PONDICHERRY UNIVERSITY

(A Central University)

DIRECTORATE OF DISTANCE EDUCATION

MASTER OF COMMERCE

M.Com – First Year

Course Code: Paper Code:

59 MCOM1002

MANAGEMENT CONCEPTS
AND
ORGANISATIONAL BEHAVIOUR

DDE – WHERE INNOVATION IS A WAY OF LIFE

 PONDICHERRY UNIVERSITY
( A Central University)

DIRECTORATE OF DISTANCE EDUCATION

MASTER OF COMMERCE

M.Com – First Year

Course Code:59 Paper Code:MCOM1002

MANAGEMENT CONCEPTS
AND
ORGANISATIONAL BEHAVIOUR
Management Concepts and Organisational Behaviour

Authors:

Unit I, II & V Written by

Prof. Rama Prasad Rao

Unit III & IV Written by

Mr. Madhusudhana Rao

Unit V Written by
Mr. Alagaiah

TABLE OF CONTENTS
Title Page No.

Unit –I Nature of Management and Social 4-90

Responsibilities of Management
Unit –II Organisation Structure and Design 91-146

Unit-III Perception and Learning 147-215

Unit – IV Group Dynamics 216-288

Unit – V Management Approacher and Styles 289-358

All rights reserved

For Private Circulation only
 PAPER II - MANAGEMENT CONCEPTS AND ORGANISATIONAL
BEHAVIOUR

UNIT – I
Nature of Management: Social Responsibilities of Business - Manager and
Environment Levels in Management - Managerial Skills - Planning - Steps in
Planning Process - Scope and Limitations - Short Range and Long Range
Planning - Flexibility in Planning ¬ Characteristics of a sound Plan -
Management by Objectives (MBO) - Policies and Strategies - Scope and
Formulation - Decision Making - Techniques and Processes.

UNIT-II
Organising: Organisation Structure and Design - Authority and Responsibility
Relationships - Delegation of Authority and Decentralisation - Interdepartmental
Coordination - Emerging Trends in Corporate Structure, Strategy and Culture -
Impact of Technology on Organisational design - Mechanistic vs Adoptive
Structures - Formal and Informal Organisation.

UNIT – III
Perception and Learning - Personality and Individual Differences - Motivation
and Job Performance - Values, Attitudes and Beliefs - Stress Management -
Communication Types –Process - Barriers - Effective Communication.

UNIT – IV
Group Dynamics - Leadership - Styles - Approaches - Power and Politics -
Organisational Structure - Organisational Climate and Culture - Organisational
Change and Development.

UNIT – V
Comparative Management Styles and approaches - Japanese Management
Practices Organisational Creativity and Innovation - Management of Innovation
- Entrepreneurial Management - Benchmarking - Best Management Practices
across the world - Select cases of Domestic & International Corporations -
Management of Diversity.

REFERENCES
Fred Luthans, ORGANISA TIONAL BEHAVIOUR, TataMcGraw-Hill, NewDelhi
Koontz, Weirich &Aryasri, PRINCIPLES OF MANAGEMENT, Tata McGraw-Hill, NewDelhi,2004
Laurie Mullins, MANAGEMENT AND ORGANISATIONAL BEHAVIOUR, Pearson, NewDelhi,2007
Meenakshi Gupta, PRINCIPLES OF MANAGEMENT, PHI Learning, NewDelhi, 2009
Ricky Griffin, MANAGEMENT: PRINCIPLES & APPLICATIONS, Cengage, NewDelhi,2008
Stephen Robbins, ORGANISATIONAL BEHAVIOUR, Pearson, New Delhi
Tripathi & Reddy, PRINCIPLES OF MANAGEMENT, Tata McGraw-Hill, New Delhi,2008
 UNIT I

NATURE OF MANAGEMENT AND SOCIAL

LESSON

1 RESPONSIBILITIES OF MANAGEMENT

LESSON OUTLINE

 Introduction
 Meaning of Management
 Nature of Management

 Management as Science
 Management as Art
 Management as Profession
 Professionalisation of
Management in India

 Function of Management
 Social Responsibilities of
Business
LEARNING OBJECTIVES

After reading this lesson you

should be able to

 Explain the announcing of

management
 Understand the nature of
management
 Identify and describe the
functions of management
 Understand the Social
Responsibilities of Business.
 Aware of the interests of various
stack holders in the business.

3
INTRODUCTION

Take a close look at the society around you. You would find the existence of
several organizations. To mention a few, the business organizations that produce
goods or services, hospitals, religious and social institutions like charities,
schools, colleges and universities. All these organizations exist to achieve pre-
determined objectives. They affect our lives in many ways. Though there are
vast differences in their functioning and approaches, they all strive to achieve
certain objectives. It must also be noted that organizations cannot achieve the
objectives effortlessly. They are achieved through systematic effort. Several
activities have to be performed in a cohesive way. In the absence of systematic
and cohesive performance of the activities to achieve the objectives, it is no
wonder that the resources of organizations would simply remain as resources.
As such it is the function of the management to facilitate the performance of
activities such that the accomplishment of the objectives becomes possible.

MEANING OF MANAGEMENT

Management is understood in different ways by different people. Economists

regard it as a factor of production. Sociologists see it was a class or group of
persons while practitioners of management treat it as a process. For our
understanding, management may be viewed as what a manager does in a formal
organization to achieve the objectives. It has bee called by Mary Parker Follet:
“the art of getting things done through people”. This definition throws light on
the fact that managers achieve organizational goals by enabling others to
perform rather than performing the tasks themselves.

4
 Management, in fact, encompasses a wide variety of activities that no
one single definition can capture all the facets of management, given its
dynamic nature. That is why, it is often said that there are as many definitions of
management as there are authors in the field. However, the definition given by
James A.F. Stoner covers all the important facets of management.
According to him:
“Management is the process of planning, organizing, leading and controlling the
efforts of organization members and of using all other organizational resources
to achieve stated organizational goals”.
The above definition suggests:
 Management is a continuous process;
 Several inter elected activities have to be performed by managers
irrespective of their levels to achieve the desired goals;
 Managers use the resources of the organization, both physical as well
as human, to achieve the goals;
 Management aims at achieving the organisation’s goals by ensuring
effective use of resources.
It is evident that the emphasis is on achieving the objectives by using the
inputs like material, machinery, money and the services of men. These inputs
are drawn from the environment in which the organization exists. Whether an
organization is engaged in business or non-business, the various inputs are
judiciously used to produce the outputs. This process which involves the
conversion of inputs into outputs is common to all organizations and is shown in
figure 1.1

5
 Figure – 1.1

INPUT – OUTPUT MODEL

INPUTS TRANSFORMATION OUTPUTS

PROCESS

EXTERBAK
ENVIRONMENT

Depending on the nature of business or activity that a firm is engaged in,

the output of the firm may be a physical product or service. Since a business
organization is an economic entity, the justification for its existence lies in
producing goods and services that satisfy the needs of the people. As could be
seen in the figure, the organization draws several inputs from the environment,
converts them into products or services and sends them back to the environment.
Environment here means the larger system, i.e., the society in which the firm
exists. Therefore, it goes without saying that how effectively the goods and
services are produced is a matter of concern for any society, given the scarcity
of resources. Effective management plays a crucial role in this context.
ACTIVITY - A
Write the meaning of management in your own words.

…………………………………………………
…………………………………………………
…………………………………………………
…………………………………………………

6
NATURE OF MANAGEMENT
The practice of management is as old as human civilization. In fact, much of the
progress of mankind over the centuries may be attributed to the effective
management of resources. The irrigation systems, existence of public utilities,
the construction of various monuments like Taj Mahal, and the Egyptian
Pyramids of the bygone era amply demonstrate the practice of management in
the olden days also. The study of management in a systematic way as a distinct
body of knowledge is only of recent origin. That is why, management is often
described as “oldest of the arts and youngest of the sciences”. Thus, the practice
of management is not new. It was been practiced for thousands of years. But the
science part of it ‘the systematic body of knowledge’ is, no doubt, a
phenomenon of the present century.
MANAGEMENT AS SCIENCE
To gain a correct perspective as to what management is, let us examine the exact
nature of management – whether it is a science or an art. An understanding,
therefore, of the exact nature of science as well as art may help in resolving the
problem to a larger extent. Any branch of knowledge to be considered a science,
(like the ones we have – physics, chemistry, engineering, etc.) should fulfil the
following conditions:
 the existence of a systematic body of knowledge encompassing a wide
array of principles;
 the principles have to be evolved on the basis of constant enquiry and
examination;
 the principles must explain a phenomenon by establishing cause-effect
relationship;
 the principles have to be amenable for verification, in that they must be
universally applicable.
7
 Locked at from this angle, management as a discipline fulfils the above
criterion.
MANAGEMENT AS AN ART
Art refers to the ‘know-how’ – the ways of doing things – to accomplish a
desired result. The focus is on the skill with which the activities are performed.
As the saying goes ‘practice makes a man perfect’, constant practice of the
theoretical concepts (knowledge base) contributes for the formation and
sharpening of the skills. Therefore, what is required is the right blend of the
theory and practice. In a way, the attributes of science and art are the two sides
of a coin. 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. As an university gold medalist in surgery may not necessarily
turn out to be a good surgeon, similarly a management graduate from the best of
the institutes may not necessarily be very effective in practice. In both the cases,
the application of the knowledge acquired through formal education, requires
ingenuity, creativity on the part of the practitioner. Correct understanding of the
variables of the situation calls for pragmatism and resourcefulness.
Effective practice of any art requires a through understanding of the
science underlying it. Thus science and art are not mutual by exclusive, but are
complementary. Executives who attempt to manage without the conceptual
understanding of the management principles and techniques have to depend on
luck and intuition. With a sound knowledge and the necessary skills to use such
knowledge, they have a better chance to succeed. Therefore, it may be
concluded that management is both a science and an art.

8
MANAGEMENT AS A PROFESSION
These are the days where we are hearing a lot about professional managers and
their contribution to the economic development of the nation. Therefore, it is
appropriate to know the other dimension of management – whether it is a
profession. McFarland gives the following characteristics of a profession:
 existence of an organized and systematic body of knowledge.
 formalized methods of acquiring knowledge and skills;
 existence of an apex level body with professionalisation as its goal;
 existence of an ethical code to regulate the behaviour of the members of
the profession;
 charging of fees based on service; and
 a concern for social responsibilities.
A closer examination of management as a profession reveals that unlike
medicine or law, management has to go a long way to have a universally
acceptable norm of behaviour. There is no uniform code of conduct that governs
the behaviour of managers. The apex level body, All India Management
Association (AIMA) provides only guidelines and does not have any controlling
power over the erring members. Managers also differ widely in respect of their
concern for the ethics and values of the society in which they function. Many a
time, in their obsession with profit, the societal interests are either neglected or
compromised. However, as in the case of other professions, it is implied that
managers are expected to set an example in doing good to the society. While
making decisions, they should be conscious of the impact of their decisions on
the society. The larger interests of the society must be given top priority rather
than short-term temptations. After all, given the enormous resources they have
at their command, the expectation that managers should address themselves to
the problems of society is not unnatural.

9
 It must, however, be remembered that unlike the professions like
engineering, medicine, law, accountancy, etc., the entry to management
positions is not restricted to individuals with a special degree. In other words,
one need not necessarily possess M.B.A or any other management degree or
diploma to practice management. To quote Peter Drucker, “no greater damage
could be done to an economy or to any society than to attempt to professionalise
management by licensing managers, for instance, or by limiting access to
management to people with a special academic degree”.
PROFESSIONALISATION OF MANAGEMENT IN INDIA
In the last few years, management as a profession has gained a firm footing in
India. The awareness about the contributions of professional managers has been
increasing. Consequently, there has been a manifold increase in the number of
institutes offering MBA and related diploma courses resulting in a phenomenal
increase in the number of students seeking admission into the management
programmes. Interestingly, the awareness of the society of the importance of
professional education for the management of various sectors also is growing.
For instance, the specialized programmes to cater to the specific needs of the
sectors like, Hotel and Tourism Industry, Transport, Health care, Foreign trade,
etc.
The following factors seem to be mainly responsible for the growing demand
for professional managers:

 The liberalisation polices pursued by the government opened up new

vistas for the Indian organizations;
 As a consequence, competition has increased in all the sectors of India
economy, forcing the firms to be efficient;

10
  Private industrial houses which were indifferent before, have fully
realized the need for professional managers. While the promoters in
many cases still reserve the policy formulation for themselves, the day-
to-day managerial activities are entrusted to the professional managers.
 Public sector undertakings are also, of late, forced to perform, if the
number of memorandum of understandings (MOUs) signed by the
managements of PSUs and the concerned ministries of the Government
is any indication. As a result, qualified managers are sought after by
PSU’s than ever before.
 Apart from the manufacturing concerns, public utilities like transport,
telecommunications, and a host of service organizations are recruiting
professional managers in a big way.

FUNCTIONS OF MANAGEMENT

There is no consensus among the management thinkers on the classification of

management functions. The number of functions as well as the terminology used
to describe them are not alike. Henry Fayol identifies five functions, viz.,
planning, organizing, commanding, co-ordinating and controlling. Newman and
Summer recognize only four functions, namely – planning, organizing, staffing,
directing, coordinating, reporting and budgeting. Koontz and O’Donnel classify
the functions into planning, organizing, staffing, directing, and controlling. For
the purpose of our study, we shall confine the discussion the following four
functions of management – planning, organizing, staffing, directing and
controlling, Since staffing function forms the core of personnel management, of
late, it has become customary not to discuss it at great length in this paper –
management concepts.

11
PLANNING
Planning in simple is looking ahead. It is preparing for the future. It involves
outlining a future course of action. Planning makes the things to happen.
Therefore, it is needless to say that in the absence of planning, things are left to
chance. It is unique in that, it precedes all the other managerial functions. It
involves deciding the objectives and formulating the policies and procedures to
achieve them. Effective planning provides answers to questions like – what to
do? How to do? who is to do? and when to do?
Planning is a function performed by managers at all levels. Though every
manager plans, the plans developed by different managers may vary in respect
of scope and importance. For example, plans made by top managers have a
wider scope with a focus on the organization as a whole and normally cover a
longer period. On the other hand, plans developed by middle and lower level
managers relate to the divisions or departments and usually cover a short period.
Systematic planning helps in facing the uncertainties of future with less
embarrassment. It helps in making things happen in the expected way.
ORGANIZING
Organizations achieve objectives by using physical and human resources. When
people work in groups, every one in the group should know what he is expected
to achieve and with what resources. In other words, organizing involves in
establishing authority - responsibility relationships among people working in
groups. The manager’s task in organizing aims at creating a structure that
facilitates the achievement of goals. Organizing involves:
 determination of activities required to achieve goals;
 grouping of these activities into departments;
 assignment of such groups of activities to a manager;
 delegation of authority to carry them out; and
12
  provision for coordination horizontally and vertically in the
organization.
The managerial function of organizing makes the performance of the
tasks easy. It involves in designing the structure. The resulting structure varies
with the task. A large organization with huge markets needs a different structure
compared to a small organization. Similarly, structure of an organization
operating in a stable environment may be different from the one operating in a
dynamic environment. Thus, the size and nature of the activities involved, the
type of environment, and the overall business strategy, influence the structure.

STAFFING
Organising process results in the creation of a structure with various positions.
Staffing involves manning the various positions of the organisation. It includes
manpower planning, recruitment and selection of the right people, training and
developing them, deciding financial compensation, appraising their performance
periodically. There is a debate whether staffing function is to be performed by
all managers in the organisation or handled by personnel department alone.
However, in general, some processes of staffing are performed by personnel
department only. For example recruitment and selection, training, fixation of
salary, etc. Performance appraisal, on the other hand, may be done by all
managers.

DIRECTING
Once plans are made and the organisation is created, the focus shifts to the
achievement of objectives. This function is called by various names: directing,
leading, motivating, actuating and so on. It basically involves directing or
leading the activities of the people. The manager directs the activities of his

13
subordinates by explaining what they have to do and by helping them perform it
to the best of their ability. In leading the people, the manager performs the
following three distinct tasks:
Communication : the process of passing information from
one person to another:
Leadership : the process by which a manager guides and
influences the work on his subordinates;
and
Motivation : the act of stimulating the people so that
they give their best to the organisation.

Leading is a function predominantly interpersonal in nature. In the

organizational context many problems arise because of the failure of managers
to understand the people, their aspirations, attitudes, and behaviour as
individuals and in groups. If the manager fails in leading the people towards
better performance, any amount of planning and organizing, however effective
they are, may not help the organisation.

CONTROLLING
Planning and controlling – the two functions are closely interrelated in that
while plans specify the objectives to be achieved, control as a managerial
function facilitates to know whether the actual performance is in conformity
with the planned one. So that, in the event of deviations, appropriate corrective
measures can be taken. In the absence of adequate control mechanism,
unexpected changes in the environment may push the organisation off the track.
Thus, controlling implies measuring and correcting the activities to assure that
events conform to plans. That is why planning and controlling are often
14
described as the ‘Siamese’ twins of management. It involves four main
elements:
 Establishing standards of performance;
 Measuring the actual performance and comparing it against the standard
performance;
 Detecting deviations, if any, in order to make corrections before it is too
late; and
 Taking appropriate corrective measures.
ACTIVITY - B
Briefly describe the functions of management.
…………………………………………………
…………………………………………………
…………………………………………………
…………………………………………………

SOCIAL RESPONSIBILITIES OF BUSINESS

According to Keith Davis, “Social Responsibilities refer to the businessman’s

decisions and actions taken to reasons at least partially beyond the firm’s direct
economic or technical interest”. To quote Andrews, “By social responsibility,
we mean intelligent and objective concern for the welfare of society that
restrains individual and corporate behaviour from ultimately destructive
activities, no matter how immediately profitable, and leads in the direction of
positive contribution to human betterment, variously as the latter may be
defined”.

15
 H.R.Bowen’s observation on social responsibility is more clear and point
to the specifics of the concept. He suggests that business managers are bound to
“pursue those policies, to make those decisions, or to follow those lines of action
which are desirable in terms of the objectives and values of our society”. Thus,
as the above definitions indicate, the concern for the society on the part of
managers imply a particular behaviour which is in line with the societal
interests. It suggests that they refrain from actions detrimental to the interests of
the society.

RESPONSIBILITIES TO VARIOUS GROUPS

In a broad sense, business owes a lot to the various groups such as customers,
employees, shareholders, government and the community at large in which it
exists. These groups in the society are called interest groups’ or ‘stakeholder’ in
any modern business organisation. Let us examine how an organisation responds
in a socially responsible ways to cater to the growing demands of all these
interest groups.
Towards The Customers
Production and supply of quality goods and services at an affordable price in the
primary responsibility of business. Customer service should be the motto of the
business. It involves offering a fair deal to the customer by indulging in ethical
business practice. Therefore, every manager in order to serve the customers in
an effective way should restrain from:

 making misleading advertisements aimed at deceiving the consumer;

 giving wrong or false information about the ingredients, quality, origin,
etc. of the product;

16
  entering into collusive agreements with other firms to exploit the
customers;
 making false claims of being an authorized dealer / importer of certain
goods; and
 giving misleading names to the products, etc.

Towards Employees

 proper election, training and promotion;

 recognition of the value of human resource;
 maintaining cordial relations with employees;
 recognition and encouragement of constructive unionism;
 fair wage in relation to the cost of living;
 better working conditions;
 initiating appropriate measures for the development of human resource;
and
 increase in productivity and efficiency by recognition of merit, by
providing opportunities for creative talent and incentives.
Towards Shareholders
Shareholders are the real owners of a corporation. In view of the several
practical limitations for them in overseeing the day-to-day operations of the
business, an organisation must strive to provide:

 security to their funds;

 a fair rate of return on their investment;
 correct information about the operations of the company; and
 proper appreciation of the value of their investment in the company by
identifying new opportunities that contribute for the growth of business.
17
Towards Creditors / Suppliers
Creditors or suppliers provide the necessary inputs to the business. Business has,
therefore, certain responsibilities to them. The management can discharge its
responsibilities towards this group by
 realizing the importance of maintaining good business relations with
them;
 meeting the payment obligations timely;
 providing true and correct picture about the financial aspects of the
company; and
 helping them grow along with the growth of the company, etc.

Towards Government
Government provides various facilities for the development of business.
Infrastructural facilities like roads, telecommunication, transport, banking,
insurance are some of the facilities created by the government without which no
business, worth mentioning can conduct its affairs smoothly. Therefore, business
also in turn owes to the government in the following ways.
 Business enterprises should act like law-abiding citizens;
 Taxes and other duties should be paid timely and honestly;
 Compliance with the rules and regulations as stipulated by various laws
of the land; and
 Supplementing the governments efforts in the developmental activities,
etc.
Towards Society at Large
Any business organisation can exist as long as it enjoys societal sanction. If it
fails to safeguard the interests of the society, the pressure from various segments
of the society mounts up. Such a situation eventually leads to the promulgation
18
of various acts by the government. That is why, it is always desirable for the
business to keep the government at bay. Some managements conduct their
affairs in such a responsible way where governments intervention is not
warranted. For instance, the origin of several laws governing the business
organizations may be traced back to the failure of business organisation in
protecting the intensity of the various groups in the society. An organisation can
act in a socially responsible way by:
 properly deciding the product policies in line with the national priorities;
 preventing the creation of monopolies;
 ensuring hygienic disposal of smoke and waste and other affluents;
 providing to the community accurate information about its working; and
 preserving the national resources of the nation by not indulging in
reckless exploitation of the resources, etc.
ACTIVITY-C
Briefly describe the social responsibilities of business.
…………………………………………………
…………………………………………………
…………………………………………………
…………………………………………………

SUMMARY
In this lesson, the meaning nature and functions of management are explained.
The concepts of Management as Science, Management as an Art and
Management as a Profession are described. The social responsibilities are
business towards customers, employees, shareholders, creditors / suppliers,
government and society at large are examined.

19
SELF – ASSESSMENT QUESTIONS
1. What is Management? Explain the nature of management.
2. Describe whether management is Science or Art.
3. What are the functions of management? Explain.
4. Explain the Social Responsibilities of Business.
FURTHER READINGS
1. Drucker, peter, F., Management: Tasks, Responsibilities and Practices,
Allied Publishers, New Delhi, 1981.
2. Stoner, James.A.F and Freeman. E.R., Management, Prentice-Hall of
India, New Delhi, 1989.
3. Keith Davis, “The meaning and Scope of Social Responsibility” in
McGuire (e), Contemporary Management, Prentice-Hall, Eaglewood
Cliffs, 1974.
KEY TERMS
 Management  Staffing
 Profession  Directing
 Planning  Controlling
 Organizing

20
 LESSON LEVELS IN MANAGEMENT AND

2 MANAGER AND ENVIRONMENT

LESSON OUTLINE

 Levels of Management

 Supervisory Management
 Middle Level Management
 Top Level Management

 Managerial Skills

 Technical Skills
 Human Skills
 Conceptual Skills

 Manger and Environment LEARNING OBJECTIVES

 Direction Action Environment
 Indirect Environment After reading this lesson you
should be able to

 Describe the levels in

management
 Understand the skills required at
each level of management
 Explain the dynamics of
environment
 Examine the various forces in
the environment that affect the
business

21
INTRODUCTION

In an organisation all those who are responsible for the work of others are
usually known as managers. Though their primary task remains the same –
getting the things done by other people-wide variances may be found with
regard to the authority and responsibility of managers. These differences are
largely due to the differences in the levels of management. In any company, the
total management job requires many skills and talents. Obviously, therefore, the
job of manager is divided and subdivided. Such an arrangement implies different
levels of management. As a matter of custom and convenience, we normally
visualize a company’s management as a pyramid as shown in figure 2.1.
LEVELS OF MANAGEMENT
The three levels of management that are commonly found in any organisation
are lower or front-line, middle and top management.
Figure – 2.1
LEVELS OF MANAGEMENT

TOP LEVEL MANAGEMENT

MIDDLE LEVEL MANAGEMENT

FRONT-LINE/SUPERVISORY
MANAGEMENT

22
Front-Line or Supervisory Management
The is the lowest level in the hierarchy of management. Usually the jobs at this
level are the entry level positions into management profession. Managers at this
level direct the operating employees (workers). They are close to the action, for
their job involves supervising the activities of operatives. Front-Line managers
are called foreman, supervisor, superintendent, inspector and so on. For
instance, in a manufacturing concern in the production department they are
called foreman, in marketings, finance and others departments, they are called
management trainees or junior executives. Similarly, in a government office, the
term superintendent or section officer are normally used.

Middle level Management

Middle management level includes, in many organizations, more than on level.
Managers who work at levels between the lower and top levels constitute the
middle management. departmental heads, Regional managers, Zonal managers
and so on fall in this category. They report to top managers. Their principal
responsibilities are to direct the activities of lower level managers who
implement the organisation’s policies.

Top level Management

Top management constitutes the highest level in the management hierarchy.
This is the policy making level in any organisation. This level consists of a small
group of executives. Board of Directors, Chairman, Managing Director and the
top functional heads and divisional managers comprise this level. Top managers
are responsible for the overall management of the organisation. They decide the
enterprise objectives, policies and strategies to be pursued to achieve those

23
objectives. They provide direction to the organisation by guiding the
organisation’s interactions with its environment.
ACTIVITY - A
Write briefly on different levels in management.
…………………………………………………
…………………………………………………
…………………………………………………
…………………………………………………

MANAGERIAL SKILLS
Management job is different from other jobs. It requires elements of stewardship
and commitment to the purpose. It involves the obligation to make prudent use
of human and material resources. It requires sound judgment to handle complex
situations. Further, the nature of the job becomes increasingly complex at each
higher level because of the increase in the scope of authority and responsibility.
Therefore, each higher level requires increased knowledge, broader perspective
and greater skills.
For purpose of analysis, skills required of any manager are classified
under three different heads – technical, human (Employee relations skill) and
conceptual skill as shown in figure 2.2. The exhibit helps in understanding the
levels of management responsibility, the principal skill requirements, and the
extent to which each kind of skill is required at each level.

24
 Top
Management

Middle
Management
Supervisory
(Lower Level)
Management
Technical Skills Human Skills
Figure 2.2 Management Levels and Skills.

Technical Skills
Technical skills refer to the ability to use the tools, equipment, procedures,
techniques and knowledge of a specialized field. It is primarily concerned with
the ways of doing the things. It implies proficiency in a specific field of activity.
Technical skills are most important for the lower level managers, because by
nature their job involves supervision of the workers. Effective supervision and
coordination of the work of the subordinates, therefore, depends on the technical
skill possessed by the lower level manager. Any supervisor without a sound
knowledge of the job cannot make an effective supervisor. Such supervisors are
not respected by the subordinates at the shop floor. The relative importance of
the technical skills as compared to the other skills diminishes as one moves up to
higher levels of management.
Human Skills
Human skills are primarily concerned with persons, as contrasted with “things”.
When a man is highly skilled in employee relations, he is aware of his own
attitudes, assumptions, and beliefs and recognizes their limitations as well as
their usefulness. He accepts, as an important fact of life, the existence of

25
viewpoints and feelings, different from his own. Thus, human skill refers to the
ability of the manager to work effectively as a group member and to build
cooperative effort in the team he leads. It is the ability to work with, understand
and motivate people. He understands why people behave as they do and is able
to make his own behaviour understandable to them. he can foresee their
reactions to possible courses of action and, is able to take their attitudes into
account. His skill in working with others is natural and continuous. He does not
apply it in random or in inconsistent fashion. It is a natural ingredient of his
every action.
Conceptual Skills
The skill also called design and problem-solving skill, involves the ability;
 to see the organisation and the various components of it as a whole;
 to understand how its various parts and functions mesh together; and
 to foresee how changes in any one of these may affect all the others

Conceptual skills extend to visualizing the relation of the organisation to

industry, to the community and to the political, economic and social forces of
the nation as a whole and even to forces which operate beyond the national
boundaries. It is the creative force within the organisation. A high degree of
conceptual skill helps in analyzing the environment and in identifying the
opportunities and threats. Managements of companies like ITC, Larsen &
Toubro, Asian Paints, Bajaj Auto in the private sector and National Dairy
Development Board in the public sector, to mention a few, have amply
demonstrated this skill in gaining a competitive edge over their competitors.
As you have understood by now – the three types of skills discussed so
far are not mutually exclusive. In other words, management job always requires
all the three skills but in different proportions depending upon the level of

26
management. there is a gradual shift in the emphasis from the bottom to the top
of the pyramid. Technical skills and human skill are always in great demand at
the lower level of management for it is there the productive processes and
operations are carried out. It is there where you find most of the people. It is
there where the action takes place. The need for conceptual skill is greatest at
the top level of management. Obviously, the top managers are not often
involved in the direct application of specific methods, procedures and
techniques, compared to those at the lower echelons of management.
As evident from the foregoing discussion, at the entry level is not the
management job, that is, at the supervisory level, besides technical skills, you
have to acquire human skills and the problem – solying skills (conceptual). To
climb up the organizational ladder, you must not only be good at the skills
required for the present job, but also learn and acquaint yourself with the skills
required at the next level. As result, in the event of promotion to the next higher
levels, you would feel at home and discharge the responsibilities with ease.
Based on the differences in the type of skills required, organisations
assess the training needs of the managers. Accordingly, appropriate training
methods or modules are designed to equip them with the skill required at the
respective levels. Although, each of these skills is needed in some degree at
every level of management, there are successful executives who have no great
amount of technical skills. But they are able to compensate the lack of that skill
through superior creative ability and skill in selecting, planting and effectively
motivating subordinates who are strong in technical skills.

27
ACTIVITY – B
Explain the different proportion of management skills required at different levels
of management
…………………………………………………
…………………………………………………
…………………………………………………
…………………………………………………

MANAGEMENT AND ENVIRONMENT

Like human beings, organisations are the products of environment. As explained
in Lesson – 1, all organisations whether they are engaged in business or non-
business activities draw the inputs from the environment, convert the inputs into
outputs and send them back to the environment. Thus every organisation has a
two-way interaction with the environment.
A business organisation is an open system which is influenced by the
environment and inturn influences the environment. The environment of the
business consists of two components – internal as well as external environment.
The former refers to the various systems inside the organisation such as,
technology, structure, processes and people. As all these aspects constitute the
subject matter of this course and are discussed in various lessons, the internal
environment, therefore, does not merit a detailed analysis. As such, this lesion
focuses on the important variables of the external environment which have a
bearing on the successful functioning and survival of the business.

IMPORTANCE OF THE ENVIRONMENT

The need to consider the forces external to the organisation was first
incorporated into management thought during the late 1950s. It was one of the
28
major contributions of the systems approach to management, which emphasizes
and stressed the need for managers to view their organisation as an entity of
interrelated parts intertwined with the outside world. In an ever changing
business environment as of today, changes in the outside world have made the
need to consider the environment more important than ever. As Alvar Elbing
states, “the external environment of an organization is a subject of increasing
challenge for today’s managers. In fact, the managers of societies major
organisations – business, education, government – have been faced by recent
events to place an increasing focus on a rapidly changing environment and its
effect on the internal organization”. Even if changes are not so significant,
management would still have to consider the environment because, as an open
system, an organization is dependent on the outside world for supplies, energy,
workers and customers. As all these effect the organisation’s very survival,
management must be able not only to identify the factors in its environment but
also to cope with them.
In this respect, organisations are similar to biological organisms.
According to Charles Darwin’s theory of evolution, the species that have
survived have done so because they were able to evolve and adapt to changes in
their environment. Organisations, too, must adapt to changes in their
environment in order to survive and be effective.

DIRECT ACTION VERSUS INDIRECT ENVIRONMENT

The external environment affecting the organisation may be divided into two
major categories – Direct action and Indirect action environment. Direct action
environment consists of those factors that directly affect and are affected by the
organisation’s operations. These factors would include suppliers, labour unions,
the various laws of the land, customers add competitions. The indirect

29
environment, on the otherhand, consists of those factors that may not have an
immediate, direct effect on operations but nevertheless influence the activities of
the firm. These include such factors as technology, socio-cultural and political
factors, general economic conditions and so on. Let us now understand the
impact of all these factors in detail.

DIRECT ACTION ENVIRONMENT

Suppliers
As already understood, an organisation is a vehicle for transforming inputs into
outputs. The important inputs are materials, equipments, energy, capital and
labour. The relationship between the organisation and the suppliers of these
inputs presents the forces in the environment that directly influence the
operations of a firm. If an organisation is unable to obtain these essential inputs
of right quality, quantity and at the right price, it cannot possibly achieve the
objectives.

Laws
Virtually every aspect of the business is influenced by the laws of the land. The
form of organisation, the management and the way how a firm conducts itself in
the society are very much influenced by the various provisions of the laws. For
instance, The Companies Act, Factories Act, Workmen’s Compensation Act,
Industrial Disputes Act, Provident Fund Act, just to name a few, affect the
functioning of the business. As a responsible corporate citizen, an enterprise has
to comply itself with the provisions of these acts.

30
Customers
The justification for the existence of a firm lies in the satisfaction of customer
needs. In this context, it is appropriate to remember Peter F.Drucker’s
observation on the purpose of business. According to him, the purpose of any
business is to create a customer. There is no exaggeration in stating that it is
customers in the market place who dictate the fortunes of any business. Needless
to say that those organisations which neglect the customers expectations and
aspirations would find the long-term survival very difficult. Customers tastes
and preferences are not static, but keep on changing. Mention may be made of
some of the changes taken place in the recent past: the preference for quartz
watches, audio-video gadgets, various sophisticated domestic appliances, cotton
garments, fast foods and so on. Organisations which are adept in identifying the
changes in the customers attitudes and preferences or which can comfortable
respond to the changes in a positive may would survive and those which fail to
take cognizance of changes in customers preferences would ultimately fall on
the way side.
Competitors
Many a policy of the organisation are influenced by the competitors. In a
competitive environment, the market place is characterized by moves and
countermoves. The post-liberalisation Indian markets for many products offer an
excellent example as to how competition influences the organisations. In the last
few years, as could be easily seen, in almost all the sectors of the Indian
economy, competition has tremendously increased. As a result, many firms are
forced to wake up from their slumber. They are forced to unlearn many of the
practices and attitudes of the pre-liberalisation/protection era. Company after
company is now redefining its business, rediscovering the markets, talking in

31
feverish pitch about customer service, human resource development and concern
for the society.

ACTIVITY – C
Explain organisations external environment be considered by management.
…………………………………………………
…………………………………………………
…………………………………………………
…………………………………………………

ACTIVITY – D
Briefly explain the Direct Action Environment
…………………………………………………
…………………………………………………
…………………………………………………
…………………………………………………

32
INDIRECT ENVIRONMENT

The indirect environment is usually more complex and uncertain than the direct.
Management is often compelled to make assumptions about the impact of the
various factors like technology, general economic conditions, socio-cultural and
political factors. Let us, therefore, examine the impact of these factors on the
business organisation.

Technology

Technology, in the organizational context, influences the ways of doing things.

It influences various processes. Technological changes affect the efficiency with
which products are manufactured and sold, when a product will become
obsolete, how information can be gathered and processed, and what customers
expect from the organisation’s product and so on. Important technological
developments that have profoundly affected the organisations and society in the
last few years are the computer, laser, xerography, integrated circuits,
semiconductors, television, satellite communication, nuclear power, synthetic
fuels and foods etc. all these innovations have thoroughly changed the face of
the society. Therefore, today’s organisations need to keep abreast of
technological changes that affect their operations and products so as to remain
competitive. Failure of the management to clearly gauge the technological
changes would cost the business dearly. It endangers the very survival of the
organisation.
The pace at which technological changes occur varies from industry to
industry. In some industries where technology is stabilized, the changes are less
frequent and less turbulent. One the otherhand in some industries like
information technology, telecommunication systems, polymers, etc. changes are
33
frequent. Depending upon the nature of business and the type of technology
used, every organisation has to assess the technological environment form time
to time.
Economic Conditions
Managers must also assess how changes in general economic conditions will
affect the operations. The fluctuations in economic activities of a nation as
measured by the various parameters like the gross domestic product (GDP),
price level, employment, aggregate demand and supply of consumer and
industrial goods, etc. will have far reaching impact on the prosperity of the
business. These factors affect the cost of the inputs and the ability of customers
to buy the goods and services. Organisations must be able to tackle effectively
the inflationary and recessionary trends in the economy. When the economy is
in an upbeat mood, firms normally benefit enormously and commit the resources
for further growth with a hope of continuity of favourable economic conditions.
Problems arise when the economy turns to the downswing. It is at that stage,
firms have to adjust themselves to the down turn in economic conditions.
Efficiency in operations, elimination of wastage, product planning, etc. hold the
key for the survival of firms in such an adverse economic climate. As business
organisations, in terms of size and impact, have grown into mega institutions,
their failure will have disastrous affects on the society. By virtue of their size,
they also influence significantly the economic conditions of the nation. Further,
it is important to note that a given change in economic conditions may have a
positive affect on some organisations and a negative affect on others. Therefore,
a manager must be able to clearly assess the impact of changes in economic
conditions on the industry in general and his firm in particular.

34
SOCIO-CULTURAL FACTORS

Organisations are affected by the culture of the particular society in many ways.
Firms which have their operations in more than one country have to adopt to the
respective cultures in an effective way. Otherwise, they find it difficult to gain
the acceptance of the society. Sound understanding of the cultural variables is all
the more important for firms in a country like India where there are several
diversities in cultures of various regions within the country.
Culture is a wider concept which includes value systems, beliefs, likes
and dislikes, altitudes and perceptions. If the products or services of a firm are
not in line with the culture of the place, they may not be accepted by the society.
For instance, in India ‘Miss’ brand cigarette targeted at the women was a failure
because it is against the cultural echoes of the society, likewise at the
international level, many brands have failed to gain any market because they are
out of tune with the respective cultures. At the same time, it has to be
remembered that certain products and services also affect the culture of a place.
The satellite television which has made deep inroads into the Indian culture, and
how certain values particularly in the Indian youth are changing makes a good
example.
As such, an organisation cannot insulate itself from the socio-cultural
factors specific to a community. For example, paying bribes to obtain contracts
or political favours, promotion on the basis of favouritism instead of
competence, and spre3ading unfavourable rumours about a competitor are
considered unethical immoral business practices in many countries. In some
countries such practices are seen as normal and accepted business practice
because of differing socio-cultural factors. In this regard General Electric’s
former chairman Reginald Jones observation is worth mentioning. He states that

35
“organisations must be able to anticipate the changing expectations of society;
and serve them more effectively than competing firms. This means that the
organisation itself must change, consciously evolving into an institution adapted
to the new environment”.

POLITICAL ENVIRONMENT

The performance, growth and survival of business in general, to a larger extent,

depends on the attitude of the government towards the business. Since
government is fully empowered to monitor and control the various institutions
of the society, the policies perused by the government affects the business in a
significant way. The continuity of policies is very much essential. That depends
on the stability of the government of the particular nation. For instance, the
attitude of the government in India towards foreign companies has undergone
dramatic change in the last two decades. In the late seventies during the Janata
Party rule at the centre, Coca-Cola, IBM and a few other multinationals were
forced to leave the country. There were several other restrictions on the equity
holding of foreign partners. The whole thing has changed, in the last few years
so much so that multinationals are not only welcome but also offered many
facilities. Acts like FERA and MRTP, to a larger extent have become redundant.
The cooperation that exists between business and government in Japan
has infact helped the Japanese Companies to conquer the world markets in the
last few decades. In Japan, Ministry of International Trade and Industry (MITI)
extends out excellent support to the organisations to emerge internationally
competitive. In India too, of late, we see a lot of change in the attitude of the
government both at central and state level towards the business. Various state

36
governments are weighing each other with attractive packages to woo the
foreign investment in many core sector industries.
The various factors discussed so far highlight the impact of the
environment on the business. If companies like Arvind Mills, Larsen & Toubro,
Reliance, Ranbaxy, ITC, etc. are able to go global, it is precisely because of
their ability to assess the changing environment effectively and to adapt to the
changes with considerable case. As a result, we see a few Indian companies
reaching the status of being called Indian multinationals.

ACTIVITY – E

What factors do you consider as oranisations in direct environment?

…………………………………………………
…………………………………………………
…………………………………………………
…………………………………………………
SUMMARY

The levels of management such as Front -line managers, Middle level managers
and Top-level managers in the management are described through this roles and
responsibilities. The skills required to the people at different levels such as
Technical skills, Human skills and Conceptual skills are also explained. As
business organisations are influenced by the environment, in this lesson, this
impact of direct action environment and indirect environment are explained.

37
SELF – ASSESSMENT QUESTIONS

1. What are the various levels in management? Explain them.

2. What are the important management skills required at different levels of
management?
3. If you are a practicing manager, analyse the various skills you possess in
relation to the level of you job.
4. Describe the major factors in the environment of business and how they
affect the survival of an organisation.
5. Present the call of at best two Indian Companies and explain how they
responded to changes in the environment.

FURTHER READINGS

1. Koont3, Horold and Cyril O’donnell, Management. A system and

Contingency Analysis of Managerial Functions, Mc grow Hill, Tokyo,
1976.
2. Kat3 R.L., Skills of an Effective Administrator, Harward Business
Review, 52(5) 1974 – 90-102.
3. Alvin Toffler, Future Shok, Random House, New York, 1970.

KEY WORDS
 Managerial skills  Conceptual skills
 Technical skills  Leader
 Human skills

38
 LESSON PLANNING AND PLANNING PROCESS

3
LESSON OUTLINE

 Purpose of Planning
 Principles of Planning
 Steps in Planning
 Characteristics of Sound Plan
 Long Range and Short
Range Planning
 Types of Plans

LEARNING OBJECTIVES

After reading this lesson you

should be able to

 Understand the principles and

purpose of planning
 Explain the steps in planning
 Analyse the characteristics of a
sound plan
 Describe the strategic/long range
planning
 Distinguish operational planning
from strategic planning
 Understand to develop different
types of plans.

39
INTRODUCTION

Planning is an important managerial function in that there is no choice between

planning or no planning. The choice is only in regard to the method and
techniques used to plan. It is anybody’s knowledge that we plan many things in
our day to day lives. We plan to go on a holiday trip, plan our careers, plan our
investments and so on. Organizations are no exception. Lot of planning is done
by managers at all levels. Planning is the basic process by which we use to select
our goals and determine the means to achieve them. Lot of information has to be
gathered and processed before a plan is formulated. In other words, a plan is like
a jigsaw puzzle. All the pieces have to be put together properly, so that they
make sense.
Planning is necessarily forward looking. It is looking into the future. It
bridges the gap between where we are and where we want to go. It involves
visualizing a future course of action and putting it in a logical way. Let us look
at what the following observations that suggest about planning.

 “Failure to plan is planning to fail”

 “Planning is out line a future course of action in order to achieve an
objective”
 “Planning is looking ahead”
 “Planning is getting ready to do something tomorrow”
 “Plan is trap laid down to capture the future”

40
ACTIVITY – A
Write the meaning of planning
…………………………………………………
…………………………………………………
…………………………………………………
…………………………………………………

PURPOSE OF PLANNING

It is no exaggeration that in the absence of planning, events are left to chance.

As a manager in such a case, you are depending on luck. You may, as a result, in
all probability, end up in frustration. Organisations often fail not because of lack
of resources, but because of poor planning. Whatever the resources you have, in
the absence of systematic planning, the resources may not help you in achieving
the objective. The following factors further highlight the importance of
planning.

a. To achieve objective

While developing a plan, you have to ask yourself a few questions.

 Why am I making this plan?

 What am I trying to accomplish?
 What resources do I need to execute the plan?
Objectives are the ends sought to be achieved by the organisations. The
above questions, if properly answered provides lot of clarity to the objectives. In
other words, they force you to be clear about the objectives, the time frame
required to achieve them and the resources required. It forces you to visualize

41
the future in an organized manner. The saying that “when a man doesn’t know
what harbour he is making for no wind is the right wind” is quite appropriate in
the case of planning Systematic planning, thus, starts with a clear statement of
objective. All the important inputs necessary to achieve the objectives are
carefully thought of the uncertainties of the future, if any, are also taken into
consideration.

b. To make the things happen

Effective managers anticipate future and prepare themselves to meet the

challenges of the future. They are rather pro-active. They influence the outcome
of the events in a significant way. In any modern business, the interests of many
people are involved the shareholders, employees, creditors, consumers and the
Government are the major interest groups in any organisation. Further, the
interests and expectations of all these groups are varied and at times are in
conflict. That apart, they constantly change in a dynamic business environment.
In the light of the uncertainties involved in the future environment, your job, as a
manager, is to foresee the future and predict the consequences of actions. In
other words, you have to look down the road into future and prepare yourself to
meet the uncertainties ahead. A well thought out plan solves many of the
problems associated with the uncertain future.

c To cope with change

Organisations are products of environment. The ability to deal with the

environment has enabled many an organisation to survive, despite other
weaknesses. Alert managements continually tune in to the environmental forces.
On the other hand, managements which fail to adapt would eventually fall on the
42
way side. Therefore, in the managerial job, you have to constantly analyse the
impending changes in the environment and assess their impact on your business.
For instance, the liberalisation policies pursued by the government have, of late,
brought in too many changes. Markets are shifting due to increased competition.
Pressure on the existing resources in increasing. Expectations of the employees
as well as the consumers are changing Product life – cycle is becoming shorter
due to rapid technological changes. All these changes exert a tremendous
pressure on the management.

d To control the evens

Planning and control are often described as the ‘Siamese’ twins of

management. when you plan the events, you make them happen in a particular
way. The specific objectives decided in advance themselves become the
standards or the measuring tools. Therefore, it goes without saying that plans
provide mechanism to know whether the events are happening in the way
expected. Planning ensures the events to conform to plans. Thus, if you do not
plan (no clear objectives), you do not know what to control. Control assumes
significance in a dynamic environment as of today, where several forces push
you away form reaching the goal. Appropriate control devices help you to check
the course from time to time, so that you will be able to take the appropriate
corrective measures.

