers.

Applications:
1. Suitable for factories of small and medium size, where the number of subordinate and
operational staff is less.
2. Suitable for continuous process such as sugar, paper, oil refining, spinning and weaving
industries, textiles, etc.
3. Suitable where labour problems are not difficult to solve.
4. Suitable where automatic plants are used.
2. Functional Organization
The line organization does not provide specialists in the structure. Many jobs require
specialized knowledge.
In functional organization the specialists are made available in the top positions
throughout the enterprise.The functional organization was introduced by F.W.Taylor.
Figures 1 and 2 below represent line and staff organization
Under functional organization, various activities of the enterprise are classified according
to certain functions like production, marketing, finance, personnel etc., and are put under
the charge of functional specialists as show in fig1
A functional in charge directs the subordinates throughout the organization in his
particular area of business operation. This means that subordinates receive orders and
instructions not from one superior but from several functional specialists.
Figure 11 Functional Organization

In figure11 , there are 8 functional foremen like route clerk, speed boss, inspector, etc
who are specialists in their own fields. Each specialist provides expert advice to workers
in his field and workers receive orders and instructions from eight superiors.
Advantages of functional organization
1. Due to specialisation quality of work is better.
2. This system provides more specialised knowledge and guidance to individual workers
through experts.
3. It helps mass production by standardisation and specialisation.
4. If any operation needs improvement, it can be improved even up to the last moment.
5. Considerable expansion of the factory is possible.
6. As expert guidance is available, chances of accidents, wastage of materials, man and
machine hours are reduced. This will reduce prime cost.
7. Unnecessary overloading of responsibilities will not be there, as was in the case of line
organization.
8. No special knowledge of workers is required as the instructions are supplied by drawing
and experts.
9. The line executives are spared from routine specialized decisions.

Disadvantages
1. As each worker is responsible to all experts, it becomes difficult to maintain discipline
2. By employing high waged experts, the total cost of job may become high.
3. As line workers will not be using their skills, their initiative cannot be utilised.
4. It is very difficult to fix up the responsibility to any one foreman in case something goes
wrong.
5. Workers will always be confused about the authority and activity of each expert.
6. Proper co-ordination of the work of different departments is required but it is difficult to
maintain as everybody is working individually.
7. Lack of coordination among functional executives will delay decision making.
8. Industrial relationships become more complex.
 Application:
 Due to the above disadvantages, a pure functional system is rarely found. However in
modified form, it is used in a few modern advanced concerns.
3. Line and Staff Organization
Figures 12 and 13 below represent line and staff organization. Here the line executives are
marked vertically and staff executives are placed horizontally.
Line and staff organization has advantages of both line and functional organization.
Here, the line executives have supervisory authority and control over subordinates.
Authority flows from top to bottom as it does in the line organization
In addition, specialists called staff are recruited to advisethe line executives on important
matters. The final decision whether to accept and implement the recommendations of staff
lies with line executives.
The staff officials do not have any power of command in the organization as they are
employed only to provide expert advice to the line manager.

Figure 12: Line and Staff organization

Figure 13 Line and Staff organization

(G.M.: General Manager; W.M.: Works Manager; Suptd : Superintendent; F/M : Foreman; B.O.D: Board Of
Directors)
Advantages
(1) Specialized and expert advice from staff executives is available.
(2) Reduction of burden on line managers.
(3) Better decisions, as staff specialists help the line managers
(4) Unity of command
(5) Flexible when compared to functional organization.
(6) Less wastage of material, man and machine hours.
(7) Quality of product is improved.
(8) Has all advantages of both line and functional organization.