43
ACTIVITY – B
Write in brief the purpose of planning
…………………………………………………
…………………………………………………
…………………………………………………
…………………………………………………

PRINCIPLES OF PLANNING
Systematic planning is essential for the success and survival of any organisation.
Organisations fail not because they don’t plan, but because they don’t plan in an
effective way. An understanding of the following principles helps one to achieve
effectiveness in planning, so that you can guard yourself against the possible
mistakes that are often committed by managers.

(i) Take Time to Plan

As a plan is a decision regarding a future course of action, it specifies the

sequence of event to be performed. It involves the commitment of organizational
resources in a particular way. Therefore, if a plan is not conceived well, the
resources would be put to wrong use. It becomes a wasteful exercise resulting in
agony and frustration. To avoid such unpleasant outcomes, several probing
questions have to be asked. Planning in haste with incorrect information,
unsound assumptions and inadequate analysis of the environment has to be
avoided by all means Otherwise, you may save some time in quickly developing
a plan, but in the event of things going wrong, you are hard pressed for time and
resources to correct yourself. It not only lands you in trouble, but the
organisation also.

44
(ii) Planning can be top down and bottom up

Normally in any organisation major enterprise plant are developed by the top
management. These plans are wider in scope and provide the direction to the
whole organisation. They spell out what the organisation wants to achieve over
the years. The overall plan thus formulated by the top management is split into
departmental plans. Accordingly, plans for production, marketing, finance,
personnel and so on, stem from the basic plan of the organisation. The other
operational plans at various levels down the organisation, flow from the
departmental plans. This approach is called top-down approach to planning.
In constrast, bottom-up approach involves information emanating from
the lower levels – that is, top management collects information from lower
levels. On the basis of such informations, plans are formulated. The underlying
assumption is that people at the operational level are closer to the action and
they possess valuable information. In this approach, the initiative for planning
comes from the lower levels in the organisation. This approach makes use of the
rich experience of the subordinates. It also helps to motivate the people and
elicit commitment from them. however, the choice of the method depends on the
size of the organisation, the organizational culture, the preferred leadership style
of the executive and the urgency of the plan.

(iii) Involve and communicate with all those concerned

Modern business organisations are so complete that various operations are
highly interrelated. Such an interrelation of activities requires the involvement
of all the people concerned with the achievement of goals. For instance, a plan
to improve the quality of the products (Quality control plan) may require the

45
cooperation of the people in the production, to involve the concerned people in
these departments. Such a participation helps in instilling a sense of commitment
among the people. They also in turn gain a sense of pride for having been a
party in deciding the plan. Such an involvement makes possible the process of
sharing information. If concerned people are not involved, there may be
unnecessary gaps in the execution because of lack of understanding of the plans.
(iv) Plans must be flexible and dynamic
Your managerial career indeed would be a “bed of roses” if there are no
unexpected changes in the environment. Day in and day out, you are confronted
with too many changes forcing you into so many dilemmas or problems. Most of
such problems are caused by unexpected events in the environment. If the plan
is rigid with less scope for modifications as required by the changes in the
environment, the organisation would ultimately sing. In a static environment, of
course, there may not be a problem with a rigid plan. But in a dynamic
environment, to meet the unexpected changes, adequate flexibility has to be
built into a plan. Otherwise, the plan itself becomes a limiting factor.
(v) Evaluate and revise
While building into the plans the required flexibility, you should not lose sight
of the additional costs involved to buy such flexibility. You must also remember
that flexibility in plans may not be possible always. For example, a plan for a
petroleum refinery may not offer any flexibility because the machinery can
hardly be used for any other purpose. Evaluation of the plan at regular intervals
is necessary to make sure that it is contributing to the objectives. Like a pilot,
who in the high skills checks the course to make sure that he is flying in the
right direction, the manager has to, from time to time evaluate and review the
plan. Such an exercise enables to initiate the corrective measures at the right

46
time before it is too late. This depends on the accuracy of the information
systems in the organisation, though rich information reaches the management.

STEPS IN PLANNING

Though there may be a few variations in the exact procedure adopted by

different organisations in planning, the following are the brad steps;

(a) Establish goals

Planning begins with decisions about what the organisation wants to achieve
during a specified period. The goals of an organisation and various subunits
have to be decided and spelt out in clear terms. It is always desirable to express
the goals in quantitative terms for all the key areas of the business like
production, profit, productivity, market share, employee relations, social
responsibilities, etc. For instance, instead of saying that the objective of business
is to achieve a fair rate of return on the investment, it may be given a quantitive
expression, say, 10 or 15 percent return on the investment. The time frame in
which the objectives have to be achieved must also be specified. Besides,
adequate attention has to be paid to the resources required to achieve the
objectives. Thus what to achieve, when, how and with what resources are a few
important questions that should be answered at this stage.
Since goal setting is the essential first step in planning, managers who
fail to set meaningful goals will be unable to make effective plans. If Telco is
able to retain its prominence in the Heavy Commercial Vehicle (HCV) segment,
it is because all the employees of the organisation know clearly that the primary
objective is retaining the leadership in the industry. For instance, SAIL’s
corporate mission “Infrastructuring India” explains basic purpose and board

47
objectives of the company to a larger extent. The mission of the organisation,
the corporate values, experience, polices of other experiences provide adequate
guidance to the managers in goal setting.

(b) Establish Planning premises

Planning premises, in simple, are the assumptions that should be made about the
various elements of the environment. Planning assumptions or premises provide
the basic framework in which plans operate. Appropriate assumptions have to be
made on various aspects of the environment – both internal and external to the
organisation. Otherwise, it will be like fighting a battle without a clear
assessment of the enemy’s strengths and weaknesses.
(i) Internal premises: Important internal premises include sales forecasts and
policies of the organisation. Each one of these elements is a critical success
factor. For instance, the accuracy of the sale forecast influences the procurement
of resources, production scheduling and the marketing strategies to be pursued
to achieve the objectives. Similarly, however effective the objectives are, it is
the people who have to perform and achieve. If their attitude is not positive,
nothing moves. The important internal premises include sales forecasts,
resources of the organisation, skills, attitudes and beliefs of the people.
(ii) External premises: Important external premises relate to all those factors in
the environment outside the organisation. They include technological changes,
general economic conditions, government policies and attitude towards business,
demographic trends, socio-cultural changes in the society, political stability,
degree of competition in the market, availability of various resources and so on.

48
 It is evident that some of these factors are tangible while others are
intangible. For example, material and human resources availability, etc. are
tangible factors which can be stated in quantitative terms. On the other hand
factors like political stability, attitudes of the people, certain other sociological
factors are intangible, in, that, they cannot be measured quantitatively. Effective
premising – the making of appropriate assumptions, helps the organisation to
identify the favourable and unfavourable elements in the environment. Though
accurate premising is difficult, anticipating future situations, problems and
opportunities would undoubtedly help the managers in reducing the risk, though
not completely eliminating it.

(c) Decide the planning period

How far in the future should a plan be made is another pertinent question in the
process of planning. Business vary in their planning periods. In some cases plans
are made for a short period, varying from a few months to an year, while in
some other cases, they are made to cover a longer period, to cover a period of
more than a year. The period may extend upto 5-10 years and even beyond.
Companies normally plan for a period that can be reasonably anticipated. The
lead time involved in the development and commercialization of a product and
time required to recover the capital investment (pay-back period) influence the
choice of the length of the plan. Again, in the same organisation, different plan
periods may exist for different purposes. This gives raise to the tow important
concepts – operational planning and strategic planning. While operational plans
focus on the short-term, strategic plans focus on the long-term.

49
(d) Develop alternatives and select the course of action
The next logical step in planning involves the development of various
alternative courses of action, evaluating these alternatives and choosing the most
suitable alternative. Objectives may be achieved by different courses of action
(alternatives). For example, technical know-how may be developed by in-house
research, collaboration with a foreign company or by tying up with a research
laboratory. Similarly, an organisation can grow by expanding its scale of
operations or through acquisitions and managers. Technical feasibility,
economic viability and the impact on the society are the general thumb rules to
select the course of action. The alternative courses are evaluated the light of the
premises and the overall goals of the organisation.

(e) Derivative plans

The plan thus decided after a through analysis of various alternatives suggests
the proposed course of action. To make it operational, it has to be split into
departmental plans. Plans for the various operational units within the
departments have to be formulated. The plans thus developed for the various
levels down the organisation are called derivative plans. For instance,
production and marketing of 10,000 units of a product and thus achieving a
return of 10 percent on the investment may be the enterprise’s plan relevant for
the whole organisation. Its effective execution is possible only when specific
plans are finalized for the various departments like production, marketing,
finance, personnel and so on with clear-cut objectives to be pursued by these
departments.
(f) Review periodically
Success of the plan is measured by the results and the ease with which it is
implemented. Therefore, provision for adequate follow-up to determine

50
compliance should be included in the planning work. To make sure that the plan
is contributing for the results, its review at regular intervals is essential. Such a
review helps in taking corrective action, if necessary, when the plan is in force.
ACTIVITY – C
Explain the steps involves in a systematic planning
…………………………………………………
…………………………………………………
…………………………………………………
…………………………………………………
LIMITATIONS OF PLANNING

Effective planning is not an easy task. There are a number of reasons for failure
of planning in practice. Planning suffers from the following limitations.

1. Costly and time Consuming

Planning is quite a costly and time consuming pro9cess. Unlimited amount of

time is spent on forecasting, evaluating alternatives etc. By the time a plan is
established the environment might change and this requires a complete revision
of the plan. Besides this, cost also increases.

2. Depends on forecast
Planning is future oriented activity which is based on forecast. As the period of
planning increases the accuracy of forecasting, diminishes. Planning loses its
value if reliable and adequate data is not available.

3. Inflexibility
Planning becomes rigid at times because of internal inflexibilities. This reduces
individual initiative and causes delay in decision making. Internal inflexibilities
like rigid policies and procedures and limited resources affect planning process.
51
4. Influence of External Factors
External factors beyond the control of an organisation affect the effectiveness of
planning. These are very difficult to predict and this makes execution of plans
very difficult. External factors like government control, technological change
and trade unions affect the planning process.
5. Resistance to change
Another important limitation of planning is resistance to change. The human
element in an organisation always resist change, they are more concerned about
the present rather than the future, which is uncertain. Planning being forward
looking is always affected by this resistance to change.
6. Not formulating correct plans
The entire planning process may fail, if people involved in it do not formulate
correct plans. The reasons for failure of people in planning may be due to a
number of reasons like, lack of commitment to planning, lack of delegation of
authority, excessive reliance on past experience, tendency to overlook premises
etc.
It is an irony that at times even the best of the plans may flounder inspite of
careful analysis and mental commitment. So as to avoid the pitfalls in planning,
make sure of the following;
 Set realistic and achievable goals;
 Communicate the assumptions on which plans are formulated to all the
people and departments concerned;
 encourage and make people participate in the planning programme so as
to ensure the right commitment;
 ensure proper coordination between the short-term and long-term plans.
They should not be viewed as mutually exclusive;

52
  encourage creativity in planning. Creativity helps in identifying the best
alternatives; and
 pay attention to the resources position of the organisation so as to ensure
the availability as and when required.
Characteristics of a Sound Plan

A sound plan should have the follows characteristics:

(a) Primacy. Planning is an important managerial function that usually
precedes other functions. Obviously, without setting the goals to be reached and
the lines of actions to be followed, there is nothing to organize, to direct, or to
control in the enterprise. But this should not lead us to think that planning is
isolated from other managerial functions which have no impact on it.
(b) Continuity .Planning is a continuous and never-ending activity of a manager
to keep the enterprise as a going concern. One plan begets another plan to be
followed by a series of other plans in quick successions. Actually, a hierarchy of
plans operates in the enterprise at any time. Planning gets used up where
tomorrow becomes today and calls for further planning day in and day out.
Again, the incessant changes make replanning a continuous necessity.
(c) Flexibility.Planning leads to the adoption of a specific course of action and
the rejection of other possibilities. This confinement to one course takes away
flexibility. But if future assumptions upon which planning is based prove wrong,
the course of action is to be adapted to the altered situations for avoiding any
deadlock. Accordingly, when the future cannot be moulded to conform to the
course of action, the flexibility is to be ingrained in planning by way of adapting
the course of action to demands of current situations.

53
(d) Unity. Planning is made by different managers at different times.
Maintenance of consistency or the unity of planning is one of its essential
requirements. Objectives provide the common focus for unifying managerial
action in planning. Moreover, policies and procedures introduce a consistency of
executive behaviour and action in matters of planning.
(e) Precision. Planning must be precise as to its meaning, scope and nature. As
guides to action, planning is to be framed in intelligible and meaningful terms by
way of pinpointing the expected results. According to the capacities and
facilities of the company, planning must be realistic in scope rather than dreams
indicating pious desires. As planning errors are far more serious than mistakes in
other functions and cannot be offset by effective organizing or controlling, the
planning precision is of outmost importance.
(f) Pervasiveness. Planning is a pervasive activity covering the entire enterprise
with all of its segments and every level of management. Planning is not
exclusive responsibility of top management only, but it extends to middle and
lower management as well. Although top mangers are mostly preoccupied with
planning work because of their wide jurisdiction of operation and decision
making, planning is of equal necessity to every manager. Further, there is
nothing to choose between a large firm and a small firm so far as the planning
process is concerned.
Activity – D
Give a brief note on the characteristics of a sound plan.
………………………………………………………..
………………………………………………………..
………………………………………………………..
………………………………………………………..

54
Long range planning and short range planning
Planning implies looking into the future. Since it involves deciding a future
course of action, plans always have some time frame-the period in future that a
plan covers. Based on the length of time involved, plans are usually classified as
strategic range and operational plans or short range plans are designed to meet
the broad objectives of the organisation to implement the mission that provides
justification for the organisation’s existence. Operational plans provide details as
to how strategic plans will be accomplished. However, it must be remembered
that both strategic and operational plans are not mutually exclusive, but are
complimentary. We will first discuss strategic planning and then proceed to
operational planning.
Long Range Planning / Strategic Planning
The terms long range planning, Strategic planning, and Corporate planning are
used synonymously by many authors. Strategic planning has its origin in
military organizations where the objective is to envisage a variety of
contingencies that may arise when large forces move into operation. Viewed in
this backdrop, strategic planning in a business organisation envisages a
comprehensive study of the various external and internal parameters that affect a
company in charting a course of action to achieve the goals.
Strategic planning helps the management in;
 coping effectively with future contingencies.
 Providing an early opportunity to correct mistakes.
 Making decisions about the right things at the right time: and
 Understanding what actions to take in order to shape the future as
consired.

55
 George Steiner has defined strategic planning as the process of determining
the major objectives of an organisation and the policies and strategies that will
govern the acquisition, use and disposition of resources to achieve those
objectives”. Strategic plans reflect the socio-economic purpose of the
organisation and the values and philosophy of the top management. In simple,
they relate the organisation to the environment in which it operates by providing
answers to the basic questions like:
 Where are we now?
 Where do we want to go? And
 Why do we want go?

Organisations in the west have been exposed to the strategic planning

since long. In India, many subsidiaries of the multinational corporations made a
beginning in this direction. Other Indian companies (Private and public sector)
have also realized the importance of strategic planning, thanks to the changed
realities in the last few years. As a result, every company has now begun to
speak in terms of corporate mission, strategic planning and organisation vision.
These have, of late, become pet phrases of the Indian corporate sector in 1990’s
strategic planning serves the following two functions;
a. Anticipates future opportunities and threats
An accurate assessment of the future opportunities and threats is crucial to the
success of any business. Business environment is changing so fast these days
that a deliberate corporate effort is called for to keep abreast with the changes.
The changes that occur may be precursors of future threats and opportunities.
The investment in large business enterprise today runs into hundreds of crores of
rupees. The gestation period is too long. During this period many things may
change. Take for instance, the case of the Enron Power Project in Maharashtra.

56
The agreement to construct a mega power project was entered into by the U.S
Enron power corporation and the then Maharashtra government. The company
also commenced the work. In the meantime, the change in the state government
resulted in the reversal of the earlier government’s decision, causing lot of
embarrassment to the parties involved. This case demonstrates the need for close
monitoring of the potential threats in the environment.
Effectiveness of the business organissation lies in converting the threats
into opportunities. For instance, when the crude oil prices were hiked in 1973 by
the OPEC countries it created a have on petro-based industries. Automobile
companies as a result were forced to change to small fuel efficient cars. In this
case, the threat was converted into an excellent opportunity. Small car, thus has
become the fashion of the day. Similarly ITC in India, continuously hounded by
excise levies and taxes on their main product, cigarettes – had to think of
diversification into hotels, paper, agro products and aquaculture – which
ultimately turned out to be a God sent opportunity.
b. Provide Clarity of Purpose and Direction
As a result of the overall increase in the size of companies, the internal
departments (production, marketing, finance, personnel etc.) have also become
quite large. With growing specialization in each of these areas, these
departments are prone to become watertight compartment giving rise to inter-
departmental rifts.
Corporate strategies spelt out clearly help in smoothening out some of
the interdepartmental conflicts. Strategic planning provides unity of purpose and
direction, the much emphasized management principle.
It is not unusual, for instance, for marketing department to ask the
production department to shorten their productions runs, to cater to the demands
of various models which is normally resisted by the latter. Similarly, the design

57
department may often specify certain change in the product which may raise the
cost of production. The finance department may try to block any measure that
increases the cost of production.
The process of strategic planning in any organisation is similar to the
general planning process which has been discussed in Lesson – 3 However, the
emphasis on strategic planning is more on long-term objectives rather than the
day-to-day operational aspects. The objective is to keep the firm afloat in the
long-run in the light of several uncertainties. The following are the important
steps in the process of strategic planning;

 deciding the corporate mission and broad objectives;

 gathering the relevant information and analyzing it;
 conducting a resources audit (analysis of strength, weaknesses in the
light of the opportunities and threats) – popularly known as SWOT
analysis;
 identifying strategic alternatives; and
 making the choice (selection of the right strategy).
The manager’s success lies in understanding the trend in the environment.
The trends contain signals and give clues about the potential opportunities and
impending threats. Many organizations have paid a heavy price for their failure
to draw the right meanings from the signals. In some cases, though the
management is aware of the trends, a fixed mind set or resistance to change
make them cling to the status-quo.
Take the case of the public sector gaint, HMT which prided itself, for a
long time on its dominance in the Indian wrist watch market. The company was
on a high tide for a long time and failed to understand the shift in the consumer
preference towards the more trendy, sleek quartz watches. It was so complacent

58
that it took the market for granted. In the meantime much of the HMT’s
traditional markets have been captured effortlessly by TITAN. TITAN with its
innovative marketing strategies has, no doubt, changes the face of the Indian
watch market. This is only one or the several examples of failures in strategic
planning in the contemporary business world.
Political, economic, sociological and technological changes in the
environment are so extensive and affect so many activities of an enterprise.
Failure to read the changes and complacent attitude on the part of management
costs the firm dearly. There are numerous examples, where yesterday’s leaders
have become today’s non-entities solely because of their failure to adapt tot eh
changing realities.
ACTIVITY – E
What are the functions of strategic planning and Explain the steps
involved in strategic planning.
………………………………………………………..
………………………………………………………..
………………………………………………………..
………………………………………………………..
Short range planning / Operational planning
Strategic planning is the prerogative of the top management which is the highest
policy making body in any organisation, where as operational planning is done
at the lower levels. Strategic planning is mostly concerned with the “why” of the
things, whereas operational planning is concerned with the “How” of the things.
The focus in strategic planning is on long-term, while it is on short-term in
operational planning. Further, planning is less detailed in the former because it is
not involved with the day-to-day operations whereas it is more detailed in the
latter Considering its nature, operational planning is also called tactical

59
planning.
However, Operational plans stem or originate from strategic plans. In
other words, strategic planning provides guidance and boundaries for
operational planning. Effective management, therefore, must have a strategy and
must operate on the day – to – day level to achieve it. Both should not be viewed
as mutually exclusive because operational planning identifies the major
activities to achieve the objectives of strategic planning. For example, if the
strategic plan is to face competition with new and innovative products, major
tasks to achieve this goal would be clarified by operational planning. The
possible tasks at the operational level include:

 strengthening the research and development department;

 motivating the people to work on new products; and
 creating a climate in the organisation where people are willing to take
risks.
TYPES OF PLANS
Different types of plans are developed by an organisation, namely mission,
strategies and policies, procedures, rules, programmes and budgets. One
common thing is, they all refer to a future course of action. However, some
variances in respect of the scope and operation are found in the implementation.
Some are single-use plans while some are standing plans. They are discussed
below:
Mission or Purpose
Organisations exist in society. Therefore, it is appropriate to relate their
existence to society by satisfying a particular need of the society. Mission may
be defined as “a statement which defines the role that an organisation plays in
the society”. The terms ‘mission’ or ‘purpose’ are often used interchangeably.

60
An organisation’s mission statement includes its philosophy and basic purpose
for which it exists. It establishes the values, beliefs, and guidelines that the
organisation holds in high esteem. Mission statement suggests how an
organisation is going to conduct its business. It defines the basic intentions of
the firm. A Clear definition of ‘mission’ or ‘purpose’ is necessary to formulate
meaningful objectives.
Answers to two important questions are provided by the mission
statement; what is our business? and what should it be? These questions force
the management to define their customers and their needs.
Policies
Koontz and O’Donnel define policy as “a general statement of understanding
which guides the thinking and action in decision-making. Policies provide the
framework within which managers operate. Policies exist at all levels in the
organisation. Some may be minor or derivative policies affecting the whole
organisation, while others may be minor or derivative policies affecting the
functioning of department or sections within the departments.
A policy is considered to be a guideline for action. Policies may be very
clear and explicit. Good policies are flexible, easy to interpret and consistent
with overall objectives of the organisation. Policies are laid down by the
management for all the important functional areas. As such, we hear about
production policies, financial policies, marketing policies and personnel
policies, to mention a few. For instance, in the personnel area, specific policies
may be formulated for recruitment, training, compensation, etc. Accordingly
whenever the need for recruitment arises, the personnel manager consults the
existing recruitment policy of the company and initiates the steps necessary to
fill the vacancies. Thus it is evident that the personnel manager operates within
the broad policy of the company in recruiting the people. Thus, policy is a one

61
time standing decision that helps the manager in making day-to-day decisions in
their operational areas.
Procedures
Policies are subdivided and stated in terms of procedures. (A series of related
steps or tasks to be performed in a sequential way). For example: A company’s
policy may be to sell the obsolete products at a discount. The procedure may
explain how to decide which product is obsolete and what percentage of
discount is to be offered. But procedures, if simple and clear would ensure order
in the performance of operations. Though procedures exist at all levels in an
organisation, they are more detailed at the lower levels. In common parlance,
they are called ‘Standard Operation Procedures’ (SOPs),
Procedures for placing orders for material and equipment, for
sanctioning different types of employee’s leave, for handling grievances at the
shop floor level, etc., suggest how each of these has to be handled. Policies and
procedures are closely interrelated. For instance, a company may follow time-
bound promotion policy to promote people from within. But the operational part
of the policy is specified by the procedure – the formalities to be fulfilled to
effect the promotion are dictated by the procedure.
Rules
A rule is also a plan. A rule is a prescribed course of action that explicitly states
what is to be done under a given set of circumstances. Rules are plans in that
they suggest the required actions. A rule requires that a definite action has to be
taken in a particular way with respect to a situation. Some definiteness is
associated with rules. For example, ‘no smoking’ is a rule. The essence of the
rule is that it reflects a managerial decision that certain actions be taken – or not
be taken.

62
 Rules should not be confused with policies and procedures. Policies
contain some operational freedom or discretion while rules allow no discretion
in their application. Similarly, procedures though different form rules may
contain rules. For example, there may be a procedure to enable customer
grievances in respect of post-sale service. The procedure may contain a rule that
free service is available only for a period of two years after the sale.
Programmers
A programme is a broad term which includes goals, policies, procedures, rules
and steps to be taken in putting a plan into action. Terry and Frankin define
programme as “ a comprehensive plan that includes future use of different
resources in an integrated pattern and establishes a sequence of required and
time schedules for each in order to achieve stated objectives’. Thus, a
programme includes objective, policies, procedures, methods, standards and
budgets. For instance, launching Prithvi” satellite is a programme Jawahar
Rojgar Yojana” is a programme. The essential ingredients of any programme are
time phasing’ and budgeting. It implies that specific dates are prescribed for the
completion of various phases of a programme. Adequate budgetary provisions
are made for financing the programme. Programmes may be major or minor. For
instance, a company may embark upon modernisation programme of the plant
and machinery and other manufacturing systems in a big way. By all means such
an effort is a major programme. Similarly, a large organisation may start
computerizing all its activities. On the other hand, modernisation of small
equipment in some section of the factory and computerization of a particular
operation in a certain department may be considered as minor programmes.
Budgets
A budget is a plan statement for a given period of time in future expressed in
financial or physical units. Budget contains expected results in numerical terms.
63
A budget is a quantitative expression of a plan. Organizational budgets vary in
scope. Master budget which contains the consolidated plan of action of the
whole enterprise is in a way the translated version of the overall business plan of
the enterprise. Similarly, production budget represent the plan of the production
department. Again, capital expenditure budget, raw material budget, labour
budget, etc. are a few minor budgets in the production department. On of the
advantages of budgets is they facilitate the comparison of actual results with the
planned ones by providing yardsticks for measuring performance.
SELF ASSESSMENT QUESTIONS
1. What is planning? Explain the purpose and principles of planning.
2. Explain the steps involved in planning.
3. What are the characteristics of a sound plan?
4. What are limitations of planning?
5. What are the different types of plans? Explain them.
FURTHER READINGS
1. Terry, George and Franklin, Stephen, ‘Principles of Management, All
India Traveller Book seller, New Delhi, 1988.
2. Steiner, George A, ‘Top Management Planning’ Macmillan, New York,
1969.

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 LESSON
MA
4 MANAGEMENT BY OBJECTIVES

LESSON OUTLINE

 Objectives
 Process of MBO
 Pre requests of MBO
 Advantages of MBO
 Reasons why MBO Fails
 Types of policies
 Principles of polices
q Policy formation
 Strategies
 Appropriateness of Business
strategy LEARNING OBJECTIVES

After reading this lesson you should be

able to

 familiarise yourself with the process

of MBO
 understand the usefulness of MBO as
a managerial tool.
 understand the sources of polices
 acquaint with the formulation of
polices.
 explain the appropriateness of
business strategy

65
INTRODUCTION

Management guru Peter Drucker is credited with being the first to introduce
MBO as an approach for increasing organizational effectiveness. He observes
that every manager, from the highest to the lowest levels in the organisation,
should have clear objectives to pursue. According to him, such a process would
enable each manager to have a clear understanding of what the organisation
expects of him or her and how their individual objectives are integrated with the
overall organizational objectives. George Odiorne has done substantial research
work on MBO and further popularized the concept.
To quote George Odiorne, “MBO is a process whereby the superior and
subordinate managers of an organisation jointly identify the common goals,
define each individual’s major areas of responsibility in terms of the results
expected of him, and use these resources as guides for operating the unit and
assessing the contribution of each of its members”.
Different goals are sought to be achieved by the introduction of MBO in
organizations. MBO, as a management tool, thus, is so versatile that it is used;
 to integrate the organizational goals with the individual goals;
 as a motivational technique wherein individuals are driven towards the
achievement of goals;
 to appraise the performance of managers involved in the process; and
 to control the activities as they are performed.

66
 Drucker suggests that objectives are to be specified in the key result areas of
business (KRAs). A key result area may be understood as one, the performance
of which, directly and vitally affect the success and survival of the business.
accordingly, for a manufacturing firm production, productivity, profitability,
market share, social responsibilities, employer and employee relations, manager
and worker development, development of physical resources, constitute the
important key result areas.
It may be understood that the KRAs vary from business to business. Since
MBO involves a systematic effort towards the achievement of objectives, utmost
care has to be exercised in setting the objectives for all the key result areas.

OBJECTIVES
‘Objectives’ are the end-points of management action. They provide meaning to
the existence of an organisation. Objectives are the specific targets to be
achieved by an organisation. Therefore, the objectives. They are the end-points
towards which all management activities like organising, staffing, directing and
controlling are directed. In other words, only after defining the basic objectives
for which an organisation exists, can the manager determine the kind of
organisation, the type of personnel and their skills, the kind of motivation and
direction and the nature of control techniques which may be employed to
achieve the ends.
1. Objectives may be tangible or intangible, in that certain of the
objectives may be expressed in quantitative terms. For example, in the
areas of market standing, productivity and physical and financial
resources quantification is possible. On the otherhand, worker’s morale,
social responsibility, etc. cannot exactly quantified. However objectives
in the latter category may be expressed in qualitative terms. Thus,

67
 quantitative objectives are gauged by ‘how much’ while qualitative
objectives by ‘how well’. Accordingly, objectives may also be classified
under ‘quantitative’ and ‘qualitative’ objectives.
2. Objectives have hierarchy, in that objectives that have wider scope and
are relevant for the whole organisation are known as enterprise
objectives. These objectives are split into unit level or departmental
objectives. Thus, objectives at all levels in the organisation are
interrelated and form a network.
3. Short-term and Long-term Objectives: Short-term objectives are
those which are sought to be achieved by the organisation in the
immediate future, while long-term objectives are those which are aimed
to be achieved over a long period, say five to ten years or even more.
However, both are not mutually exclusive and rather are interrelated.
4. Objectives sometimes may be in conflict with each other: the goals of
the various departments at times may clash, in that, each department
considers that its goals are more important. For example, the production
goal of low unit cost achieved through mass production may be in
conflict with the sales goal of offering high quality goods. Such conflicts
have to be resolved amicable.

ACTIVITY - A
Briefly explain objectives and describe their characteristics.

…………………………………………………
…………………………………………………
…………………………………………………
…………………………………………………

68
PROCESS OF MBO
Having understood the basic characteristics of the objectives, let us examine the
process of MBO. As a process, management by objectives begins at the top of
the organisation with the establishment of specific organizational objectives.
Subsequently, objectives at the various other levels down the hierarchy are
decided by mutual discussions and consultations by both superior and
subordinates.
The process of MBO includes the following steps.
 establishment of goals for the whole organisation,
 preparation by subordinates, of specific goals within the framework
provided by the superior,
 joint discussion of an agreement upon the goals by the superior and
subordinate,
 joint review of progress at regular intervals in the light of the
predetermined goals, and
 corrective measures, if necessary, as revealed by the review.
In the whole process, setting of goals for the subordinate positions is the
crucial step. Unlike in the traditional system where goals are decided for the
subordinates by the superiors, in the MBO system, goals are set on the basis of
consensus reached in the discussions between superiors and subordinates. They
are set in a democratic way. Superiors act as facilitators and create a favourable
climate where subordinates freely express their opinions, viewpoints and
perceptions about what they believe could be achieved. The process ensures
meeting of minds between superiors and subordinates. As a result, there is ample
possibility for the subordinates to feel that they are working for their own goals
and not for somebody else’s. Consequently, they strive to achieve the goals. As
they participate in the goal setting exercise actively, they in turn get motivated to

69
achieve them. Once they achieve the goals, that contributes for the satisfaction
of their ego needs. Thus, MBO serves as a motivational techniques.
ACTIVITY - B
Give the steps in the process of MIBO in sequential order
…………………………………………………
…………………………………………………
…………………………………………………
…………………………………………………
PREREQUISITES OF MBO
 MBO is not merely a goal-setting tool. It is a philosophy and has to
be understood thoroughly by the managers concerned with
achievement of objectives.
 Top management must be willing to implement the system
wholeheartedly. Its support and encouragement are crucial for the
success of MBO. The necessary democratic climate has to be
created in the organisation for setting the goals in a realistic way.
 Goals have to be spelt out in specific and clear terms. To the extent
possible, they must be made realistic because goals motivate
employees towards better performance;
 The key result areas (KRAs) of the business have to be identified
and appropriate goals have to be specified for these areas. All the
important areas of the business must be covered with meaningful
goals.
 It has to be realised that MBO which involves goal-setting is not an
end by itself. It is only a means to achieve organizational
effectiveness. Otherwise, goal-setting becomes the primary task
rather than their achievement.

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  Appropriate organisation structure has to be designed with well-
understood relationships among people such that every goal
becomes some individual’s responsibility.
 Besides clarifying the organizational roles by adopting a suitable
organisation structure, attention has to be paid on the resources
required by the people to achieve the goals. Otherwise, goals by
themselves, however effective they are, do no assure performance.
Performance depends on the timely availability of resources. Non-
availability or inadequate access to the resources frustrates the
individuals concerned with the achievement of goals.

ADVANTAGES OF MBO
An organisation can benefit in the following ways by introduction MBO.
Following are some of the advantages:
 Accomplishes consistency in objectives of each department are
consistent with the organizational objectives, the possibility for the
various department working at cross purposes is very less.
 Contributes for effective management by providing lot of clarity in
the objectives and the organisation that is necessary to achieve
them;
 Forces the management to plan the activities in a systematic way.
 Facilitates objective performance appraisal. As the goals themselves
become the standards against which the actual performance is
measured, MBO system itself acts as an effective performance
appraisal tool.
 Contributes for the installation of a democratic and participative
setup, very essential for the success of an organisation in a complex

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 business environment of today. The interaction that takes place
between the superiors and subordinates is a good sign of human
resource development in the organisation.
REASONS WHY MBO FAIL
Inspite of many advantages, MBO may no be considered as a panacea for all the
evils of the organisation. The success of the programme depends on several
factors. It may not yield the desired results in some organizations due to the
following reasons:

 Lack of top management involvement and support. For an MBO

programme to succeed, it must have the complete support of top
management.
 Lack of understanding of the philosophy behind MBO.MBO programme
in some organizations meet the resistance employees because it is
imposed on them as ‘control device’ to curb their freedom.
 Difficultly insetting realistic and meaningful objectives. Some jobs and
areas of performance cannot be quantified and hence are not amenable
for objective evaluation.
 Increased time pressure. To use MBO programme, manager must learn
to establish priorities and use the time effectively.
 Lack of relevant skills. Managers may not have the requisite skills for
identifying objectives, communication and interpersonal interaction
such as counseling and giving and receiving feedback.
 Lack of individual motivation. The rewards and incentives for superior
performance have to be specified clearly. Ambiguity or uncertainty
regarding the outcome of the efforts is one of the reasons for the non-
performance.

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  Poor integration with other systems. The objective setting and review
phases must be performed in conjunction with other activities such as
budgeting, forecasting and the like. Often managers are neither taught
how to set the objectives nor familiarized with the various plans and
policies of the organisation. In such cases, each department ends up
going its own way, and the results are counterproductive to the overall
organisaiton.
POLICIES
Decision-making is the primary task of a manager. While making decisions, it is
common that managers consult the existing organizational policies relevant to
the decisions. Policies provide the basic frame work within which managers
operate. Policies exist at all levels in the organisation. Some may be major
company policies affecting the whole organisation while others may be minor in
nature affecting the departments or sections within the departments. Thus,
policies are, intended to provided guidance to managers in decision-making. It
has to be remembered that a policy is also a decision. But it is a one time
standing decision, in the light of which, so many routine decisions are made.
TYPES OF POLICES
Polices come into being is an any organisation in different ways. Koontz and
O’donnel have classified policies under the following types, based on their
source.
1. Originated
Top management formulates policies for the important functional areas of
business such as Production, Marketing, Finance, Personnel and so on. The
objective is to help the concerned managers in decision making in their
respective areas. Thus, originated policies are the result of top management
initiative. These policies are formulated in the light of organizational objectives.
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They may be broad or specific depending on the centralization or
decentralization of authority. If they are broad, they allow the subordinates some
operational freedom. On the other hand, if they are specific they are
implemented as they are.

2. Appealed Policies

Managers quite often confront with peculiar situations as to whether they have
the authority to take a decision on a particular issue or problem. The policies
regarding some issues may be unclear or may be totally absent. There may not
be precedents to guide the manager. In such a case, he appeals the matter to his
superiors for their thinking. Thus, appeals are taken upwards till they reach the
appropriate level in the hierarchy. Depending upon the nature of issues involved,
after a through examination, policy decision would be taken at the appropriate
level. The decision taken by the higher-ups, thus becomes a policy. For example,
during festival seasons, the manager at the branch level may be in a dilemma to
offer discount to the customers. There may not be any explicit policy to guide
him. But to meet competition in management, on the basis of an appeal made by
the branch manager may allow him to offer discount on such occasions. Unless
otherwise stated, it becomes an unwritten policy and guides the manager’s
decision making in all such future situations.
3. Implied Polices
In some cases, there may not be specific policies for all the contingencies.
Managers draw meanings from the actions and behaviour of their superiors. For
example, if customer service in on top of the agenda of the organisation and if
such a philosophy is constantly reinforced by the actions of top management
from time to time, a manager may go all out to help a customer who is in a

74
difficult situation. There may not be any objection from the top management to
the stand taken by the lower level manager in support of the customer. Though
there is no explicit policy, mangers may assume it in a particular way and go
about in their day-to-day operations.
4. Externally Imposed Policies
These are the policies which are not deliberately conceived by the managements.
They are rather imposed on the organizations by the agencies in the external
environment like government, trade unions, industry association, consumer
councils, etc. these agencies, to protect the interests of the respective groups
may lay down certain policies to be followed by the business. As the interaction
of the business with external environment is increasing, one can find many
policies thus coming into being in any modern business. For instance, the
recruitment policy of the organisation is influenced by the government’s policy
towards reservations to weaker sections. Anti-pollution measures, concern for
the quality of the product and customer service also fall in this category.

ACTIVITY – C
Write the classification or types of polices
…………………………………………………
…………………………………………………
…………………………………………………
…………………………………………………

IMPORTANCE OF POLICIES
Furnish the Framework for d ecisions
Policies provide the broad framework within which decisions are made. In the
absence of appropriate policies, managerial decision-making may be analogous
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to “Reinventing the Wheel” every time. For example: a policy on internal
promotions greatly helps the manager in filling the vacancies. Whenever
vacancies arise, he simply goes by the existing promotion policy of the
organisation. Sound policies, thus save lot of time in decision-making and avoid
confusion.

Assure Consistency in Operations

Policies specify the boundary conditions of decisions. Thus, when decisions are
actually made, they conform to the policy relevant to the decision. If the policy
of an organisations is to face competition with quality products, the emphasis
naturally will be on issues relating to improving the quality of the product. All
the decisions that affect the product quality are normally taken in the light of the
explicit policy. Policies developed carefully and understood perfectly result in
consistency in planning.
PRINCIPLES OF POLICY MAKING
Policies help to ensure that all units of an organisation operate under the same
ground rules. They facilitate coordination and communication between various
organizational units. This is possible because policies make consistency in
action possible. In view of the importance of policies in guiding executive
behaviour, they have to be formulated carefully. In fact, policy formulation is
one of the important executive responsibilities. Effectiveness of policies,
therefore, lie in understanding the following principles underlying policy
formulation.
1. Define the Business
The two fundamental questions to be asked in this regard are what is our
business? what should it be? Many business have failed because they did not
attempt to seek answers to these simple and basic questions. Gramophone record

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companies for long, did not realize that they are in the entertainment business.
hence they are now here in the corporate history. In contrast, Hallmark
Incorporation of USA defines its business as “social expression” and not as
greeting cards. Such a definition helped the company a lot in expanding
operations in the related fields like personal accessories and women’s jewellery,
etc. To define the business, a company must take a close look at its basic
operations and analyse it’s major strengths and weaknesses in all the functional
areas like marketing, product development, finance and public relations. Such an
exercise enable the enterprise to capitalist on its strengths while overcoming the
weaknesses.
2. Assess Future Environment
A realistic estimate of the future trends in matters relating to technology,
economic and market conditions, political stability, etc., is essential for policy
formulation. As many people would agree, forecasting is a difficult task.
Instances are not rare, where the best of the forecasts turned out to be just
intentions. That is why, for some managers, forecasting is a highly unpleasant
task. It is interesting to note that sometimes products which were predicted to be
instant failures by the so called market surveys proved to be run-way successes.
The ‘sintex’ water tank is a classic example where the product defied the gloom
predicted by the experts. However, examples of this sort are few and far
between. On the otherhand, quite the opposite is also possible.

3. Ensure availability of Resources

While formulating policies the resources required to implement the policies have
to be assessed. If policies are formulated without regard to the ground realities,
you would encounter too many problems while implementing the policies. As a
result, policies do not serve the intended purpose. For example, if the policy of

77
the organisation is to cash in on the new opportunities, if does not mean that you
can enter any field thrown open by the government. You have to assess yourself
as to how strong you are in terms of resources required. Otherwise it amounts to
overstretching. That is how, “close to the knitting”, building on “core –
competencies” are very much emphasized these days.
4. Communicate the Policies
if policies are to serve the desired purpose, they have to be communicated to all
those who are to implement them by taking appropriate decisions at the
operational level. The policy of the organisation towards competition, for
instance has to be communicated to the people in the marketing department.
Otherwise there will not be proper synchronization between the policy and
action.

POLICY FORMULATION
As mentioned earlier, the basic intention of policies is to help executive thinking
in decision-making. Policies are formulated for all the key functional areas of
business like production, marketing, finance, personnel and so on. Effectiveness
and consistency of decisions in all these area depended on how well the polices
are formulated and understood. A policy is a plan. Therefore, the steps involved
in policy formulation are similar to the steps in planning. Though policies vary,
in respect of scope, the process of policy formulation usually involves the
following steps.
a. Corporate Mission
Corporate mission specifies the purpose for which the organisation exists. It
relates the organisation to the environment in which it operates. It is natural,
therefore that all the activities of the organisation are geared towards the
achievement of the mission. The mission statement provides the direction to the

78
organisation. As such, thorough understanding of the corporate mission is the
starting point for policy formulation.
b. Appraisal of the Environment
Environment appraisal in a systematic way is the key for successful formulation
of the policies. Correct appraisal of the environment enable the organisation to
integrate its activities with the needs of the society. As such, the nature of the
environment, the various dynamics of its have to be analysed. It included
collection of relevant information from the environment and interpreting its
impact on the future of organisation.
c. Corporate Analysis
While the focus in environmental appraisal is on the internal factors of the
business, corporate analysis takes into account the internal factors. Corporate
analysis discloses strengths and weaknesses of the organisation and points out
the areas that have potential. This is an inward looking exercises.
d. Identification of Alternatives
The above two steps – Environmental appraisal and Corporate analysis
popularly know as SWOT (Strengths, Weaknesses, Opportunities and Threats)
analysis will help identifying the alternative policies. For example, the objective
of the organisation is expansion. This may be achieved by several ways.
Diversification of the activities, acquisition of existing organisations,
establishment of subsidiaries abroad and so on. Again, if diversification is
chosen, it has to be decided whether it is into related or unrelated business. The
alternative policies thus identified have to be evaluated in the light of the
organizational mission and objectives.
e. Choice of the Right Policy
This stage involves choosing the right policy from among the several policy
options that suits the organizational objectives. The Corporate history, personal
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values and attitudes of the management and the compulsions in the environment,
if any, influence the choice of the policy.
f. Policy Implementation
Effective implementation of the policy requires designing suitable organisational
structure, developing and motivating people to contribute their best, designing
effective control and information systems, allocation of resources, etc. At times,
polices may have to be revised in line with the changes in the environment.
Polices have to be monitored constantly during the implementation stage, so that
inadequacies, if any may be corrected at the appropriate time.
ACTIVITY - D
Describe how policies are formulated.
…………………………………………………
…………………………………………………
…………………………………………………
…………………………………………………
STRATEGIES
The terms ‘strategy’ has been adopted from war and is being increasingly used
in business to reflect broad overall objectives and policies of an enterprise. In
the context of business, strategy refers to the firm’s overall plan for dealing with
and existing in its environment. Strategies most often denote a general
programme of action and deployment of emphasis and resources to attain
comprehensive objectives. Strategies are plans made in the light of the plans of
the competitors because a modern business institution operates in a competitive
environment. They are a useful framework for guiding enterprise thinking and
action. For instance, a company may follow a strategy of charging a lower price
or using more sales force than competitors advertising more heavily than
competitors.
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 The purpose of strategies is to determine and communicate, through a
system of major objectives and policies, a picture of what kind of enternrise is
envisioned. They do not attempt to outline exactly how the enterprise is to
accomplish its objectives since this is the task of countless major and minor
supporting programmes. But they are a useful framework for guiding enterprise
thinking and action. This usefulness in practice and importance in guiding
planning do, however, justify their separation as a type of plan for purposes of
analysis.