Disadvantages
(1) If allocation of duties between line and staff is not clear, it may give rise to confusions.
(2) There might be conflict between line and staff executives.
(3) Since staff is not accountable, they may not perform well.
(4) Product cost will increase because of high salaries of staff executives.
Now-a-days this type of organization is preferred for medium and large scale industries,
depending upon internal structure, nature of productive activities and span of business area.
It is applied in automobile industries and other intermittent nature of industries
4. Project Organization:
When an organization takes up a new project, a Project Organization is set up in order to
complete the project.
It comprises of specialists from different functional areas of the parent organization. If
needed experts are hired from outside also.
The team of specialists work simultaneously to achieve the goals of the project.
After the project is completed the team is dissolved. So it is a temporary in nature.
Advantages:
It does not interfere with the functioning of the existing organization.
Decision making is quick.
It allows maximum usage of specialist knowledge.
It provides the maximum attention that a project needs.
Disadvantages:
The members are recruited for a short period so it creates a feeling of insecurity
and uncertainty.
There may be conflicts among specialists.
The project manager may not have complete authority over team members.
Sometimes decision may be difficult due to pressures from different specialists.
Applications:
In IT companies like L&T, Infosys, TCS, Wipro, etc where business is mainly project based.
CEO

Marketing HR Manager
Manager

Manager Project- Manager

A Project-B

Engineering Engineering
Activities Activities

Resources Resources

Figure 14 Project Organization Structure

(C.E.O: Chief Executive Officer)

1.5. Steps in organizing

 While organizing, a manager differentiates and integrates the activities of his
organization. Steps in organizing are:

Providing physical facilities

and proper environment
Delegation of authority

Assignment of duties

Identification and grouping of activities

Determination of objectives

Figure 15 Steps in Organizing

(1) Determination of objectives:
 The first step in organizing is to know the objectives of the enterprise. Objectives
determine resources and the various activities which need to be performed and the type
of organization which needs to be built for this purpose.
 Objectives also serve as guidelines for the management and workers. They bring about
unity of direction in the organization.
 (2) Identification and grouping of activities:
To achieve the objectives, the process of organization is divided into functions and
sub-functions. Then similar activities or related activities are combined and grouped
into departments.
This will enable the people to know what is expected of them as members of the
group and will help in avoiding duplication of efforts. For example, the total activities
ofan enterprise may be divided into major functions like production, purchasing,
marketing, finance, human resource, etc. Each function is further subdivided into
various jobs.
(3) Assignment of duties:
After classifying and grouping the activities into various jobs, they should be allotted
to the individuals for ensuring certainty of work performance.
Each individual should be given a specific job to do according to his ability, skill, and
knowledge and made responsible for that.
Delegation of authority:
Authority without responsibility is dangerous and responsibility without authority is an
empty vessel. Hence, corresponding to the responsibility authority is delegated to the
subordinates for enabling them to show work performance.
(5) Providing physical facilities and proper environment:
Provision of right type of physical facilities and proper environment isessential for the
smooth running of an organization.
Physical facilities mean proper tools, machinery, etc.
Right environment means proper lighting, ventilation, heating/cooling arrangements at the
place of work,proper hours of work,rest intervals, safety devices, job satisfaction and
above all, human approach by management.

1.5 Functional areas of Management

There are four functional areas of management namely production, finance, marketing and
human resource(personnel). Each functional area has a number of sub-activities.

Figure 16 Functional areas of Management

A. Production management:
Production Management is the management of productive processes that convert inputs
into goods and services. The inputs are men, material, equipment, technical knowledge,
etc.It is also known as manufacturing management or operational management. The main
objective of Production Management is: “To produce goods and services of right quality
and quantity at the right time and right manufacturing cost”
This department is generally put under production manager and he is responsible for all
production related activities.
This area has a number of activities; few of them are given below:
(1) Purchasing: This is related to the purchase of various materials required by the
organization. Purchasing involves procuring right quantity of materials of the right quality,
at the right time and at the right price from the right supplier.
(2) Materials management: This involves storing of materials and issues of materials to
various departments.
(3) Research and Development: It deals with improving the existing products and
process and developing new products and process.