APPROPRIATENESS OF BUSINESS STRATEGY

A business strategy is a pragmatic plan of action to achieve certain objectives.
To evaluate its appropriateness reguires certain criteria. We may identify six
criteria to measure the appropriateness of a business strategy:
1. Internal Consistency. A business strategy in a particular area of
business should be consistent with strategies in other areas and objectives and
polices of business. Internal inconsistency in any strategy will create problem in
its implementation.
2. Consistency with Environment. A strategy is basically an
enterprise’s response to cope with external environmental variables. Therefore,
it should aim at meeting the threats and pressures of external forces.
3. Appropriateness in the light of available Resources: Formulation
of a strategy requires a realistic assessment of the resources of the enterprise-
men, money and materials – both existing resources and the resources it can
command. The resources of an enterprise also include the skills of management
and other manpower, command over sources of scarce raw materials, production
facilities, technology, marketing capabilities and image, and so on. It is desirable
that the every enterprise formulates its strategy within the limitations imposed

81
by its resources. The objective is to ensure that the enterprise’s resources are
into over-stretched or over-strained on the one hand and to utilize the existing
and commendable resources in the best possible manner, on the other.
4. Acceptable degree of Risk. Any major strategy carries with it
certain element of risk and uncertainty because it covers a long future horizon
and because it seeks to cope with complex environment. The degree of risk
inherent in a strategy should be within the bearable capability of the enterprise.
Resources should not be committed irrevocable, nor they should be concentrated
on a single or narrow range of ventures. Also, there should be match between
risk and returns, financial and otherwise.
5. Appropriate Time Horizon. Time is the essence of any strategy.
While a reasonably long time span imparts come flexibility, the problem of
forecasting is ever present. How far in the future can top management predict
with credibility is a measure of its capability An optional time span cannot be
mathematically determined; it is a matter of environmental conditions, the
objectives to be sought and the judgment of management.
6. Workability: A strategy should be feasible and produce desired
results within the constraints and parameters know to management. It should be
realistic and relatively simple to understand in interpretation and
implementation. Certain quantitative measures like volume of sales and profit,
growth rate, asset formation, market share, introduction of successful of new
products and so on, are to be set. These are to be combined with qualitative
criteria like the degree of confidence with which managers implement the
strategy, the extent to which major areas of decision situations are handled by
reference to the criteria embedded in the strategy, the extent to which
opportunities are exploited, threats averted, resources mobilised, and
environmental control gained.

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SELF- ASSESSMENT QUESTIONS

1. What is the nature of objectives?

2. Explain the process of MBO.
3. What is the importance of policies?
4. Explain how policies assure consistency in decision-making.
5. What are the important steps in policy formulation? Explain.
6. What strategy? Explain the appropriateness of business strategy.

FURTHER READINGS
1. Dale, Earnest, Management: Theory and Practice, Mc Graw-Hill, New
York, 1973.
2. Drucker, Peter F, Management: Tasks, Responsibilities, practices,
Harper & Row, New York, 1974.

KEY TERMS
 MBO  Imposed Policies
 Objectives  Corporate Mission
 Policy  Programmed Decisions
 Appealed Policies  Strategic Decisions
 Implied Polices  Group decisions

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 DECISION MAKING
LESSON
5
LESSON OUTLINE

 Decision – Making process

 Types of Decisions
 Decision making process
 Techniques of Decision
Making.

LEARNING OBJECTIVES

After reading this lesson you should be

able to

 understand the meaning and

characteristics of decision making
 explain the types of decisions
 examine the process of decision
making
 understand the techniques of decision
making.

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INTRODUCTION
It is said that decisions are the principal diet on which a manager thrives. It is
decision-making power which distinguishes a manager from others in an
organisation, Hardly a day passes without making some decision or other in the
executive’s life. Whatever a manger does, he does through making decisions. As
such decision-making constitutes the most exciting and eventful part of any
modern executive’s career. Considering the importance of decision-making
some authors even view it synonymously with management.
In the course of managing an organisation, the manager is confronted
with several problems which require immediate and appropriate solutions. Such
problems are solved by making decisions. For instance, break-down of
machinery, customers’ complaint on quality, delay in collection of receivables,
some industrial relations problem at the shop-floor level leading to unrest among
the employes, to mention a few, call for timely solutions. That apart, in some
cases, though there is no any problem as such – to improve productivity, market
share, profitability, some vital decisions have to be taken. Thus, a manager has
to make decisions convering several aspects of the organisation.

DECISION – MAKING MEANING

Decision-making in simple, may be defined as “the selection of a future course
of action from among various alternatives’. Thus it presupposes the existence of
various alternatives. It is in a way a choice between alternatives. In other words,
if there are no alternatives, there is no choice. Therefore, the question of
decision-making and the associated dilemma do not arise. Thus, the following
characteristics emerge from the definition of decision-making.

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Characteristics

(1) Decision making is a continuous process.

(2) The question of decision-making comes into picture only when
there are alternatives.
(3) Decision making is always purposive, in that decisions should
aim at achieving some purposes.
(4) It is an intellectual process supported by sound-reasoning and
judgment.
(5) Decision-making is all pervasive in the sense that all levels of
managers take decisions, though at the impact and scope of
decision vary.
The famous decision theorist, Herbert Simon has identified three major
steps in the decision-making process. The first step involves the recongnition
and understanding of the real problem. In the second phase, various alternatives
may be developed. The third step involves careful assessment of alternatives
available for taking a better decision.
ACTIVITY -A
Write the meaning and characteristics of decision making.
…………………………………………………
…………………………………………………
…………………………………………………
…………………………………………………
TYPE OF DECISIONS
Decision taken by managers may be classified under various categories
depending upon the scope, importance and the impact that hey create in the

86
organisation. The following are the different types of decisions that are usually
taken by managers in the organisation.

1. Programmed and Non -programmed Decisions

Programmed decisions are normally repetitive in nature. They are the easiest to
make. Usually these decisions are taken in consultation with the existing policy,
rule or procedure which are already laid down in the organisation. For example:
making purchase orders, sanctioning of different types of leave, increments in
salary, settlement of normal disputes, etc. Managers in dealing with such issues
of routine nature, usually follow the established procedures.
On the other hand, non-programmed decisions are different in that they
are non-routine in nature. They are related to some exceptional situations for
which there are no established methods of handling such things. For example:
Issues relating to how to handle a serious industrial relations problem, declining
market share, increasing competition, problems with the collaborater, growing
public hostility towards the organisation fall in this category. Problems like
these have to be handled in a different way. While different managers reach the
same solution in the case of programmed decision, because they are guided by
the same policy or procedure, the solutions may widely differ in the case of non-
programmed decisions. As one moves up in the hierarchy, many of the decisions
that managers make are non-programmed in nature.
It is important to note that the effectiveness of a manager lies in handling
exceptional situations. Such situations call for ingenuity and sound judgment.
Surprisingly, many managers get bogged down in the routine issues at the cost
of the non-routine issues. The saying that “routine drives out the non-routine”
instead of the other way round in true in many organizations. Such a tendency
results in devoting less time for the important issues.

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2. Operational and Strategic Decisions
Operational or tactical decisions relate to the present. The primary purpose is to
achieve high degree of efficiency in the company’s ongoing operations. Butter
working conditions, effective supervison, prudent use of existing resources,
better maintenance of the equipment, etc. fall in this category. One the
otherhand, expanding the scale of operations, entering new markets, changing
the product mix, shifting the manufacturing facility from one place to the other,
striking alliances with other companies, etc. are strategic in nature. Such
decisions will have far reaching impact on the organisation. Usually, routine
decisions do not need intensive deliberations and huge resources and are taken
by managers at the lower levels, while strategic decisions require extensive
deliberations and huge resources and are taken by top level managers. The focus
in the operational decisions is on the short-run or immediate present, while it is
on the long-rum in the cse of strategic decisions.
3. Organisational and Personal Decisions
Decisions taken by managers in the ordinary course of business in their capacity
as managers relating to the organisational issues are organisational decisions.
For example: decisions regarding introducing a new incentive system,
transferring an employee, reallocation or redeployment of employees etc. are
taken by managers to achieve certain objectives. As against such decisions,
managers do take some decisions which are purely personal in nature. However,
their impact may not exactly confine to their selves and they may affet the
organisation also. For example: the manager’s decision to quit the organisation,
though personal in nature, may create some problems for the organisation.
4. Individual and Group Decisions
It is quite common in organizations that some decisions are taken by a manager
individually while some decisions are taken collectively by a group of managers.
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Individual decisions are taken where the problem is of routine nature, whereas
important and strategic decisions which have a bearing on many aspects of the
organisation are generally taken by a group. Group decision making is preferred
these days because it contributes for better coordination among the people
concerned with the implementation the decision.
Decisions may also be further classified under major and minor decisions
and simple and complex decisions. However, a detailed description of these
types is not necessary because they are almost all similar to the already
discussed programmed and non-programmed decisions in respect of importance
and impact.
Rational decision-making process contains the following steps as could
be seen in figure.
a. Define the Problem
Problem definition is the most crucial step in the entire decision-making process.
As the saying goes, “a problem well defined is a problem half-solved, utmost
care has to be exercised in this stage, for wrong definition of the problem leads
to wrong solutions. This is also called diagnostic stage. Jumping to conclusions
on the basis of certain symptoms has to be avoided. The problem has to be
examined from different angles so as to identify the exact causes. Unless exact
causes are identified, right decisions cannot be taken.
b. Analyse the problem
The problem has to be thoroughly analysed. The past events that contributed to
the problem, the present situation and the impact of the problem on the future
have to be examined. Problems do no crop up overnight. The genesis of the
problem and the various contributing factors have to be analysed. In analysing
the problem, personal prejudices have to be avoided. As far as possible, an
objectives assessment of the situation is useful to arrive at right decisions.
89
 Proper analysis of the problem helps the manager to assess the scope and
importance of the problem. If the problem is of minor nature, he can authorize
his subordinates to solve it. If it is a major problem requiring the involvement of
many people, he can initiate the necessary steps. At times, the problem may not
warrant any decision. Leaving the problem as it is could be better.
c. Develop Alternatives
There are hardly few problems for which there are not many alternatives.
Effective decision-making depends on the development of, as many alternative
solutions, as possible. The underlying assumption is that a decision selected
from among many alternatives tends to be a better one. The ability to identify
and develop alternative courses of action depends on the manager’s creativity
and imagination. As the thinking of two people may not be similar, the skills and
abilities in developing alternatives significantly vary from one manager to the
other.
d. Evaluate Alternatives
The next step in the decision-making process involves evaluation of the
alternative courses or solutions identified to solve the problem. Alternatives
have to be evaluated in the light of the objectives to be achieved, and the
resources required. Evaluation involves a through scruitiny of the relative merits
and demerits of each of the alternatives in relation to the objectives sought to be
achieved by solving the problem.
e. Select and Implement the Decision
Scientific evaluation of the alternatives reveals the acceptability of various
alternatives. After weighing the pros and cons in detail, the best alternative has
to be selected and implemented. It may not always be possible to select the best
alternative for a given problem for want of complete information, time and

90
resources. In such a case, the manager has to satisfy with limited information
and optimise the yields under a given set of circumstances.
Once an alternative is selected, that becomes the decision and it has to be
implemented in a systematic way. The required resources for the
implementation and the necessary cooperation from the people concerned with
or affected by the decision have to be ensured. Otherwise, however good the
decision may be, it may encounter stiff resistance in the implementation stage.
f. Follow-up and Feed back
Once the decision is implemented, it has to be closely monitored. Adequate
follow-up measures have to be taken. In the course of implementation, so many
unexpected events may render the decision ineffective. The decision may not
yield the desired results. Constant follow-up helps to take corrective measures as
and when necessary. Further, such a follow-up enables to identify the
shortcomings or negative consequences of the decision. It provides valuable
feed-back on which the decision may be reviewed or reconsidered.

ACTIVITY -B
Describer the process of decision-making.

…………………………………………………
…………………………………………………
…………………………………………………
…………………………………………………

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Rationality in decision -making
Rationality implies that decision-making tries to maximize the values in a given
situation by choosing the most suitable course of action. Rationality refers to
objectivity in the development of alternatives and the final selection of an
alternative to achieve the desired goal. Though it is very much desirable, for a
variety of reasons, complete rationality is not always possible. That is the reason
why people prefer to take satisfactory decisions instead of ideal or optimum
decisions. In reality they confine themselves to a few important alternatives
which have limited risks combined with favourable consequences. Following are
the major reasons that stand in the way of rational decision-making process:
 Because of time and cost constraints, all complex variables that have a
bearing on decision cannot be examined fully. Hence, the decision-
maker is forced to strike a balance between the ideal and real situations.
 Since decisions are related to future, managers cannot foresee all the
future consequences accurately.
 Human factors like value systems, perceptions, prejudices, social
factors, etc., may enter the decision making process. Managers, being
human beings, are greatly influenced by their personal beliefs, attitudes
and bias.
TECHNIQUES OF DECISION -MAKING
Now-a-days, different techniques are used by managers in making decisions.
These techniques, if used properly, would contribute for the effectiveness of the
decisions. Some of the important techniques are discussed below.
1. Brainstorming: Brainstorming is the oldest and widely
followed technique for encouraging creative thinking. It was originally
developed by A.F. Osborn. It involves the use of a group. The success of this
technique lie in creating a free and open environment where members of the
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group participate without any inhibitions. It starts on the premise that when
people interact in free environment, they will generate creative ideas.
Continuous interaction through free discussions may result in spontaneous and
creative thinking. The large the number of solutions, the fairer are the chances in
locating an acceptable solution, Established research proves that one hour
brainstorming session is likely to generate 50-150 ideas. It is interesting to not
that while most of hem are proved to be impracticable, at least, some of them
merit serious consideration. This group process is not without limitations. It
consumes lot of time and therefore, is an expensive exercise. Secondly, it
emphasises only quantity of solutions, which more often than not, prove to be
superficial. By overcoming the above limitations, a modern manager can use
this as an effective tool.
2. Synectics: Synectics is a new concept developed by Williamb
J.J.Gordon. The term ‘synectics’ is derived from a Greek word which means
“Fitting together of diverse element”. It starts on the premise that this concept
encourages novel thinking for the development of alternatives through putting
together different ideas which are distinct from each other. A given problem is
presented to a group of people with different backgrounds and varied
experiences.
It is the responsibility of the group leader to present the problem and lead
the discussion in order to stimulate creative solutions. This approach ensures on
the spot evaluation of ideas. The leader who is a technical expert assists the
group in evaluating the feasibility of their ideas. Experience shows that synectics
is less widely used than “Brainstorming”. When the problem is tough and
challenging, this approach is used for effective decision-making.

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3. Operations Research: The origin and development of operations research
is attributed to military operations and applications during Second World War.
The war put tremendous pressure on the use of available scarce resources for
various strategic and tactical operations. The success of operations research in
developing effective options is instrumental in making this approach rather
dependable in decision-making process. Operations Research employs
optimizing models like Linear Programming, Project Management, Inventory
Control, Decision Theory and Waiting Line Theory.
Operations Research is the systematic method of studying the basic
structure, functions and relationships of an organisation as an open system. It
aims at developing optimal solution with limited resources in a given situation.
It covers six steps in its approach to problem solving. They are: (a) identification
of a problem; (b) construction of a mathematical model to investigate the
problem; (c) developing a good solution; (d) testing of the model in the light the
data available; (e) identifying and setting up of control points; (f)
implementation of the option as a solution to a critical problem (putting a
solution to work). In essence, Operations Research attempts to develop the best
solution that will contribute to organisational goals.
SELF- ASSESSMENT QUESTIONS
1. What is decision-making? Explain the basic characteristics of decision-
making process.
2. What are different types of decisions and explain their managerial
implications.
3. Explain steps involved in the rational decision-making process.
FURTHER READINGS
1. Terry, George and Franklin, Stephen, ‘Principles of Management, All
India Traveller Book seller, New Delhi, 1988.

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 2. Steiner, George A, ‘Top Management Planning’ Macmillan, New York,
1969.
KEY TERMS
 Decision Making
 Programmed Decision
 Strategic Decision
 Group decision

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UNIT – II
LESSON
ORGANISING: ORGANISATION STRUCTURE
6 AND DESIGN

LESSON OUTLINE

 Steps in Organising Process

 Organisation structure
 Chain of Command
 Span of Management
 Functional Departmentation
 Product Depart mention
 The Matrix structure

LEARNING OBJECTIVES

After reading this lesson you should be

able to

 understand the meaning of organising

 describe the steps in organising
process.
 draw the organisation chart of a
typical organisation
 explain chain of command and unity
of command.
 describe the concept of span of
Management.
 understand the factor that influence
the span.
 Design various organisation
structures based on departmentation

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INTRODUCTION
The managerial function ‘organising’ may be defined as “defining and grouping
the activities of the enterprise and establishing authority, responsibility and
relationships among them”. It results in the creation of a structure most
appropriate for the organisation’s objectives and other internal and external
factors. The best structure is the one that enables the organisation to interact
effectively with its environment, to efficiently channelise the efforts of its
people, to make efficient use of its resources. Thus, while planning specifies the
objectives, organising facilitates the accomplishment of objectives.
STEPS IN ORGANISING PROCESS
Organising is a multi-step process consisting of the following steps:
1. Detailing all the work that must be done to attain the objectives;
(Identification of tasks involved)
2. Dividing the total work load into activities that can logically and
comfortably be performed by one person or by group of persons; (this
activity is called differentiation)
3. Grouping the related tasks in a logical manner (this activity is known as
departmentation);
4. Setting up a mechanism to coordinate the work of members into a
unified whole be establishing authority – responsibility relationships,
(This involves delegation and decentralisation of authority); and
5. Monitoring the effectiveness of the organisation and making adjustments
to maintain or increase effectiveness.
The various steps stated above in organising process results in a structure
that facilitates the performance of tasks in a cohesive way. The resulting
structure, however, is not a static form, like the structure of a building. Since

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structure is based on plans, major revision of plans may necessitate a
corresponding modification of structure. As such, organising and reorganising
are ongoing processes. Successful organisations continuously assess the
appropriateness of their structure and change it in accordance with the dictates
of the environment. It is anybody’s knowledge that many Indian companies are
restructuring their activities to meet the new challenges in the present
liberalisation era. Organisation structures are modified periodically in response
to the environmental demands. Management export Tom Peters estimates that
about 50 percent of organisation problems arise from inappropriate organisation
structure. Because adaptation is a key to competitive survival, the ‘right’
structure for an organisation is determined by numerous factors. For this reason,
selecting an organisation structure might best be described as an evolutionary,
trial-and-error process.
ACTIVITY –A
Write the means of ‘orgnisations’.
…………………………………………………
…………………………………………………
…………………………………………………
…………………………………………………

ACTIVITY –B
What are the steps involved in organising
…………………………………………………
…………………………………………………
…………………………………………………
…………………………………………………

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 ORGANISATION STRUCTURE
Organisation structures is described of the on organisation chart that shows all
the positions in an organisation and their formal relationships to one another. It
illustrates an organisation’s overall shape and the levels of management in a
comprehensible manner. The organisation chart of a typical company organized
on functional basis is present in figure 6.1.
Figure 6.1 Organization Chart

Chairman

Manager Manager Manager

Production Marketing Finance

Manufacturing Quality Sales Advertising Accounting Taxes

As could be seen in figure, an organisation chart shows;

 The hierarchical structure that is typical of most organisaitons;
 The number of management levels;
 Scope of authority and status of the individuals as indicated by the
location of their positions in relation to other positions;
 How an organisations activities are groped in terms of departments
(whether by function, by territory and so on);
 The work being done in each positions (indicated by the labels in the
boxes);

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 Interaction of people as indicated by the horizontal and vertical lines
connecting various positions/departments;
 Relations between superiors and subordinates-who report to whom, that
is, the chain of command;
 How may subordinates report directly to each manger, that is the span of
control;
 Career progression – routes to the higher levels; and
 Formal channels of communication (indicated by the connecting lines)
However, an organisation chart does not show:
 Interactions between people who have no official reporting
relationships, that is, the informal organization;
 The ongoing dynamics of workplace behaviour;
 Personal preferences and coalitions;
 Informal communication channels, that is, the grapevine; and
 Interference by outsiders. The organisation chart of any company
enables one to understand easily three classical principles of organising,
viz., chain of command, unity of command and span of control.
Chain of Command
The type of arrangement of various positions in an orderly way is termed
scalar chain or chain of command. The chain of command exists whenever
one individual is made subordinate to another. Since ancient times, it has
been recognized that the only way to structure unified systems involving
large number of people is through a chain of command. The resulting
hierarchy is found in every company or in any human system including a
family. Figure 6.2 depicts the chain of command in a typical manufacturing
company. In addition to defining different degrees of authority of people,

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 Chain of Command also suggests the routes through which information
flows within an organisation.

CHAIRMAN

MANAGER
PRODUCTION

PLANT
MANAGER

DEPARTMENT
HEAD

SUPERVISOR

Figure - 6.2
Unity of Command
The Chain of Command principle implies another feature of organising: one
subordinate-one boss. If the efforts of subordinates are to be effectively
coordinated, it is necessary that they must have a reporting relationship with
only one superior. Unity of command principle avoids the confusion as to who
should report to whom and who should issue orders to whom.

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ACTIVITY –C
Describe organisation chart.
…………………………………………………
…………………………………………………
…………………………………………………
…………………………………………………

ACTIVITY –D
What is chain of command?
…………………………………………………
…………………………………………………
…………………………………………………
…………………………………………………

ACTIVITY –E
What is unity of command?
…………………………………………………
…………………………………………………
…………………………………………………
…………………………………………………

SPAN OF MANAGEMENT
It is anybody’s knowledge that a manager cannot effectively supervise the
activities of an infinite number of subordinates. This is because of the
limitations of time, energy and skills. These limitations place a limit on the
number of subordinates that a manager can effectively supervise. But for this
limit, organizations would have not taken the pyramid shape. Span of
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management refers to the number of subordinates that report directly to a
manager. The traditional thinking was that an effective span involved some
definite number of subordinates. For example, Lyndall Urwick found “the ideal
number of subordinates for all superior positions to be four and at the lower
level or organisation, the number may be eight or twelve”. Often, one of the first
things done by an organizational analyst or consultant was to count the number
of subordinates reporting to each manager. In each instance, when the number
exceeded a definite figure, say – six or eight, there would be a recommendation
to narrow the span. Thus, the thinking of the classical theorists about the span
revolved around a definite number.
Classical Thinking on Span of Control
The traditional theory of management was much concerned with the specific
number of subordinates that could be supervised by a manager. For instance,
Lyndall Urwick suggests that no executive should attempt to supervise directly
more than five. Different thinkers suggested different spans both at the top and
lower levels of organisation.
The contribution of V.A. Graicunas was however, significant to the span
of management theory. According to him, in selecting a span, managers should
consider not only the direct one-to-one relationship with their subordinates, but
also two other kinds of relationships, namely, direct group relationships and
cross-relationships. As such, if A has two subordinate B and C, the following
relationships would emerge.
i. Direct one-to-one relationships: These relationships relate the superior
directly with his subordinates, A in this case will have two direct relationships
with B and C, viz. A to B and A to C.

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ii. Direct group relationships: This type refers to the relationship of
superior with the various possible combinations of subordinates. In the above
example, A may interact with B in the presence of C or with C in the presence of
B. Graicunas argues that though the individuals are same, the two situations
have different implications.
iii. Cross-relationships: This type of relationships are created when
subordinates consult one another. In our example, the two cross relationships are
B with C and C with B. Graicunas gave a formula to ascertain the number of all
the three kinds of relationships:

 2n 
Number of relationships = n  2  2  1

n stands for the number of subordinates. One can easily ascertain how
the number of relationships increases as the number of subordinates rises by
applying this formulate. With four subordinates, what total relationships go upto
44, with five subordinates to 100, with six subordinates to 222, and with 10
subordinates to 5,210. Though Graicunas formula explains the complexities
involved as the number of subordinates increase, it suffers from the following
inadequacies.
 The formula ignores the frequency and importance of relationships, and
 Several other factors which have a bearing on the superior subordinate
relationships have not been taken into consideration while framing the
formula.
Span of Management and the Levels
The limitation on the part of a manager to manage an infinite number of
subordinates, obviously results in the levels in the organisation. Thus, an inverse

104
relationship generally exists between the span of management and number of
management levels. That is, if an organisation has wide span, the resulting
structure will be flat, with few levels of management. Conversely, if an
organisation has narrow span, the structure will be tall, with many management
levels.
Problems with levels
Creation of too many levels has certain problems relating to the costs involved
communication, and managerial control.
i. Costs: Levels are costly. Too many levels involve lot of expenditure.
Additional facilities in terms of secretarial staff have to be provided besides the
pay differentials in the compensation package. In many organisations substantial
expenditure has been saved by increasing the span.
ii. Communication: Successive layers of management act as
communication filters distorting the transmission of information. Experience
shows that the greater the number of management levels a message must pass
through, the longer it will take to reach its destination. More often, the
information also looses clarity. Thus, communication of organizational
objectives, plans and policies become difficult. Omissions and
misinterpretations usually occur as information passes through too many levels
in the scalar chain.
iii. Managerial Control: The distance between the top and bottom levels of
an organisation also affects control. For example, even the best of the plans
which are definite and complete at the top level loses clarity as the plans are
sub-divided and elaborated at lower levels. Consequently, at the implementation
stage of the plan, control becomes difficult.

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ACTIVITY –F
What are the steps involved in organising
…………………………………………………
…………………………………………………
…………………………………………………
…………………………………………………
Organisation Design
The organisations are in different sizes and may be producting single product or
multiple products may be operating in small geographic area or different areas in
the world. To cope with these varied objectives, strategies and situations,
managers adopt different designs of organisation structure.
Departmentation in oranisation design is the process of dividing the
organisation into manageable submits. The subunits are often refereed to as
departments divisions, or sections. By whatever name the units are called, the
process is known as departmentation.
FUNCTIONAL DEPARTMENTATION
This is perhaps the most logical and simple form of departmentation. Functional
departmentation is the process of dividing the organisation into units on the
basis of the firm’s major activities. It involves grouping employees according to
broad tasks they perform. Normally separate departments are created for all the
key activities of the business. for example, in a manufacturing company, the
activities essential to the existence of the company are production, marketing,
and finance. However, in non-manufacturing concerns these functions differ. In
a transport company, the key areas may be operations, sales and finance. Thus,
public utility concerns like electricity, transport, banking, insurance and
hospitals have their own distinct key functional areas. In all these cases, under

106
functional departmentation, major or primary departments are created along the
key functional area of the respective business.
If the organisation or given department is large, or in other words, as the
organisation grows, major departments can be subdivided. These sub-divisions
are called derivative departments. The essential idea is to take advantage of
specialization. A typical functional organisation with major functions and
derivative functions already shown in the figure – 5.1.
The following are the advantages and disadvantages of functional
departmentation.
Advantages
 It is the most logical and simple form of departmentation;
 It makes efficient use of specialized resources and skills;
 It makes supervision easier, since each manger has to be an expert in
only his functional area of operation;
 It fosters development of expertise in specialized areas.
Disadvantages
 Functional departmentation is often found to be inadequate to meet the
growing needs of the business, particularly as the organisation expands
or diversifies its activities;
 Further, decision-making becomes slow as the functional mangers have
to get the approval of the headquarters;
 It is also difficult to determine accountability in a functional structure. If
a product fails, the question as to who is responsible cannot be easily
answered; and
 Functional mangers tend to develop narrow perspective and loose sight
of the bigger picture. Members of each department feel isolated from
those in other departments. For example, manufacturing department

107
 may be obsessed with cost reduction and meeting the delivery dates
neglecting the quality control. As a result, marketing department may be
flooded with complaints.
ACTIVITY –G
What is the function departmentation .
…………………………………………………
…………………………………………………
…………………………………………………
…………………………………………………

PRODUCT / MARKET DEPARTMENTATION

As organizations are not static, they grow in size either by broadening its
product line, or by expanding geographical. Further, as the size of the
organization increases, some of the disadvantages become more apparent. The
organization is rather forced to look for other models in tune with the
requirements. In such situations, managements will opt for various other types
of departments, in focusing on the product or market. Three patterns are adopted
generally by organizations depending on the specific requirements to overcome
the limitations of functional structure. They are product, territorial and customer
departmentation.
i. Product Departmentation
One of the most common ways in which business grow is by increasing the
number of product they make and sell. If the organization is successful, several
product lines may attain such high sales that they require a separate division.
Large organizations like Kirloskar, Hindustan Level, Shaw Wallace have coped
with the expansion of their product lines by creating separate departments or

108
divisions for the various products. Under product departmentation, a single
manager, often referred to as the product manager, is delegated authority over all
activities required to produce and market that product. Thus, the forces shift
themselves. As against functions in the functional departmentation, basic
products or services become the primary or major departments in the product
departmentation.
Advantages
 Product departmentation places emphasis on the basic products, the
success of which is critical to the survival of the organization;
 Since all revenues and costs are assigned to a particular product, cost
centers can be established, high profit areas can be encouraged and
unprofitable product lines can be dropped. Thus, responsibility for cost
reduction and profits can be established at the division level;
 Proper coordination of all functional areas can be achieved as all the
functional managers work as a team under close supervision of the
product manager. Since the department or division is multifunctional, it
often operates like a complete company.
 Enables quick-response to changes in environment as compared with
functionally organized firm;
 Provide managers a training ground in general management which is
useful in overcoming narrowness of interest, and
 Expansion and diversification of activities is made easy by creating new
departments for the new products that are added to the existing ones.
Disadvantages
 Requires adequate availability of persons with general management
abilities as more and more departments are created for the various
products;

109
  The product departments may try to become too autonomous thereby
presenting top management with a control problem;
 It is also common to find product departments engaged in the duplication
of efforts. Each product unit has its own functional departments. These
may not be sufficiently large to make maximum use of facilities. Thus
product departmentation becomes an expensive organizational form.

ii. Customer Departmentation

It is common that some organizations sell a wide variety of goods or services
that appeal to different groups of customers, each of which has distinguished
needs. Each customer group may have to be addressed differently. In such a
case, departments are created around customer groups. For instance, commercial
banks organize their activities around customer groups to cater to their specific
needs. As such, we find separate departments or divisions for agricultural,
industrial and merchant banking operations. Similarly, we find Blue Star
company organizing its air-conditioning business around domestic and industrial
air-conditioning units.
Advantages
 Customers departmentation facilitates concentration on customer needs.
This is in line with the customer orientation professed by many
organizations these days;
 Customer feel that they have an understanding supplier. For example, the
manufacturer may sell to wholesalers and industrial buyers. Wholesaler
requires a product of dependable quality with assured supplies. The
industrial buyer wants product of high quality plus a service that includes
installation and repair of the product and the specific training of
employees.

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  Helps the organization to get the correct feel of the market dynamics in
terms of preferences of the customers, competitors’ strategies, etc.
Disadvantages
 Difficult to coordinate operations between competing customers’
demands;
 Requires considerable expertise on the part of managers in understanding
customers’ problems and specific needs;
 There is a possibility of under utilization of facilities and employees
specialized in terms of customer groups. Small organizations particularly
can not afford the expenditure involved because some amount of
duplication of the facilities is inevitable.
iii. Territorial Departmentation
The process of creating departments along the geographical lines is termed
territorial departmentation. This method is adopted when an organization
operates in different geographical area, each with distinct needs. Territorial
Departmentation makes it easier for the organization to cope with variations in
laws, local customs and customer needs. Public utilities like transport
companies, insurance companies, etc. adopt territorial departmentation.
Similarly, a large scale organization operating both in domestic and international
markets may have separate departments for both the markets. Again, different
departments or divisions may be created for different regions of the world.
Many multinational companies organize their global activities with regional
headquarters in different regions of the world.
Advantages
 Territorial departmentation makes possible concentration on markets
and marketing channels in different geographical areas;

111
  Develops opportunities for more efficient marketing activities because
of better face-to-face communication with local interest and
 Makes possible effective utlisation of locally available resources besides
being able to cater to the region-specific variations in terms of
preferences and sentiments of the people.
Disadvantages
 In this type of departmentation, there are problems in training people to
think in terms of markets rather than products;
 Requires more persons with general management abilities; and
 Increases problem of top management control because of the distance
between the corporate headquarters and the regional offices.
The three patterns of departmentation discussed above – product, customer
and territorial departmentation broadly characterize the divisional structure. All
the three patterns have advantages and disadvantages. The choice of any of these
structure, therefore, would be based on which of the factors management judges
to be more important and critical in the light of the strategies and objectives.
ACTIVITY –H
Describe product departmentation
…………………………………………………
…………………………………………………
…………………………………………………
…………………………………………………
Project Organisation
The use of the project organisation has increased in the last few years. It is
currently being employed in numerous undertakings engaged in the execution of
construction activities, turnkey projects and research and development projects.
The project organisation can take various forms, but the important
112
characteristic that distinguishes it from other forms is: once the project is
completed the organisation is disbanded or phased out. By definition, project
management involves, “the gathering of the best available talent to accomplish a
specific and complex undertaking within time, cost and quality parameters,
following by the disbanding of the team upon completion of the undertaking”.
The group members then go on to another project, return to their permanent
home department in the organisation, are given jobs elsewhere in the
organisation, or, in some cases, are phased entirely out of the firm.
CONTINGENCY ORGANISATION DESIG N
In contrast to the models discussed so far, several contingency systems have
come into wider practice of late. The emphasis in these systems is on flexibility.
Accordingly, so many flexible structures are adopted these days to meet the
specific needs of the organizations. This approach basically implies the
development of a contingency theory of organisation. The approach is based on
the exigencies of the situation. William F.Glueck, offers the following
guidelines for contingency design:
 When low cost and efficiency the keys to successful goal achievement,
organisaitons should use functional departmentation;
 When the environment is complex, matrix structure is effective;
 If the organisation is large and operates in a stable environment, it can
afford to formalize the structure;
 The greater the intensity of competition, the greater will be the degree of
decentralization;
 The greater the volatility of the environment, the more decentralized and
flexible the organisation has to be; and

113
  Companies that implement the organisational systole appropriate to their
strategy will be more effective than those that use an in-appropriate
style.

SELF ASSESSMENT QUESTIONS

1. Draw the organisation chart of a hypothetical company and explain its
salient features.
2. Define Unity of Command and Chain of Command.
3. Examine V.A. Graicunas theory on span of management. do you accept
his views?
4. What do you understand by levels in the organisations? Examine the
implications of too few and too many levels.
5. How does a tall organizational structure differ from a flat one? Give an
example of each.
6. What do you mean by span of control? Examine the traditional as well as
modern view points on the span of control.
7. What are the characteristics of functional departmentation? Explain its
merits & demerits
8. What is Territorial departmentation? What are its merits and demerits?

FARTHER READINGS
1. Dale, Ernest, The Great Organisers, McGraw-Hill, New York, 1960.
2. Kast.F.E., and J.E.Rsenzweig, Organisation and Management: A systems
Approach, McGraw-Hill, New York., 1973

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KEY TERNS
 Organising
 Unity of command
 Chain of Command
 Span of Control
 Functional departmentation
 Product departmentation
 Territorial departmentation

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 LESSON
7 AUTHORITY AND RESPONSIBILITY

LESSON OUTLINE

 Authority
 Responsibility
 Delegation Process
 Barriers to Effective
Delegation
 Overcoming the barriers
 Decentralization of authority
 Line and staff Relationships
 Line and staff conflict
 Achieving harmony between
line and staff

LEARNING OBJECTIVES

After reading this lesson you should be

able to

 Understand the concept of authority,

responsibility delegation
 Describe the process of delegation of
authority
 Identify the barriers to affective
delegation and find the ways to
overcome the barriers
 Discuss decentralization of authority
 Find the factors influencing
decentralization
 Explain the line and staff
relationships

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INTRODUCTION

‘AUTHORITY’ is the right to command. It is the discretion power vested with

a manager to use the organizational resources. Manager acquire authority by
virtue of the rank or title associated with this position. Authority is granted to
the individuals in a formal way in the organisaiton. It flows from the top to
down in the organisation structure.
RESPONSIBILITY, on the other hand is obligation to perform the tasks and
account for their satisfactory completion. It is implied that an individual is
expected to fulfil certain job requirements when he or she accepts a position in
the organisation. In other words, the individual is answerable for the results of
the task to be performed. In contrast to authority, responsibility of an individual
in the organisation is always upwards, that is, the subordinate is responsible to
his or her superior.
DELEGATION is the process by which authority is granted to a subordinate by
his superior. But for delegation of authority, organizations would remain for
ever small. Delegation is the only solution to cope with the increasing work load
of managers as the organisation grows. Because of the constraints of time and
ability, a manager cannot perform all the tasks himself. Therefore, he delegates
certain of the tasks to the subordinate and gets them done. Before proceeding
further to understand the process of delegation, it is appropriate to examine, in
brief, the concepts of authority and responsibility.
PROCESS OF DELEGATION
1. Entrustment of duties or Assignment of responsibilities
This is a crucial step in that a few important questions like what to delegate?
When to delegate? Whom to delegate? And how to delegate? Are answered. The
effectiveness of delegation depends on how clearly these questions are

117
answered. First of all, the manager has to decide the tasks to be delegated to the
subordinates. For this, he must be able to distinguish between the routine and
non-routine tasks. Routine and single tasks can as well be performed by the
subordinates while the non-routine and very important tasks must be performed
by himself.
2. Granting of authority
When the subordinates are assigned certain tasks or responsibilities, it goes
without saying that they need authority also to perform the tasks. Authority is
required by them to use of the resources of the organisation in the execution of
the tasks. The superior, therefore, parts with his authority to enable the
subordinate to perform. Responsibility and authority both go together. One of
the important principle of organising parity of authority and responsibility-
emphasises the need for a proper balance between the two.
3. Creation of Accountability
Delegation does not end with just entrusting of duties and the granting of
authority. The superior has to create an obligation on the part of the subordinate
to perform. In other words, the subordinate is accountable to his superior for the
tasks delegated. Thus, while authority flows downwards, responsibility flows
upwards.
Normally, accountability is created by asking the subordinate to submit
performance reports / status reports from time to time.

BARRIERS TO EFFECTIVE DELEGATION

To make delegation effective, the spirit and willingness of both the parties are
crucial. Though delegation is a powerful tool to motivate the subordinates and to
develop managerial skills in them. if adequate care is not exercised the result
may be considerable anxiety for both superiors and subordinates. Following are

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some of the reasons why delegation often fails in organisation, to which both
superiors and subordinates are responsible.
The Superiors Resist to delegate because of the following reasons:
 Lack of confidence in subordinates
 The “I can do it better myself fallacy”
 Lack of ability to direct
 Aversion to risk
 Absence of selective controls

Subordinates Resistance to Delegation

Delegation to be effective, apart from the role of superiors, subordinate’s
attitude and role are also important. Sometimes, subordinates may avoid
responsibility and block the delegation process for the following reasons:
i. The subordinates lack self-confidence. Added to that the fear that
they will get into trouble in the event of failure puts them in a still
worse situation.
ii. The subordinate is not offered any incentives or benefits in terms of
pay rises, importance and status for assuming additional
responsibilities.
iii. The subordinate finds it easier to ask the boss what to do rather than
taking the initiative himself.
iv. The subordinate fears criticism for mistakes. Since greater
responsibilities increase the chances of making an error, subordinates
for the sake of security try to avoid additional responsibilities.
v. The subordinate believes he has more work than he can do. for fear
of over burdening himself he may not show any interest to accept
new responsibilities.

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 vi. The subordinate lacks the information and resources needed to do the
job successfully. Some managers with a view to let down their
subordinates may deliberately make the delegation unclear. As a
result the subordinate lands himself in confusion as to the exact
nature of the duties and the authority that he can exercise. The
motive of the superior in such cases may be to make the subordinate
fail in the execution.

OVERCOMING THE BARRIERS

Several of the barriers to delegation discussed above mostly relate to the
behavioural aspects of individuals. Insecurity aversion to risk, lack of self-
confidence, inability to trust another to perform a task are all different types of
manifestations of human behavior. Among the various barriers, psychological
barriers are the most difficult ones to overcome. To overcome many of these
barriers, both superiors and subordinates must take a hard look at themselves,
recognize their own fears and try to come out of the inhibitions. The following
measures may help delegation to be effective.
 Effective Communication
 Parity of Authority and Responsibility
 Incentives for additional responsibility

DECENTRALIZATION OF AUTHORITY
The terms ‘delegation’ and decentralization are often confused. While in
delegation, authority is transferred on one-to-one basis from the superior to the
subordinate, decentralization of authority is broader in scope and involves the
transfer of authority in the organization context from top to the lower rungs of
management in the hierarchy. Thus, the greater the amount of authority

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delegated throughout the organization, the more decentralized the organization
is. Decentralization is much more wider in scope reflecting management’s
philosophy regarding which decisions to be taken at the top as well as down the
line in the organization.
It must also be understood that both absolute centralization and absolute
decentralization are undesirable, for, the former refers an autocratic structure
while the latter results in a chaotic situation. For this reason, decentralization
must be viewed as a relative concept, not as an absolute one. Ernest Dale, a
well-known management writer, has described the following conditions where
decentralization is greater:
 The greater the number of decisions made lower down the management
hierarchy.
 The more important the decisions made lower down the management
hierarchy. For example, the greater the sum of capital expenditure that
can be approved by the plant manager without consulting anyone else,
the greater the degree of decentralization in this field.
 The more functions affected by decisions made at lower levels. Thus,
companies which permit only operational decisions to be made at
branch/plant levels are less decentralized than those which permit
financial and personnel decisions at branch / plant level.
 The less checking required on the decision. Decentralization is greatest
when no check at all must be made; less when superiors have to be
informed decision after it has been made, still less if superiors have to be
consulted before the decision is made. The fewer people to be consulted,
and the lower they are on the management hierarchy, the greater the
degree of decentralization.

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 Unburdening of top managers, better decisions because decisions are
made closer to the scene of action, better training, morale and initiative at lower
levels, and more flexibility and faster decision making are some of the
advantages of decentralization. These advantages are widely acclaimed so much
so that decentralization is often is regarded as good’ and centralization as ‘bad’.
But total decentralization, as mentioned earlier with no coordination from the
top would be undesirable. That is why, the question before manager is not
whether an organization should be decentralized, but to what extent it should be
decentralized.
However, the degree of decentralization in an organization will vary with
time and circumstances. It will also vary for the different units of the
organization. For example, production and sales departments, in general, have
gained a high degree of decentralization in many organizations, whereas
financial departments have tended to remain relatively centralized.
1. Attitude of Subordinate Managers
The Attitude of subordinate managers is another important factor that influences
the decentralization because they can both encourage or discourage
decentralization. If subordinates want decentralization, top management can not
hold every thing in their hands for too long a period. The desire by subordinates
for independence and the willingness to assume increased responsibilities may
make them think of decentralization. As against this, shortage of lower level
managers who are willing to assume responsibility may encourage top
management to maintain a centralized structure.
2. The cost and Impact of the Decisions
Managers may not be willing for decentralization where the commitment
involved in the decisions is very high. As a rule of thumb, the greater the cost
involved, the more likely it is that the decision will be made at the upper levels.

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We often find situation in organizations where managers at a particular level
seek the approval of superiors where the expenditure involved exceeds a certain
limit.
3. Company Size and Rate of Growth
It is very difficult to manage a large organization efficiently with decision-
making authority concentrated in one or few people at the top. further, as an
organization grows in size and complexity, the need for decentralization is
obviously felt. Top management cannot continue to hold a tight grip over the
several aspects of the growing organization. This is the principal reason why
organizations often engage in reorganizing their units and operations as they
grow in size. The necessary autonomy is given to the units or departments so
that top management can concentrate itself with more important tasks such as
strategic planning and policy formulation.
Organisation’s Environment: The type of competition in the market,
technological developments, socio-cultural and political factors play a dominant
role in the company’s strategy. Strategy, in turn, influences the type of structure
that can cope with the environmental pressures. In a fast changing environment
as of today, one can easily find companies choosing decentralized structures that
facilitate quick response to the environment.

LINE AND STAFF RELATIONSHIP

Koontz and Weirich have defined line and staff authority as follows.
“Line authority becomes apparent from the scalar principle as being that
relationship in which a superior exercises direct supervision over a subordinate –
an authority relationship in direct line or steps. The nature of staff relationship is
advisory. The function of people in a pure staff capacity is to investigate,
research, and give advice to line managers to whom they report.”

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 There are two approaches, to understand line and staff concepts. One
approach lays emphasis on the basic functions of the business. Accordingly,
functions of an enterprise are classified into line and staff functions. To quote
Louis Allen: “Line function are those which have direct responsibility for
accomplishing the primary objectives of the enterprise and staff functions refer
to those elements of the organization that help the line to work most effectively
in accomplishing the primary objectives of the enterprise”.
The other approach views that line and staff are two kinds of authority.
According to this approach, line authority is defined as a direct authority which
a superior exercise over his subordinates to carry out orders and instructions.
The exercise of this authority is always downwards, that is, form a superior to a
subordinate. Staff authority involves giving advice to line managers to carry on
the operation. The flow of this authority may be in any direction depending on
the need of such an advice. It is common that in actual practice, some variations
may exist. The variations are more pronounced in the case of staff authority.
The distinction between line and staff though not rigid, is important
because staff must be provided if the growing organization is to accomplish its
goals. The differentiation between line and staff is necessary for the following
reasons.
LINE AUTHORITY
In the organizing process, authority is delegated to the individuals to perform the
activities. These individuals, in turn, assign some of the activities to persons
working below them in the hierarchy and delegate them authority. This process
goes on, creating superior-subordinate relationships in the organization. The
direct relationship between a superior and his subordinate is created through the
enforcement of line relationship.

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STAFF AUTHORITY
The relation between a staff manager and the line manager in part depend on the
type of duties performed. A man who only gathers facts or only checks on
performance will have relationship with line manager that are different from
those of a man who has concurring authority. Such variations between line and
staff relationships as discussed earlier, run along a continue with only advice at
one extreme point. In two more situations represent compulsory staff
consultation and concurring authority. Thus, variations are often found in
respect of staff authority and responsibility the organizations.
LINE AND STAFF CONFLICT
Line and staff relationship implies that both are complimentary in nature.
However, there are frequent instances of conflict between line and staff in the
organizations, resulting in friction. The various factor leading to line-staff
conflict can be groped into there categories. Apprehensions of line managers, 2.
Apprehensions of staff, and Nature of line-staff relationship.
ACHIEVING HARMONY BETWEEN LINE AND STAFF
The effectiveness of line people depends to a large extent on how they make use
of staff. Staff people are needed in the organization because line people may not
able to solve the problems which require specialized knowledge. For making
proper use of staff, following points are important.
(i) Staff people should be involved right from the initial stages of
planning of an activity rather than when the problem becomes
critical. When they are involved at the level of planning, many of the
problems may
(ii) In order to make proper use of staff, they should not be kept busy in
unimportant work-because it does not serve any meaningful purpose.
Instead, they should be assigned critical work in the area other.

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 (iii) There should be encouragement and education to line people as to
how to make maximum use of staff effectively. Line people can not
make use of staff unless they know what a specialist can do for them.
At the same time, staff people also have a responsibility to let line
people know how they can contribute for the better performance of
line activities.
(iv) If line people take some actions directly affecting staff activities
without consulting staff people, they should be informed
immediately about such actions. The information will help in
removing misunderstandings. If any, created in the minds of staff
people.
SELF ASSESSMENT QUESTIONS
1. What do you mean by the terms ‘authority’ and ‘responsibility? Are
they important in the process of delegation?
2. Explain the process of delegation of authority in an organization. Discuss
3. How are delegation and decentralization related? Are they both one and
the same?
4. Critically examine the line3 and staff authority concepts with the help of
a few examples.
FURTHER READINGS
1. Chester A. Barnard, 1938. The functions of the Executive, Harward
university Press, Cambridge.
2. Claude S. George, Jr. 1968. The history of Management Thought,
prentice-hall, England Cliffs, N.J.

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KEY TERMS
 Authority  Line – Staff relationship
 Responsibility  Line Authority
 Delegation  Staff Authority
 Decentralization  Line – Staff Conflict

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 LESSON

8 EMERGING TRENDS IN CORPORATE

STRUCTURE

LESSON OUTLINE

 Organisation Design in the future

 Small number of
Management Levels
 System decoupled from
structure
 The sharing of resources
rather than the dividing of
them
 Strategy and organisation design
 Informant organisation and culture.
LEARNING OBJECTIVES

After reading this lesson you should be

able to

 Explain organisation design in the

 Describe how strategy will fit in the
organisation design
 Understand that organisation culture
will play a role in deputing informed
organisation.

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INTRODUCTION
For many years the fundamental structure underlying organization design has
been the classic pyramid. Although it still plays a major role, some authors are
beginning to suggest that organization design in the future will be characterized
by four basic differences from today’s pyramid-oriented structures and will
exhibit.
1. A small number of management levels
2. Adhocracy and porous departments
3. Systems decouple from structure
4. The sharing of resources rather than the dividing of them
ORGANIZATION DESIGN IN THE FUTURE
Small Number of Management Levels
The distance between the point where an organization experiences the forces of
change-especially in its markets, technologies, and products-and the point where
strategic decisions are made to redesign the company in response to these forces
is often five or more levels of management. As a result, the time it takes to
respond to major change may be much longer than necessary, causing
organizations to be reactive rather than proactive (at the forefront of change).
Requests for changes carry a heavy burden of documentation, justification,
presentation, and timing requirements as they move up and down each of these
five or more levels of management.
Organization of the future will seek to reduce the physical and
psychological distance from the top to the bottom of their structures. The
authority, responsibility, and power necessary to deal effectively with rapidly
changing conditions will be vested in the lowest level of the organization, where
the factors relevant to decisions about change are most readily apparent and best
understood. John Scullery at Apple moved in this direction by adjusting Apple’s

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design so that territorial managers have greater discretion in deciding how Apple
can meet the needs of major customers (educational or business) in their areas.
Scullery also created rapid-response teams composed of the territorial manager,
a production manager, and an ancillary products manager. This team has
authority to make significant decisions about how Apple will price, produce, and
supply products for customers whose needs exceed certain levels.
ADHOCRACY AND POROUS DEPARTMENTS
As organizations get larger, they begin to stifle the ability of subunits to make
decisions and respond autonomously to change. One of the major reasons for the
success of the corporate raiders of the 1980s was the efficiencies to be gained by
simply buying highly diversified companies and breaking them apart into their
individual, separate business. The resulting freedom and flexibility often
produced much more profitable business.
Organizations of the future will accept adhocracy: federations of relatively
autonomous units each of which can operate entrepreneurially. And within each
unit, the structure will be more fluid or porous. Arbitrary barriers between and
within departments will be less important – may even be removed – to allow
people to “float” more between units, contribute to decisions, and get key jobs
done.
SYSTEMS DECOUPLED FROM STRUCTURE
Most organization structures are quasi-permanent. They stay in place for many
years. It is not surprising that most of the systems that help “manage” the
company-compensation, promotion, accounting communication, and planning,
to mention a few – are fitted to the structure of the organization.
If flexible structures such as adhocracy and fewer levels of management
evolve, the supporting systems will have to stand alone. Promotions must be
more than movements between slots in units and levels. Compensation must be

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linked to more than unit-related criteria. The key will be tailoring the systems to
individuals rather than to organization units. Systems generally exist today to
protect the company from human error. Systems of the future must enhance
innovation, which probably means that systems must decouple from structures
and serve to enhance individual initiative, not limit it.
SHARING RATHER THAN DIVIDING UP RESOURCES
The system that many organizations use to make decisions about the future and
to commit resources to support those decisions is budgeting. Hence many
managers are preoccupied with determining what resources they have to work
with. Then, on the basis of that, they decide what they can do in the future. They
ask, “What resources do we have under our control and what options do they
allow us to pursue?”. The central theme in this orientation is the need to identify
and control the resources available.
Another system or orientation that many organizations are beginning to
take seriously looks at the opportunities dictated by changing environments as
the true starting point for making future decisions. Managers with this
orientation ask, “What opportunities are available to us?” Only after settling on
a range of opportunities do they address the issue of resources: “What resources
do we need [not ““control;”] in order to pursue favorable opportunities?” The
manager who takes this approach seeks to borrow or temporarily use resources,
not to own and control them. resources are viewed simply as a means of
pursuing attractive opportunities, not as things to accumulate as a source of
organizational power. Managers in firms that employ this type of system use
company resources (people, facilities, money, capacity, technology, marketing
capability) only as long ass they are needed. And because it is critical to make
resources available in time for managers to seize the opportunities they discover,
this system encourages access to resources in a manner that reduces paperwork,

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the levels of management through which decisions must travel, and the extent of
“political” activity necessary to secure resources. Many people feel that this
orientation – sharing rather than owning resources will be the most effective
orientation for organization designs of the future.

ACTIVITY - A
What are future organization designs?
…………………………………………………
…………………………………………………
…………………………………………………
…………………………………………………

STRATEGY AND ORGANIZATION DESIGN

The primary consideration in designing an organization is that organization’s
strategy. A will-developed design enhances the accomplishment of strategic
objectives, and these strategic objectives should have been carefully selected to
ensure successful organizational performance. Organization design are overall
plans for organizing the work, goals, relationships, and decisions of an
organization in such a way that people can perform to the best of their abilities.
Thus the ultimate goal of organization design is to facilitate performance. A
poorly conceived design can prevent high performance. In a well-managed
organization, the connection among strategy, design, and performance is strong.
Researchers have pointed out that an organization’s existing design also
affects its strategy. For example, the design places power in the hands of a
certain group of people, so there is a tendency among the members of this group
to formulate strategies that preserve the status quo. It is not necessary to figure
out whether strategy or design came first, or which has more impact, but it is

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critical to acknowledge the strong reciprocal relationship that exists between
strategy and design.

ACTIVITY - B
What is the relationship between strategy and organization design?
…………………………………………………
…………………………………………………
…………………………………………………
…………………………………………………

INFORMAL ORGANIZATION AND CULTURE

The informal organization consists of the personal relationships and means of
communication that are often necessary to accomplishing the work of the
organization but are not a part of the formal organization structure. A related
concept is the organization’s culture: the shared beliefs, attitudes, and opinions
about the company and what it stands for. The informal organization and the
organization’s culture are created by people through out the company rather than
being controlled by top management.
Informal organization and culture are important considerations in the
overall design of an organization because of their influence on the behaviour and
performance of employees. In designing or redesigning an organization,
management must always take the informal organization and the prevailing
culture into account. If the organization’s design clashes with its culture, it is
most unlikely that the design will be effective. And where the design
specifically attempts to frustrate part of the informal organization, harmful
conflict may result.

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SELF ASSESSMENT QUESTIONS

1. What are they emerging trends in corporate structure? Explain.

2. Explain the relationship between strategy and organization design.
3. Explain the role of culture in acceptable formal and informal
organization.

FURTHER READINGS
1. A.D. Chandler, JR., Strategy and structure. History of American
Industrial Enterprises. MIT Press, Cambridge, Mass, 1962.
2. J. Woodward, Industrial Organization, Oxford University Press, 1965.

KEY TERMS
 Adhocracy
 Porous Departments
 Strategy
 Culture
 Informed organization

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 LESSON

9 IMPACT OF TECHNOLOGY ON
ORGANIZATIONAL DESIGN

LESSON OUTLINE
 Impact of Environment on
organization design
 Environmental variations

 Stable Environment
 Changing Environment
 Turbulent Environment

 Design organizations to match

 their Environment

 Mechanistic design
 Organic / Adoptive design

 Impact of Technology on
organization design
LEARNING OBJECTIVES
 Unit and Small-Batch
Technology After reading this lesson you should be
 Large –Batch and Mass able to
production technology
 Continuous process  Explain the impact of environment on
technology organization design
 Size  Understand to design organization to
match their environment
 Describe the impact of technology on
organization design
 Understand that organization culture
will play a role in deputing informed
organization.

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INTRODUCTION
Three factors have been found to have an effect on the design of an
organization. The most appropriate design for an organization seems to be
contingent on such variables as the state of its environment, the complexity
of its technology, and its size. The organization’s environment is an external
variable, its technology has internal as well as external aspects; and its size is
principally an internal factor.
Impact of Environment on Organization Design
Organizations are influenced by the broader environment in which they exist.
Government policy, societal values and social norms, economic trends, and the
rate of technological change and innovation are general environmental factors
that can affect virtually any organization. And every business must adjust daily
to its customers, competitors, suppliers, and creditors – all are part of its
immediate environment.
Managers of business design their organizations to take advantage of
opportunities that arise in their environment and to respond to changes in this
environment. Most studies investigation, the relationship between an
organization’s design and its environment have concluded that the best design
for a given organization is contingent on the characteristics of its environment.
Environmental variability
In assessing the possible impact of the environment on its design, an
organization must consider the amount of variability in its environment – that is,
the degree of change with which it must be prepared to cope. It must consider
the frequency of change, the magnitude of change, and the predictability of
change. An organization’s environment may be stable, changing, or turbulent.
Stable Environments. A stable environment is one that experiences little or no
unexpected or sudden changes. Products require only minor changes, if any, and

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the market shows very few fluctuations. For whatever reasons, the product
attracts neither regulatory attention nor technological innovation. Consequently,
the organizations in a stable environment can remain virtually the same for a
long time. But stable environments are becoming more scarce. It is difficult to
think of many organizations that have made the same product with the same
process and sold it in essentially the same way for the last century.
Arm & Hammer is one organization with stable environment. It has been
providing baking soda to similar markets for over one hundred years. The
markets have grown, outlets for selling baking soda have changed, and
additional uses for the product have been found, but the overall level and rate of
change in the product and its markets have been minimal.
Changing Environments. Changing environments are defined by trends that
are predictable. Thus the organization can be prepared to adjust to the changes
when they occur. For example, the environment of many service firms could be
characterized as changing. Trends in demand for services often depend on the
social fabric of society. Values and tastes certainly change over time, but these
changes do not usually occur so unexpectedly or so rapidly that service-firms
cannot adjust to them. the characteristic flexibility of service firms helps them
adapt readily to such changes. Firms that produce products can also predict
trends in changing environments. For example, Apple’s decision to position
itself more strongly in the business computer market was motivated in part by
the overall decline in the student population (Apple’s traditional strength),
which resulted from changes in demographic trends that were apparent will
before they actually affected the numbers of students.
Holiday Innos is another example of a company that is adjusting its
business to predictable changes – in this case, changes in the social
characteristics of potential lodging customers. Specifically, the rising number of

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women in the work force has created a need to ensure that lodging facilities
accommodate female as well as male executive. And the declining number of
families has reduced the emphasis on family-centered accommodations.
Turbulent Environments. Turbulent environments are marked by swift,
frequent, and radical changes that occur with little or no warning. In the early
stages of development of an industry, its environment is often turbulent as a new
technology quickly emerges to replace an older one, new products or models are
rapidly introduced to supersede yesterday’s, and (often) regulations are imposed
to reign in the rapidly changing industry. Usually this turbulence is temporary,
and the industry and its surviving organizations soon settle down into a less
volatile state. The computer industry, however, is an exception. It has operated
in a turbulent environment for several decades now.
Consumer electronic product constitute one of the most rapidly changing
industries worldwide. A model introduced in the fall of the year, such as a VCR
camera, is often rendered obsolete by new models – and even new technologies
– available the next sprint.

ACTIVITY - A
Explain how environment effect the organization design
…………………………………………………
…………………………………………………
…………………………………………………
…………………………………………………

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DESIGN ORGANIZATIONS TO MATCH THEIR ENVIRONMENTS
Some of the pioneering work on the relationship between organization design
and environment was done by Tom Burns and G.M .Stalker. They found that
successful organizations were designed differently in different environments.
They distinguished between two types of organization designs: a mechanistic
design and an organic design.
Mechanistic Designs. A mechanistic design follows Weber’s bureaucratic
model very closely in that it is characterized by specialized activities, specific
rule sand procedures, an emphasis on formal communicational and a well-
defined chain of command. Because mechanistic designs tend to be inflexible
and resistant to change, this type of design is more successful in a stable
environment. The U.S. Army offers a good example of a mechanistic design.
Organic Designs. In an organic design, task activities are loosely defined,
there are very few rules and procedures, and great emphasis falls on self-control,
participative problem solving, and horizontal communication. Organic designs
are more successful in dynamic, rapidly changing environments that require
adaptability to change. Apple’s early organization design was organic. The
personal computer industry (which Apple pioneered) was rapidly changing, and
this design was well suited to those early days of a new industry.

Comparison of Mechanistic and Organic Organisations

Mechanistic Organic
1. Tasks are highly fractionated and 1. Tasks are more interdependent;
specialized; little regard pad to emphasis on relevance of tasks and
clarifying relationship between organizational objectives.
tasks and organizational
objectives.

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2. Tasks tend to remain rigidly 2. Tasks are continually adjusted and
defined unless altered formally by redefined through interaction of
top management. organizational members.
3. Specific role definition (rights, 3. Generalized role definition
obligations, and technical (members accept general
methods prescribed for each responsibility for task
member). accomplishment beyond individual
role definition).
4. Hierarchical structure of control, 4. Network structure of control,
authority, and communication. authority, and communication.
Sanctions derive from Sanctions derive more from
employment contract between community of interest than from
employee and organization. contractual relationship.
5. Information relevant to situation 5. Leader not assumed to be
and operations of the organization omniscient; knowledge centers
formally assumed to rest with identified where located throughout
chief executive. organization.
6. Communication is primarily 6. Communication is both vertical and
vertical between superior and horizontal, depending on where
subordinate. needed information resides.
7. Communications primarily take 7. Communications primarily take
form of (1) instruction and form of information and advice.
decisions issued by superiors and
(2) information and request for
decisions supplied by inferiors.
8. Insistence on loyalty to 8. Commitment to organization’s tasks

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 organization and obedience to and goals more highly valued than
superiors. loyalty or obedience.
9. Importance and prestige attached 9. Importance and prestige attached to
to identification with organization affiliations and expertise in external
and its members. environment.
Burns and Stalker did not suggest that organizations could make on of
only two design choices on the basis of their environment. They recognized that
the environment surrounding each firm is unique and that each firm must design
its structure accordingly. The mechanistic and organic designs are not tow
“either-or” design options; rather, they exist at opposite ends of a continuum
along with an organization’s design is characterized.
Later work by Paul Lawrence and Jay Lorsch supported Burns and
Stalker’s findings. Lawrence and Lorsch studied several firms in three different
industries and found that more effective forms had designs that matched their
environments. The effective firms in stable industries had mechanistic
organization designs, whereas the most effective firms in turbulent industries
had organic designs.

ACTIVITY - B
Distinguish Mechanistic and Organic design
…………………………………………………
…………………………………………………
…………………………………………………
…………………………………………………
While the nature of firm’s external environment has a strong influence
for should have on the firm’s organization design, other influences must be

141
considered. Another important factor to be taken into account in organization
design decisions is the nature of the firm’s technology.
Impact of Technology on Organization Design
As we have said, technology has internal as well as external dimensions. There
is a tendency to associate technology only with factories and machines, but in
terms of organization design, its meaning is much broader. Technology
encompasses all the tools, equipment, processes, actions, materials, and
knowledge required to convert an organization’s inputs into outputs that can be
distributed as useful goods or services. This definition makes it possible for such
diverse activities as teaching students, dry cleaning clothes, and assembling
automobiles all to be considered technologies. In this sense, technology is an
internal dimension; it is the way the organization goes about doing the work it
exists to do. A professor can teach a course with three hindered students in one
class; another course might be restricted to thirty-five students. The former
would probably require the lecture format, or technology, whereas the thirty-
five-student class could be taught via several technologies. Including the case
method, lectures, and group projects. Similarly, a dry cleaner can choose among
several technologies, including the case method, lectures, and group project
Similarly, a dry cleaner can choose among several ways to provide dry cleaning
services. In either example, the “technology” whereby the work is done can
vary. And different technologies affect the degree of specialization or
standardizations necessary eh types of coordination mechanisms needed, the
levels at which decisions should be made, and the optimal size of organizational
units.
JOAN WOODWARD
Much of the pioneering work on the relationship between technology and
organization design was done by Joan Woodward. She found that differences in

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technological complexity accounted for differences in the way effective
organizations were designed. Her scale for measuring technological complexity
consisted of three major categories: unit and small-batch technology, large-batch
and mass production technology, and continuous-process technology.
Woodward assigned a firms technological complexity to one of these there
categories on the basis of the extent to which its manufacturing processes were
automated and standardized.
Unit and Small-batch Technology. Unit and small-batch technology is
consistent with the notion of a job shop. Custom-made items (such as tailored
clothing) and items only one of which is produced (such as portraits) are
examples of unit production. Small-batch technology is the production of small
quantities of items with each production run. Print shops wherein each
customer’s order must be set and run separately utilize small-batch technology.
Unit and small-batch technology is the least complex of Woodward’s categories
because it offers little opportunity for using automated and standardized
techniques. Most of the work done by professionals such as doctors, lawyers,
and managers could be considered unit technology.
Large-Batch and Mass-Production technology. The most common example of
large-batch and mass-production technology is an assembly line, where large
numbers of the same product are product. This kind of production utilizes
mechanization and standardized parts. Almost all consumer durable goods, such
as automobiles and appliances, are produced in this manner.
Continuous-Process Technology. A continuous-process technology utilizes
fewer workers than dos mass production, because most of the process is
automated. A continuous stream of raw-material input is actually transformed
into a continuous flow of output, not into separate, definable units. The process
often changes the material composition of the inputs. Most refinery operations,

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such as that of petroleum, chemicals, or sugar, are considered continuous-
process technologies. This category is the most complex in Woodward’s
scheme, because the processes involved are almost always completely
automated.
Woodward found that several design components varied with the
organization’s type of technology. As technological complexity increased, the
number of levels of management increased (that is, the organization structure
became taller) the span of control of top management increased, and the ratio of
line to staff workers increased. However, the span of control for lower-level
managers was greatest for technologies intermediate in complexity. This is
probably because large-batch and mass-production technologies require
numbers of workers than do either unit or continuous-process technologies.
Woodward’s findings indicated that organizations characterized by the
most complex (continuous-process) and the least complex (unit and small-batch)
technologies tended to have more organic designs. Organizations exhibiting
technologies in the middle range of complexity (large-batch and mass-
production technologies) had more mechanistic designs. Most important, she
found that the most successful organizations followed this pattern. It appears
that technologies is an important determinant of appropriate structure.
JAMES THOMPSON
Several years after Woodward’s British studies, the American James D.
Thompson divided technologies into three categories on the basis of years of
observation in different organizations. He labeled technologies as long-linked,
mediating, or intensive.
Long-Linked Technology. Thompson’s long-linked technology is
characterized by a series of sequential tasks that must be performed in a
specified order. The assembly line is an example of long-linked technology.

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Thus this category closely parallels Woodward’s large-batch and mass-
production technology.
Mediating Technology. A mediating technology is a process that brings
together groups that need to be interdependent for the desired action to take
place. For example, banking is a mediating technology; it facilitates the
interaction between depositors and borrowers. Employment and other talent
search agencies connect suppliers of specialized labor with buyers. This type of
technology is intermediate in flexibility. It allows for some standardization but
can also adjust its output in response to variations in the needs of the parties it
seeks to link.
Intensive Technology. An intensive technology involves the application of
specific skills, techniques, or services in order to make a change in an input.
This type of technology describes custom work and is consistent with
Woodward’s unit production technology. The value of an intensive technology
is its maximal flexibility.
Environment and technology are not the only critical factors shaping
organization design decisions. The sheer size of an organization often plays a
central role in organization design. The next section examiner is the size
consideration in grater detail.
Size
The impact of the sheer size of an organization on its design has attracted a great
deal of research attention. It seems obvious that organizations change as they get
larger and that more complex designs become necessary, but the research results
are not unanimous. This may be due in part to the fact that size has been
measured in a variety of ways, including criteria as diverse as number of
measures does not explain away the different outcomes. Most of these measures
are highly correlated and thus should produce similar results.

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SELF ASSESSMENT QUESTIONS
1. Describe the impact of environment on organization design
2. What are environmental variables that will have impact on organization
design?
3. What are Mechanistic design and organic design?
4. Explain the impact of Technology on organization design.
FURTHER READINGS
1. Dale, Ernest, The great organizer, McGraw-Hill, New York, 1960.
2. John A. Parce II, Richard B. Robinson Jr, Management, McGraw-Hill
International, New York, 1989.

KEY TERMS
 Environment  Small-Batch Technology
 Stable environment  Size
 Changing Environment  Mass-Production technology
 Turbulent Environment  Continuous Process technology
 Mechanistic design  Long-Linked Technology
 Organic design  Mediating technology
 Technology  Intensive technology

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LESSON

10 FORMAL AND INFORMAL ORGANIZATION

LESSON OUTLINE

 Formal Organisation
 Informal Organisation
 Making better use of informal
organization
 Comparative study of formal
and informal organisation

LEARNING OBJECTIVES

After reading this lesson you should be

able to

 Understand the concept of formal and

informal organizations.
 Define what is formal organization.
 Describe the nature of informal
organization.
 How to make use of informal
organization.
 Compare the formal and informal
organizations.

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INTRODUCTION

Formal organization, which refers to the structure of well-defined jobs, each

bearing a definite measure of authority, responsibility and accountability, is not
capable of accomplishing organizational objectives all alone. It needs the help of
informal organization for this purpose. In other words, informal organization,
which does not appear on the organization chart, supplements the formal
organization in achieving organizational goals effectively and efficiently.
FORMAL ORGANISATION
Chester I. Barnard defined formal organization as “a system of consciously
coordinated activities or forces of two or more persons”. A formal organization
is deliberately designed to achieve some particular objectives. It refers to the
structure of well-defined jobs, each bearing a definite measure of authority,
responsibility and accountability. The structure is consciously designed to
enable the people of the organization to work together for accomplishing
common objectives. Thus, formal organization is more or less an arbitrary
structure to which the individual must adjust. It tells him to do certain things in a
specified manner, to abbey orders from designated individuals and to cooperate
with others. Co – ordination also proceeds according to a prescribed pattern in
the formal organization structure.
The formal organization is built around four key pillars; namely, (i)
division of labour, (ii) scalar and functional processes, (iii) structure, and (iv)
span of control. These may also be called the principles of formal organization.
Division of labour and specialization is the basic principle of formal
organization. The whole work is divided into a number of small operations and
each operation is performed by a different person so that there is maximum
specialization. The scalar and functional processes imply the growth of the

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organization both vertically and horizontally. The structure of the organization
refers to the overall arrangement in the organization which ensures proper
balance between different parts of the organization and secures the execution of
all operations and the achievement of organizational objectives. The span of
control refers to the number of subordinates directly reporting and accountable
to one superior.
Formal organization is the official hierarchy as it appears on paper. It is
the basis and official version of the organization. Formal organization possesses
the following characteristics:
1. It is deliberately impersonal;
2. It is based on ideal relationship; and
3. It is based on the rabble hypothesis of the nature of man.
These characteristics have also been criticized by many authors. Firstly, as
formal organization is deliberately impersonal, emotions and sentiments of
individuals are ignored in determining the interactions, communication and
accountability. But human beings cannot live without social relations and, that is
why, they develop informal relations. Secondly, it is based on ideal
relationships. Human beings are thought to be rational and economic beings.
Further it is assumed that there would be no unofficial channel of
communication. But it is very difficult to find such ideal relationships in actual
life. Lastly; it is based on the rabble hypothesis of the nature of man. It is
assumed that there will always be the same kind of reaction if human beings are
punished or rewarded. But the individuals are not always motivated by the same
rewards or punishments in the same manner.
Formal organization is deliberately construed to achieve some goals. It
sticks to the goals (as laid down by the originators.) Goals are not easily
changeable with the passage of time. This is another point of criticism put

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forward by its critics. The rules and regulations of the organization may be too
rigid that it becomes difficult to achieve the goals. Moreover, formal
organization does not consider the goals of the individuals. Because of these
reasons formal organization usually gives birth to informal groups which cannot
be separated from it. As a matter of fact, there is a close relationship between the
formal and informal organizations. Management should not ignore informal
organization (informal group, informal leader, informal communications, etc.),
but it should use it to achieve the organizational goals.

ACTIVITY-A
Describe the characteristics of formal organization.
…………………………………………………
…………………………………………………
…………………………………………………
…………………………………………………
INFORMAL ORGANIZATION
Informal organization refers to the relationship between people in the
organization based on personal attitudes, emotions, prejudices, likes, dislikes.
Etc. These relations are not developed according to procedures and regulations
laid down in the formal organization structure; generally, large formal groups
give rise to small informal or social groups. These groups may be based on same
taste, languages, culture or some other factor. These groups are not preplanned,
but they develop automatically within the organization according to its
environment. The reasons for creation of informal groups have been discussed
later in this chapter.
Informal organizations are small groups and these groups can overlap
because a person may be a member of several different informal groups. A

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manager cannot abolish the informal groups since he does not create them.
Informal relations will always support and supplement the formal one. There are
certain disadvantages also of informal organizations. They put resistance to
change and conform to old practices. The communication in informal
organization is very fast; sometimes, it creates rumours which may prove
dangerous to the enterprise.
Modern authors on organization behaviour view organization as
consisting of both types of relationships, i.e., formal and informal. It is true that
while laying out an organizational plan, management can only develop formal
structure of relationships, but organization is not only a formal chart or structure
of relationships. Formal organization, no doubt, is an important part of the
organization. But informal organization is also not less important. If handled
properly, it will help in performing the activities of the organization very
efficiently and effectively. The role of informal leaders and groups has been
discussed later in the chapter in short, informal relations are complementary to
formal relations and procedures laid down in the organization structure. Both
formal and informal organizations are necessary for any group action just as two
blades are essential to make a pair of scissors workable.

ACTIVITY-B

Describe the nature of informal organization.

…………………………………………………
…………………………………………………
…………………………………………………
…………………………………………………

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Making Better Use of Informal Organization

The management should not look down upon the informal organization as it
arises spontaneously along with the formal organization and fills in some of the
vital gaps in the formal organization. It may be noted that formal organization is
unable to need all the needs (e.g., affiliation, affection, esteem, etc.) of its
members. Management can fulfil these needs of the workers by encouraging
informal organization provides a buffer to absorb the shock of tensions and
frustrations among the members as a result of formal organizational pinpricks.
Informal organization may act to fill in gaps in a manger’s abilities. For
instance, if a manager is weak in planning, one of his subordinates may
informally help him in such a situation. Management may also make use of
informal group leaders by taking them into confidence to mediate as bridges of
understanding between the management and the employees. Shartle has rightly
said, “Informal structure is one index of the dynamics of getting work done and
it appears that, for efficiency, it will necessarily deviate from the formal
structure.” Therefore, management should adopt a positive attitude towards
informal organization. It should use it alongwith formal structure to make a
workable system for achieving the organizational objectives.
Most informal groups tend to be small. Each has its leader, who was not
elected or appointed, but earned this status because of age, seniority on the job,
dominant personality, special capability, physical strength, or some other
characteristic. However, in large informal organizations, there may be more than
one leader whom the group will follow under given circumstance. An individual
with more formal education than the others may be looked to in matters that
require formal communication. He may be asked to speak for the group in
dealings with management, the union, or other informal groups. Another

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member possessing more job experience and “know-how” may be consulted
when direction or guidance is needed in handling a work assignment or solving
some problems connected with it. A manager should identify informal leaders
and work with them.
A manager can build favourable relations with informal leaders in
several ways. He can consult the leaders and seek their advice on technical
matters or human relations problems. He can request their assistance and
cooperation in indoctrinating new members and training them to become
competent workers in their formal job assignments. Open, two-way
communication can be encouraged on a continuing basis for mutual benefit. A
manager must be careful not to reduce the status of the leader in the eyes of his
constituents. Informal communication system though may have certain ill
consequence, can also be used by an enlightened manager to plug the loopholes
of the formal communication system. Informal communications is very fast and
ensures speedy transmission of information. It is the duty of every manager to
see that informal communication does not produce rumours and if a rumour
spreads, it should not be allowed to damage the functioning of the organization.
In short, management can use every aspect of informal organization to achieve
the organizational objectives.

ACTIVITY-C
Briefly explain how to make use of informal organization.
…………………………………………………
…………………………………………………
…………………………………………………
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Comparative Study of Formal and Informal Organization

The formal and informal organizations differ form each other in the following
respects:
(i) Origin: The reasons and circumstances of origin of both formal and informal
organizations are totally different. Formal organizations are created by
conscious managerial decisions. But informal organizations arise naturally
within the formal organization because of the tendency of the individuals to
associate and interact. Management has no hand either in emergence or in
abolition of informal groups.
(ii) Purpose: Formal organizations are created for realizing certain will-defined
objectives. But informal groups are created by organizational members for their
social and psychological satisfaction. There may be a conflict between the goals
of the formal organizational and those of the informal groups.
(iii) Activities: Activities in case of formal organization are differentiated and
integrated around the objectives of the enterprise and are formalized into work
units or departments on a horizontal basis. Individuals are fitted into jobs and
positions and work groups as a result of managerial decisions. In case of
informal organization, there are no specific activities. They arise from time to
time as a result of interactions and sentiments of the individuals. Informal
groups may be based on common taste, language, culture or any other factor.
(iv) Structure: Formal organizations is hierarchical, pyramid shaped and
bureaucratic in structure with well defined positions, rigid delineation of roles
and superior-subordinate relationships on impersonal basis, enforcement of
organizational order through a set of policies, procedures, and rules, conscious
emphasis on status, differential based on authority, narrow and downward
oriented communication system, etc. On the other hand, informal organization is

154
uncharitable; it looks like a complicated and common social network of
interpersonal relationships. Informal organization is loosely structured, with
only unwritten norms of behaviour enforced by consent. Communication is
informal and multi directional. There are no rigid status differentials.
(v) Membership: In a formal organization, every individual belongs to one work
group only and works under one superior. But in case of informal organization,
one person can be a member of more than one group, according to his choice.
He may be a leader in one group and a follower in another. There is no rigidity
about group membership.
(vi) Orientation: In case of formal organization, values, goals and tasks are
dominantly economic and technical and they concern productivity, profitability,
efficiency, survival and growth. But in case of informal organization, values,
goals and tasks are dominantly psycho-social, setting around individual and
group satisfaction, affiliation, cohesiveness and friendship.
(vii) Norms of Behaviour: In a formal organization, individuals are required to
behave in the prescribed manner in their work situations. They are expected to
behave in a rational manner. Devotions from the standard norms are dealt with
according to the processes of organizational law and order. There is also a
system of rewards and punishments. But in case of informal organization,
individual behaviour and group behaviour influence each other. Behaviour is
more natural and social.
Interactions cut across formally established positions and relationships
and there is free exchange of feelings and ideas. An informal organization
develops its own norms of behaviour and a system of rewards and punishments
to ensure adherence of group norms.

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ACTIVITY-D
Compare formal and informal organizations.
…………………………………………………
…………………………………………………
…………………………………………………
…………………………………………………

SELF-ASSESSMENT QUESTIONS
1. Define Formal organization and explain its features.
2. Give a comparative assessment of the importance of formal and informal
organization.
3. Distinguish between formal and informal organization. What should be
the attitude of management towards informal organization?
4. How can informal organization undermine and distort the formal
organization?

FURTHER READINGS
1. Brown J.A.C., The Social Psychology of Industry, Penguin Books Ltd.
Harmondsworth, 1970.
2. John A. Pearce II, Richard B. robinson, Jr. Management, Mc Graw-Hill
International, 1990.
KEY TERMS.
 Formal Organisation.
 Informal Organisation.

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 Unit-III

PERCEPTION AND LEARNING

OBJECTIVES

The objective of this lesson is to make you understand the perceptual processes and the
learning processes. After going through this lesson, you should be able to:

 Understand the perceptual process and the influencing factors thereof

 Identify the factors determining the external and internal stimuli

 Examine the various learning theories, and

 Distinguish between positive and negative reinforcement influencing the

learning behaviour.

STRUCUTRE

This lesson deals with the following aspects:

 THE PERCEPTUAL PROCESS

 FACTORS INFLUENCING SELECTION OF STIMULI

 FACTORS INFLUENCING PERCEPTION

 MANAGING THE PERCEPTION PROCESS

 LEARNING THEORIES

 LEARNING REINFORCEMENT

NATURE AND SIGNIFICANCE OF PERCEPTION

Perception is how people look at and understand the things. It is a unique

interpretation of the situation rather than recoding of it. Perception is a complex
cognitive process of understanding the world, sometimes not in its real form.
Perception is a learning process and hence it differs from person to person. As a result,
the same stimuli may produce different behaviours and responses. In managing the
organizations particularly in dealing with the people, managers should be able to
understand the perceptions of the people. It is in this context, an attempt is made here to
explain you the perceptual process, factors influencing perceptions and managing the
perceptions to the advantage of the organization.

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THE PERCEPTUAL PROCESS

Perception is the process by which people select, organize, interpret and respond to
information from the world around them. This information is obtained through the
senses namely, seeing, hearing, touch, taste and smell.

Perception may be defined as the process of receiving, selecting, organizing,

interpreting, checking, and reacting to sensations. It is also defined as a process by
which individuals organize and interpret their sensory impressions in order to give
meaning to their environments.

The perceptional processes show that their functioning is affected by three

variables – the objects perceived, the environment in which perception occurs, and the
individual perceiving the objects.

Diagram: The Perceptual Process

Stimuli Observation Perceptual Perceptual Response

Interpretation
Selection Organization

In the above diagram, you may find that the important aspects of perception are
selection and organization. Different people perceive an object differently both in terms
of what they selectively perceive and how they organize and interpret the things
perceived. A person’s selection process involves factors internal to the person as well
as external to him. It is, in fact, a complex set of factors that determine the perception
of an individual.

Similarly, an individual organizes the selected stimuli into meaningful patterns.

The interpretation of what is perceived may vary widely. For example, a wave of hand
may be interpreted as a friendly gesture or it may be interpreted as a sign of threatening
depending on the circumstances and the state of mind of the two people. Therefore,
quite often the people perceive things differently and behave on the basis of those
perceptions. Managers in organizations should understand that people’s perceptions
differ and at times they also go wrong.

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ACTIVITY - I

Explain the perceptual process.

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External Factors Influencing Selection

The external factors influencing selection are nature, intensity, size, contrast,
repetition, motion, and novelty and familiarity.

Nature

By this we try to understand the nature of the object. Is it a visual object? Does it have
words, pictures, people or animals? Pictures attract attention more than words and a
picture with human beings attracts attention more than a picture with inanimate objects.

Intensity

The intensity principle conveys that if the external stimulus is more intense in nature,
the more it is likely to be perceived by the individual. That is why people pay more
attention to loud noise, strong odour or bright light. At work places, superiors speak
loudly to subordinates for this reason only.

Size

Like intensity, size also matters very much. The larger objects are likely to be
perceived more by the individuals than the smaller ones. A maintenance engineer gives
greater attention to a bigger machine than a smaller one.

Contrast

The contrast principle suggests that the external stimulus that stands out distinctly
against the background or the one that is quite unusual will receive greater attention of
the people.

Repetition

The principle of repetition suggests that a repeated external stimulus draws more
attention than a single one. The several advertisements of various products shown daily

159
on TVs are based on the principle of repetition only. This principle also explains why
supervisors have to give directions to workers repeatedly for even simple tasks.

Motion

According to this principle, people pay greater attention to moving objects rather than
stationary objects. That is why advertisers create signs that incorporate moving parts.

Novelty and Familiarity

This principle states that either a novel or a familiar external situation can better serve to
draw attention. New objects in familiar settings or familiar objects in new settings are
likely to draw the attention of the perceiver. Job rotation is followed in organizations
for this reason. With changing jobs the workers will pay greater attention to the tasks
assigned to them.

Internal Factors Influencing Selection

Internal factors influencing selection of stimuli are personality, learning, and

motivation. They are explained below.

Personality

It cannot be disputed that personality has a significant impact on what and how people
perceive. The various personality dimensions influence the perceptual process. A
conscientious person is likely to pay greater attention to external environmental stimuli
than a less conscientious person who is likely to be careless, impulsive and
irresponsible. On the other hand, conscientious people tend to organize their
perceptions into clear categories, receive information quickly and in an organized
manner. They are careful and methodical in their perceptual selection and organization.

Learning

Perceptual selection is also affected by learning. Learning determines the development

of perceptual sets. Perceptual set means the expectation of particular interpretation
based on past experience with the same object. This is also known as cognitive
awareness by which the mind organizes information and form images and compare
them with previous exposures to similar stimuli. In organizations employees’
experiences are influenced by their perception very much. In making decisions,
managers are also influenced by their functional background. However, it is necessary

160
for managers to rise above their own experiences and be able to solve the problems in
an appropriate way. Individual differences lead to perceptual bias. This bias can be
overcome through education and experience.

Motivation

Motivation also plays an important role in influencing the process of perception. For
example, a hungry person is likely to be sensitive to the sight or smell of food than a
non hungry person. Like wise if the person is deprived of sleep, he looks for a situation
in which he can have a comfortable sleep. Generally, people perceive things that help
in satisfying needs and those that were found rewarding in the past. The relationship
between motivation and perception is explained through Collenyannia Principle which
states that people process pleasant events more efficiently and accurately than the
unpleasant events.

ACTIVITY - II

What factors influence selection of stimuli?

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FACTORS INFLUENCING PERCEPTION

A number of factors operate to shape and sometimes to distort perception. These

factors emanate from three sources – the perceiver, the perceived and the situation.

The Perceiver

When a person looks at a target, his interpretation of it is influenced by his personal

characteristics like his needs, past experience, habits, personality, values, and attitudes.
A person with a strong need for ego satisfaction may select out from a situation and
emphasize signals that tend to satisfy the desire for self esteem. Similarly, negative
attitudes toward unions may cause a manager to look for antagonisms in even routine
visits by local union officials to the organization. These and other personal factors will
determine what a person gives attention to in a situation and how these cues are
interpreted as a basis for decision-making and action responses.

161
The Perceived

Characteristics in the target that is being observed may influence what is perceived.
The physical attributes, appearance, and behaviour of other persons in the situation also
influence how the object is perceived. Physical attributes of a person are related to age,
sex, height, and weight. A young person exercising authority in a situation is viewed
differently from an older person doing the same thing. Personal attire and appearance
are also relevant factors in the formation of perceptions.

The Situation

The context in which we see the objects or events is important. The physical, social and
organizational elements of the situation or event may also influence perceptions. A
subordinate calling his boss by a first name may be perceived quite differently when
observed in an office as opposed to in a social reception. Though the perceiver and the
perceived are the same, it is the situation that makes a difference. Such background
characteristics of the situation or context are additional factors that can affect how the
situation is perceived by the different persons. The following Diagram shows the
summary of the factors influencing perception.

Situational factors

Characteristics of the Individual’s Characteristics of the

Perceiver perception perceived

Diagram: Factors Influencing Perception

MANAGING THE PERCEPTION PROCESS

Successful managers understand the importance of perceptions as influences on

behaviour, and handle them accordingly. They are aware of perceptual distortions and
accept that perceptual differences are likely to exist in any situation. With this

162
knowledge, they make appropriate decisions that are acceptable to all persons
concerned. The perceptual skills of a manager will help him in the following ways.

High level of self awareness

As already made clear, individual needs, experience, and expectations will all affect
perceptions. The successful manager understands this and is able to identify when he is
inappropriately distorting a situation because of such perceptual tendencies.

Seek information from various sources for decisions

The successful manager minimizes the bias of personal perceptions by seeking out the
viewpoints of others. These insights are used to gain additional perspective on
situations and the problems or opportunities they represent.

Empathy

As is understood, different people look at the same situation differently. The successful
manager rises above the personal impressions and tries to understand problems as felt
by other people.

Influence of perceptions on other people

People act according to their own perceptions. If felt necessary, the successful manager
influences the perceptions of others in such a way that the work events are interpreted as
accurately as possible and to the advantage of all concerned.

Avoid common perceptual distortions

Perceptual distortions include the use of stereotypes and halo effects, as well as
selective perception and projection. Successful managers are self disciplined and
sufficiently self-aware that the adverse impact of these distortions is minimized.

Avoid inappropriate attributions

A person has a tendency to explain why events happened the way they did or why
people behaved as they did. The successful manager is wise enough to establish the real
reasons for the things that happen and avoid the tendency of making quick or
inappropriate attributions.

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LEARNING
Now we may turn our attention to understanding the learning and the various processes
of learning. Learning is any relatively permanent change in behaviour that occurs as a
result of experience. There are two important elements in learning:

a. Change must be relatively permanent. It means after ‘learning’ the behaviour of

a person must be different from the previous behaviour. If a person learns car
driving, it will last for a long time indicating the changed behaviour. Temporary
changes may be only reflexive and fail to represent any learning. Therefore, this
requirement rules out behavioural changes caused by fatigue or other temporary
adaptations.

b. The second element is that the change of behaviour should take place as a result
of some kind of experience. Learning must be because of some interaction with
the environment and some feedback from such environment that affects
behaviour. The experience may be direct or indirect. Sometimes we learn to
change our behaviour when our colleagues are punished for that kind of
behaviour.

You may note that learning itself cannot be observed. The behavioural changes
consequent upon learning only can be seen. This kind of change in behaviour should be
differentiated from change in behaviour caused by other factors. For example, aging
may cause behavioural changes. A change an individual’s thought process or attitudes,
if accompanied by no change in behaviour, would not be learning.

Learning certainly has its own impact on training activities in an organization. It

can give insights into how to best develop the skills and talents of employees for
performing the jobs effectively. But it is the desire to change individuals that is of the
greatest importance. The manager who undertakes to produce such changes acts like a
teacher. He guides the employees to engage in behaviours that will help the
organization achieve its objectives. When the employees are late for work, lazy,
disobey the rules or engage in any type of dysfunctional behaviour, the manager
attempts to teach behaviours of functional nature. Further, if the employee is
performing well, he gives the employee feedback and also rewards to strengthen such
desirable behaviour.

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 You may understand that individuals enter an organization with a host of learned
attitudes and behaviours. Their job performance is a function of their learned
experiences. Learning is a continuous experience for employees. It is because of
learning, employers recruit people with college degrees or those with job experience.
The employer presumes that not only education or experience provides learning, but
that learning will lead to higher job performance.

LEARNING THEORIES

In an organization, employees have to learn and practice productive work behaviours.

The manager’s task is to provide sufficient learning experiences to employees in an
environment that will facilitate learning process and promote desired behaviours.
Training prepares employees to meet the challenges of the job, for which incentives are
to be provided to learn and practice right behaviours. The following are the important
theories of learning.

Classical Conditioning

Classical conditioning is the process by which individuals learn to link the information
from a neutral stimulus to a stimulus that causes a response. This response may not be
under an individual’s conscious control. Pavlov, in his experiments, hanged some meat
in front of dogs. This meat is unconditioned stimulus or unlearned stimulus. The dogs
responded to this stimulus by salivating. This kind of response was instinctive or
unconditioned. Afterwards Pavlov started to ring a bell at the same time when meat was
offered. Ringing the bell without offer of meat was not connected to any responses.
However, by ringing the bell every time when meat was offered, Pavlov established a
relationship between the two stimuli that is the bell and the meat. With the continuation
of the process, the ringing of the bell alone acted like a stimulus to evoke the response
of salivating even without presentation of meat. As a result, the bell became a
conditioned stimulus leading to conditioned response.