B. Marketing Management:
Marketing Management is planning, organizing, controlling and implementing of marketing
programmes and policies to distribute the organization’s products to the buyers to generate an
acceptable profit.
The major objectives of marketing management are: creation of demand, customer
satisfaction, market share, generation of profits, creation of good will and public image.
The sub-activities are:
(1) Advertising: Involves giving information about products to buyers.
(2) Marketing research: It is related to the systematic collection and analysis of data relating
to the marketing of goods and services.
(3) Sales management: It involves management efforts directed towards movement of
products and services from producers to consumers.

C. Financial Management:
Financial Management is planning, organizing, directing and controlling the financial
activities like procurement and utilization of funds of the enterprise. It means applying
management principles to financial resources of the enterprise. The objectives are:
1) To ensure regular and adequate supply of funds to the organization.
2) To ensure adequate returns to the shareholders
3) To ensure optimum funds utilization
4) To ensure safety on investments
5) To plan a sound capital structure
The functions are financial planning and forecasting, determination of capital composition,
fund investment, maintaining proper liquidity, disposal of surplus and financial controls.
 D. Human Resource (Personnel) Management: Human Resource Management includes the
processes of planning, selecting, recruiting and inducting employees in an organization. The
objectives include
a) Effective utilization of human resources
b) Motivation
c) Creating policies and procedures
d) Growth and development of Human resources.
The functions of human resource management include man power planning, recruitment,
selection, performance appraisal, training, wage and salary administration, compensation and
rewards, industrial relations, employee communication and personnel record maintenance.

1.6 Managerial Skills

Managerial skills are certain abilities or attributes that an executive should possess in
order to fulfil specific tasks in an organization such as his role duties, dealing with
subordinates and co-workers, all of which allows for the easy flow of activities in the
organization. These can be developed through learning and practical experience as a
manager.
Managerial skills are crucial for various positions and at different levels of a company,
from top leadership to intermediate supervisors to first level managers

Three Types of Managerial Skills

The three types of managerial skills that are essential are:
Technical skills
Conceptual skills
Human or interpersonal management skills

Figure 17 Managerial Skills

Technical Skills
 Technical skills involve the knowledge of and proficiency in activities involving methods,
processes and procedures. For example, mechanics work with tools and their supervisors
should have the ability to teach them how to use these tools.
The skills are acquired through education or experiences in particular industry .These
skills involve the use of tools, equipment, procedures, and techniques of the industry.
Technical skills are most important for supervisory level or first-level managers. As we go
through a hierarchy from the bottom to higher levels, the technical skills lose their
importance.
Conceptual Skills
Conceptual skills are the abilities to see the organization as a whole, to recognize inter
relationships among different functions of the business and external forces and to guide
effectively the organization efforts.
It is easier to learn technical skills than the conceptual skills.
These skills help in making long-range plans and decisions for expanding the business
(forecasting).
The conceptual skills will help managers to look outside their department’s goals. So, they
will make decisions that will satisfy overall business goals.
Conceptual skills are vital for top managers, less critical for mid-level managers, and
not required for first-level managers.
These can be classified as Decision Making skills and Organizational skills.
Decision making skills:
o It is the ability of a person to take timely and accurate decisions. This requires
mental ability and presence of mind.
Organizational skills:
It helps to select and fix right people at right work.

Figure 18 Managerial Level-wise Skills

Human or Interpersonal Managerial Skills

These skills represent the ability of a manager to work effectively with people.
They help to build a team and create an environment in which people feel
secure and free to express their opinions. As seen in above figure, these skills
are equally essential for managers at all levels in the company.
They are classified as:
Communicating skills:
It is the ability to convey information to the other. Improper, insufficient and
poorly expressed information can create confusion.

Motivating skills:
It inspires people to do what the manager wants them to do. The
motivationmay be positive or negative.
Positive motivation includes rewards, Negative motivation
includes punishment, threats, etc
Leadership skills:
This skill helps the manager to lead the people working under
him. It is the ability to inspire confidence and trust in the
subordinates in order to have maximum cooperation from them.