Operant Conditioning

B.F. Skinner coined the term operant conditioning to refer to a process by which
individuals learn voluntary behaviour. Voluntary behaviours are called operant because
they operate or have some influence on the environment. Learning occurs from the
consequences of behaviour, and many employee work behaviours are operant

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behaviours. As a matter of fact, most behaviours in everyday life are forms of operant
behaviour. Managers are interested in operant behaviours because they can influence
the results of such behaviours. On the basis of the direct relationship between the
consequences and behaviour, the management can identify the relationship and try to
modify the behaviour. That is how the behaviour can be controlled by manipulating its
consequences. Two principles guide this relationship. 1. The behaviour that results in
positive rewards is likely to be repeated and behaviour with negative consequences is
likely to be extinguished. 2. Based on such consequences, the behaviour can be
predicted and controlled. Therefore, some consequences can be used to increase the
recurrence of desired behaviour and some other consequences can be used to decrease
the recurrence of undesired behaviour.

ACTIVITY - III

What do you know about operate conditioning?

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PRINCIPLE OF REINFORCEMENT

We understand that some behaviours are strengthened by the process of reinforcement.

Reinforce may be any stimulus that prompts a behaviour to be repeated or stopped.
Managements expect that the employee should behave in a desirable manner in the
organization and avoid undesirable behaviour. By the appropriate use of reinforces, the
organizations are able to maintain or increase the probability of behaviours like quality
oriented performance, wise decision making, regular attendance and punctuality and so
on. Some reinforces work by their application to a situation whereas other reinforces
work by their removal from this situation.

Positive Reinforcement

Positive reinforcement is provided by offering rewards for desired behaviours. Such

rewards should be powerful and durable so as to increase the probability of occurrence
of desirable behaviour. Money, as you understand, is the most powerful reinforcement
for positive behaviour since money can be used for a number of other purposes. Some

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other positive reinforces are recognition for good performance, challenging task,
participation in decision making and so on. As individuals have different motivations of
performance, positive reinforces should be individually tailored with a view to facilitate
the repetition of desired behaviour. That means reinforcer must be valued by the
employee. For example, money would be a less reinforcer who values praise for his
performance more. The reward must be directly linked with behaviour so that the
higher the performance of an employee, the grater would be the reward.

Negative Reinforcement

In negative reinforcement, an unpleasant event that precedes the employee behaviour is

removed when the desired behaviour occurs. This procedure increases the likelihood of
the desired behaviour to follow. Negative reinforcement is sometimes confused with
punishment because both use unpleasant events to influence behaviour. However,
negative reinforcement is used to increase the frequency of a desired behaviour,
whereas punishment is used to decrease the frequency of an undesired behaviour.
Managers frequently use negative reinforcement when an employee hasn’t done
something that is desired.

ACTIVITY - IV

Distinguish between positive reinforcement and negative reinforcement.

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Omission

Omission is the removal of all reinforcing events. While reinforcement increases the
frequency of a desirable behaviour, omission decreases the frequency and eventually
extinguishes an undesirable behaviour. Managers use omission to reduce undesirable
employee behaviours that obstruct achievement of organizational goals. The omission
procedure consists of three steps.

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 1. identifying the behaviour to be reduced or eliminated,

2. identifying the reinforcer that maintains the behaviour, and

3. stopping the reinforcer.

Omission is a useful technique for reducing and eventually eliminating

behaviours that disrupt normal workflow.

Punishment

Punishment is an unpleasant event that follows a behaviour and decreases its frequency.
As in positive reinforcement, a punishment may include a specific antecedent that cues
the employee that a consequence will follow a specific behaviour. While a positive
consequence of reinforcement encourages the frequency of a desired behaviour, a
consequence of punishment decreases the frequency of an undesired behaviour.

Organizations typically use several types of unpleasant events to punish

individuals. They may be a wage cut, a suspension without pay, a demotion, or a
transfer. The severe punishment is the dismissing an employee for failure to perform.
In general, organizations use punishments of unpleasant nature sparingly for cases of
serious behavioural problems.

It may be kept in mind that punishment should be used as a lost resort. The use
of punishment should be limited to those undesirable behaviours that cause a significant
damage to the organizational operations. It may also be remembered that punishment
should not lead to hostility to such an extent of making solution more harmful than the
problem itself.

Punishment may cause undesirable emotional reactions. An employee who has

been reprimanded for a mistake may react with anger toward the manager and the
organization. Such reactions may lead to retaliatory behaviour harmful to the
organization. Sabotage, you remember, typically is a result of a punishment-oriented
management system. It is clear that punishment leads to short-term suppression of the
undesirable behaviour, rather than to its elimination. Further, the punished individual
may develop a tendency of avoiding the situation. High absenteeism is a form of
avoidance and quitting is the final form of escape.

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 You should also note that punishment suppresses employee initiative and
flexibility. Overusing punishment produces apathetic employees, who are not assets to
an organization. Sustained punishment can also lead to low self-esteem. Low self-
esteem, in turn, undermines the employee’s self-confidence, which is necessary for
performing most of the jobs.

ACTIVITY - V

What should be management’s approach towards using punishments?

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PERSONALITY AND INDIVIDUAL DIFFERENCES

OBJECTIVES
The objective of this lesson is to make you understand the concept of personality and
its dimensions. After going through this lesson, you should be able to:

 grasp the meaning of personality

 understand the factors contributing for personality development

 gain the knowledge of various personality theories and

 find out the impact of personality differences on behaviour.

STRUCUTRE

This lesson deals with the following components:

 Meaning and Definition of Personality.
 Determinants of Personality
 Theories of Personality
 Personality Traits and Their Impact on Behaviour.

MEANING AND DEFINITION OF PERSONALITY

Personality is a complex phenomenon and difficult to be understood. There is no single
universally acceptable definition. Personality refers to the personal characteristics that
lead to consistent patterns of behaviour. It represents the overall profile or combination

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of stable characteristics that capture the unique nature of a person. Personality
combines a set of physical and mental characteristics that reflect how a person looks,
thinks, acts and feels. It has both internal and external elements. External traits are
observable behaviours on the basis of which we can understand one’s personality. The
internal factors are thoughts, values and genetic characteristics that are inferred from the
observable behaviours. According to Hogan,1 personality refers to the relatively stable
pattern of behaviours and consistent internal states that explain a person’s behavioural
tendencies.

We can understand from the above that people have some traits in common with
others and some uncommon with them. Each employee in an organization is unique
and he may or may not act similarly in a similar situation. Therefore, managers cannot
use the same kinds of rewards or motivation techniques to influence employee’s
behaviour. The above definition does not mean that people do not ever change. It
simply indicates that individuals do not change drastically overnight and their thoughts,
feelings, values, and actions remain relatively stable over time. Personality changes in
individuals occur slowly over an extended period of time. An understanding of
personality dimensions would enable managers to predict the behaviour of employees
and manage them effectively.

ACTIVITY - I

Define personality.

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1
Hogan RT, ‘Personality and Personality Measurement in MD. Dunnette and LM Hough (eds.)
Handbook of Industrial and Organisational Psychology (2 nd ed.) 1991.

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DETERMINANTS OF PERSONALITY

Having understood the concept of personality, now you can move further to know how
an individual’s personality is determined? Is it inherited (genetically determined) or is
it formed after years of experience? There are no simple answers to these questions. In
fact, several factors influence the shaping of our personality. Primarily, there are two
sources contributing for personality differences. They are 1) heredity and 2)
environment. Environment has several factors within it like culture, family background,
life experiences and the groups we interact with. The following diagram shows how
personality is shaped by these factors.

ENVIRONMENT
 Culture
 Family
background
HEREDITY  Life experiences
 Socialisation
process

PERSONALITY

Heredity

Our personality is partly inherited genetically from our parents. For example, whether
we are fair or dark, tall or short, strong or weak are all characteristics that have
something to do with heredity. Personality characteristics are partly influenced by
environmental factors also like experiences in life. Some traits may have strong
genetic component while others may be largely learned.

Culture

Culture refers to the distinctive ways in which people organize and live their lives.
Hence people belonging to different societies will have different cultural systems.
Persons born into a particular society are exposed to family and societal values and to
norms of acceptable behaviour in the culture of that society. People in the West and
those in the East have cultural differences between themselves. In US culture, people

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are rewarded for being independent while in Japanese culture they are rewarded for
being group oriented. These differences are primarily due to variations in cultural
norms and expectations of acceptable behaviours in the respective societies. You may
also note that though cultural values may have an impact on personality differences
among people in different cultures, people born in the same culture may also differ from
each other in many characteristics. For example, being Indians some are more assertive,
than others. Similarly, the work ethic is usually associated with Western cultures. But
this value does not influence all the people in Western cultures equally. Managers
should keep this in mind when they are dealing with the employees.

Family Background

An important tool for socializing a person into a particular culture is the person’s
immediate family. Factors like the socio-economic status of the family, the number of
children in the family and birth order, and education of the parents and extended
members of the family such as cousins, uncles and aunts, can influence personality
formation. In this regard, you may note that parents’ influence on children’s
development is significant and it happens in three ways:

1. Through their own behaviours, they influence children’s behaviours

2. They serve as role models

3. They selectively reward and punish the behaviours of childrens.

Experiences in Life
self esteem, are all related to his past experiences. A complex set of events and
interactions with other people determine the level of self esteem of a person. Therefore,
some personality traits get changed positively or negatively on the basis of the kind of
experiences in one’s life.

Groups We Interact With

The first group of people, a person interacts with is the family. As they grow, people
participate in various groups in the life time. The roles and experiences people have as
members of different groups lead to personality differences. People influence each other
and tend to associate with members who are akin to them in their attitudes and values.
The interactions begin first with patents and siblings, then our teachers and classmates,
later on our friends and colleagues. Undoubtedly, the influence of groups and various

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individuals will shape our personality. For example, if a person wants to become a
member of a work group, he has to change himself to conform to the values and norms
of that group. If the person is of aggressive type, he may have to become cooperative.

On the basis of the above discussion, it can be said that personality is influenced
by both heredity and environmental factors. In the next section, we try to understand
how personality does affect the behaviour of people at work.

ACTIVITY - II

How is personality of an individual shaped?

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THEORIES OF PERSONALITY

A study of personality theories would help us in understanding the nature of personality.

A few theories have been explained below:

Trait Theory

Trait theory shows a way for understanding personality. Many traits are common to
most people. However, there are many other traits that are unique to a person. It may
be remembered that traits are reactions and not what a person possesses. A person does
not possess emotion but he acts emotionally in some circumstances. One the basis of
the traits, people can be described as emotional, aggressive, loyal, creative, flexible,
humorous, sentimental, impulsive and so on. Traits are the basic elements of personality
and can be used to summarize the behaviour of a person. However, determining basic
traits is rather difficult because thousands of descriptive words are there.

Psychoanalytical Theory

The psychoanalytical theory of personality is based on the Freudian concept of

unconscious nature of personality. On the basis of his clinical experience, Freud noted
that his patient's behaviour could not always be consciously explained. This prompted
him to believe that the personality structure is primarily founded on unconscious
framework and that human behaviour and motivation are the outcomes of such

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conflicting psychoanalytic concepts as the id, the ego and the super ego. Id is the
foundation of the unconscious and is the basis of libido drives. It strives for sexual and
other biological pleasures and has animal instincts of aggression, power and
domination. Ego is conscious in nature and is a mechanism to relate our conscious
urges to the outside real world. It keeps the id in check through the realities of the
external environment. While id demands immediate pleasure, regardless of costs, ego
controls it so that these pleasures are granted at an appropriate time and in an
acceptable manner. Because of difficulty in keeping the id under control, ego is
supported by super ego. The super ego is the higher level restraining force and can be
described as the conscience of the person. The conscience creates standards of what is
right and what is wrong and is generally subconsciously developed by the absorption of
cultural and ethical values of the social environment. All these three Freudian elements
are inter-related and each cannot exist in isolation from others. In order to create a
"normal" personality, there must be a balance in the relationship among these three
forces.

Social Learning Theory

The social learning theory differs from the psychoanalytical theory in two ways. First, it
is believed that personality development is more a result of social variables than
biological drives. Secondly, motives can be traced to known and conscious needs and
wants rather than unconscious and latent desires. Thus, learning theory looks at
personality as the sum total of all that a person has learned. The social learning theory
focuses on behaviour patterns and cognitive activities in relation to the specific
conditions that evoke, maintain or modify them. The social learning theory uses
“reinforcement and punishment” approach in understanding personality. For example,
good behaviour is rewarded by management in terms of praise that further reinforces
good behaviour. Thus, behaviour and external environment have mutual interaction.
Behaviour partly creates the person’s environment and the environment affects the
behaviour as well.

Learning may also take place simply from observation rather than interaction
with the environment. We watch the behaviour of other people, draw conclusions from
it and come out with our own behaviour. Unlike trait theory or psychoanalytical theory,

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social learning theory considers situation as an important variable in determing human
behaviour.

ACTIVITY - III

What do you know about psychoanalytical theory of personality?

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INDIVIDUAL DIFFERENCES AND IMPACT ON BEHAVIOUR

The range of personality traits is quite bewildering. Personality trait means the basic
components of personality. The important personality traits that influence employee
behaviour at work place are need patterns, locus of control, introversion and
extroversion, self-esteem and self-concept, risk taking, self monitoring, Type A or
Type B personality, and goal orientation. These are briefly explained below.

Need Patterns

Primarily four personality needs can be identified that manifest themselves in the work
setting. They are the needs for achievement, affiliation. autonomy and dominance.
Those with a high need to achieve engage themselves proactively in work behaviours
in order to feel proud about their achievements and success. Those high in need for
affiliation tend to work cooperatively with others. Those high in need for autonomy do
well when not closely supervised. Those high in their need for dominance prove to be
effective in situations where they can enforce their legitimate authority.

Locus of Control

Locus of control refers to a generalized belief that events are either within one’s control
(internal locus of control) or are determined by the fate or luck (external locus of
control). People who have moderately strong internal locus of control are likely to
perform better at work places. They are likely to be more successful than their external
counterparts. Internals are more suitable for leadership positions and are likely to be
more satisfied with the jobs. Internals typically have more control over their own
behaviour than externals that leave every thing to fate.

Introversion and Extroversion

Personality traits are commonly understood in terms of introversion and extroversion.

Introversion is the tendency in individuals which directs them to turn inward and
experience and process feelings, thoughts and ideas within themselves. Extroversion
refers to the tendency in individuals to turn outward searching for external stimuli with
which they can interact. While there is some element of introversion as well as
extraversion in all of us, based on dominance, people are regarded as either introverts or
extroverts. Extroverts are sociable, lively, gregarious, and seek outward stimuli or
external interactions. Introverts are quiet, reflective, introspective, and intellectual

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people. They interact with a few intimate people. Introverts perform well when they
are alone and when the environment is quiet. Since managers have to constantly interact
with individuals both within and outside the organization and be able to influence them
to achieve organization’s goals, it is expected that extroverts prove to be better
managers than introverts.

Risk - taking

Personality differences can be seen in the willingness of people to take risk. Some
managers are prepared to take risk and act on little information and quickly also. They
prove to be as much effective as those other managers that are averse to take risk and
make decision cautiously.

Self – Monitoring

It refers to a person’s level of sensitivity and ability to adapt to situational cues. High
self-monitors change their behaviour quite easily to suit the situation whereas low self
monitors reveal their moods and personal characteristics to others who can easily
predict their behaviour in a given situation. Self monitoring personality trait is
important in carrying out organizational activities. Employees having this trait emerge
as better performers, better leaders and are likely to grow faster in the organization.

Self – Esteem and Self-Concept

Self esteem is the result of a person’s continuing self-evaluation. Self-esteem refers to

the extent to which an individual consistently regards himself as capable, successful,
important, and worthy. Self-esteem is an important personality factor that determines
how managers perceive themselves and their role in the organization. It is important to
self-concept, which refers to the way individuals define themselves as to who they are
and derive their sense of identity. High self-esteem leads to a high sense of self-concept,
which in turn, reinforces high self-esteem. The two are mutually reinforcing forces. As
a trait, a person high in self-esteem is likely to take on more challenging assignments
and be successful, thus enhancing their self-concept. That means they define
themselves as highly valuable and valued individuals in the organization. The higher the
self-concept and self-esteem of a person, the more he contributes to the goals of the
organization.

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Type A and Type B Personalities

Individuals can be grouped into two types of personalities – Type A and Type B. Type
A persons feel a chronic sense of time urgency, are highly achievement oriented, exhibit
a competitive drive, and are impatient when their work get slowed down for any reason.
In contrast, Type B persons are easy going individuals who neither have sense of time
urgency, nor the competitive drive. Type A individuals are more prone to heart attacks
than Type B individuals. While helping the organization to move ahead in a relatively
short period of time, Type A persons may suffer from health problems which are
harmful to themselves apart from the organization.

Goal -
Orientation

An important personality difference affecting behaviour at work is goal orientation.

There are two orientations – learning goal orientation and performance goal
orientation. A person with learning orientation develops by acquiring new
competencies whereas a person with performance orientation demonstrates
competencies by seeking favorable judgements from others. As is well known, some
individuals are highly work-oriented while others try to do the minimum that is
necessary for not being fired on the job. The extremely work oriented person gets
greatly involved in the job and lives up to being described as "living, eating, and
breathing the job". Estrangement from immediate family members could may occur.
Though a high level of work orientation of members is good for the organization to
achieve its goals, too much of it may lead to premature burnout and health problems.

In the above discussion, it is becoming clear to us that personality traits are

important for employees, managers and organizational effectiveness. With personality
differences, we are able to understand, how they affect the behaviour of the people in
organizations.

ACTIVITY - IV

Distinguish between introversion and extroversion.

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178
 MOTIVATION

OBJECTIVES

In this lesson we will introduce you to the concept of motivation and explain the various
models of motivation. After going through the lesson, you should be able to:

 Appreciate the nature and types of motivation

 Understand different theories of motivation and

 Analyse the impact of motivation on organizational performance.

STRUCTURE

In this lesson, we have discussed the following contents:

 CONCEPT OF MOTIVATION

 MOTIVATIONAL SOURCES

 THEORIES OF MOTIVATION

 MOTIVATION FOR HIGH PERFORMANCE

INTRODUCTION

Motivation received a great deal of attention in the management of the people in

different organizations. It represents the internal and external forces acting on a person
that prompt him to behave in a specific goal directed manner. It is the ‘willingness’ to
do something and is conditioned by its ability to satisfy the needs of an individual.

The term motive is defined as an urge, desire, craving or need that must be
satisfied. All motives are directed towards goals. “Motivation represents an unsatisfied
need which creates a state of tension or disequilibrium, causing the individual to move
in a goal directed pattern towards restoring a state of equilibrium, by satisfying the
need.”

Because motives of employees affect their productivity, management’s job is to

channel employee motivation effectively toward achieving organizational goals.
However, motivation is not the same as performance. The important motivational
principle states that the performance is a function of a person’s level of ability and
degree of motivation. This may be expressed as a formula shown below:

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 Performance = f (Ability x Motivation)

Ability represents a person’s talent for performing goal related tasks. For the
successful performance of a task, the person should have ability coupled with a high
level of motivation.

Motivated people find themselves in a constant state of tension. This tension

drives a person to behave in a particular way to reach an outcome or incentive that
relieves the person of the tension. The greater the tension, the more activity will be
needed to bring about relief and hence higher level of motivation. Thus the basic
motivation process can be depicted as follows:

DIAGRAM : THE PROCESS OF MOTIVATION

Need Drive Incentive

MOTIVATIONAL SOURCES

Having understood the concept of motivation, now you can learn something about the
various sources of motivation. You may note that motivation may sometimes come
from external environment in the form of rewards or punishments and sometimes it is
generated from within an employee in the form of intrinsic motivation. It may be
recognized that under the same set of external factors, all employees are not equally
motivated. It depends upon various factors which you can understand when you go
through the different motivational theories. The motivational sources are explained
below.

Positive Vs. Negative Motivation

Motivation may be either positive or negative. Positive motivation takes place when
management recognizes the employee’s efforts towards the achievement of
organizational goals. It is positive because, this kind of motivation increases the level
of performance, promotes team spirit, a sense of cooperation and generates a feeling of
belongingness and happiness. The positive motivational factors are:

 Praise and reward for good performance.

 Concern for the well being of an employee.
 Confidence reposed in the employee.

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  Delegation of authority
 Scope of participation given in the decision making.
Negative motivation, on the other hand, results from the use of force, pressure,
fear or threat. You may note that fear of punishment also affects motivation and thereby
the behaviour of a person. In the organizations, negative motivation may come from the
fear of being transferred, demoted or removed. This fear of punishment prompts the
person to work hard and achieve the goals.

It may, however, be realized that negative motivation is not desirable because

employees do not like to be punished. As far as possible, they have to be motivated by
positive means only.

Extrinsic Vs. Intrinsic Motivation

You may understand that motivation may be either extrinsic or intrinsic. Extrinsic
motivation is induced by external factors primarily financial rewards. It is expected that
the behaviour caused by positive rewards is likely to be repeated. But the reward should
be sufficiently powerful for desirable behaviour to be repeated. Money acts as a
significant incentive for positive behaviour of employees. Realizing the value of
financial incentives as motivators, managements now-a-days make use of wage
increments, bonus payment, fringe benefits, stock options, profit sharing schemes, paid
holidays, medical benefits, etc. for motivating the employees.

Intrinsic motivation is something that is generated within an individual. It is an

inner feeling. It may be a sense of achievement or recognition leading to satisfaction
that motivates the employee further. Since this kind of motivation comes from within, it
is called intrinsic motivation. There are many retired doctors who work free in the
hospitals because it gives them a sense of accomplishment and satisfaction. Some of the
intrinsic motivators include praise, status, recognition, esteem, challenge, risk and
responsibility in job.

ACTIVITY - I

What constitute the sources of motivation?

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THEORIES OF MOTIVATION
There are two types of motivational theories - content theories and process theories
(cognitive theories). While content theories explain what motivates and what does not
motivate, the process theories examine the variables that go into the motivational
process taking place within an individual. Some of these theories are explained below.

Maslow’s Need Hierarchy Theory

Abraham Maslow has propounded this need hierarchy theory as early as in 1943.
Maslow points out that human beings have divergent needs and they strive to fulfill
those needs. The behaviour of an individual is determined by such needs. These needs
range from biological needs at lower level to psychological needs at the highest level.
Further, these needs arise in an order of hierarchy or priority such that lower level needs
must be satisfied before higher level needs become important for motivation. Maslow
postulates five basic needs arranged in a hierarchy as follows:

Self-actualization 5
Needs

Esteem Needs 4

Social Needs 3

Safety and Security Needs 2

Physiological Needs 1

DIAGRAM: MASLOW’S NEED HIERARCHY

The first three levels of needs at the bottom are known as lower order needs as
they are related to one’s existence and security. The top two levels of needs are called
higher order needs as they are concerned with personal development and realization of
one’s potential. The needs are explained below.

Physiological Needs
The physiological needs are the basic needs having the highest strength in terms
of motivation. These are the needs arising out of biological tensions created as a result

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of deprivation of food, water, shelter, rest etc. If these basic needs are gratified, then the
next level needs become important and act as motivators.

Safety and Security Needs

Once the physiological needs are fulfilled, safety and security needs become
predominant. These are the needs for self-preservation while physiological needs are for
survival. These needs include those of security, stability, freedom from anxiety and a
structured and ordered environment. These safety and security needs arise out of the
concern for the fulfillment of physiological needs in the future. An individual seeks
economic or social protection against future threats and dangers that he is exposed to. If
once these needs are gratified, they fail to serve as motivators any more. The
individual, then, moves on to the next level needs and strives for their fulfillment.

Social Needs

At the third level, social needs or love needs become important. An individual cannot
live an isolated life. A sense of affiliation becomes important for a meaningful life.
These needs include the need for love, affection, companionship and social interaction.
We know very well that at home the child needs the love of parents and at school he
needs the friendship of his classmates.

Esteem Needs
This is to attain recognition from others that would induce a feeling of self-worth and
self-confidence in the individual. It is an urge for status, prestige and power. Self-
respect is the internal recognition while respect from others is the external recognition.
People that are able to fulfill this need feel that they are useful and have some positive
influence on their surrounding environment.

Self-actualization Needs
At the highest level is the need to develop and realize one’s capacities and potentialities
to the fullest extent possible. This need gets activated as motivator when all other needs
have been reasonably fulfilled. At this level, the person wants to excel in the skills and
abilities that he is endowed with. As a result, he seeks challenging work assignments
that require creativity and talent.

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 This need is inner-oriented and the motivation is intrinsic in nature. A self-
actualizing person is creative, independent, content, and spontaneous and has a good
perception of reality. He constantly endeavours to realize his full potential.

In conclusion, it may be said that Maslow’s model explains human behaviour in

general. It has nothing to do with the employee motivation at the work place. Further,
human needs may not necessarily have the hierarchy as shown by him. The relative
dominance of not able to satisfy his social needs may prompt a person to set the
physiological needs and safety needs aside and motivate him for earning the love and
affection of the family members are the friendship of his colleagues.

Herzberg’s Two-Factor Theory

Frederick Herzberg has developed the two –factor theory in 1950s. He developed it on
the basis of his survey of 200 engineers and accountants. In his survey the respondents
were required to describe a situation in which they felt happy and a situation in which
they felt bad about their jobs. Based upon the answers, he concluded that there are some
characteristics or factors that tend to be consistently related to job satisfaction and there
are other factors that are consistently related to job dissatisfaction. Herzberg named the
factors related to job satisfaction as motivators and those related to job dissatisfaction as
maintenance factors or hygiene factors. These two factors are explained below.

Motivators
The set of motivators are related to the nature of work and are intrinsic to the job itself.
These factors positively contribute for satisfaction and increase performance.
According to Herzberg, the motivators are:

The job itself

To get motivated, people must like and enjoy their jobs. Then, they are likely to be
committed to goal achievement. They do not mind working late hours and under going
other inconveniences to complete the work. Their morale remains high and they try to
avoid absenteeism and tardiness.

Recognition

An employee looks for recognition of his good performance by management. It gives

him a feeling of worth and increases his self esteem. It is but natural to be happy when

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you are appreciated by anyone. Hence recognition is considered an important motivator
in organizations.

Achievement

A sense of achievement gives a great feeling to an employee. To have this sense of

achievement the task must be challenging, requiring initiative and creativity. Therefore,
jobs are to be designed in such a way as to make available to the employees a sense of
pride when such jobs are performed.

Responsibility

An employee will have satisfaction in carrying out duties that have greater degree of
responsibility. The higher the level of responsibility, the more satisfaction and
motivation the employee gets.

Growth and Advancement

These factors are important for motivation. Promotions, higher responsibility,

participation in decision-making and executive benefits are all indicators of growth and
advancement that add to the satisfaction of employees.

Hygiene Factors

Unlike motivators, hygiene factors do not motivate employees. However, they prevent
dissatisfaction and try to maintain status quo. They do not contribute for growth but
prevent loss. The absence of these factors, you should understand, may lead to job
dissatisfaction which the organization cannot afford. You may also remember that the
elimination of dissatisfaction does not mean satisfaction. According to Herzberg, the
hygiene factors are:

 Wage and salary

 Company policies and practices

 Interpersonal relations with peers, superiors and subordinates.

 Working conditions

 Job security

As pointed out above, the hygiene factors are intended to avoid possible
dissatisfaction on the part of employees. These factors do not stimulate employees

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towards satisfaction or performance. Hence, the managements should concentrate on
motivators and at the same time take care of hygiene factors as well.

Herzberg’s model has been criticized since the results were based primarily on
the responses of white collar workers which do not reflect the opinions of blue collar
workers’ who may consider some hygiene factors as motivators. In fact, in some of the
subsequent studies some hygiene factors proved to be motivators e.g., salary.
Indisputably workers get motivated by financial rewards and sometimes by work
environment also.

In spite of these limitations, the study of Herzberg is found relevant and useful
as it is a model developed specifically to explain employee motivation at work place
unlike Maslow’s model that explains human behaviour in general.

ACTIVITY - II

Distinguish between motivators and hygiene factors.

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Vroom’s Expectancy Theory

This is one of the process theories of motivation propounded by Victor Vroom in 1960s.
The expectancy theory suggests that the motivation or inclination to act in a certain way
depends on the intensity of the desire of the employee for a given outcome and on the
attractiveness of such an outcome. There are three variables in the expectancy theory as
explained below.
Attractiveness- It is related to the importance that an individual place on the potential
outcome or reward which can be achieved on the job. It depends on the unsatisfied
needs of the individual.
Performance –Outcome Linkage – It shows the degree to which the individual expects
that the performance at a particular level will lead to the attainment of a desired
outcome.

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Effort -Performance Linkage – It shows the degree to which the individual expects
that exerting a given level of effort will lead to the performance at a particular level.
The following diagram shows the expectancy of the individual.

Individual Individual Organizational Individual

effort performance outcomes goals

Diagram: Vroom’s Expectancy Model

In the expectancy model shown above, we have to understand first, what

perceived outcomes does the job offer to the employee? It may be noted that outcomes
may be positive like pay, security, companionship, trust, fringe benefits, and congenial
relationships or they may be negative like fatigue, boredom, frustration, anxiety, and
threat of punishment. What is important for this purpose is not the reality but what the
individual employee perceives the outcome to be.
Second, how much attractive are the outcomes for the employee? Are they
valued positively, negatively, or neutrally by the employee. It depends on the
individual’s personal values, and needs. The individual who considers a particular
outcome to be attractive-that is, positively valued-would prefer to attain it rather than
not attaining it. Others who consider it negative may prefer not attaining it rather than to
attaining it. A few others may be neutral also. In their case, motivation does not take
place.
Third, what kind of behavior an employee must produce in order to achieve
these outcomes? The outcomes are not likely to have any effect on the individual
employee’s performance unless the employee knows, clearly and unambiguously, what
he must do in order to achieve them.
Last, how does the employee consider his chances of doing what is expected of
him? After the employee has considered his own competencies and ability to control
those variables that will determine his success, what probability does he place on
successful attainment?
Therefore, whether an employee has the motivation or not depends upon his
preferred outcomes and his expectation of performance-outcome linkage and effort-
performance linkage. You can understand that an employee does not get motivated if

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he is indifferent towards an outcome or if he does not have the knowledge of the linkage
between outcome – performance – effort.

MOTIVATION FOR HIGH PERFORMANCE

High performance work system is one that integrates well-established methods of
motivation with new technologies that link pay and performance. Linking pay and job
performance is very essential but achieving it is difficult. Complex issues are: should
pay increase be linked to the performance of a worker or a team? Should the reward be
based on cost savings or profits and be distributed annually or when people retire or
otherwise leave the organization? The accounting procedures required by cost savings
plans are very complex. Further many employees view wages, fringe benefits,
challenging work, and the achievement of difficult tasks as rewards.

A number of studies are available on how rewards affect individual and team
performance. The ability of rewards to motivate individuals or a team towards high
performance depends on the following factors:

Availability: Plenty of rewards should be made available to reinforce desired

performance. For example, pay increases are often highly desired but not available.
Further, pay increases that are too low may actually lead to negative consequences, like
theft, falsifying records, etc.

Timeliness: Like performance feedback, rewards should be given promptly. A

reward’s motivating potential will come down to the extent that it is separated in time
from the performance it is intended to reinforce.

Performance Linkage: Rewards and performance should be closely linked with each
other. If a task is met, the reward is given. The clearer the linkage between
performance and rewards, the better the rewards are able to motivate desired behaviour.

Durability: Some rewards last longer than others. Intrinsic rewards, like autonomy,
challenge, achievement and responsibility, tend to last longer than extrinsic rewards,
like pay increase, job security, good working conditions etc.

Equity: Employees’ motivation to perform is more when they perceive that the
compensation policies of their organization are fair and equitable.

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Visibility: It is necessary that rewards are visible throughout an organization. Visible
rewards, like pay increase or promotion send signals to employees that rewards are
available for high performance.

Therefore, in designing the reward systems in organizations, the above factors

have to be considered for motivating employees and make them achieve high level of
performance.

ACTIVITY - III

How should rewards be used for achieving higher performance?

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 VALUES AND ATTITUDES

OBJECTIVE
The objective of this lesson is to make you understand the concepts of values and
attitudes. After going through this lesson, you should be able to:
 Grasp the meaning of values and types of values
 Understand the changing value system at work place
 Know the attitudes and the mechanism of attitude formation and
 Appreciate the implications of attitudes in organizations
STRUCUTRE
Keeping in view the above objectives, this lesson deals with the following components
 MEANING AND DEFINITION OF VALUES
 TYPES OF VALUES
 VALUES AT WORKPLACE
 ATTITUDES AND THEIR FORMATION
 TYPES OF ATTITUDES
 IMPLICATIONS OF ATTITUDES

MEANING AND DEFINITION OF VALUES

At the outset, you try to examine a few definitions of values. According to Rokeach
“values represent basic conviction that a specific mode of conduct or end state of
existence is personally or socially preferable to an opposite or converse mode of
conduct or end state of existence”.
Chakravarti defines values as “the manner in which an individual tends to make
judgements or choices, both about goals and means, at different stages of one’s life, in
different facets of it, as are deemed to lead to the well being and happiness of oneself
and society”.
From the above, you can understand that values are learnt from the society and
hence are acceptable to the society as preferred ‘modes of conduct’ or ‘end states’.
Values are stable and long-lasting beliefs about what is important in a variety of
situations. They are evaluative standards that help us distinguish between right and
wrong or good and bad in the world. Values do not represent what we need but they
indicate what we ought to do to achieve the need in a socially desirable way. Some
people value practicality while others value aesthetics. Some people value frugality

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while others value generosity. Values influence our priorities, preferences and our
actions. Value systems represent prioritizing of individual values in relation to their
relative importance. We all have a set of values that form a value system. This system
is identified by the relative importance assigned to such values as pleasure, self-
respect, honesty, freedom, equality, and so on. The values of an individual influence
his attitudes and also his behaviour.
Importance of Values
Values are important for organizations because they depend on individual employees
for making decisions and actions aimed at achieving the goals. The problem for these
organizations is how to align the individual values with those of the organization.
Now-a-days, employees resent the traditional command-and-control supervision and
expect a lot of autonomy to be given to them. This presents a problem to the
managers. Organizational ethics is becoming important in view of the manipulations
and malpractices. It has something to do with the values of that organization.
Values influence behaviour of an employee in several ways. If he feels that
payment of wage on the basis of performance is right, he cannot accept payment of
wage on the basis of seniority. He remains skeptical about such a system followed in
the organization. Therefore, the values of individuals need to be studied, so that a
proper match can be established between the employees’ values and that of the
organization.
Sources of Values
You may note that values are learnt right from the childhood. They are taught by
mother when she guides the child in several ways like “you go to bed early”; “you
should wear clean clothes”, “you should achieve first rank” and things like that. Your
early ideas of what is right and wrong were probably formulated from the views
expressed by your parents. As you grow, you are likely to get exposed to other value
systems and be induced by them. We derive the values from the people we love or
respect like our parents, teachers, friends, and other famous personalities in movies,
sports, business, and political fields. Out of our admiration for them, we are likely to
emulate them by imbibing their values also.
You may remember that in our culture itself, certain values have been developed
over time and they are continuously reinforced. Peace, cooperation, harmony, equity,
and democracy are the desirable societal values nurtured in our culture.

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 It is interesting to know that values are relatively, stable and enduring. This is
because of the way in which they are originally learned. In childhood, you are told that
a certain behavior is always desirable or always undesirable. You are told, for example,
that you should be honest and truthful. You were never taught to be a little bit honest or
a little bit truthful. It is this absolute learning of values that more or less assures their
stability and endurance. You may also note that they are not permanent, but change
very slowly. The process of questioning our values, may result in a change.
ACTIVITY - I
What are values? How are they important?
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TYPES OF VALUES
You may note that values do not operate in isolation. Several values interact with each
other to form value system in a society. According to Rikeach, value systems are
composed of rank-ordered sets of values that fall into two general categories namely
terminal values and instrumental values. Terminal values reflect the desired end states
of existence where as instrumental values are related to the choice of behaviour in
reaching those end states. The terminal values are desired states of existence that we
try to achieve. Your preferences like duty, equality and wisdom and a compatible life
are some of the terminal values. On the other hand, instrumental values are desirable
modes of behaviour that help us reach terminal values. Being polite, courageous,
logical, self controlled, ambitious etc., are some of the instrumental values.
Values can be categorized on the basis of the level at which operate. These may be:
 Personal values which are formed from past experience and interaction
with others.
 Cultural values which are the dominant beliefs held by a collective society.
 Organizational values which are at the heart of organizational culture in
terms of shared assumptions, values and beliefs.
 Professional values which are held within an occupational group.

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 Values may also be classified as the espoused values and enacted values.
Espoused values represent the values that we want others to belief we avoid by. Values
are socially desirable and so people create a positive public image by claiming to
believe in values that others expect them to hold. Contrary to this, enacted values
represent the values actually practiced. These values, in fact, guide our decisions and
behaviours.
It may be recognized that values are functions of preferences. The most important
early work in categorizing values was done by All port and his associates. They
identified six types of values. They are:
1.Theoretical-places high importance on the discovery of truth through a
critical and rational approach
2. Economic--emphasizes the useful and practical
3. Aesthetic-places the highest value on form and harmony
4. Social-the highest value is given to the love of people
5. Political-places emphasis on acquisition of power and influence
6. Religious-concerned with the unity of experience and understanding of the
cosmos as a whole.
All port and his associates developed a questionnaire that describes a number of
different situations and asks respondents to preference rank a fixed set of answers.
Based on the respondents' replies, the researchers could rank individuals in terms of the
importance they give to each of the six types of values. The result is a value system for
a specific individual.

VALUES AT WORKPLACE
The work values may be defined as the conceptions of what is preferable from among
the alternative modes of conduct or end states with respect to one’s work. Work values
are expected to be an integral part a nation’s cultural system and hence we notice
differences between the work values of American organizations and Japanese
organizations. They represent the values internalized by members of the society
through the process of socialization. In global organizations, now-a-days, it is
becoming difficult to achieve congruence between the diverse values of employees and
those of the organization.
While defining managerial values, Indian executives mentioned work ethics,
commitment, self-motivation, integrity, hard work, character etc. It is reported in a

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study that the most important goals of an ethical Indian manager are customer
satisfaction, achievement of organizational goals within scheduled time, employee
motivation and career progress. According to Upadhyay, Indian managers are status
and power oriented and consider decision making as their prerogative and consultation
as a means of eroding their authority. They tend to take credit for work done by them
rather than share it with individual members of the team. It may be noted that while
values are stable and enduring, they are not rigid. Therefore, new generations of
employees may bring into the organizations new set of values.
In some of the studies age has been found to be a major factor in differentiating
employee values. Young employees give importance to more autonomy at work place,
short-run gratification, quick growth, individualism, and openness compared to old
employees.
As a result, young employees bring a different set of values to the work place.
Hence, management should understand those new values and accordingly deal with
them for achieving good performance. Managers have to study values because they are
the foundations for understanding a person’s attitudes, perceptions, motivation and
behaviour in the organization.

ACTIVITY - II
What do you know about the values at work place?
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ATTITUDES AND THEIR FORMATION

Having understood the values, we may turn our attention to know about the attitudes
and their formation. You should recognize that attitudes are evaluative statements-
favorable or unfavorable- concerning objects, people, or events. They indicate how one
feels about something. When you say "I like my job,” or “I hate making lies” they
represent your attitudes.
Attitudes are different from values. Values could be a little broader in concept
while attitudes are more specific. Values indicate the rightness or desirability of

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something. For example, a statement like "gender discrimination is bad" reflects the
values one stands for. On the other hand, a statement “I prefer women to be given an
equal place with men in recruitment” represents the attitude of a person. Attitudes are
learned predispositions towards various aspects of our environment.
While, attitudes and values are different, there are also some similarities. Both
are powerful instruments influencing cognitive process and behaviour of people. Both
are learned and acquired from the same sources – people and objects. Both are
relatively permanent and resistant to change. Both values and attitudes influence each
other and are used interchangeably. Hence, values people hold can explain their
attitudes and, in many cases, the behaviours they engage in. However, we cannot
determine which values underlie which attitudes and behaviours.
Sources of Attitudes
As already pointed out above, attitudes, like values, are acquired from the environment
- parents, teachers, friends, and colleagues. You may note that they are only acquired
but not inherited. We begin modeling our attitudes after those we admire and respect.
We observe the way family members and friends behave and we shape our attitudes
and behavior to align with theirs. You tend to imitate the attitudes of famous persons or
those you admire and respect. Attitudes may also be developed from a personally
rewarding or punishing experience with an object or event. If employees are rewarded
for being regular in an organization, you are likely to believe that you will also be
rewarded if you are regular.
In contrast to values, your attitudes are less stable. That is why advertising
messages attempt to change your attitudes toward a certain product or service. If Maruti
Company is able to create a favorable opinion toward their car, that attitude may lead to
a desirable behavior i.e., the purchase of Maruti car.
In organizations, knowledge of attitudes is important for managers because they
affect job behavior. Manager’s knowledge can serve two purposes. Firstly, it helps him
in understanding and predicting how a person is likely to behave. Secondly, it helps
him in changing unfavorable attitudes into favorable attitudes.

ACTIVITY - III
What factors influence the formation of attitudes?
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TYPES OF ATTITUDES
A person may have a multitude of attitudes, but what is important for us to study is the
limited number of job-related attitudes. These job-related attitudes are positive or
negative evaluations held by employees about various aspects of their work
environment. Essentially, there are three important attitudes we are concerned with: job
satisfaction, job involvement, and organizational commitment.

Job Satisfaction
One of the tasks of a manager is to provide job satisfaction to their employees. Job
satisfaction refers to an individual's general attitude toward his or her job. A person
with a high level of job satisfaction holds positive attitudes toward the job, while a
person who is dissatisfied holds negative attitudes towards the job. When we talk about
employee attitudes, mostly we mean job satisfaction. As a matter of fact, the two are
closely related.

Job Involvement
The term "job involvement" is relatively a recent concept in the literature. There is no
complete agreement over what the term means. Generally, it refers to the degree to
which a person identifies with his job, actively participates in it, and considers his
performance important to his self-worth. Individuals who express high involvement in
their jobs are likely to be more productive, have higher satisfaction, and are less likely
to resign than employees with low involvement.

Organizational Commitment
The attitude reflects an individual's orientation toward the organization by tapping his
or her loyalty to, identification with, and involvement in the organization. Individuals
who highly committed see their identity as closely attached to that of the organization.
Like job involvement, highly committed employees will be better performers and have
lower turnover than those with low levels of commitment to the organization.
You may understand that when you talk about job attitudes and their impact on
behavior, you are referring to the positive or negative appraisals that people make about
their job or organization. Job satisfaction is the most popular attitude measured in

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organizations, but more recently there has been increased attention given to job
involvement and organizational commitment. All these attitudes are measured with a
view to predict employee behaviors like performance, productivity, absenteeism,
turnover and unionization.

IMPLICATIONS OF ATTITUDES

Attitudes and Productivity

The attitude-productivity relationship is not clear. Because in 1955, Brayfield and

Crockett made an extensive study of this relationship and concluded that there was
minimal or no relationship between attitudes and performance. However, two years
later, Herzberg and his associates concluded from the review of studies, that there was
generally a positive relationship between attitudes and productivity. They noted that in
many cases the correlations, although positive, were low. Similarly, a review in 1964 of
twenty-three separate studies revealed that, except in three cases, there was a low but
positive relationship between satisfaction and performance. It is clear that the studies
on the relationship between attitudes and productivity give rise to mixed findings. Even
in recent studies also increased employee satisfaction, involvement, or commitment
cannot be said to lead to higher productivity.
Attitudes and Withdrawal Behaviors
It was found in early studies that employee satisfaction is inversely related to absen-
teeism and turnover. The greater the job satisfaction on the part of an employee, the
less is the scope for employee’s withdrawal behavior. Brayfield and Crockett found a
significant but complex relationship between attitudes and both absenteeism and
turnover. Vroom found a consistent negative relationship between job satisfaction and
turnover, but a less consistent negative relationship between satisfaction and
absenteeism. Many studies have found that satisfaction has a consistent impact on
absenteeism, but an even more profound and consistent relationship on turnover.
However, the conclusion that satisfaction and absence are inversely related has come
under recent attack.
There is growing enthusiasm for the view that organizational commitment is a
better predictor of voluntary resignations than job satisfaction. If this is true, efforts to
develop valid measures of organizational commitment may be of increasing importance

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to managers.
In conclusion, the evidence is fairly clear that committed and satisfied em-
ployees have lower rates of both turnover and absenteeism. If we consider the two
withdrawal behaviors separately, however, we can be more confident about the
influence of attitudes on turnover.
Attitudes and Satisfaction
You should recognize that job attitudes and job satisfaction are closely related. In many
research studies, in fact, these terms are used interchangeably. In studies of job
attitudes, it is generally thought that the result is some measure of job satisfaction or
dissatisfaction. Job satisfaction, however, is not a behavior but rather a general feeling
of contentment with the job. As a result, if attitudes are positive, job satisfaction tends to
be positive. On the other hand, if the attitudes are negative satisfaction becomes low.
Therefore, if a manager wants to have employees who are satisfied with their jobs, he
should strive to create in them positive attitudes toward their job and the organization.
ACTIVITY - IV
Explain the implications of job attitudes in organizations.
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 STRESS MANAGEMENT

OBJECTIVES

The objective of this lesson is to familiarize you with the job stress and its management
in organizations. After going through this lesson you should be able to:

 Know the meaning of stress and its causes

 Understand how stress levels change on the basis of occupational and

individual differences

 Acquaint with the consequences of distress affecting employee performance

and behaviour and

 Think of appropriate strategies for managing stress.

STRUCUTURE

This lesson focuses attention on the following contents

 MEANING AND DEFINITION OF STRESS

 CAUSES OF STRESS

 OCCUPATIONAL DIFFERENCES AND STRESS

 INDIVIDUAL DIFFERENCES AND STRESS

 CONSEQUENCES OF DISTRESS

 MANAGING WORK- RELATED STRESS

MEANING AND DEFINITION OF STRESS

People often think of stress in negative terms and believe that it is caused by something
bad in the environment. For example, a family member becomes ill, a student fails to
get admission into the desired course or an employee is scolded by his superior for late
coming. All this is to be called a form of distress. However, there is a positive side of
stress also caused by good things like a student securing admission into medicine or an
employee getting promoted as a manager. This is called eustress. The Greek word eu
means good. Therefore, at work places employees may experience bad stress as a result
of demotion or good stress caused by increased job responsibility and time pressure that
go with a promotion.

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In fact, there are numerous definitions of job stress. You should understand at least a

few of them. Ivancevich and Matteson define stress simply as “the interaction of the

individual with the environment”. They give a more detailed definition of stress as “an

adaptive response, motivated by individual differences and/or psychological processes,

that is a consequence of any external (environmental) action, situation, or event that

places excessive psychological and/or physical demands on a person”.

Beehr and Newman define job stress as “a condition arising from the
interaction of people and their jobs and characterized by changes within people that
cause them to deviate from their normal functioning”.

From the above, you can understand that stress is an adaptive response to
a situation that is challenging or threatening to the person. You may also note that
stress is a person’s reaction to a situation but not the situation itself.

 ACTIVITY - I

What is job stress?

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CAUSES OF STRESS

Let us examine the causes of stress now. The factors contributing to

stress are called stressors. Stressors exist in the environment and they make a
physical or emotional demand on the person. Stressors emanate from both within
the organization and outside which can be classified as external stressors,
organizational stressors, group stressors and individual stressors as shown in the
following diagram.

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 INDIVIDUAL STRESSORS
JOB
STRESS
GROUP STRESSORS
ORGANISATIONAL STRESSORS

EXTERNAL STRESSORS

Diagram: Factors contributing to Job Stress

External Stressors

In the analysis of job stress, we tend to ignore outside forces or events.

In fact, they have a greater impact on stress. Quite often, we experience plenty of
stress situations outside the organizational settings. External stressors stem from
societal changes, globalization, family economic conditions, relocation, race,
religion and community conditions. You have to remember that when employees
enter into the organizations, the stressors are also carried over which affect their
behaviour. In the changing situation, inspite of the advancement in medical
sciences the modern living has increased the stressful conditions and decreased the
health and well being of people in urban environments. The life styles have
changed giving rise to several anxieties and tensions. As a result, potential job
stress has increased.

Outside the organization, a person’s family also plays an important role

in contributing for stress conditions. An illness of the family member or a strained
relation with spouse or a child may create stress for an employee. Not able to
properly balance the family responsibilities and the job responsibilities, employees
experience a lot of stress. For example, a psychologist reports that divorce between
wife and husband interferes with work more than any other trauma in a person’s

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life. It is pointed out that in the first three months after a spouse walks out; the
employee becomes incapable of focusing on work.

In addition, now-a-days various developments in the macro level

scenario like frequent communal riots, strikes, violence, religious differences,
oppressions, harassments, kidnaps, suicides, attacks by extremists have all become
a common place. Living in such an environment, a person is exposed to a variety
of stressful situations.

Organizational Stressors

Organizational stressors are many and manifest themselves in different

forms. You may note that any change in organization is stressful. Technological
changes and structural changes happen too frequently. Mergers and acquisitions are
increasingly resorted to. It is needless to say that downsizing of workforce is
extremely stressful to those who lose their jobs. Layoff survivors also experience
stress due to higher workloads, feeling of guilt, job insecurity, and the loss of
friends at work.

In the physical environment of an organization, you find stressors in the form of

high temperature, excessive noise, lack of privacy, poor lighting, safety hazards and
poor quality of air. A study observed that in a noisy plant, workers’ levels of stress
significantly decreased when they were supplied with ear protectors. In another
study, it was found that clerical employees experienced significantly higher stress
levels in noisy open offices than in quiet areas.

ACTIVITY - II

What are organizational stressors?

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Group Stressors
As you are aware, within an organization, there are several groups that function at

different levels. A number of stressors arise at group level, which are discussed below.

Lack of Group Cohesiveness:

Cohesiveness means “togetherness”. Employees should remain a cohesive group.

If the cohesiveness does not exist among employees, it may lead to job stress.
Cohesiveness of the group may be lost because of the task design, or animosities of
group members, or the supervisor trying to limit it.

Lack of Social Support:

Employees have different social groups for different purposes. These play an
important role in extending support to an employee. By sharing their joys and sorrows
with others, they feel comfortable and happy. In the absence of this kind of mutual
social support, the situations prove to be very stressful. There are research studies
indicating that the lack of social support is so stressful that it results in health care costs.
You may note that group-level dynamics may also act as stressors. A study indicated
that organizational politics was a potential source of stress in the work environment.

Interpersonal Stressors

Interpersonal stressors like group competition, ineffective supervision, office politics,

and other conflicts are many in the organizations. The more an employee is required to
interact with other people, the more is the scope for stress. As you are aware, in banks
and call centers, the employees experience a lot of stress because of the uncooperative
customers and high targets to be achieved.

Individual Stressors
At individual level, there are many factors that contribute to stress, most of which are
role-related. Role-related stressors include conditions where employees have difficulty
in understanding, reconciling, or performing the various roles in their lives. The four
main role-related stressors are role conflict, role ambiguity, workload, and task control.
Role Conflict
Role conflict occurs when people face competing demands. Inter-role conflict
exists when employees have two roles to play which are conflicting. For example,

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people in supervisory cadre in organizations face this kind of conflict, as they have to
meet the expectations of management on the one hand and the expectations of workers
on the other. Role conflict also occurs when an employee receives contradictory
messages from two superiors about how to perform a task or work with organizational
values and work obligations that are incompatible with his or her personal values. The
working women often experience role conflict between their job responsibilities and
family obligations.

Role Ambiguity
Role ambiguity exists when employees are uncertain about their job duties,
performance expectations, level of authority, and other job conditions. This ambiguity
tends to occur when people enter new situations like joining as a manager in an
organization accepting a foreign assignment. This is because they are uncertain about
task and social expectations that go with the new positions.

Workload
Workload is a well-known job stressor. But you remember that work under-
load, receiving too little work or having tasks that do not sufficiently use your talents, is
also a possible stressor. Now -a-days, employees have either too much to do in too little
time, or they work too many hours on the job. Long work hours may lead to unhealthy
lifestyles, which, in turn, cause heart disease, back pain or eye sight. Work overload is
such a problem in most of the software organizations in India leading to health
problems.

OCCUPATIONAL DIFFERENCES AND STRESS

Several studies have attempted to identify which jobs have more stressors than
others. You may note that one problem with rating occupations in terms of their stress
levels is that a particular occupation may have considerably different tasks and job
environments in different organizations and societies. The job of a police officer may be
less stressful in a small town than in a large city where crime rates are higher and the
organizational hierarchy is more formal.

Another important point for you to remember is that a major stressor to one
person may be insignificant to another. We cannot conclude that people in high-stress
occupations actually experience higher stress than people in other occupations. Some

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jobs expose people to more serious stressors, but careful selection and training can
result in stress levels no different from those experienced by people in other jobs.

INDIVIDUAL DIFFERENCES AND STRESS

You have already understood that individuals differ in their personality
characteristics. These differences determine the stress levels experienced by the people.
Two people may be exposed to the same sources of stress like meeting a deadline for
achieving a goal. However, in terms of stress levels, they may be different. Similarly
they may be different in terms of stress strums also.

Some individuals are more prone to stress than others. It may be on account of
demographic differences and cognitive affective differences. Demographic differences are
related to age, health, education and occupation. Age causes stress because as people go
through the life stages, certain things are expected of them. As they grow, they have to
shoulder greater responsibilities. Health is another factor influencing health. Healthy people
can cope with stress more than sick people. Education is also important in this context. If the
person is not educated, he feels unworthy and that may cause stress. Coming to occupation, it
is needless to say that every occupation involves one kind of stress or other.

Cognitive affective differences are satisfaction, locus of control and type of

personality. Persons having greater urge for satisfaction work hard and try to excel others.
This may lead to overwork and also burnout. Locus of control refers to one’s feeling of the
extent to which he is able to control the surrounding world. The greater the person’s
perception of control over the environment, the lesser is his proneness to stress. Another
cognitive factor is personality. As explained earlier, there are two types of personalities –
Type A and Type B. Type A personalities are involved in struggles to get more achieve more.
Therefore, they are more prone for stress. On the other hand, Type B personalities are more
patient and easy going. They are interested in achieving goals but follow different ways for
the purpose. As a result, they are less prone for stress.

ACTIVITY - III

How do stress levels change from one individual to another?

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CONSEQUENCES OF DISTRESS

Stress will have serious consequences on our health as well as our job
performance. Stress results in a variety of physiological, psychological, and behavioral
consequences.

Physiological Consequences
Stress takes its toll on the human body. Studies have found that students who are
anxious about their exams are more susceptible to colds and other illnesses. As you are
aware, many people experience tension or headache due to stress. Others get muscle
pain and related back problems. These physiological ailments are attributed to muscle
contractions that occur when people are exposed to stressors.

Psychological Consequences

Stress results in various psychological consequences, like job dissatisfaction,

moodiness, and depression. Emotional fatigue is another psychological consequence of
stress, which is related to job burnout.

Job Burnout

Job burnout is the process of emotional exhaustion, depersonalization, and

reduced personal accomplishment resulting from prolonged exposure to stress. The term
“job burnout” was not known 50 years ago; but it’s heard everywhere now a days. Job
burnout is a complex process that includes the dynamics of stress, coping strategies, and
stress consequences. Burnout is caused by excessive demands made on people who
serve or frequently interact with others. Interpersonal and role-related stressors cause
burnout.

There are three components of job burnout. The first one is emotional
exhaustion, which plays a key role in the burnout process. It is characterized by a lack
of energy and a feeling that your emotional resources are exhausted. Emotional
exhaustion is sometimes called compassion fatigue because the employee no longer
feels able to give as much support and caring to clients.

The second one is depersonalization, which is identified by the treatment of

others as objects rather than people. Employees subjected to burned-out become
emotionally detached from clients and cynical about the organization. This detachment
reaches the point of callousness, far beyond the level of detachment normally required

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in helping occupations. Depersonalization can be seen when employees strictly follow
rules and regulations rather than try to understand the client’s needs and search for a
mutually acceptable solution.

The third component of job burnout is reduced personal accomplishment. It

refers to the decline in one’s feelings of competence and success, and becomes evident
in feelings of diminished competency. In other words, the person’s self-efficacy
declines. In these situations, employees develop a sense of learned helplessness, as they
no longer believe that there make a difference.

Behavioral Consequences
When stress becomes distress, job performance comes down and workplace
accidents increase. High stress levels impair your ability to remember information,
make effective decisions, and take appropriate actions. You probably experience this
kind of distress in exams. You are likely to forget important information and commit
mistakes.

Overstressed employees also tend to become absent frequently. This is because

stress makes people sick. Some times absenteeism is used as a stress coping mechanism.
Normally, we react to stress through fight or flight. Absenteeism is a form of flight-
temporarily withdrawing from the stressful situation so that we find time to re-energize
ourselves.

Sometimes workplace aggression may be the consequence of stress. Aggression

represents the fight reaction to stress. In its mildest form, employees engage in verbal
conflict. They are not likely to empathize with co-workers. Occasionally, it may lead to
more dangerous levels of workplace hostility.

MANAGING WORK-RELATED STRESS

In managing work related stress, both the organization and the employees have joint
responsibility. Stress management often includes several strategies. These are shown in
the following diagram.

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 REMOVE THE STRESSOR

WITHDRAW FROM THE STRESSOR

STRESS

MANAGEMENT CHANGE STRESS PERCEPTION

STRATEGIES
CONTROL STRESS CONSEQUENCES

RECEIVE SOCIAL SUPPORT

Diagram: Stress Management Strategies

Remove the Stressor

An important way companies can effectively manage stress is by removing the
stressors that cause unnecessary tension and job burnout. Other stress management
strategies may keep employees. “Stress-fit”, but they don’t solve the fundamental causes
of stress.

In managing stress organizations have to investigate the main causes of stress in

their workplace. For example, you may ask employees to complete confidential
questionnaires to identify when and how they experience stress. You may remember
that one of the most powerful ways to remove workplace stressors is to empower
employees so that they will have more control over their work and work environment.
Placing employees to positions that match their competencies can minimize role related
stressors. Noise and safety risks are stressful, so improving these conditions would also
go a long way to minimize stress in the workplace.

Family-Friendly and Work-Life initiatives

The most common work-life balance initiatives are flexible work time, job
sharing, telecommuting, personal leave programs, and childcare support. Many firms
have flexible timings with regard to the hours, days, and amount of time employees
want to work.

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 Job sharing splits a career position between two people so that they experience less
time-based stress between work and family. They typically work different part of
the week, with some overlapping work time in the weekly schedule to coordinate
activities.

Telecommuting reduces the time and stress of commuting to work and makes it
easier to fulfill family obligations, such as temporarily leaving the office to pick up the
kids from school. Research suggests that telecommuters experience a healthier work-life
balance. Employers with strong work-life values offer extended maternity, paternity,
and personal leaves to care for a new family or elderly parents who need assistance.
Childcare support reduces stress because employees are less rushed to drop off their
children and less worried during the day about how well they are doing.

Withdraw from the stressor

Removing the stressor may be an ideal solution, but that is not always possible.
An alternative strategy is to permanently or temporarily take employees away from the
stressor. Permanent withdrawal occurs when employees are transferred to other jobs.

Change stress perceptions

You have earlier learnt that employees experience different levels of stress in the
same situation because of their perceptual differences. Therefore, changing perceptions
of the situation can minimize stress. This strategy does not involve ignoring risks or
other stressors. Rather, it involves strengthening the self-efficacy and self-esteem of a
person so that job challenges are not perceived as threatening.

Control the consequences of stress

Managing workplace stress does also involve controlling its consequences.
Research studies show that physical exercise reduces the physiological consequences of
stress by helping employees lower their respiration, muscle tension, heartbeat and
stomach acidity. Beyond fitness programs, some companies offer wellness programs
that educate and support employees in terms of better nutrition and fitness, regular
sleep, and other healthy habits. Another way to control the physiological consequences
of stress is through relaxation and meditation.

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Employee Assistance Programmes
Now-a-days many large firms offer employee assistance programs in the form
of counseling services that help employees overcome personal or organizational
stressors and adopt more effective coping mechanisms. Personal problems and family
problems are solved through these programmes. Employee assistance programmes can
be one of the most effective stress management interventions where the counseling
helps employees understand the stressors, acquire management skills and practice those
skills.

Receive Social Support

Receiving social support from co-workers, supervisors, family, friends, and
others is one of the more effective stress management strategies. Social support refers to
the person’s interpersonal transactions with others and involves providing either
emotional or informational support to buffer the stress experience.

Social support reduces stress in at least three ways. First, employees improve
their perception that they are valued and worthy. This, in turn, increases their self-
esteem and perceived ability to cope with the stressor. Second, social support provides
information to help employees interpret, comprehend, and possibly remove the stressor.
Finally, emotional support from others can directly help buffer the stress experience.
People seek out and benefit from the emotional support of others when they face
threatening situations.

ACTIVITY - IV

What strategies do you adopt for managing job stress?

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 COMMUNICATION

Objectives
In this lesson, you will study the importance of organizational communications
and the methods of communications. After going through this lesson, you should be
able to
 Appreciate the need for communications and their complexities
 Understand the communication process along with the barriers of
communication
 Distinguish between various methods and forms of communication and
 Suggest measures for improving organizational communications.

Structure
This lesson is dealt with incorporating the following contents:

 SIGNIFICANCE OF COMMUNICATION
 COMMUNICATION PROCESS
 COMMUNICATION BARRIERS
 TYPES OF COMMUNICATION
 MANAGING EFFECTIVE COMMUNICATIONS

SIGNIFICANCE OF COMMUNICATION

In a knowledge-based economy, organizations cannot function without

communication. Employees require a high degree of communication competence. By
communication competence, we mean a person’s ability to identify appropriate
communication patterns in a given situation and apply that knowledge in achieving
goals. People strong in communications learn quickly the meaning of the words and
symbols used and they can easily decide. Competent people can better determine
whether a telephone call, a personal visit or e-mail would be the effective medium and
which medium of communication is best in a given situation to convey the message to
other people. You may understand that corporate managers spend a large part of their
time and energy in communicating to different sections of the people within and outside

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the organization. Naturally, such people require a high degree of communication
competence to be effective.
In an organization, you may understand that employees are like organization’s
brain cells and communication is like the nervous system that carries the information to
the vital parts of the organizational body. Organizations become effective through
knowledge dissemination to the employees. By this knowledge, managers keep
themselves better informed to be able to take wise decisions. Apart from helping in
decision-making and in knowledge management, communication plays an important
role in coordinating the work activities. Communications bring people together and
make them perform the jobs like a team. In the process, it provides employees social
support for getting themselves relieved of work related stress.

COMMUNICATION PROCESS

Communication refers to the process by which the information is transmitted

and understood between two or more people. You may note that transmitting the
sender’s intended meaning is the essence of good communication.

It is needless to say that communication involves two people in the process - a

sender and a receiver. One person alone cannot communicate. It may be noted that if a
person loudly makes a cry for help, and if it is not heard by any body, the
communication is not complete and the person will not get the expected help. In the
similar way, if a manager sends information to the workers at bottom level, he has no
reason to believe that he has communicated. Transmission of the message is only a
beginning. There is no communication until the information is received, read and
understood by the employee at the other end. Therefore, you have to understand that
communication is what the receiver understands, but not what the sender says.
The communication process refers to the stages through which the message
passes from the sender to the receiver. In this process, the sender forms a message and
encodes it into words or symbols. The encoded message is transmitted to the receiver
through a channel or medium. The receiver senses the incoming message and decodes
it for understanding the message. Further, in most of the situations, the sender looks for
confirmation that the message has reached the receiver. This happens in the form of
feedback or some kind of acknowledgement. It may take the form of a reply given by

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the receiver. The reply is to be again encoded, transmitted through a channel, received
and decoded by the sender of the original message. You have to note here that feedback
repeats the communication process. You can understand all this through the following
diagram.

SENDER RECEIVER
Channel

Create Encode Receive

encoded Decode
message message
message message

Noise

Decode Receive Encode Create

feedback feedback feedback feedback
Channel

Diagram: The Communication Process

The different steps in the above process are elaborated below.

Sender
The sender is the source of the message that initiates the communication. The
sender of information has a message or purpose of communicating to one or more other
people. As you are aware, a manager in an organization has to communicate
information about the tasks to be achieved or a production deadline to be met by his
subordinate employees. Without a reason, purpose, or desire, the sender has no
information/message to send.

Encoding
In the next stage, encoding takes place when the sender translates the
information or message into some words, signs or symbols. Without this encoding the
information cannot be transferred from one person to another. In encoding of the
message, the sender has to choose those words, symbols or gestures that he believes to
have the same meaning for the receiver. While doing so, therefore, the sender has to

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keep the receiver in mind and accordingly communicate with him in the way the
receiver understands it.

The message may be in any form that can be felt and understood by the
receiver. Speech is heard; words are read; gestures are seen or felt and symbols are
interpreted. For example, there are several communications we make with a wave of
the hand or with a nod of the head.

Channel

The channel is the medium used for transmission of information or message

from sender to receiver. There are various media like telephone, mail through post,
internet, radio, TV, press etc. For communication to be effective and efficient, the
channel must be appropriate for the message. A phone conversation, you will agree, is
not a suitable channel for transmitting a complex engineering diagram. An express
mail may be more appropriate. The needs and requirements of the receiver must also be
considered in selecting a channel. If the receiver is illiterate, sending the message
through postal mail is not relevant. Similarly, you cannot select the medium of
telephone, if the receiver does not have a telephone with him.
You may note that, the managers in the organizations, inspite of a number of
channels available for them, often fail to select the right one. Some times, their choices
are guided by their habits or personal preferences. A manager may use the telephone
because he dislikes writing. Another manager chooses to write a letter when e-mail
would be more effective.

You should remember that written and graphic communications like letters,
reports, and memos serve the purpose of clarity and also provide a permanent record.
On the other hand, telephone and oral communications have the advantage of
immediate feedback. Therefore, in choosing the appropriate channel, the manager must
decide whether feedback is important.

Receiver

The receiver is the person whose senses or perceives the sender's message. There
may be just one receiver or a large number of receivers, when a memo is addressed to
all the members of an organization. As already pointed out, the message must be
prepared with the receiver’s background in mind. An engineer in a software

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organization should avoid using technical terms in communicating with his family
members. It should be recognized that if the message does not reach a receiver, no
communication takes place. Even, when the message reaches the receiver, if he cannot
understand it, again there is no communication.
Decoding
Decoding is the process through which the receiver interprets the message and
translates it into meaningful information. It may be remembered that decoding is
affected by the receiver's past experience, personal assessments of the symbols and
gestures, expectations, and mutuality of meaning with the sender.

ACTIVITY - I
What are the steps in communication process?
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COMMUNICATION BARRIERS

As seen above, the process of communication is lengthy involving different

stages. For effective communication, every stage is crucial. It is possible, hurdles may
arise at any stage in this lengthy process blocking the understanding of the message by
the receiver. These hurdles are known as barriers to communication. They may entirely
prevent a communication, filter a part of it or distort it in meaning. There are three
types of barriers - personal, semantic and physical.
Personal Barriers
These barriers arise out of human emotions, values, and poor listening habits.
These are very common occurrences in work situations. We have already seen how our
personal feelings can limit our communications with other people. Personal barriers
result from psychological distance between people who may be physically closure. For
example, a subordinate perceiving his superior to be authoritarian which he dislikes,
cannot understand his directions well.
Our emotions also act as filters in almost all our communications. We tend to see
and hear what we are emotionally "tuned" to see and hear leading to communication

215
failure. Similarly, we communicate our interpretation of reality rather than the reality
itself. Therefore, what we understand is when the sender's and receiver's perceptual
profiles are at variance with each other, smooth and effective communications do not
take place between them.
Semantic barriers
Semantic barriers arise out of language problem. As you are aware, the sender
uses a language of words and symbols for communicating to the receiver. Words
usually have a variety of meanings. As a result, the receiver may not get the same
meaning of the word as intended by the sender. In such case, the receiver does not
properly understand the message or he may understand it to the contrary. For example,
the word ‘steps’ has different meanings. It may refer to the staircase, or the measures
to be taken to solve a problem, or the steps of a dancer in a dance programme.
Whenever we select a meaning that is not factual, we are making an inference.
Inferences are an essential part of most communications. We cannot avoid them all
together. In our day-to-day conversations also, very often we hear people saying ‘I
mean’ or “it is not what I mean” because of the possibility for making different
inferences.

Physical barriers
Physical barriers exist in the environment in which the communication takes place.
When you are working in a factory where machines produce a lot of sound, you cannot
talk to the other one even if he is very close to you physically. Likewise, telephone
interruptions, walk in visitors, or attending to other matters are very common hurdles in
the process of communication.

ACTIVITY - II
What do you understand by semantic barriers?
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216
TYPES OF COMMUNICATION

Communications in organizations may be classified as downward, upward and

horizontal communications. They may also be classified as verbal and non-verbal
communications as shown in the following diagram. Verbal communications include
oral and written communications. Non-verbal communications refer to the body
language or the use of gestures and body movements. In fact, no method of
communication is independent. You can see complimentarity between them. For
example, a combination of oral communication and communication through gesture
would be more effective. All these types of communications are discussed below:

Organizational Organizational
Communication Communication

Verbal Non-verbal
Communication Communication
Upward Downward Horizontal

Oral Written

Downward Communication

Communication downward in an organization is the flow of information from

top to bottom. It is through this, the hierarchical system between superiors and
subordinates is maintained. Downward communications are made to the employees at
lower levels through directions and instructions. Conforming to the formal channel of
communication, downward communications pass through different hierarchical levels
in the organization. Downward communications are used for the practice of delegation
of authority in which the superior managers assign the tasks to be performed by their
subordinates, sanction authority and also make them accountable for achieving the
results.

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Upward Communication
In upward communication, information flows from bottom to top. This is
intended to facilitate managers to receive information from the operational levels.
Higher levels of management should get the feedback information from lower levels in
the form of reports and responses. They need to know how an assigned task is
performed by the subordinates and also their reactions and satisfaction.

Upward communications tend to become slow. They are usually subject to delay
and filtering. A manager at each level is reluctant to take a problem upward because to
do so is considered as a confession of failure. Therefore, each level delays the
communication in an effort to decide how to solve the problem. If the problem cannot
be solved, the message may be filtered so that higher management receives only a part
of the information. An employee tends to convey the superior only what the employee
thinks the superior wants to hear. Therefore, each subordinate has his own reasons for
selecting, interpreting, and other filtering actions.

Horizontal Communication
This is also known as lateral communication, which takes place among people
equal in hierarchy. These kinds of communications are necessary for achieving mutual
support and mutual cooperation for the effective of functioning of various
organizational units. After all, organizational activities are mutually dependent and
hence coordination of all these activities is necessary for which horizontal
communications are very essential. For example, as a Marketing Manager, you have to
communicate to the production manager the market trends, customer expectations,
changes in product demand etc. On the basis of your market knowledge, you may share
information with him about the changes to be brought about in product features in terms
of its size, colour, packing etc. Similarly, a stores manager and a finance manager have
to work together for optimization of financial resources. A HR manager has to work
with other managers to exchange information about the manpower supply, training and
development, and their welfare and wellbeing.

Verbal Communication
This includes both oral and written communications, which are discussed below:

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Oral Communication
The most common form of communication in organizations is oral. It takes the
form of face – to - face conversation when the speaker and listener are physically at one
place or they may use a public address system, an intercom or a telephone when they
are at a distance. Oral communications are effective because the receiver not only hears
the message but also simultaneously observes the gestures used, the tone, volume, pitch
of the spoken words. The voice of the speaker plays an important role in influencing
the attitudes and feelings of a person rather than the written words used for
communications. Further, an immediate feedback can be obtained avoiding any kind of
delay. The speaker can convey the personal warmth and friendliness apart from the
message. It is, in fact, a less expensive form of communication.
However, a few limitations also can be found in oral communications. Since it is
not recorded, it does not serve the purpose of reference in future. Organizations require
more of recorded documents to guide their future policies. Further, when the oral
communication passes through the long hierarchical channel, it is likely to be
misinterpreted and finally distorted information is passed on to the people. You
remember that if management is entering into an oral agreement with the workers’
unions, after some time, they fail to recollect what it is agreed upon or if they want, any
of the party may purposefully set it aside or may back out. In the absence of evidence,
this attempt by either party cannot be checked.

Written Communication

Written communication is also a part of verbal communication, which takes the

form of letters, reports, memos, instructions, guidelines, policy manuals, annual reports
etc. Since organizations exist for a long time, written communications are essential for
their effective functioning. Human memory is short and therefore, it is desirable to
communicate to people in written form. Apart from serving as an evidence of the
events, it provides a permanent record for future reference. The possibility of
misinterpretation or misunderstanding of the message is little. It can be checked for
accuracy before it is transmitted.
Written communication, however, requires skills and abilities on the part of
managers or workers in the organizations. As we are aware, an ordinary worker may
not be very strong in his writing skills. Even some mangers also, at times, prove

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ineffective in their written communications compared to their oral communications.
You may also note that if there is confidential information to be communicated, written
form of communication is not desirable because of the possible leakage.
Non-verbal Communication

In this form of communication, non-verbal methods are used like the

movement of body organs. It is also called body language. People are engaged in this
kind of communication through a handshake, waving the hand, a smile, a stare, an eye
wink, a nod of the head, raise of eyebrows, shrugging of shoulders, bending the body
forward, leaning backwards and in many other ways. In the day-to-day
communications, you may be doing all these things. All these movements of the body
convey their respective meanings to others.
In organizations, the managers as well as workers are required to make use of
the bodily gestures for the purpose of communications. As has already been pointed
out, if the physical noise in the environment creates a hurdle for oral communications,
you have to necessarily communicate through appropriate non-verbal methods. You
have to understand that written communications are not adequate in conveying your
emotions, feelings, or dispositions for which some kind of facial expression is required,
may be to show your love or anger, fear or frustration, arrogance or anxiety.
It may, however, be recognized that the instances of communicating exclusively
by using non-verbal methods are very few and far between. More often these are
combined with oral methods communications to make the latter more effective. In fact,
one cannot engage in oral communication without the use of non-verbal methods.

ACTIVITY - III

Distinguish between verbal and non-verbal communications.

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MANAGING EFFECTIVE COMMUNICATIONS
Some guidelines would be helpful to management to improve their skills in
communication to avoid the barriers in communication and also to achieve the goals and
targets. Every organization does need effective communications for its success as it
carriers out its business in a knowledge society. Communication should be effective for
converting information into strength and a resource for the organization. Management
should realize that communication plays a significant role in motivating the employees,
building high morale among them, providing satisfaction in work, developing employee
potential and performance, changing employee attitudes and increasing their loyalty and
commitment to the organization. Managers should understand the importance of
making clear ideas and messages for effective transmission to the receivers for
obtaining positive responses from them. Communication should be very comprehensive
and timely. In the modern society, managers do well in their communications by using
latest technology in an appropriate way.

ACTIVITY - IV

What measures should management follow for improving communications?

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 UNIT IV
LESSON 1
GROUP DYNAMICS

LESSON OUTLINE

 Definition & Types

 Concept of Group Dynamics
 Reasons for Informal Groups
 Characteristic features of informal
groups
 Major elements of Group Behaviour
 Group & their members
 Group functions LEARNING OBJECTIVES
 Principles of Group Dynamics
 Reasons for emergence of informal After reading this lesson you
groups in an organisation. should be able to

 Define and understand the concept

of group
 Classify the different types of
groups
 Understand the reasons for the
emergence of informal group
 Recognise the characteristic features
of informal group
 Realise the group behaviour
 Understand the relationship between
the groups & their members
 Recollect the functions of a group.

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 LESSON-1
GROUP DYNAMICS

Groups extensively influence the behaviour & performance of members as also the
overall behaviour of the organisation.

Definition: “Cluster of two or more individuals who interact with each other on a
relatively enduring basis, identify themselves as belonging to a distinct unit & who
share certain common activities, interests, values, goals, commodities, beliefs &
perceptions”
A group is distinct from a crowd in a bus or watches a cricket match.

Types of groups

1. Small & large groups

i. Small: Compact cluster of a few individuals- face to face inter personal relations,
interactions & inter dependencies
ii. Large: A collection of a few small groups. (A State, Nation, group of Nations,
European community, SAARC, etc.) - Inter personal relations, interactions,
and inter-dependencies are somewhat weak in a large group.

2. Primary & Secondary groups [FORUM]

i. Primary: Almost identical to small group- (ex. A work group, a friendship group)
- All small groups need not be primary groups
- existence of a shared sense of identity among members and their
common values, interest & goals.

ii. Secondary: - larger entity & is made up of several primary groups

- Interpersonal relations & unity of purpose are weak
- less cohesive than a primary group

3. Formal & Informal group

i. Formal: A work unit that is established as a part of an organisation and it’s

structure
- It is governed by rules, procedures & regulations
- ex., various work units, sections, depts., divisions, established by an
organisation to achieve it’s goals.

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 Two types of formal groups:
a) Command group; and
b) Task group.

a) Command group: Consists of a manager and a set of his immediate

subordinates directly reporting to him- Permanent work group-Undertakes
regular activities.
b) Task group: Assembled for undertaking certain specified tasks
Ex., - A committee or a project group is a task group.
- It can be either a standing group or an adhoc group.

ii. Informal group: Voluntary unofficial formation of a small number of members of

an organisation who are mutually attracted and aligned by virtue of certain
commonly shared background interests, values & needs.
- Members seek social alliances, interactions & relationships on a selective basis in
the course of their association with their jobs. (Ex. Music groups; Sports groups;
Magazine circles, etc.)
Characteristics of a group:
1. Common motive(s) to group interaction
2. Group structure with a hierarchical status system
3. Standardisation of norms & values
4. Differential effects of the interaction on individual group members.

Other classification of groups:

1. Apathetic groups: People with low skills and who lack unity and power and are
usually discontented.
2. Eratic groups: Composed of relatively skilled employees who display a
considerable unity of purpose.
3. Strategic groups: People with high skill, display a high degree of unity, generally
productive.
4. Conservative groups: People at top level of an organisation display considerable
self-confidence

According to purpose: Almost like informal

1. Vocational groups: Business conference, teachers association, etc.

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2. Instructional groups: People who have enrolled themselves for the same course or
in study or similar purpose.
3. Governmental groups: Municipal councils, School management boards, Student’s
unions etc.
4. Religious groups: Jain, Samaj, YMCA, YWCA, etc.
5. Fraternal groups: Social fraternities and sororities, etc.
6. Recreational groups: Cricket, Volleyball clubs, Picnic groups, etc.
7. Social groups: Bridge clubs, etc.

According to Length & Time

1. Temporary or Momentary: One meeting, Conference, Summit meeting, etc.
2. Continuing Group: Meet regularly over a long period of time, BOD, etc.

According to intimacy dimension

1. Primary group: Characterised by intimate face-to-face association & cooperation.
2. Non-primary group (secondary): Group does not interact intimately. Membership
is voluntary and easily withdrawn.

Concept of Group Dynamics (GD):

Group Dynamics is a field of study concerned with research & analysis of the various
forces in and patterns of the formation of small informal groups in organisations.

Kurt Lewin- a social psychologist of the university of Lown, USA was the founder of
GD as an academic & research discipline in 1930’s.

GD is concerned with promotion of one’s understanding on the following aspects:

1. Why & how groups are formed?

2. What forces are operative in the structure of groups?
3. How groups grow, decline and die?
4. How they make decisions & solve problems?
5. How they achieve unity & handle conflict?
6. How they change and adapt themselves?
7. How they influence task performance & member satisfaction?

Major elements of Group Behaviour:

1. Activities or Tasks.
2. Interaction
3. Group norms

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4. Conformity of Behaviour
5. Cohesiveness
6. Role & Role playing
7. Conflicts
8. Status & power
9. Informal leadership
10. Informal Hierarchy
11. Group culture.

Principles of Group Dynamics: (According to Cartwright)

1. The barriers between leaders & the led should be broken down
2. Greater influence
3. Greater the prestige, the greater the influence
4. Successful efforts- results in making them conform to the norms.
5. Pressure for changes by a shared perception by members
6. Change must be shared by the members of a group.
7. Bring readjustment in order to eliminate strain.

Reasons for emergence / formation of informal groups in

organisations

1. Proximity & Similarity

i. Same work space
ii. Same or similar type of work.
iii. Same economic, education, ethnic, communal, regional background.
iv. Interaction regularly with each other in the course of their organisational
activities.

2. Need Satisfaction:
i. Safety (Physical, Psychological safety)
ii. Reduction of anxiety and uncertainty
iii. Social affiliation needs (belonging, to be cared and accepted, friendship, get away
from isolation & anonymity)
iv. Ego needs (for respect, influence, Power & status)
v. Self-actualisation needs (Needs for self-development, creative self-expression,
achievements, etc.)
vi. Other Needs: Need for information, participation; relaxation, stress reduction,
emotional support, etc.)

3. Promotion of interest & pursuit of goals:

Protection & promoting the economic & other interests of members (Retiring
people, new entrants, professionals, literacy, artistic states, interests, goals etc.)

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Characteristic features of Informal groups:
1. Small in size-homogeneous in one or more respects
2. Share certain goals, values & beliefs
3. Participate in a system of inter-locking roles & relationships
4. Strong elements of social control over the behaviour & performance of members
5. Cooperation, cohesiveness and conflict co-exists in informal groups
6. Strong social rankings among members depending on their power relations
eventhough there are no superior- subordinate relationship as such
7. It has got it’s own culture
8. Membership is overlaping- an individual may belong to more than one formal
groups
9. Members behave in a natural & relaxed manner & generally ‘feel at home’.
10. Membership is voluntary
11. Mostly oral communication in a direct face to face manner.
12. Groups are loosely structured
13. The goals tend to be different from & are often in conflict with the goals of the
organisation

Informal groups & Informal organisation

Informal organisation:
- A network of several overlapping informal groups.
- Inter personal relationships, interactions and inter-dependencies tend to be less
intense & intimate than in an informal group.

Informal groups: Informal groups are formed by members who are attracted each other
for some reason or the other.

Group Behaviour: Social process by which people relate and respond to each other &
perform their respective roles as members of integrated clusters.

Major factors which affect and influence the group process

(a) Group goals & Tasks: Survival, self-reliance, freedom of action, adaptation, unity,
etc. Tasks-vary-complexity, skill requirements, co-ordination requirements,
specificity, measurability & divisibility.

(b) Group size: Large enough to provide diversity of talents and viewpoints; and small
enough to facilitate interactions [5 to7 members].

227
(c) Group composition: Personality traits, physical characteristics, abilities & skills,
needs & expectations. Groups are unlikely to be totally homogeneous or
heterogeneous in their composition.

Group process & functions:

1. Assumption & Assignment of roles-(explicitly or implicitly indicated) [Task related
roles; relations oriented roles; self oriented roles]
2. Group problem solving & decision making (for ex. BOD problem solving and
decision making) committees, logical, methodical, exhaustive decision processes-
democratic/participative.
3. Leadership in groups-informal leaders
4. Group communication & interaction sense of “we-ness”
5. Group cohesiveness: The extent of unitedness and knit together.

Factors which influence group cohesiveness

1. Social rewards
2. Interaction
3. Homogeneity
4. Goals
5. Leadership
6. Size & structure
7. Atmosphere in the group
8. Group norms: by common consent- unwritten & informal.

SUMMARY
In this lesson we have discussed some aspects of group and group dynamics. We have
defined the term ‘group’, classified various types of groups. We have also understood
the concept of Group Dynamics as a systematic study of why and how small informal
groups and other types of groups emerge, what they do and how they affect the
individuals and organisations.
The informal groups have several distinguished features, which include their
similarity on one or more aspects, close interaction and participation, etc. They also play
an important role in molding and shaping the behaviour and performance of it’s
members.

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Terms and Concepts for Review

 Group and Group Dynamics

 Formal & Informal Groups
 Command & Task Groups
 Apathetic and Eratic Groups
 Strategic & Conservative Groups
 Vocational & Instructional Groups
 Governmental Groups & Religious Groups
 Fraternal, Recreational and Social Groups
 Temporary or Momentary Groups
 Regular or Continuing Groups
 Primary and Non-primary Groups
 Informal Organisation and Informal Groups
 Group Behaviour

Self Assessment Questions

1. What are the characteristic features of informal groups?

2. Define the concept of group. What are the principles of group dynamics?
3. How do informal groups emerge and how they do benefit to individual members?
4. Write short notes on
a) Informal Group
b) Informal organisation
c) Group Norms
5. Distinguish between
a) Command group and Task group
b) Formal group and Informal group
c) Primary group and Secondary group
6. What are the major elements of Group Behaviour?
7. What are the major factors which affect and influence the group process?

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 LESSON -2 LEADERSHIP

Lesson outline

 Meaning, Definition & Nature

of leadership
 Leadership traits & functions
 Managerial skills of a leader
 Leadership & Management
 Theories of Leadership
 Leadership styles
 Effectiveness of leadership
 Measures for developing leaders

LEARNING OBJECTIVES

After reading this lesson you should be

able to
 Understand the meaning &
nature of leadership
 Recognize the traits,
characteristics & functions of a
leader
 Recall the managerial skills of a
leader
 Distinguish between leadership
& management
 Classify the styles of leadership
 Categories the theories of
leadership
 Substantiate the effectiveness of
leadership

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 LESSON 2 - LEADERSHIP

Leadership is a much studied topic in management because of a certain mystique

associated with it and because organizations and societies are generally dependent on
leaders for their survival and development. Most of the basic organizational problems
such as a distorted structural design, poor morale of managers and employees,
communicational gaps, resistance to change, inefficient controls, iniquitous salary
structure, resources scarcities, incompatibility with external environment and so on, are
attributed to poor leadership, especially at the top.

Meaning and nature of leadership:

Leadership may be defined as a position of power held by an individual in a group;

which provides him with an opportunity to exercise interpersonal influence on the group
members for mobilizing and directing their efforts towards certain goals. Leadership
position exists in most group settings irrespective of the size of the group. Leadership is
an influence process. The leader is in a position to shape, regulate, control, and change
the attitudes, behaviour and performance of his group members.
Definition: “The relationship in which one person, or leader, influences others to work
together willingly on related tasks to attain that which the leader desires.”
Koontz & O’ donnel: “The ability of a manager to induce subordinates to work with
zeal and confidence.”
- Outstanding aspect of management. (Ability, creativeness, initiative, inventiveness,
confidence, cooperation, willingness of the people, employee morale)

In any group situation the leader has a few bases of power by virtue of which he is in a
position to influence the behaviour of group members. They are

a. Knowledge, information and experience

b. Resources for dispensing favours, rewards and penalties.
c. Formal authority
d. Charisma
e. Distinct personality characteristics like for example, will to dominate, ability to
establish rapport, skill to communicate, identify with and understanding of
people, decisiveness and so on.

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Characteristics of leadership:

a. Influence
b. Involves the leader & his followers (a specific goal, situation, communication,
feedback)
c. A reciprocal relationship between the leader & his followers
d. A leader must be acceptable to his followers –employees
e. A leader gains influence through their speech behaviours.

Leadership functions:

A leader whether formal or informal, is required to undertake several functions in

relation to his group. David Bowers and Stanley Seashore classify the above functions
into four categories for conceptual purposes:

a) Support: Behaviour, which enhances the members’ feelings of personal worth

and importance.
b) Emphasis on goals: Behaviour, which stimulates enthusiasm for meeting the
group goals with excellence.
c) Facilitation of work: Behaviour which manifests itself in such activities as
planning, scheduling, coordinating and providing resources, information and
other infrastructural facilities.
d) Facilitation of interaction: Behaviour, which encourages group members to
develop members to develop close and mutually satisfying relationships.

Role of a leader:

a) Group task roles:

1. Initiator - contributor
2. Information seeker
3. Opinion seeker
4. Information giver
5. Opinion giver
6. Elaborator
7. Coordinator
8. Orienter
9. Evaluator - critic
10. Energizer
11. Procedural technician
12. Recorder

b) Group building & Maintenance roles:

1. Encourager

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 2. Harmonizer
3. Compromiser
4. Expeditor
5. Standard setter or ego ideal
6. Group observer & commentator
7. Follower

c) Individual roles:
1. Aggressor
2. Blocker
3. Recognition seeker
4. Self-confessor
5. Playboy
6. Dominator
7. Help-seeker
8. Special help pleader

Importance of leadership:
1. Directing group activities
2. Better utilization of manpower
3. Source of motivation
4. Developing good human relations
5. Promoting the spirit of coordination
6. Fulfilling social responsibilities
7. Influence the behaviour
8. Creates confidence
9. Increases employee morale
10. Helps in the use of formal authority effectively

Qualities of a leader:
In the opinion of Discount slim
1. Courage
2. Willpower
3. Judgement
4. Flexibility
5. Knowledge, and
6. Integrity

George terry
1. Energy
2. Emotional stability
3. Knowledge of HR relations
4. Personal motivation

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 5. Communication skill
6. Teaching ability
7. Social skill; and
8. Technical competence

Chester I Burnard

1. Vitality & Endurance

2. Decisiveness
3. Persuasiveness
4. Stability in behaviour
5. Intellectual ability; and
6. Knowledge

Ordway Tead

1. Physical & nervous energy

2. Self- confidence
3. Moral qualities
4. Self sacrifice
5. Paternalism (paternal affection)
6. Fairness (justice)
7. Initiative
8. Decisiveness
9. Dignity and
10. Knowledge of men

Nitisdh R. De

1. Physical & nervous energy

2. Endurance and vigour of body &mind
3. Readiness to shoulder responsibility to discharge it
4. Unfaltering friendliness and effective
5. Tolerance & patience
6. Sense of fairplay & justice
7. A high degree of integrity
8. Decisiveness & initiative
9. Knowledge of men
10. Ability to face rough weather opposition.

234
HILL

1. Courage
2. Self confidence
3. Moral qualities
4. Self sacrifice
5. Paternalism (paternal affection)
6. Fairness (Justice)
7. Initiative
8. Decisiveness
9. Dignity
10. Knowledge of man

OVERALL QUALITIES OF A LEADER

1. Energy
2. Emotional maturity & stability
3. Knowledge of human relations
4. Objectivity
5. Empathy - objectively look
- Respect others
- Beliefs etc
6. Personal motivation
7. Communication skill
8. Teaching ability
9. Social skill-Understand weak & strong points of employees
10. Technical competence
11. Integrity-Morally sound
12. Conceptual skill
13. Moral courage
14. Flexibility of mind
15. Ability to establish proper priorities

CAUSES FOR FAILURE OF LEADERSHIP

1. Inability to organize
2. Unwillingness to do what they would ask another to do
3. Expectation of pay for what they know instead of what they do
4. Fear of competition from others
5. Lack of creative thinking
6. The ‘I’ syndrome (ego)

235
 7. Over indulgence-alcohol, abuse, etc
8. Disloyalty
9. Emphasis of the ‘Authority of leadership’ (fear not successful)
10. Emphasis of title
11. Lack of understanding of the destructive effects of a negative environment
12. Lack of common sense.

DISTINCTION BETWEEN LEADERSHIP AND MANAGEMENT

1. Narrower-broader: Leadership is a narrower concept than management in

some respects and a broader one than management in some other respects.
2. Authority-power: Since leadership is based on power, leaders tend to be prone
to exercise their power in a personalized manner.
3. Tightly structured-loosely structured: Leadership structures, processes and
environment generally more dynamic, flexible and open than in management.
4. Elective-selective: In non–management situations, the leadership position of a
person arises out of the fact of acceptance by a group of persons who allow
themselves to play the role of his electors and followers.
5. Formal-informal: Leader-follower relations have a flavour distinct from
manager-subordinate relations. Leaders generally identify themselves with the
interests and aspirations of their followers.
6. Formal education and training: Formal education and training for leadership
for leadership are almost negligible and even non-existent unlike in the case of
management which has been evolved into a highly popular and somewhat
professional discipline.

MANAGERIAL SKILLS

Managers develop or acquire a range of skills in their jobs. They are briefly described as
follows:
a. Conceptual skills: This is the ability to think in abstract terms to form images
and ideas, to visualize and understand the future and to discern relations and
interactions among the elements of a system and changes therein.
b. Analytical skills: These refer to abilities to proceed in a logical, step-by step
and systematic manner, to examine the various aspects of specific issues and to
understand characteristics of a phenomenon.
c. Administrative skills: They center around ability to act in pragmatic manner, to
get things done by implementing decisions and plans, to mobilize and organize

236
 resources and efforts, to co-ordinate diverse activities and to regulate
organizational events in an orderly manner.
d. Behavioural or inter personal skills: These skills have to do with the ability to
understand people and their problems, needs and feelings, to get along with
them, to interact and communicate with them, to provide leadership, to inspire
confidence.
e. Technical Skills: Technical skills relate to job knowledge and expertise, ability
to apply methods and techniques to work settings, to provide technical guidance
and instructions to subordinates.

THEORIES OF LEADERSHIP

We may classify them into three categories- Personality theories, behavioural theories
and situational theories.

Personality theories: Personality theories focus on the personal qualities or traits of

leaders, either inborn or acquired. The great theory and trait theory fall in this area.

Great theory of leadership: One of the early notions of leaderships, which is still
popular in certain circle, is that leadership is an inborn quality. This is the great-man
theory of leadership, which asserts that leaders in general and great leaders in particular
are born and not made. According to the theory, leadership calls for certain qualities
like charm, persuasiveness, commanding personality, high degree of intuition,
judgement, courage, intelligence, aggressiveness and action orientation which are of
such a nature that they cannot be taught or learnt in a formal sense. Examples are drawn
from such great leaders like Mahatma Gandhi, Mao tse Tung, Kamal ataturk, Abraham
Lincoln, General de Gaulle and others.

Trait theory of leadership: A modification of the great Man Theory is the Trait theory,
which argues that leadership qualities or traits can be acquired. They need not always

237
be born. The trait theory of leadership states that there are certain identifiable qualities
or characteristics that are unique to leaders and that good leaders possess such qualities
to some extent.

The following list is only illustrative and not exhaustive:

a. Intelligence: Intelligent enough to understand the context and content of their

position and function, to grasp the dynamics of environmental variables, both
internal and external.
b. Personality: More than outward appearance, certain inner- personality qualities
mark out good leaders from others. Such qualities include: emotional stability
and maturity. Self-confidence, decisiveness, strong drive, optimism, extrovert
ness, achievement orientation, purposefulness, discipline, skill in getting along
with others, integrity in character and a tendency to be cooperative.
c. Other qualities: Apart from intelligence and personality attributes, good leaders
also possess a few key qualities like open mindedness, scientific spirit, social
sensitivity, ability to communicate, objectivity, an abiding interest in people ,
pragmatism and a sense of realism.

Behavioural theories: The focus shifts from personal qualities; or traits to actual
behaviour of leaders or dimensions of leader behaviour. The questions asked are; what
kind of behaviour from follower behaviour? What do effective leaders do that
ineffective ones do not do? For example, are effective leaders task-oriented or employee
oriented, democratic or autocratic, permissive or directive? The most systematic and
comprehensive research studies in the direction were conducted in USA at Ohio State
University and University of Michigan, during 1945-47. The researchers at Ohio State
University concluded that there were two broad dimensions of leader behaviour: these
are ‘Initiating structure’ and Consideration.

Michigan studies: Employee-centered leaders were associated with higher group

productivity and higher job satisfaction.

238
The Michigan University leadership studies conducted under the direction of Rensis
Likert have also identified two dimensions of leader behaviour, similar to those of Ohio
University studies. These two dimensions have been termed as job centered and
employee-centered leader behaviour. The job centered leader behaviour closely
corresponds to ‘initiating structure’ while employee centered leader behaviour
correlates with ‘consideration’.

Ohio State Studies

The leader is friendly approachable, define the activities of subordinates so that

organizational goals are accomplished.

Chart : OHIO STUDIES: LEADERSHIP

HIGH

HIGH HIGH
CONSIDERATION CONSIDERATION
AND LOW AND HIGH
STRUCTURE STRUCTURE
CONSIDERATION
(RELATIONSHIP
BEHAVIOUR)

LOW LOW
CONSIDERATION CONSIDERATION
AND LOW AND HIGH
STRUCTURE STRUCTURE

LOW INITIATING STRUCTURE (TASK BEHAVIOUR) HIGH

239
Managerial grid: (Robert R. Blake & Jane S. Mouton)
1. Concern for the people, and
2. Concern for production

HIGH

9 1.9 9.9
(Country club) (Team)
8
Concern
7
for people 6 5.5
5 (Middle of the road)
4
3 (Improvershed) 9.1
1.1 (Task)
LOW 2
1 1 2 3 4 5 6 7
LOW8 9 Concern for HIGH
production

Managerial Grid: ‘Managerial grid’ as developed by Robert Blake and Jane Mouton,
is a graphic model of alternative combinations of managerial styles or orientations or
behaviours, on two-dimensional space. The two styles or orientations are: concern for
production and concern for people. These are shown on horizontal and vertical
dimensions of the grid on 1 to 9 scale or degree. Blake and Mouton argued that a
leader’s managerial style is a point on the grid; they have identified five combinations
of styles, for illustrative purposes, out of 81 possible combinations.
Improver shed leadership
1.1: Low concern for production and for people.
Country club leadership 1.9: Low concern for production and high concern for
people.
Task leadership 9.1: High concern for production and low concern for people.
Team leadership9.9: High concern for production and people.
Middle of the road 5.5: Moderate concern for production and people.

Situational theory: Suitable in one situation or the leader has to change his style from
situation to situation (adoptive type)

The great man theory: Alexander the great, Jesus Christ, Julius Caesar, Winston
Churchill, Mahatma Gandhiji, John Kennedy, etc how they became leaders? What made
them leaders?

240
Contingency theories:

A. Fred Fielders contingency theory: Least preferred co-worker Questionnaire

(LPC) measure whether the person is
- Task oriented or
- Relationship oriented

Task oriented: The high LPC person

Relationship oriented: The low LPC person

B. Robert Houses path goal theory:

Robert Houses path goal theory: The path goal theory of leadership was originally
developed by Martin Evans and subsequently refined by Robert house. The theory is
related to situational /expectancy theories of motivation. Four types of leader behaviour
based on member expectations may be conceptualized.

i. Directive leadership: The leader is expected to define the tasks and

responsibility of his group members, set performance and reward norms, clarify
the rules and regulations as applicable, provide guidance, advice and instructions
as necessary and monitor their performance.

ii. Supportive leadership: The leader establishes warm interpersonal relationships

with the group, understands and shares their aspirations and feelings, shows
concern for their welfare and promotes group cohesiveness.

iii. Participative leadership: Here members expect the leader to keep them
informed on relevant tasks, goals and situations, involve them in decision
making, solicit their ideas and consult with them often.

iv. Achievement oriented leadership: The leader is expected to develop and

utilize the skills and talents of group members, set changing goals to them, make
tasks interesting and meaningful, and give some freedom to people in their jobs.

Effective leaders clarify the path or means by which subordinates can attain both high
job satisfaction and high performance. The leader’s function is to motivate and help
subordinates reach their highly valued job related goals. There are two contingency
variables, viz., Employee characteristics, and Task characteristics

241
Fielder’s Contingency Theory of Leadership

242
Likert’s management systems: Rensis Likert of the University of Michigan, USA and
his associates made extensive survey research on management and leadership patterns
in a large number of organizations. He assigned numbers 1 to 4 to his conceptual
models to indicate the stages of evolution in the patterns and styles of management in
organizations.
His systems are:
System 1 Exploitative-authoritative
System 2 Benevolent-authoritative
System 3 Consultative- authoritative
System 4 Participative-democratic

System 1: Managers/Supervisors and organizations in the system are highly autocratic.

System 2: This is highly less primitive than the first. A sort of master-servant
relationship exists between the manager and employees in this system.
System 3: In this setting, management evinces some interest in employees and their
contributions. They are often consulted and their views are taken into account by
managers.
System 4: This is an ideal type management system. The relationship between
managers and subordinates are cordial and friendly.
Situational/Contingency approaches to leadership: Some individuals are thrown into
leadership positions by the inter play of situational forces. Examples are such diverse
types of leaders as Hitler, Mussolini, Churchill, Roosevelt, Mao and Gandhi.
Leader

Influence - Interaction

Situation Group

Situational Factors: The range of situational factors in leadership may be stated in

terms of the following classification

243
 a. Forces in the leader: They include the leader’s specific personality
characteristics, orientations, qualities and skills, which are relevant for the
function of leadership.

b. Forces in group: Forces such as perceptions and attitude of group members

towards the leader, towards their tasks and towards organizational goals, needs
and expectations of group members, their skills and knowledge, extent of group
size, nature of group structure and unity and so on.

c. Other situational forces: The nature of the task, its complexity and technology,
its importance in relation to other tasks, form one set of situational forces. The
structure of the organization, authority responsibility relations, organizational
values and goals, policies and postures, reward leader and his group, are another
set of situational forces.

d. Leadership continuum: One of the early situational theories was developed in

1958 by Robert Tannenbaum and Warren Schmidt. They, however, modified
and refined theory in 1973. They placed leadership behaviour on a continuum,
which consists of a range of styles or patterns.

Manager Power and Influence Non-Manager Power and Influence

Area of Freedom for Manager

Area of Freedom for Non-Manager

244
Manager Manager Manager Manager Manager Manager Manager
able to must sell presents presents presents defines and non-
make decision decision tentative problems, limits managers
decision before but must decision gets within jointly
which gaining respond to subject to inputs which make
Non- acceptance questions change from non- non- decision
managers from Non- after Non- managers, managers within
accept Managers Manager then make limits
inputs decides decisions defined by
organization
constraints

Autocratic Paternal Participative

Continuum of Leadership Behaviour

Contingency theory: Fred Fielder developed a situational model of leadership, which

is termed as contingency theory of leadership. Fielder lists three variables or factors,
which govern the situation in which, the leader functions: These are

a. Leader-member relations (the extent to which the leader is accepted, respected

and trusted by members of his work group).
b. Task structure (the extent to which the jobs of members of the work group are
defined, routine and known).
c. Position power (extent of formal authority commanded by the leader as also the
rewards and penalties which he can dispense to members).

Hersey and Blanchard’s situational theory

Leadership dimension

Task behaviour(initiating structure) Relation behaviour(Consideration)

The leadership style should change as an employee matures on the job. (not as age,
emotional stability, etc)
Four styles that match different maturity levels of subordinates are:
i. Telling - where subordinate requires specific direction
ii. Selling - where subordinate is unable but willing
iii. Participating - where subordinate is able but unwilling

245
 iv. Delegating - where subordinate is at higher maturity, but willing and accept
responsibility.

The final component in Hersey and Blanchard’s theory is defining four stages of
follower readiness or maturity:
M1 People are both unable and unwilling to take responsibility to do something. They
are neither competent nor confident.
M2 People are unable but willing to do the necessary jobs tasks. They are motivated
but currently lack the appropriate skills.
M3 People are able and unwilling to do what the leader wants
M4 People are both able and willing to do what is asked of them

Hersey and Blanchard’s situational leadership model

Figure integrates various components into the situational leadership model. The
appropriate match between situation in terms of maturity or readiness of followers and
leadership style as proposed by Hersey and Blanchard is as under:
M1=Telling; M2=Selling; M3=Participating; M4=Delegating. As followers reach high
levels of readiness or maturity, the leader responds by not only continuing to decrease
control over activities, but also by continuing to decrease relationship behaviour as well.
The theory has received little attention from researchers.

246
LEADERSHIP STYLES:
1. Formal & Informal: Formal is deliberate & conscious. Informal leader is
nothing to do with official relationship.
2. Autocratic or Authoritarian: Who centralizes the authority for decision
making
a) Strict Autocrat - negative motivation approach
b) Benevolent Autocrat - positive motivation approach
c) Manipulative Autocrat - who makes the subordinates feel that they are
participating in decision-making process eventhough he has already
taken the decision.
3. Participative or Democratic leader: Decentralizes the decision making process
& authority
4. Laissez Faire or Free- rein Leader: Entrusts the decision-making authority to
his subordinates. (Permissive style of leadership)
5. Paternalistic leader: His function is paternal or fatherly.
6. Rules Centered leader: Concentrates mostly on rules and regulations,
violations, punishment, etc.,

LEADERSHIP EFFECTIVENESS

There are at least three major views on the determinants of leadership effectiveness.
One view is that effectiveness is a function of the personal qualities or traits of the
individuals who assume the role of leadership. Although possession of these qualities
does not guarantee effectiveness, all we can say is that they increase the probability of
leadership effectiveness. The second view is that leadership effectiveness is not a
matter of what leaders are but rather a matter of what they do and how they behave.
This is known as the behavioural approach. The two most important dimensions of the
behaviour of leaders are productivity orientation and employee satisfaction
orientation. Leaders who score very high in both the above behavioural dimensions are

247
said to be very effective. The third view is that leadership effectiveness is a function of
interaction among at least three variables; the leader, the group of followers and the
tasks situations. This is known as the situational or contingency approach to leadership
as discussed earlier. Here effectiveness is defined in terms of the task performance and
satisfaction of the group of followers.

MEASURES FOR DEVELOPING LEADERSHIP ABILITY OF MANAGERS

The measures for developing leadership ability of managers are:

a. Leadership training: Training programmes are offered to expose managers to

several leadership situations and teach them how to tackle them.
b. Internal organizational exposure: Another measure to develop the leadership
ability of managers is to expose them within the organization itself to critical
situations calling for application of leadership abilities.
c. Autonomy and accountability: Managers may be able to sharpen their
leadership abilities under conditions of relative freedom.
d. Opportunities for interaction: Managers should also have opportunities to
interact with their subordinates in a more intense and continuous manner.
e. Setting challenging but realistic goals: Managers have to be put on their toes
most of the time in their career by setting challenging goals to be met within
particular time frames.
f. Job rotation: Managers may also be helped to develop leadership skills by a
process of systematic rotation of their jobs.

Summary

In this lesson we have understood the term’ leadership’ as an interpersonal influence

process among a group of people organized formally or informally. Those who assume
the leadership role exercise influence, power and sometimes even authority over their
followers in those areas in which the groups interests are involved. They protect their

248
followers from outside threats and pressures. They maintain and promote group
cohesiveness by providing momentum to continuous group interaction. They commit
themselves to be loyal to the group goals and values and even to individual group
members. They inspire their followers, sometimes by their own personal behaviour, to
scale new heights of excellence. There are several variables, which determine the roles
and goals of leaders. The leader’s own abilities, traits and skills, the range of styles he
adopts in directing the activities of his followers, the type of followers and their
expectations, the goal structure of the group, and the all important situational factors all
these have an important influence on the effectiveness of the leader. Goal leaders are
both task oriented and people oriented. Task orientation involves defining group goals
and standards, establishing task structures, assigning role and duties to followers,
scheduling work assignments, monitoring, evaluating and correcting performance.
People orientation encompasses such behaviour as showing concern and understanding
for the feelings, opinion and aspirations of followers, being considerate to their needs
and general well being and evincing interest to tackle individual problems. In this lesson
we have also discussed a wide range of leadership theories ranging from Great Man
theory to Path-goal by categorizing them into personality theories, Behavioural theories,
and Situational/Contingency theories. All these theories center around one or more
aspects; who the leaders are, what they do? How they behave and what factors in the
leadership are deterministic in making the leader successful and effective.

Terms & concepts for Review:

1. Authority & power
2. Tightly structured and loosely structured
3. Elective and selective
4. Formal and informal
5. Conceptual skills
6. Analytical skills
7. Administration skills
8. Behavioural or interpersonal skills
9. Technical skills
10. Great man theory

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 11. Trait theory
12. Behavioural theory
13. Ohio state study
14. Michigan study
15. Managerial Grid
16. Likert’s management system
17. Situational approach
18. Leadership continuum
19. Contingency theory
20. Path goal theory
21. Group task role
22. Group building / Maintenance role
23. Individual role
24. Qualities of a leader
25. Causes for failure
26. Strict autocrat
27. Benevolent autocrat
28. Manipulative autocrat
29. Participative
30. Laissez Faire or free Rein or Permissive style
31. Rules centred leader
32. Hersey Blanchard’s situation theory.

Self-Assessment Questions
1. What good qualities are necessary for a successful leader?
2. Write short notes on
a) Benevolent Autocrat Style
b) Laissez Faire or Free Rein Style
c) Path-goal theory of Leadership
3. In what circumstances the ‘Managerial Grid’ is useful as a training device for
improving leadership?
4. Analyze Rensis Likert’s systems of leadership and comment on his conclusions
5. “Leadership is an influence- interaction process”- Do you agree?
6. What are the traits and functions of a leader?
7. Define leadership. Explain the measures that can be taken or developing
leadership ability of managers.
8. “Rules centred leaders are not so successful when compared to democratic
leaders”. Do you agree? Why?
9. “Leaders are not only made but also born” – comment.

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 LESSON-3 - POWER AND POLITICS
Power and Politics:

Power is the ability to influence other people and events. It is the leader’s stock-in-
trade, the way that leaders extend their influence to others. It is somewhat different
from authority, because authority is delegated by higher management. Power, on the
other hand, is earned and gained by leaders on the basis of their personalities, activities,
and the situations in which they operate.

Distinction between Power and Authority:

Normally the two terms ‘power’ and ‘authority’ are used as synonyms because they
both influence the behaviour of people on whom these are exercised. But there is a
clear distinction between these two terms. Power is the capacity to command or the
ability to exercise influence whereas; authority is the right to command. Power is
exercised by a person, whereas authority is derived from one’s position in the
organizational structure. The differences between authority and power are as follows:

Power - Capacity to Command

Authority - Right to Command
Power - Exercised by a Person
Authority - Derived form one’s position

Authority Power
Sl. No.
1 Legitimate No such legitimate
2 One’s position Personal factors
3 Flows downwards All directions
4 Increases when he moves up Need not
5 Formal May not exist between any two persons

TYPES OF POWER
Power develops in a number of ways. There are five bases of power, and each has a
unique source.

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Personal power: Personal power also called referent power, charismatic power, and
power of personality-comes from each leader individually; it is the ability of leaders to
develop followers from the strength of their own personalities. The leader senses the
needs of people and promises success in reaching them. Well-known historical
examples are Joan of arc in France, Mahatma Gandhi in India, Franklin D. Roosevelt in
the United States.

Legitimate Power: Legitimate power, also known as position power and official
power, comes from higher authority. It arises from the culture of society by which
power is delegated legitimately from higher established authorities to others. People
accept this power because they believe it is desirable and necessary to maintain order
and discourage anarchy in a society.
Expert power: Expert power, also known as the authority of knowledge, comes from
specialized learning. It is power that arises from a person’s knowledge of that
information about a complex situation. It depends on education, training, and
experience, and so it is important type of power in our modern technological society.

Reward power: Reward power is the capacity to control and administer items that are
valued by another. It arises from an individual’s ability to give pay raises, recommend
someone for promotion or transfer, or even make favourable work assignments.
Reward power serves as the basis for behaviour modification programmes.

Coercive power: Coercive power is the capacity to punish another (or at least to create
a perceived threat to do so). Managers with coercive power can threaten an employee’s
job security, make punitive changes in someone’s work schedule, or (at the extreme)
administer physical force. Coercive power uses fear as a motivator, which can be
powerful force in inducing action. However, it is likely to have an overall negative
impact on the receiver.

When one power base is removed from supervisors, employees may perceive
that others bases of influence will decline as well. The use of a power base must fit its

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organizational context in order to be effective. Employees can respond in one of three
ways, as shown in figure. They may resist the leader’s initiative, especially if coercive
power is used consistently, without apparent cause, or in an arrogant manner. They may
comply with the leader’s wishes by meeting minimal expectations while withholding
extra effort. The most desirable outcome from wielding power is commitment, which is
the enthusiastic release of energy and talent to satisfy the leader’s requests.

Possible responses to the use of power

Resistance Compliance Commitment

BASES OF POWER:

 The ability to sanction & punish.

 Determined primarily by the organization structure, consequently changes of
structure.
 Commitment of others to the power holder.
 Persuading others that proposed changes in strategy are feasible & desirable.
 Increasingly significant as information technology grows in importance.

FURTHER (LUKES 1974) SUGGESTS

The ability to prevent a decision, or not make one.
The ability to control the issue on which decisions is to be made.
The ability to ensure that certain issues are kept offs agendas.

USES OF POWER & INFLUENCE

1. Structure the situation.

2. Changing their intentions.

Macmillan identifies from tactics in relation to these points:

1. Inducement.
2. Coercion.
3. Persuasion.
4. Obligation.

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ORGANISATIONAL POLITICS:
Organisational politics refers to between that enhance or protect a person’s self-interest.
These behaviours may be used to help attain a promotion, self higher management on
the merits of a proposal that will expand one’s responsibilities and resources, or gain
personal visibility. Employees involved in organizational politics usually put their
employer to their attempts to gain and use political power. To a large extent, managers
agreed that

 Politics is common to most organizations

 Managers must be good at politics to succeed
 Politics becomes more important at higher levels
 Politics can detract from organizational efficiency

TACTICS USED TO GAIN POLITICAL POWER

There are a number of tactics that leaders can use to gain political power; several
examples are given in figure. Two of the most popular ones are social exchanges and
alliances of various types. Social exchange implies, “ If you ‘ll do something for me,
I’ll do something for you.” It relies on the powerful norm of reciprocity in society.
Where two people in a continuing relationship feel a strong obligation to repay their
social “debts” to each other. Continuing exchanges over a period of time usually lead to
an alliance in which two or more persons join in a longer-term power group to get
benefits that they mutually desire. Another popular path toward political power is to
become identified with a higher authority and/or a powerful figure in an organization.
Another popular way to acquire political power is to give service selectively to your
supporters. Some managers use the more aggressive tactic of applying power plays to
grab power from others. A common tactic for increasing power is to join or form
interest groups that have a common objective. Power and politics are a basic part of
leadership success in an organization.

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 EXAMPLES OF TACTICS USED TO GAIN POLITICAL POWER

Tactic used Example

In a trade-off the chief engineer helps the factory manager
Social exchange get a new machine approved if the manager will support an
engineering project
Alliances The information system manager and the financial vice
president join together to work for a new computer system.
Identification with The president’s personal assistant makes minor decisions for
higher authority her.
The research and development manager controls new
Control of information
product information needed by the marketing manager.
The purchasing manager selectively gives faster service to
Selective service more cooperative associates.
The new controller arranges to double the size of the office,
Power and status decorate lavishly, and employ a personal assistant.
symbols
Power plays Manager A arranges with the vice president to transfer part
of manager B’s department to A.
Networks A young manager joins a racquetball club.

POLITICAL POWER BASES AND TACTICS

BASES OF PERSONAL POWER

Particularly significant where the skill is in scarce supply.
Expertise It is possible to use mobility, and the threat of leaving; to
gain support for certain changes of strategy- again
depended upon the manager’s personal importance to the
firm.
Assessed stature A reputation for being a ‘winner’ or a manager who can
obtain results.
Credibility Particularly credibility with external power source, such as
suppliers or customers.
Control over information Internal and external sources Information can be used
openly and honestly or withheld and used selectively
consequently it is crucial to know the reliability of the
source.
Group support In managing and implementing change it is essential to
have the support of colleagues and fellow managers
Political access Being well known around the organization and able to
influence key groups of managers.

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 POLITICAL TACTICS TO OBTAIN RESULTS
As mentioned above, it is important to develop and
Develop liaisons maintain both formal and informal contacts with other
managers, functions, and divisions.
Present a conservative It can be disadvantages to be seen as too radical an agent
image of change
Diffuse opposition Conflicts need to be brought out into the open and
differences of opinion aired rather than kept hidden.
Divide and rule can be a useful strategy
Trade-of and compromise In any proposal or suggestions for change it is important
to consider the needs of other people whose support is
required.
Strike while the iron is hot Successful managers should build on success and
reputation quickly.
Research Information is always vital to justify and support
proposals
Use a neutral cover Radical changes, or those which other people might
perceive as a threat to them, can sometimes be usefully
disguised and initiated as minor changes. This is linked to
the next point.
Limit communication A useful tactic can be to unravel change gradually in order
to contain possible opposition
Withdraw strategically If things are going wrong, and especially if the changes
are not crucial, it can be a wise tactic on occasion to
withdraw- at least temporarily.

Politically successful managers understand organizational processes and they are

sensitive to the needs of others. Effective political action brings about desirable and
successful changes in organizations- it is functional. Negative political action is
dysfunctional, and can enable manipulate managers to pursue their personal objectives
against the better interests of the organization. The strategic leader needs to be an
effective politician.

Summary

In this lesson we have discussed the power and politics. Power is needed to run an
organization. The five bases of power are personal, legitimate, expert, reward, and
coercive. Each of these has a different impact on employees, ranging from resistance to

256
commitment. Organizational politics is the use of various behaviours that enhance or
protect a person’s self-interest. In general, political behaviours in organizations are
common, necessary to success, and increasingly important at higher levels. However,
overemphasizing politics can also backfire.

TERMS AND CONCEPTS FOR REVIEW

 Power
 Authority
 Politics
 Personal power
 Legitimate power
 Expert power
 Reward power
 Coercive power
 Resistance
 Compliance
 Commitment
 Bases of power
 Uses of power
 Tactics of power
 Organizational politics
 Political power bases and tactics

SELF-ASSESSMENT QUESTIONS

1. Examine the various behaviours that are common in organizational politics.

Which of these could be used effectively in the classroom? Why not the others?
2. Review the definitions of organizational politics. Can an organization be totally
free of political behaviours? What would it be like? How could you make it
happen?
3. Think of an organization you once knew. What types of power were used?
How did people react? What changes would you recommend?
4. Review and explain the ideal of “norm of reciprocity”. Explain how you have
seen it used interpersonal relationships. How could you make use it in the
future?

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 LESSON 4

ORGANISATIONAL STRUCTURE, CLIMATE AND CULTURE

LESSON OUTLINE
 Concept of Organisational Structure
 Factors determining Organisational
Structure
 Functional areas
 Bases or forms of
departmentalisation
 Horizontal & Vertical dimension of
Organisational Structure
 Traditional, Modern, Commercial &
Non Commercial Organisational
Structure LEARNING OBJECTIVES
 Major Dimensions of Organisational After reading this lesson you
Climate
 Meaning & Characteristics of should be able to
Organisational Culture

 Understand the concept of

Organisational Structure
 Identity the factors determining
Organisational Structure
 Classify the functional areas and
bases of departmentalization
 Recall the major dimensions of
Organisational Climate
 Understand the meaning &
characteristics of Organisational
Culture.

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 LESSON 4
ORGANISATIONAL STRUCTURE, CLIMATE AND CULTURE

Organisational structure provides the framework for managers and others for
performing the various functions expected of them and for facilitating the work flow in
the organisation.

ORGANISATIONAL STRUCTURE

The process of organising results in the creation of a formal organisational structure

which is defined as a system of patterned and inter-related task units and authority
positions. It is called formal structure since it is deliberately and purposefully planned
and designed by management. The formal organisational structure has two
‘dimensions’. They are: horizontal dimension and vertical dimension.

The horizontal and vertical dimensions of the organisational structure i.e. the
activity structure and authority structures are tied together. The managerial positions are
not created in a vacuum; they are created around the sub-divided task units.

Major factors determining organisational structure

(a) Goals
(b) Technology
(c) External environment
(d) People

FUNCTIONAL AREAS

A business organisation has to perform a number of activities in order to run itself. We

have seen in the functional form of departmentalisation that an organisation groups
function or activities into primary departments. The application of functional form of
departmentalisation means grouping activities mainly into departments of production,
marketing, human resource development and finance.

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THE HORIZONTAL DIMENSION OF ORGANISATIONAL STRUCTURE

The horizontal dimension consists of the various activity or work units created through
the process of departmentalisation and is called the activity structure. In a
manufacturing enterprise, the activity structure consists of the various departments like
purchasing, production, R & D, finance, accounts, marketing and so on.

Departmentalisation: The concept of departmentalisation, (or departmentation as it is

often called) is one of the important steps in the design of formal structure of an
organisation. A systematic sub-division of activities into individual jobs, the grouping
of jobs into work-units and the integration of units into departments. The departments so
created have lateral relations to each other. Thus departmentalisation creates the lateral
or horizontal activity structure of the organisation.

Bases or forms of departmentalisation: There are several alternative ways in which

organisational activities are grouped into work units. These are called the bases or forms
of departmentalisation. The major bases or forms are: Function, process or equipment,
product, customer and geographical area.

VERTICAL DIMENSION OF ORGANISATIONAL STRUCTURE

The Concept of Authority: In every day life we come across the notion of authority.
Authority is the formal right vested in a managerial position to undertake certain
managerial tasks, to make decisions, to give directions to subordinates and to influence
events for achieving certain goals.

Authority, responsibility and accountability: The concepts of authority, responsibility

and accountability have particular relevance for understanding the process of delegation
of authority.

The concept of responsibility has two connotations. In one sense it is the set of tasks or
duties assigned to a person. In another sense, it is corollary of authority, and is the

260
obligation of a person to whom authority is delegated, to act in response to an order
issued by his superior.

Accountability is often used as a synonym to responsibility. In other words,

accountability and responsibility have the same meaning. Some others, however,
distinguish between accountability and responsibility by defining accountability as
personal answerability for decisions, actions and results on the part of a subordinate to
his superior.

Concept of management hierarchy: The vertical axis of the organisational structure

consists of the hierarchy of management or the network of managerial authority levels.
The hierarchy of management is established through the process of vertical
differentiation and integration of authority.

TRADITIONAL ORGANISATIONAL STRUCTURES

Management theorists classify traditional organisational structures into three types: Line
Structure, Line and Staff Structure and Functional Structure. Line structure: An
organisational structure which is designed around line activities and line authority only
is called a line structure.

Line and staff structure: This structure represents a modification of and improvement
over the basic line structure. In this, the basic line activity units, line managerial
positions and the flow of line authority along the vertical chain of command are left
undistributed.

Functional structure: The functional organisational structure is based on line

authority, staff authority and the notion of functional authority.

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MODERN ORGANISATIONAL STRUCTURES

Traditional structures are also regarded as some what out of step with contemporary
requirements and realities of rapid change, uncertainty and complexity of environment.
Attempts are hence made to modify the traditional structure so as to evolve refined
forms of structure. These are variously described as systems structure, project
structure, programme structure, matrix structure, task force structure and free
form structure. These modern structures are regarded as more organic, adaptive, and
flexible and are suitable for complex organisations which employ highly sophisticated
technology and which encounter a very diverse, volatile environment.

COMMERCIAL AND NON-COMMERCIAL ORGANISATION

Organisation can be classified as commercial or non-commercial on the basis of the
interest they have. A commercial organisation has profit as its main aim. We can find
many organisations around us, which do not have any commercial objective of making
profits. Their genesis may be so for social, charitable, or educational purposes. A non-
commercial organisation comes to existence to meet the needs not met by business
enterprises.

ORGANISATIONAL CLIMATE
The term, ‘Organisational climate’ is defined as a relatively enduring quality of the
internal environment of an organisation as perceived and experienced by its members,
which can be described in terms of specific dimensions or characteristics and which
influences the patterns of behaviour and work performance on members. It is the totality
of interacting and inter-related internal dimensions or characteristics which significantly
influence the motivation of members. Organisation climate evolves over a fairly long
period of time and is relatively stable. Since the dimensions of climate are internal, they
can be measured, controlled and changed by the organisation, if it so decides.
Organisational climate is the major frame of reference for the member’s interpretation

262
of organisational decisions and actions as also their own attitudes, behaviour and
performance.

The major dimensions or characteristics of organisational climate are listed as follows:

1) Organisational values, goals and priorities which are pursued in practice as against
those which are professed.
2) Managerial value systems and life styles.
3) Competence, character, commitment and dynamism of management.
4) The complexion of organisational policies and practices and the consistency with
which they are followed.
5) The power structure-the extent of concentration or dispersal of authority, the extent
to which and the manner in which formal authority is exercised, the extent of status
disparities, social distance between managers at various levels and between
managers and non-managers and so on.
6) General organisational structure-hierarchy, rigidity vs. flexibility clarity of the
structure communication and control systems, superior-subordinate relations,
informal social relationships, etc.
7) Nature of jobs – degree of skill required, relation between effort and productivity,
variety in the tasks, perceived importance of the job, rewards associated with the
job, relation with other jobs, security and so on.
8) Degree of freedom and control – requirements of conformity and compliance to
organisational norms and the extent to which behaviour of employees is structured.
9) Supervisory style – attitudes and behaviour of supervisors and managers towards
their subordinates and towards performance requirements.
10) Rewards structure – reward levels and inter-relations, equity in reward structures,
monetary and non-monetary rewards.
11) Organisational approach to conflict and dissent, amicable resolution or suppression
of conflict.
12) The physical working conditions in the organisation.

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In general, organisational climate provides certain stimuli, offers certain opportunities
and raises certain expectations among its members; at the same time, it also creates
certain constraints, threats, problems and frustrations.

Organisational climate factors influence the perceived ability of the individual

employee, which in turn has a decisive effect on his motivation. Perceived ability is
influenced by the nature and clarity of the job, the scope of responsibility, degree of
freedom, supervisory support and training, safety and other physical working
conditions, previous experience and so on.

ORGANIZATIONAL CULTURE
Organizational culture is the set of assumptions, beliefs, values and norms that is
shared among its members. This culture may be consciously created by its key
members, or it may have simply evolved across time. It represents a key element of the
work environment in which employees perform their jobs. A culture may exist across an
entire organization, or it may refer to the environment within a single division, branch,
plant, or department. This idea of organizational culture is somewhat intangible, for we
cannot see it or touch it, but it is present and pervasive. Like the air in a room, it
surrounds and affects everything that happens in an organization. Because it is a
dynamic systems concept, culture is also affected by almost everything that occurs
within an organization.

They give an organizational identity to employees – a defining vision of what the

organization represents. They are also an important source of stability and continuity to
the organization, which provides a sense of security to its members.

Characteristics of Cultures
Each has its own history, patterns of communication, systems and procedures, mission
statements and visions, stories and myths which, in their totality, constitute its
distinctive culture. Cultures are also relatively stable in nature. Most organizational
cultures have historically been rather implicit rather than explicit. A final defining

264
characteristic of most culture is that they are seen as symbolic representations of
underlying beliefs and values.

Measuring Organizational Culture

Systematic measurement and comparison of cultures is difficult at best. Most early
attempts by researchers relied on examination of stories, symbols, rituals, and
ceremonies to obtain clues. Others have used interviews and open-ended questionnaires
in an attempt to assess employee values and beliefs. In other cases, examination of
corporate philosophy statements has provided insight into the espoused cultures (the
beliefs and values that the organization states publicly). Another approach is to survey
employees directly and seek their perceptions of the organization’s culture. One of the
more interesting methods is to become a member of the organization and engage in
participant observation.

Characteristics of organizational cultures

 Distinctive
 Stable
 Implicit
 Symbolic
 Integrated
 Accepted
 A reflection of top management
 Of varying strength

Communicating Culture
If organizations are to consciously create and manage their cultures, they must be able
to communicate them to employees, especially the newly hired ones. Individuals are
generally more willing to adapt when they want to please others, gain approval, and
learn about their new work environment. These cultural communication acts may be
lumped under the umbrella of organizational socialization, which is the continuous
process of transmitting key elements of an organization’s culture to its employees.

265
Individualization occurs when employees successfully exert influence on the social
system around them at work by challenging the culture or deviating from it.

Summary
In this lesson we have understood the organisational structure, climate and culture. The
formal organisation has two dimensions-horizontal and vertical. The former is called
activity structure in which the activities or tasks of the organisation are divided, sub-
divided and integrated by means of departmentalisation. There are several bases of
departmentalisation-functional, geographical, product, market and the like.

The vertical dimension of the organisation is the authority structure which is

referred to as hierarchy. It shows how authority is parceled out from the top to the base
of the organisation among several managerial positions and how authority responsibility
relations and roles designed among these positions. Two broad categories of
organisation are traditional structures and modern structures. The latter depart from the
former in some respects so as to neutralise some of their deficiencies.

Organisational climate evolves over a fairly long period of time and is relatively
stable. Organizational cultures reflect the assumptions and values that guide a firm.
They are intangible but powerful influences on employee behavior. Participants learn
about their organization’s culture through the process of socialization and influence it
through individualization.

Terms and Concepts for Review

 Organisational structure
 Major factors
 Functional Areas
 Horizontal & Vertical Dimensions
 Bases of departmentalisation
 Authority, Responsibility & Accountability
 Traditional & Modern Organisational Structure
 Commercial & Non-Commercial organisation structure
 Organisational climate

266
 Characteristics of organisational climate
 Organisational culture
 Characteristics of organisational culture
 Measuring organisational structure
 Communicating organisational structure

Self Assessment Questions

1. Describe the organisational culture that seems to exist in your organisation. What
are some of the implicit or explicit norms, values and assumptions?
2. Discuss the bases or forms of departmentalisation in an organisation.
3. Explain various characteristics of Organisational Climate.
4. Distinguish between
a) Horizontal & Vertical dimension of organisational structure
b) Commercial & Non-Commercial dimension of organisational structure
c) Traditional & Modern dimension of organisational structure.
5. What are the major dimensions of organisational structure?
6. Describe the factors determining organisational structure.

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 LESSON 5 -ORGANISATIONAL CHANGE

LESSON OUTLINE

 Nature, costs & benefits of

Organisational Change
 Resistance to change
 Framework for change
 Role of Transformational leadership
in change
 Practices to build support for change

LEARNING OBJECTIVES
After reading this lesson you should be
able to

 Understand the nature, cost and

benefits of Organisational Change
 Find the causes for resistance to
change
 Recognise the role of
Transformational leadership in
change
 Recollect the practices to build
support for Organisational Change

268
 LESSON 5

ORGANISATIONAL CHANGE

Organizations are encountering a wide variety of dramatic changes. Some face

greater federal regulation, while others experienced deregulation. Some are
more splintered, while others consolidate; some find their markets shrinking,
while others find themselves thrown headlong into a global marketplace. Many
organizations have experienced mergers or hostile takeovers, producing
wrenching psychological and economic effects on their employees. The survival
issue is not whether to change, but when and how to make it occur most
successfully.

Human beings are certainly familiar with change, and often prove
themselves quite adaptive to it. Why, then, do they often resist change in their
work environment? This question has troubled managers since the beginning of
the industrial revolution.
WORK CHANGE
The Nature of Work Change
Work change is any alteration that occurs in the work environment. A safe
generalization is that the whole organization tends to be affected by change in
any part of it. Change is a human as well as a technical problem. Organizations,
too, tend to achieve an equilibrium in their social structure. This means that
people develop an established set of relations with their environment. This
disequilibrium highlights a dilemma for managers. Here, their role is to be
proactive-anticipating events, initiating change, and taking control of their

269
destinies. On the other hand, part of their role is to restore and maintain the
group equilibrium and personal adjustment that change upsets. In this role they
are more reactive-responding to events, adapting to change, and tempering the
consequences of change.

Responses to change

Work change is further complicated by the fact that it does not produce a direct
adjustment as in the case of air molecules. Instead, it operates through each
employee’s attitudes to produce a response that is conditioned by feelings
toward the change.

CHART: A MODEL OF HOW INDIVIDUAL ATTITUDES AFFECT

RESPONSE TO CHANGE

Each change is interpreted by individuals according to their attitudes. The way

that people feel about a change then determines how they will respond to it.
They are neither logical nor illogical but entirely apart from logic. They are
enological.

Chart

Change Response

Attitudes
(sentiments)

Response Response

270
HAWTHORNE EFFECT: The Hawthorne effect means that the mere
observation of a group tends to change it. When people are observed, they act
differently. These changes usually are unintended and not recognized.

GROUP RESPONSE TO CHANGE: Though people individually interpret

change, they often show their attachment to the group by joining with it in some
uniform response to the change.

Stimulus Individual desire Actual response

Person A
Absenteei
sm
B
Strike

C
Demands
Social action
Change D Demands
Sullennes
s
E
Harder
F
work
Demands
FIGURE: UNIFIED SOCIAL RESPONSE TO CHANGE

HOMEOSTASIS: The self-correcting characteristic of organizations is called

homeostasis; that is, people act to establish a steady state of need fulfillment
and to protect themselves from disturbance of that balance.
Costs and Benefits: All changes are likely to have some costs. There also may
be the cost of new equipment or relocation of old equipment. These costs are not

271
merely economic; they also are psychological and social. Because of the costs
associated with change, proposals for change are not always desirable. Almost
any change, for example, involves some psychological loss because of the strain
that it imposes on people as they try to adjust. Psychological costs also are
called psychic costs because they affect a person’s inner self (psyche).

FIGURE: Change of eleven promotions resulting from promotion of a high

level manager

4
8

Assistant General Assistant Manger, Senior Clerk,

Manager (Adm.) Dallas Terminal Dallas Terminal

Order 1

Order 1 5
Of promotions
9 Representative
Assistant General (Operations)
Clerk,
Manager (sales) Dallas Division
Dallas Terminal

2 6
10
Manager, Superintendent, Assistant
Central Territory Dallas Terminal Warehouse Operator,
Dallas Terminal
3 7

Assistant
11 Manager, Assistant
New
Southern Territory Superintendent,
Employee
Dallas Terminal

272
Implementation of Change Requires:
1. A perceived need for change
2. The necessary resource
3. Commitment

Forces for change:

1. Technical obsolescence & technical improvements
2. Political & Social events
3. The tendency for large organisations. & markets to become increasingly
global
4. Increase in the size, complexity & Specialisation of organisations
5. The greater strategic awareness & skills of managers & employees.

273
Level of change

Need Level of change Approaches/Tactics

New mission, different Values, culture, styles of Organisational

Ways of doing things management development

Objectives/Corporate Strategy Strategy

Planning
New Corporate
Perspective/Strategy Organisation Structure New orgn.
design

Improved competitive Competitive Strategies, Empowerment, MBO,

Effectiveness (existing Systems & mgt. roles performance
mgt., Job
Pdts. & Services) description,
policies.

Improved efficiences Functional Strategies; Method Study;

Orgn. of Tasks Job enrichment

The current dynamics of change:

1. The general dynamics & uncertainty of world economies.
2. Time horizons, PLC, the development time for new products must
also be cut.
3. Organisation structure must be designed to enable decisions to be
made quickly.
4. Quality, design & service are essential for competitive advantage.

Types of change:
1. Technology – production process
2. The product/service – The output of the business;
3. Administrative change – structure, policies, budgets; reward systems.
4. People – attitudes, expectations, behaviour.

274
RESISTANCE OF CHANGE

Nature and effects

Resistance to change consists of any employee behaviors designed to discredit,

delay, or prevent the implementation of a work change. All types of employees
tend to resist change because of the psychic costs that accompany it. Managers
as well as workers resist it. Certainly not all changes are resisted, as some are
actively sought by employees. Insecurity and change are conditions that
illustrate how a chain-reaction effect may develop in organizational behavior.
Causes for Resistance to change:

1. Change as a threat to their security

2. Resistance to ‘sideways change’- unless the people affected are fully aware
of the reasons & implications.
3. Change may require careful implementation of policies, behaviour patterns.
4. Fear of the unknown & to feel comfortable with situations, policies,
procedures they know.
5. The organisation. itself or particular mgrs. may resist external pressures if
the change involves considerable expenses, investment in new equipment &
the associated risks.
6. Resistance is likely to be forthcoming where there are perceived flaws or
weakness in the proposal.

Reasons for Resistance: Employees may resist changes for two broad reasons.
First, they may not feel comfortable with the nature of the change itself. A
second reason for resistance stems from the method by which change is
introduced.

Types of Resistance
LOGICAL RESISTANCE: This is based on disagreement with the facts,
rational reasoning, logic, and science.

PSYCHOLOGICAL RESISTANCE: This is typically based on emotions,

sentiments, and attitudes.

275
SOCIOLOGICAL RESISTANCE: Sociological resistance also is “logical,”
when it is seen as a product of a challenge to group interests, norms, and values.

TYPES OF RESISTANCE TO CHANGE AMONG EMPLOYEES

Logical, rational objections

 Time required to adjust
 Extra effort to relearn
 Possibility of less desirable conditions, such as skill downgrading
 Economic costs of change
 Questioned technical feasibility of change

Psychological, emotional attitudes

 Fear of the unknown
 Low tolerance of change
 Dislike of management or other change agent
 Lack of trust in others
 Need for security; desire for status quo

Sociological factors; group interests

 Political coalitions
 Opposing group values
 Parochial, narrow outlook
 Vested interests
 Desire to retain existing friendships

Six ways of Overcoming Resistance to change:

1. Education & Communication
2. Participation & Involvement
3. Facilitation & Support
4. Negotiation & Agreement
5. Manipulation & Cooperation
6. Explicit & Implicit coercion

276
Force field Analysis (Lewin)

Forces for change Forces Resisting

change

Equilibrium
Driving forces Restraining forces

Margerison and Smith (1989) suggest four key features for management of
change:

1. Dissatisfaction – with the present strategies & styles

2. Vision – of the better alternative
3. A strategy- for implementing the change & attaining the desired
state.
4. Resistance – to the proposals at some stage.

STRUCTURAL FOCUS OF CHANGE MANAGEMENT

-Effectiveness oriented The learning organization

- Focus on Problem Solving
Approach Innovative; Intrapreneurial
Empowerment &
CHANGE ACCEPTED risk taking
Development

CHANGE INITIATED
CULTURE &
Concentration on resource Supportive organisation
VALUES
efficiency Cross functional co-oparation

Consistant & Systematic

277 RESPONSIVE TO CHANGE
CHANGE RESISTED PRESSURES
Orientation towards
Efficiency & results Individuals & Tasks Teams & Integration

Possible Benefits of Resistance: Resistance is not all bad. Resistance may

encourage management to reexamine its change proposals, thus making sure
they are appropriate.

IMPLEMENTING CHANGE SUCCESSFULLY

Some changes originate within the organization, but many come from the
external environment. Government passes laws, and the organization must
comply. New developments in technology arise, and products must incorporate
the changes. Competitors introduce new services, and the firm must respond.
Then there are pressures from customers, labour union, communities, and others
who initiate changes. Although stable environments mean less change, dynamic
environments are becoming the norm, and they require more change.

Transformational Leadership and Change

Transformational Leaders are instrumental in this process. They are managers

who initiate bold strategic changes to position the organization for its future.

CREATING VISION: Transformational leaders create and communicate a

vision for the organization.

COMMUNICATING CHARISMA
Charisma is a leadership characteristic that can help influence employees to
take early and sustained action.

STIMULATING LEARNING: Transformational leaders recognize that the

legacy they leave behind is not simply the change itself but an organization that
will continue to change. This process is called double-loop learning.

278
Three Stages in change
Behavioral awareness in managing change is aided by viewing change as a
three-step process:
 Unfreezing
 Changing
 Refreezing

Unfreezing means that old ideas and practices need to be cast aside so that new
ones can be learned.

Changing is the step in which the new ideas and practices are learned.

Refreezing means that what has been learned is integrated into actual practice.

Reaching a New Equilibrium

The system is in a state of relative equilibrium and so current practices will
continue in a steady way until change is introduced. Change is introduced within
a group by a variety of methods, as shown in Figure. Supporting forces may be
added or strengthened, while restraining forces may be weakened, removed, or
converted to supporting ones.
Figure: A model of the change process

Effectiveness Restraining forces

Supporting forces
Ineffectiveness

Time Point at which change occurs

(Length of the vertical line indicates strength of a force)

279
The Organizational Learning Curve for Change: It is the period of
adaptation that follows change, and it typically means there will be a temporary
decline in effectiveness before a group reaches a new equilibrium.

Building Support for Change: Assuming that management is following the

model of the change process in Figure, then forces of support need to built
before, during, and after a change.
USE OF GROUP FORCES: Effective change focuses on the group along with
individuals.

PROVIDING A RATIONALE FOR CHANGE: Capable leadership

reinforces a climate of psychological support for change.

FIGURE
General approaches for changing an equilibrium
1. Adding new supporting forces
2. Removing restraining forces
3. Increasing the strength of a supporting force
4. Decreasing the strength of a restraining force
5. Converting a restraining force into a supporting force

PARTICIPATION: A fundamental way to build support for change is through

participation.

SHARED REWARDS: Another way to build employee support for change is

to be sure that there are enough rewards for employees in the change situation.

EMPLOYEE SECURITY: Along with shared rewards, existing employee

benefits need to be protected.

280
FIGURE: A model of participation and resistance to change

I
D
E
A
L

COMMUNICATION: Communication is essential in gaining support for

change.

STIMULATING EMPLOYEE READINESS: Closely related to

communication is the idea of helping employees become aware of the need for a
change. This approach builds on the premise that change is more likely to be
accepted if the people affected by it recognize a need for it before it occurs.
WORKING WITH UNIONS: Unions sometimes support management in
encouraging workers to accept change.

WORKING WITH THE TOTAL SYSTEM: Resistance to change can be

reduced by helping employees to recognize the need for each change and to
participate in it and gain from it. Five management guidelines for responsible
change may be summed up as follows:

1. Make only necessary and useful change. Avoid unnecessary change.

2. Change by evolution, not revolution (that is, gradually, not dramatically).
3. Recognize the possible effects of change, and introduce it with adequate
attention to human needs.
4. Share the benefits of change with employees
5. Diagnose the problems remaining after a change occurs, and treat them.
281
SUMMARY

In this lesson we have understood the concept of organisational change. Change

is everything, and its pace is increasing. The work environment is filled with
change that, while positive in intent, upsets the social system and requires
employees to adjust. Resistance to change can focus on the change itself or on
the way it was introduced. Further, it can be logical, psychological, or
sociological.
Change has costs as well as benefits, and both must be considered to
determine net effects. Employees tend to resist change because of its costs,
including its psychic costs. Management reduces resistance by influencing the
supporting and restraining forces for change. Managers are encouraged to apply
a systematic change procedure spanning unfreezing, change, and refreezing
activities. Since there is an organizational learning curve for change, time is
required for the potential benefits of change to occur.
Transformational leadership can be instrumental in bringing about
effective changes. Leaders need to create and share a vision, to inspire followers
through their charisma, and to encourage them to become double-loop learners
so that future changes will be even more successful. A wide range of activities
to support change can be used, such as participation, shared rewards, and
adequate communication.
Terms & Concept for Review

 Organisational change
 Charisma
 Double loop & single loop learning
 Homeostasis
 Hawthorne effect
 Pro active and reactive roles
 Psychic costs

282
 Resistance to change, Logical, Psychological & Sociological
 Transformational leaders
 Reaching a New Equilibrium
 Stages in change
 Building support for change

Self Assessment Questions

1. “Change is basically positive.” Discuss the pros and cons of this statement.
2. Resistance to change is often viewed negatively. Discuss some possible
benefits of resistance to change in an organization.
3. Considering that change even further, was there an organizational learning
curve for it? Discuss its length shape, and some of the problems that
developed.
4. Continuing the analysis of this change, how did management alter the
restraining and supporting forces for it? Discuss.
5. Think of an organizational change that you have experienced. Was there
resistance to the change? Discuss. What could have been done to prevent or
diminish it?

283
 LESSON 6
ORGANISATIONAL DEVELOPMENT (OD)

LESSON OUTLINE

 Meaning & Characteristics of OD

 Process of OD
 Assumptions & Skills of OD specialists
 OD approaches
 Experiments Learning methods
 OD interview strategies
 Behaviour focused programme
 Structure focused programme
 Team work & team building
 Benefits & limitations of OD

LEARNING OBJECTIVES

After reading this lesson you should be able to

 Understand the meaning & characteristics of OD

 List out the objectives of OD
 Recognize the process of OD
 List out the assumptions & skills of OD specialists
 Recollect the OD intervention approaches
 Realize the importance of team work & team building
 Recollect the benefits & limitations of OD

284
 ORGANISATIONAL DEVELOPMENT (OD)

Understanding organization development

In the 1950s and 1960s a new, integrated approach oriented known as

organizational development (OD). Organization development is the systematic
application of behavioural science knowledge at various levels (group,
intergroup, and total organization) to bring about planned change. Its objectives
include a higher quality of worklife, productivity, adaptability, and
effectiveness. It seeks to change beliefs, attitudes, values, strategies, structures,
and practices so that the organization can better adapt to competitive actions,
technological advances, and the fast pace of other changes in the environment.
There are three main reasons why OD was necessary. First, conventional
training in the past often failed to carry over to the job. Second cause was the
piecemeal approach to training taken by many organizations. A third cause was,
and still is, the dramatic pace of change itself, which requires organizations to be
extremely flexible in order to survive and prosper.

Characteristics of organizational development:

A number of characteristics are implied in the definition of OD.

285
Systems orientation: Change is so abundant in modern society that
organizations need all their parts working together in order to solve the problems
and capitalize on the opportunities- that are brought by change. An example of
an OD framework using four systems of management was developed by Renis
Likert. In order to analyze the present system and move toward a better one, the
Likert program uses a model of an organization with three types of variables.
They are casual, intervening, and end-result variables.

Systems 1 through 4 in relation to participation

Participative

Benevolent Participative
authoriative
Exploittative- Consultative
authoriatitive

Authoritative
System
1 2 3 4

Humanistic values: OD programs typically are based on humanistic values,

which are positive about the potential and desire for growth among employees.

Variables in Likert’s organization development approach

Casual variables Intervening variables End result variables
Organisation structure Attitudes Improved productivity
Controls Motivation Lower costs
Policies Perceptions Higher earnings
Leadership behaviour

286
Use of a change agent: OD programs generally use one or more change agents,
whose role is to stimulate, facilitate, and coordinate change.

Problem solving: OD emphasizes the process of problem solving. It trains

participants learn on the job.

Experimental learning: Experimental learning means the participants learn by

experiencing in the training environment the kinds of human problems they face
on the job.

Interventions of many levels: The general goal of organization development is

to build effective organizations-one that will continue to learn, adapt, and
improve.

Contingency approach: Organization development is usually described as

contingency –oriented.

THE OBJECTIVES OF ORGANISATIONAL DEVELOPMENT:

The objectives of organizational development are indicated as below:

a) To increase the level of personal enthusiasm, satisfaction, and support
among organizational members.
b) To increase the openness of communication in all directions
c) To develop more effective workgroups
d) To improve interpersonal competence for problem solving and conflict
resolution in a synergetic manner to reinforce positive values and beliefs
as also feelings and emotions of people.
e) To improve overall organizational climate

THE ORGANISATION DEELOPMENT PROCESS:

A typical complete program includes most of the following steps:
 Initial diagnosis
 Data collection
 Data feedback and confrontation
 Action planning and problem solving
 Use of interventions
 Evaluation and follow-up

287
Steps in the organization development process

Decision by Diagnosis of needs Collection of

management to use OD, by management and appropriate data
selection of consultant consultant
Steps (program initiated) 1 2

Data feedback and Action planning and Use of interventions

confrontation problem solving

3 4 5

Evaluation and
Follow-up

ASSUMPTIONS UNDERLYING ORGANISATION DEVELOPMENT

A wide range of assumptions can be made, but certain ones are relatively
common at the individual, group, and organizational level.

SKILLS USEFUL IN ORGANISATION DEVELOPMENT:

A highly skilled OD practitioner needs to develop a broad range of skills useful
in guiding organizational change efforts, including consultation skills (diagnosis,
contracting, designing change), interpersonal skills (such as trust building,
coaching and listening) research skills (planning and conducting a study and
evaluating results), and presentational skills (public speaking and report

288
preparation). Among the skills, two additional and closely related ones stand
out as critical to success-process consultation and feedback.
Process consultation: Process consultation is a set of activities that help others
focus on what is currently happening around them.
Common organization development assumptions

Individual
 People want to grow and mature
 Employees have much offer (eg. energy and creativity) that is not now
being used at work
 Most employees desire the opportunity to contribute (they desire, seek,
and appreciate empowerment)
Groups
 Groups and teams are critical to organizational success.
 Groups have powerful influences on individual behaviour
 The complex roles to be played in groups require skill development

Organization
 Excessive controls, policies, and rules are detrimental
 Conflict can be functional if properly channeled
 Individual and organizational goals can be compatible.

Feedback

OD relies heavily on feedback to participants so that they have useful data on

which to base decisions. Feedback encourages them to understand how they are
seen by others and to take self-correcting action.

OD APPROACHES TO CHANGE

OD programs rely heavily on experimental learning, and the approach

emphasized is laboratory training. It provides situations in which the trainees
themselves experience through their own interactions some of the conditions
they are talking about. In this way they more or less experiment on themselves.

289
Role-playing: Role-playing is a laboratory method that can be used rather
easily as a supplement to conventional training methods as well ad in OD.

Simulations: While role-playing exercises are often relatively brief;

simulations may last for hours or even days. Simulations are comprehensive
experimental approaches that create many dimensions of work life in
organizations.

Behaviour modeling: It is a method for teaching skills to handle commonly

encountered behavioural problems.

Training models for traditional training and behaviour modeling

Learn new Which lead to Which lead to Which lead

frameworks & new attitudes changed job to better
results.
theories &values behaviour
Which leads
Learn new …which lead to …which lead to to learning
behaviours… better results… new attitudes new
and values…… frameworks
and theories

OD interventional strategies: Also called OD programmes or techniques, a

wide range of interventional strategies has been used in USA and some other
advanced countries. There are two broad categories and interventions viz.,
behaviour focused intervention and structure focused interventions.

Behaviour focused programmes: Behaviour focused programmes are directed

at changing the attitudes, behaviour and interactional patterns of individuals and
groups. Some of the more popular developmental programmes are career
planning and development, assertiveness training, sensitivity training,
transactional analysis, process consultation, team building, inter group team
building, and the managerial grid.

290
Encounter groups: Encounter groups involve unstructured small-group
interaction under stress in a situation that requires people to become sensitive to
one another’s feelings in order to develop reasonable group activity.

Team building: Team building encourages team members to examine how they
work together, to identify their problems, and to develop more effective ways of
cooperating. The goal is to make the team more effective.

Survey feedback: As an OD intervention is a more powerful tool that surveys

members of an organization and reports the results directly to the persons
involved for their interpretation and action.

Structure focused programmes: These programmes attempt to improve

organizational effectiveness by changing tasks, structural relationships, and
other managerial practices. These programmes include behaviour modification,
job enlargement, job enrichment, and flextime, linking pin organization, matrix
organization, management by objectives (MBO), and survey feedback.

Benefits and limitations of OD

Organization development is a useful organizational intervention. The benefits

and limitations are summarized as follows:
Benefits and limitations of organization development

Benefits of OD Limitations of OD
Change throughout organization Major time requirements
Greater motivation Substantial expense
Increased productivity Delayed payoff period
Better quality of work Possible failure
Higher job satisfaction Possible invasion of privacy
Improved teamwork Possible psychological harm
Better resolution of conflict Potential conformity

291
Commitment to objectives Emphasis on group processes
rather than performance
Increased willingness to change Possible conceptual ambiguity
Reduced absences Difficulty in evaluation
Lower turnover Cultural incompatibility
Learning individuals and groups

Summary

In this lesson we have discussed the concepts and nature of OD, and we
understood that the benefits and limitations of OD. Organization development
is the systematic application of behavioural science knowledge at various levels
to bring about planned change. It emphasizes the whole organization as
operating system. The OD processes covers such steps as diagnosis,
datacollection, feedback and confrontation, action planning, term building,
intergroup development, and follow up. OD consultants make a variety of
assumptions that guide their behaviour, and rely on range of skills such as
process consultation and feedback
Organization development makes heavy use of experiential learning
methods, such as role-playing, simulation, and behaviour modeling. Three
major intervention approaches include encounter groups, team building, and
survey feedback.
Although OD has limitations, it is an excellent practice for introducing
change, improvements, and self-renewal in organizations. It differs sharply
from traditional training method by its focus on the entire system and its
advocacy of humanistic values. OD programs typically use a change agent to
assist with action research and feedback, and apply a variety of experiential
learning methods within a contingency framework.

292
Terms and concepts for review:
 Behavioural modeling
 Intervention
 Structure focused programmes
 Behavioural focused programmes
 Objectives of OD
 Humanistic value
 Encounter value
 Survey feedback
 Team building
 Organizational development
 Benefits and limitations of OD
 Assumptions underlying OD
 The OD process
 Variables in Likert’s OD approach
 Characteristics of OD

Self-assessment questions

1. The field of OD has been based on humanistic values. Discuss how its
skills and intervention methods would be different if those values were
not important.
2. Create a list of the kinds of organizational behaviour skills that would be
useful to an OD consultant.
3. How do role-playing, simulation, and behaviour modeling differ as
training methods? Do they have similarities also?
4. A manager suggested, “Traditional training helps employees learn
something. But OD helps them learn how to learn something.” Discuss
this distinction.
5. Summarize the different phases by which an OD program develops?
How does this differ from conducting attitude surveys?

293
6. Examine the OD assumptions. Which of these do you agree/disagree
most strongly with? Explain your feelings.
7. All adults have had experiential learning, whether it as in a classroom or
not. Select a situation in which you had experiential learning, describe
it, and then tell how it affected you. Why were you affected the way you
were?
8. Discuss the strengths and weaknesses of encounter groups?
9. Identify three major benefits and three major limitations of OD. Do you
think the benefits outweigh the costs? Report your choices, giving
reasons for your selection.
10. What are the objectives of OD?
11. What are the benefits and limitations of OD?

294
UNIT – V
unite
LESSON

21 MANAGEMENT APPRROACHER AND

STYLES

LESSON OUTLINE

 Human Relations Approach

 Hawthorne Experiment
 Systems Approach
 Contingency Approach
 Operational Approach
 Quantitative Approach
 Human Resource
Management Approach
 Management Science
Approach
LEARNING OBJECTIVES
 Management Styles
After reading this lesson you should be
able to

 Explain various approach of

management.
 Understand human relations approach
 Describe the Hawthorne Experiments
 Explain the components of Systems
approach.
 Analyze contingency approach
 Differentiate systems approach and
contingency approach.
 Understand operational and
quantitative approaches
 Explain different styles of
management.

295
INTRODUCTION
There are different approaches in management. The managers as according to
their belief and convenience adopt any one or a combination of approaches in
managing their organizations. The important management approaches are
presented here.
HUMAN RELATIONS APPROACH
Human Relations: Definition
Human relations pertains to motivating people in organizations in order to
develop teamwork which effectively fulfils their needs and leads to achieving
organizational goals. Thus human relations.
- strive to create a positive and conducive work environment, focuses on
people,
- has the ultimate goal of increase in productivity and
- seeks to build human cooperation towards achievement of organizational
goals.
The human relations approach is the outcome of reactions of classical
theorists like Many Parker and Chester I Barnard. Elton Mayo and his associates
pointed out that the techniques of scientific management are not adequate and
they do not contribute to individual and organizational goals.
The essence of human relations approach is that workers should be
treated as human beings but not as mere factors of production. Workers need,
feelings, attitudes, value and desires are extremely important. The theme of
human relations approach is that (i) organizational situation should be viewed in
social terms as well as in economic and technical terms and (ii) the social
process of group behaviour can be understood in term of the clinical method
analogous to the doctor’s diagnosis of the human organism.

296
HAWTHORNE EXPERIMENTS
An intensive and systematic analysis of human factor was made in the form of
Hawthorne Experiments. Elton Mayo is generally recognized as the father of
human relations approach although a number of professors of the Harvard
Business School and managers of Hawthorne Plant of Western Electric
Company USA where the experiments were conducted between 1924 and 1933
had been associated with him. The series of experiments conducted may be
classified as:
(i) Phase 1. Illumination Experiments
This experiments was conducted to know the impact of illumination on
productivity. The experiment involved the prolonged observation of two groups
of employees making telephone relays. The intensity of light under which one
group worked (test group) systematically varied while the light was held
constant for the second group (control group). The productivity of the test group
and control group increased. The researchers concluded that some other
variables were contaminating the effects of the light changes.
(ii) Phase 2. Relay Assembly Test Group
A small group of workers was placed in a separate room and a number of
variables were altered – like wages were increased, rest periods of varying
lengths were introduced, the workday and work week were shortened. The
supervisors, who acted as observers, also allowed the groups to choose their own
rest periods and members of their own groups and to involve in decision making
regarding suggested changes. Performance tended to increase over the period
but it also increased on decreased erratically.

297
(iii) Phase 3. Interviewing Programme
Mayo initiated a three year long interviewing programme in 1828, covering
more tan 21,000 employees to find out the causes for increased productivity.
The emphasis of the phase was on human relations rather than on working
conditions. This programme initially proved to be useless as employees often
gave stereotyped responses. This led the interviewers towards asking indirect
questions. Then the employees began to air their feelings freely. The point
demonstrated by this interviewing programme is central to the human relations
approach. And for the first time, the importance of the informal work group is
recognized. Then, the bank wiring room experiment was set up in order to find
out how informal work groups operate.
(iv) Phase 4. The Bank Wiring Observation Room Experiment (1931-32).
In this experiment, 14 male workers were formed into a work group and
intensively observed for seven months in the bank wiring room, engaged in the
assembly of terminal banks for the use in telephone exchanges. The employees
were paid individual wages and a bonus based on group effort. It was expected
that highly efficient workers would bring pressure on others for increased output
and high bonus. However, the expected results did not come about and indeed
the group developed specific mechanisms to protect themselves based on certain
sentiments:
The rate buster sentiment : don’t turn out too much work.
The chiseler sentiment : don’t turn out too little work.
The squealer sentiment : don’t tell superiors anything that would
harm an associate.
The officious sentiment : don’t act too officious in performing
duties, conform rather to work group
norms.

298
Work group norms, beliefs, sentiments had a greater impact in influencing
individual behaviour than did the monetary incentives offered by the
management. Thus, the Hawthorne Experiments indicated that employees were
not only economic beings but social and psychological beings as well.
The researchers concluded that employees would work better had they believed
that the management was concerned about their welfare and supervisors paid
special attention to them. This phenomenon (subsequently labeled the
Hawthorne effect). Has remained quite controversial to this day.
The concept social man, according to Mayo, motivated by social needs,
wanting, rewarding on-the-job relationships and responding more to work-group
pressures than to management control – was necessary to complement the old
concept of rational man motivated by personal economic needs.
Criticisms of the Human Relations Approach
(i). Scientific Validity: Although the Hawthorne Experiments
profoundly influenced the managers in managing their employees,
the studies had many weaknesses of design, analysis and
interpretation. Whether Mayo and his colleagues’ conclusions are
consistent with their data is still the subject of lively debate and
considerable confusion. These studies had a clinical bias as they
discounted theory and stressed on radical empiricism. Most of the
conclusions are not supported by adequate scientific evidence.
(ii). Shortsighted: The following points confirm the shortsightedness of
this approach: (i) it lacks adequate focus on the work, (ii) human
relations tend to neglect economic dimensions of work satisfaction
and (iii) human relations research is concerned with only operative
employees but not managerial and supervisory personnel.

299
 (iii). Over concern with happiness: The Hawthorne studies suggested
that happy employees would be productive employees. But studies
have failed to establish a positive correlationship between happiness
and productivity.
(iv). Misunderstanding of Participation: Many of the post Hawthorne
human relationists expected that participation would reduce
resistance to formal authority and would ensure worker’s support for
organizational goals. But recent studies indicate that employees want
to be utilized properly.
(v). The Mystery surrounding group decision- making: Research
evidence on the superiority of group decision-making to individual
decision-making is conflicting and inconclusive. The entire thinking
of group decision-making is mystical.
(vi). Conflict: The human relationists failed to recognize positive aspects
of conflict like creative force in society. They believed that conflict is
always bad and should be minimized.
(vii). Anti-Individualist: The human relations movement is anti-
individualist. The concept of individualism and individual behaviour
which is predominant in an organizational setting is overridden by
the concept of group decision-making and group behaviour. Human
relations approach failed to describe completely individuals in the
work place.
(viii). Total Work Environment is not considered: Work environment
comprises of organizational structure, its culture and climate, labour-
management relations, social environment etc. But the human
relations approach considered only social environment as the total
work environment.

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The next approach developed towards management is systems approach. Now,
we shall study the system approach to management.

ACTIVITY - A
What is Human Relations?
……………………………………………………………………………
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ACTIVITY - B
Describe the Contributions of Human Relations Approach.
……………………………………………………………………………
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SYSTEMS APPROACH TO MANAGEMENT

A system is a set of interrelated but separate parts working towards a common
purpose. The arrangement of elements must be orderly and there must be proper
communication facilitating interaction between the elements and finally this
interaction should lead to achieve a common goal.
Thus, systems approach to management views the organization as a
unified, purposeful system composed of interrelated parts. Hence, managers
have to deal with the organizational as a whole rather than dealing separately
with various segments of an organization. This approach also gives the
managers to see the organization as a whole and as a part of the larger external
environment. Systems theory reveals to us that the activity of any segment of an
organization, effects in different degree, the activity of every other segment.

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 Systems-oriented managers would make decisions only after they have
identified impact of these decisions on all other departments and the entire
organization. The essence of the systems approach is that each manager cannot
function in isolation and within his organizational boundary of authority and
responsibility of the traditional organizational chart. They must inter-wire their
departments with the total organization and communicate with all other
departments and employees and also with other organizations.
Key Concepts of Systems Approach
(i). Subsystem: Subsystems are those parts which make up the
whole system. Each system in turn may be a subsystem of a still
larger system. Thus, a department is a subsystem of a factor,
which is a subsystem of a firm, which is a subsystem of an
industry, which is a subsystem of a national economy, which is a
subsystem of the world economic system.
(ii). Synergy: Synergy is the situation in which the whole is greater
than the sum of its parts. In organizational terms, synergy means
the departments that interact co-operatively are more productive
than they would be, if they operated in isolation.
(iii). Open System: It is a system that interacts with its environment.
All organizations interact with their environment, but the extent
to which they do so varies.
(iv). Closed System: It is a system that does not interact with its
environment.
(v). System Boundary: It is the boundary that separates each system
from its environment. It is rigid in a closed system while flexible
in an open system.

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 (vi). Flows: A system has flows of information, materials and energy.
These enter the system from the environment as inputs (like raw
materials), undergo transformation process within the system
(like production process) and exist in the system as outputs (like
products/services).(shows the flows and feedback in an open
system).
The Flows and Feedback in the Open System

External
Environment

Input (Resources) Output

Transformation  Products
 Human  Services
 Capital
 Materials

Feedback

a. Feedback: It is the part of system control in which the results of actions

are returned to the individual, allowing work procedures to be analyzed
and corrected.
System approach helps the dynamic and interrelated nature of organizations to
plan for actions and anticipate consequences and mutual effects. It helps the
general managers to maintain balance among various subsystem and the
organization. Thus a major contribution of the systems approach results from its
strong emphasis on the interrelatedness or mutuality of various subsystems of

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the organization. Treatment of the organization as an open system is another
contribution of systems approach.

ACTIVITY - C
Define the key concepts of systems Approach
……………………………………………………………………………
……………………………………………………………………………
CONTINGENCY APPROACH
This approach is also called situational approach. This approach was developed
by managers, consultants and researchers who tried to apply the concepts of the
major schools to real life situation. They sought to know the causes for the
success of methods in one situation and failure another situation differs, as such
a technique that works effectively in one situation will not necessarily work in
all cases. Hence managers have to identify the technique which will best
contribute to the attainment of the management’s goal in a particular situation,
under particular circumstances and at a particular time. Classical theorists
suggest work implication for increase in productivity whereas behavioural
scientists suggest job enrichment. But the manager under contingency approach
should find out which method will work better in that particular situation. This
approach builds upon systems approach. The composition of a particular
situation or system will help to know the techniques best suited to that particular
situation or system.

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Systems Approach Vs. Contingency Approach
Clear-cut emergence of contingency approach was noticed after the
popularization of systems approach. In fact, contingency approach is an
outgrowth of systems approach. The contingency theorists accept open adaptive
nature of the organization and the interdependency between various sub-systems
of the organization. But they have pointed out that the systems approach does
not adequately spell out the precise relationship between organization and its
environment. It is too abstract and difficult to apply in practice. They have tried
to modify and operationalise the system framework.
The systems approach takes a broader view of organizational variables
and employs a comprehensive model of human beings. It takes into account the
full range of human needs and motives. On the other hand, contingency
approach is concerned mainly with the structural adaptation of organizations to
their task environment. But both these viewpoints, are not mutually exclusive.
They should be treated as complementary to each other. The manager should use
systems and other approaches under the framework of contingency approach.

ACTIVITY – D
……………………………………………………………………………
……………………………………………………………………………
OPERATIONAL APPROACH
Koontz and O’Donnell have suggested the operational approach to management
and in doing so, they have attempted to draw together the pertinent knowledge
of management by relating it to the managerial job, i.e., what managers do. This
approach recognizes that there is a central core of knowledge about managing
which exists in managements such as line and staff, patterns of departmentation,
span of management, managerial appraisal, and various managerial control

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techniques. Many other pertinent elements of knowledge are derived from other
fields such as application of systems theory, motivation and leadership, decision
making, group behaviour and cooperative systems, communication, and
mathematical analysis and practices.
Operational management has a central core of knowledge not found elsewhere.
It also draws from other fields of knowledge and adopts within it those parts of
these fields with are especially useful for managers. The operational approach
regards management as a universally applicable body of knowledge that can be
brought to bear at all levels of managing and in all types of enterprises. At the
same time, the approach recognizes that the actual problems managers face and
the environments in which they operate may vary between enterprises and
levels, and it also recognizes that application of science by a perceptive
practioner must take this into account in designing practical problem-solutions.

The operational approach is quite similar to the modified management process

approach advocated by G.R. Terry. It may also be called eclectic process school
of management, featuring the basic framework of the process approach modified
by certain theories from other appropriate schools of management though.
Eclectic means consisting of “what is selected” and this term has been
interpreted to indicate taking the best from what is available in the management
thought and working it into a single theory molded around the process
framework as the central core.
QUANTITATIVE APPROACH
The quantitative or mathematical approach to management developed in the
1950’s. It offered systematic analysis and solutions to many complex problems
faced by management in the real world. The quantitative school of management
is also called operations research (OR) or management science. Mathematical

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and statistical tools are now applied in the field of management, particularly in
decision making on complex problems. More commonly used OR techniques
are linear programming, game theory, queuing, simulation and probability.
Together, these quantitative decision-making tools are called ‘operations
research’.
Computer is used to find out solutions to complex management
problems. Production scheduling, replacement of capital equipment, inventory
control, plant location, transportation problems, warehousing problems, and
many other complex managerial problems are being solved today with the active
help of operations research and computers. Management scientists, with the help
of mathematics, statistics and electronic computer, can now construct
mathematical models containing as many as one thousand simultaneous
equations. Churchaman defined operations research as an application of the
scientific method to problems arising in the operations of a system which may
be represented by means of a mathematical model and the solving of these
problems by resolving the equations representing the system. The development
of models to represent a system under study requires the skills of many branches
of knowledge such as mathematics, statistics, engineering, economics, physical
sciences, behavioral sciences, and cost accounting as well as management
experts.
HUMAN RESOURCE MANAGEMENT APPROACH
Human resource is a principal and central sub-system and resource of an
organization. Both the human resource system and the entire organization
operate under the same environmental factors. Greater the effectiveness and
productivity of human resources, the more will be the effectiveness of the
organization. Most of the mangers say, our greatest asset is people. Human
resource management approach is developmental. It is concerned with the

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growth and development of people towards higher levels of competency.
Creativity and fulfillment.
The human resource management approach is supportive. It helps
employees to develop through training and development and other techniques of
human development. It also develops more responsible and committed persons
through the creation of conductive organizational climate, strong culture,
attractive reward system, free and challenging work environment, team spirit
and the like.
This approach assumes that increased capabilities and expanded
opportunities for people will lead directly to the improvement of the
organizational effectiveness and efficiency. Employee job satisfaction will also
be a direct result when employees make use of their resources to the fullest
extent. Thus, the human resource management approach reveals that sound
management of human resources through proper training and development,
judicious salary administration, creating conducive work environment,
providing challenging job and maintaining sound industrial relations result in the
employee contribution for achievement of organizational goals.
MANAGEMENT SCIENCE APPROACH
Science is a systematically organized by the knowledge based on proper
findings and exact principles and is capable of verification and general
application. Science is systematic in the sense that certain relationships between
variables has been ascertained, principles and their limitations have been
discovered, tested and established. Facts are determined based on events or this
observed initially with the help of scientific methods. The accuracy of the facts
is verified through observations on a continuous basis. Thus, the knowledge
obtained must be verifiable in scientific method. Any subject to be called
science must have the following characteristics:

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 a. Systematic body of knowledge
b. Method of scientific enquiry
c. Should establish cause and effect relationship
d. Principles should be verifiable
e. Should ensure predictable results
f. Should have universal application.
Management has a systematized body of knowledge pertaining to its field. The
scientific character of management is well supported by mathematical models
and operations research. A manager can also take appropriate decisions based on
decision science like any scientist.
The principles underlying time and motion studies, market research,
morale, motivation, job satisfaction etc. are developed based on scientific
enquiry. Many management principles like planning, direction, organization,
motivation, morale etc., establish cause and effect relationship. Management
principles like unity of command, span of control and unity of direction can be
verifiable. Those in the category of job satisfaction, morale and job enrichment
ensure predicable results. Almost all the management principles are universally
applicable.
However, it must be pointed out that management cannot be an exact
science like physics, chemistry and natural science. According to Peter
F.Drucker, management can never be an exact science. Further, management
can not be an exact science as business is highly dynamic and business
conditions change continuously. Management can be a social science as it
mostly deals with human beings.

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Ten Management Styles
In this book ‘Managing with Style and Making It Work for You’, Henry O.
Golightly, founder of Golightly and Company International, a consulting firm,
lists of the following management styles.
1. Management by Inaction: The manager who does nothing, or a least puts off
doing anything. He may be too fearful, uncertain, or bored to take action, but he
also assumes that “if you ignore a problem, it will go away, or at least, get
better”. He functions best in areas where change comes slowly and where he
works for people who prefer to make their own decisions rather than to delegate
them.
2. Management by Detail: The manager who researches a problem to death
instead of solving it. He works best with people who appreciate his information,
don’t depend on him for quick or dramatic decisions, and will set deadlines for
him.
3. Management by invisibility: The manager who make himself inaccessible
for various reasons, thus forcing subordinates to do more of the work and take
the heat. He works best with people who don’t need to interact with him, but he
needs the presence of a few people so he isn’t allowed to isolate himself totally.
4. Management by Consensus: The manger who wants decisions to be a group
effort. He either wants harmony or is afraid to make decisions by himself. He
does not work well with people who won’t interact with him or who expect him
to generate his own ideas. But he does work well in decentralized companies
that stress human relations.
5. Management by Manipulation: The manager who is most concerned with
getting people to do what he wants. He values control for control’s sake. He
works will with people who are not likely to challenge his methods and may

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even use them for their benefit. He works best in situation with well-defined
goals for which he can aim.
6. Management by Rejection: The manager who is overwhelmingly negative.
He picks apart all ideas and resists change. He can make a contribution by
tempering hastily through-out or ill-advised schemes conceived by more
dynamic co-workers.
7. Management by survival: The manger who looks out primarily for himself.
He has a subordinate mentality a good follower but one unwilling to take risks.
He works best “in an organization large and stable enough to value the
consistent performer who is not a ‘tiger’”.
8. Management by Despotism: The manager who rules with an iron fist and
expects complete subjugation. He works best under people who leave him alone
to run things and will get cooperation from subordinates by paying them well.
9. Management by Creativity: The manager who manages instinctively. He
bases his actions and decisions on hunches, which may or may not be right. He
works best with people who will respect his ideas, if not always follow them,
who will leave him alone to be creative, or who will organize and implement his
good ideas and pass over his bad ones.
10. Management by Leadership: The Manager who listens to his subordinates
and then shows them direction. He values both interaction and goals. He adopts
techniques from all the other management styles and knows when to use them
and how to keep them in balance.

ACTIVITY – E
Explain any two important management styles.
……………………………………………………………………………
……………………………………………………………………………

311
SELF - ASSESSMENT QUESTIONS
1. Comment on the Hawthorne Experiments and their outcome.
2. What is human relations? Discuss the contributions to and major
concepts in human relations.
3. Appraise the systems approach to management. What are its features?
4. Write short notes on: (i) Contingency approach to management (ii) HRM
approach to management (iii) Management Science Approach to
management.
5. What is management style? Explain various management styles.
FURTHER READINGS
1. Elton Mayo, The Human Problems of an Industrial Civilization, The
MacMillan Company, New York, 1933, p.29.
2. Gary Yunker, The Hawthorne Studies: Facts and Myths, Faculty
Working Papers, Department of Psychology, Jacksouville State
University, Summer, 1985.
3. Seymour Tilles, The Manager’s job – A System’s Approach, Harward
Business Review, January – February 1963, pp.7381.
4. Herbert G.Hicks and C.Ray Gullett, Organization Theory and Behaviour,
McGraw-Hill Book Company, New York, 1975, pp201-221.
KEY TERMS
 Management  Operational Approach
Science Approach
 HRM Approach
 Human Relations  Unity of Command
 Work Group  Synergy
 Systems Approach  Open System
 Contingency  Closed System
Approach
 Quantitative approach

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 JAPANESE MANAGEMENT PRACTICES
LESSON

22 AND CREATIVITY AND INNOVATION

LESSON OUTLINE

 Unique features of Japanese

management.
 Techniques of Japanese
management.
 Weakness of Japanese
management.
 Creativity.
 Creativity and Innovation.

LEARNING OBJECTIVES

After reading this lesson you should be

able to

 Explain the unique features of

Japanese management.
 Understand the inherent weakness of
Japanese management.
 Define Creativity.
 Explain the climate for organizational
Creativity.
 Understand what is innovation and
the rules of stifling innovation.

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INTRODUCTION

It is anybody’s knowledge that Japanese economy was reduced to scrambles

during the Second World War. The war had a devastating effect in that the
whole economy had to be rebuilt from scratches. Looking back, it is quite
amazing to note how Japan as a nation could achieve such a tremendous
development in all the sectors of the economy in a span of about 50 years. In a
way, Japan amply demonstrated to the whole world what a nation could achieve
given the commitment and determination of its people. As such, there is no
wonder that captains of the industry, management thinkers and practioner, all
over the world began to examine the factors that contributed to the Japanese
success often described as ‘Japanese miracle’.
In the several studies conducted by the management thinkers, it was
found that the secret lies in their management system. They have developed a
comprehensive system that combines structure and people in a way that, when
integrated with Japanese culture, generates a highly productive and efficient
organization.
UNIQUE FEATURES OF JAPANESE MANAGEMENT
The Japanese management system has three levels of attention: an overall focus,
general strategies and specific techniques.
FOCUS
The essence of management in large Japanese organizations is its focus on
human resources. Management considers its human resources, more than its
financial or physical resources. The Japanese organizations go all out to develop
the human resources. Much of the Japanese management revolves around a
distinct approach to personnel management. Such a focus on the human

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resources helped the Japanese industry to achieve so much, inspite of the poor
endowment of natural resources.
STRATEGIES
The concern for human resources in manifested in three interrelated strategies.
First, employees are offered long-term employment. This demonstrates the
organization commitment to its people. Second, the organization’s philosophy
concerning employee needs and the values of cooperation and teamwork are
well articulated. Third, close attention is given to hiring new employees who
will fit well into the organization and to ensuring that this fit is maintained and
enhanced throughout the employ’s work life.
(i) Long-term employment
The U.S. view towards employee is that when times are bad, employees are laid
off or fired. In Japan, except in the most severe economic circumstances,
employees are assured of permanent employment. Usually new employees are
hired fresh out of educational institutions. The organization than trains them,
makes promotions from their internal pool, and emphasizes seniority in the
allocation of rewards. Long – term employment results in employees with high
morale. From the organizations view point, turnover is low, training costs are
low, and organizational cohesiveness is higher.
(ii) Organizational Philosophy
Each Japanese organization has a specific philosophy that presents a clear
picture of its objectives and values. It acts a superordinate goal – a shared and
unifying goal with which all organizational members can identify, support and
place above any one person’s individual goals. A common theme among
Japanese companies is a heavy emphasis on cooperation and teamwork.
Members of the company are part of a family. The team spirit and cooperation

315
characteristic of a family are possible with the security provided by the strategy
of permanent employment.
(iii) Intensive Socialization
Employees once hired, undergo an initial training programme, the purpose of
which is to familiarize the employee with the organization. Over a period the
employee identifies himself with the company. He is socialized very intensively.
TECHNIQUES
(i) Job relation and slow promotion
In Japan, life-time employment means limited upward mobility Movement is
predominantly, lateral through job rotation. Promotions when they come are
based on seniority.
(ii) Complex appraisal system
In addition to the output, employees are appraised on the basis of traits such as
creativity, honesty, seriousness, maturity and cooperation with others.
Employees’ performance in the long run is given more importance, since
evaluation is done not exactly on the basis of immediate performance.
Employees are naturally motivated to demonstrate loyalty and commitment by
their attitudes and actions.
(iii) Emphasis on work groups
The Japanese system gives far greater attention to organizing tasks around
groups than around individuals. Autonomous work teams are constituted. Tasks
are assigned to such teams and the group members of the team then decide
among themselves the best way for performing the tasks.
(iv) Open Communication
The Japanese system is inherently designed to foster open communication. Job
rotation and emphasis on groups means that employees build an informal
network that facilitates extensive face to face communication. The physical

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work setting is also designed to foster communication. People work in cubicles
and in open space which facilitate interaction and open communication.
(v) Consensus Decision-making
In the Japanese model, the manger, while taking decisions, discusses them to
those who may be affected by the decision. When all are familiar with the
proposal, a formal request for a decision is made, and as a result of the previous
informal preparations, it is easily ratified.
(vi) Concern for the employee
Managers spend a great deal of their time talking to employees about everyday
matters. They take keen interest in employees needs and problems. In fact, the
concern for employees is one of the parameters on which managers performance
is appraised. Japanese companies offer a wide range of benefits to their
employees. Beyond the usual incentives, a comprehensive offering of cultural,
athletic, and recreational activities is very common. For instance, an annual
calendar of office events might include several overnight trips, monthly
Saturday afternoon recreation, and an average of six office parties, all at the
company’s expense. In addition, welfare measures like subsidized family
housing for married, dormitories for the unmarried, nurseries for pre-school
children, scholarships for children, mortgage loans and the like speak a lot of
about the concern for employees.
William Onchin, an American management thinker had extensively
studied organizations and gave a name to their management practices, called
Theory ‘Z’. He strongly advocated for the adaptation of Japanese practices for
the American companies to improve productivity. The differences between
Japanese practices and American management practices are explained in lesson
The Best Management Practices.

317
ACTIVITY-A
Describe the features and techniques of Japanese Management practices.
……………………………………………………………………………
……………………………………………………………………………
THE INHERENT WEAKNESSES OF JAPANESE MANAGEMENT
 The system of life time commitment and groupism encouraged
employees depending and suppressed individual creativity;
 The employment system discriminated against non-life time employees
and prevented the formation of a free horizontal labour market;
 The seniority-based system of rewards created a promotion gridlock for
middle management and especially for the younger outstanding
employee.
By the mid – 1980s the entire system of Japanese management faced three major
challenges:
 After the dramatic rise in the value of Yen, the problem of cost
containment become much more difficult. How to reduce labour cost,
and restructure without resorting to massive lay offs has become a
problem;
 How to continue to motivate employees in a new environment in which
the system of evaluation and rewards, as well as employee attitudes and
expectations, is change;
 How to redesign employment relationships in a way that would blend
the advantages of the order system of dependence in the company with
the necessity to promote employees self-reliance, initiative and
creativity.
THE EMERGENCE OF A NEW PARADIGM
 Companies rely on hiring freezes and on elimination of overtime;

318
  Extensive use of job rotation and employee reassignments;
 Wage, salary and bonus reductions are shared by all groups in the
enterprise; Directors, managers as well as workers.
 Wide use of inter-company manpower, leasing and transfer.
 Erosion of seniority and promotions.
 Companies are using various forms of early retirements incentives.
As a result, performance appraisal systems and wage structures are undergoing
changes.
 Company and work-group loyalties are replaced by individualism.
 Lifetime employment is undergoing change
 Hiring on the basis of skills for a specific, narrowly defined job opening
is growing.
 Mobility among Japanese managers and professionals is also increasing
 Japanese employees’ preference for security over risk and opportunity is
also change.
 Creation of multi-trade employment system. Employees hired for ‘life’
can enter the general track and can be moved horizontally (job rotation)
as well as vertically (grade promotion).
The changes going on are not designed to destroy the old system but to
increase its flexibility. This is very much in keeping with the traditional
Japanese approach to change; however fast and deep it is, continuity with the
uniquely Japanese “essence’ must be maintained. The new Japanese urgent
paradigm will certainly be different. Yet like the modern Japanese home which
usually retains a Japanese style room among western systole rooms and
furniture’s’, the Japanese company will retain a core of Japanese practices.
Source: Tomasz Mroczkowski & Masao Hanaoka, “continuity and change in
Japanese Management”, California Management Review, Winter, 1989.

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ACTIVITY-B
Write the weakness of Japanese management practice.
……………………………………………………………………………
……………………………………………………………………………

CREATIVITY
The growth and survival of the business in the dynamic environment as of today
depends upon the development of new product. Organizations must be always in
the lookout of new opportunities and exploiting the opportunities by creating
new products and services. Therefore; it is needless to say that new product
development holds the key for the survival of an organization. New products do
not come about on their own. They are the result of the ingenuity of creative
people in the organization. As such, it is obvious that new product development
is the function of organizational creativity. In other words, it depends upon how
creative an organization is in respect of new ideas because any organization can
be as creative as its people. Having understood the importance of creativity, the
organizational context, let us understand the meaning and process o creativity.

Meaning of Creativity
Creativity, in general, may be defined as an “escape from mental struckness”. In
the organizational context, it may be viewed as new insights, which points to
better ways of dealing with reality. It involves a departure from conventional
thinking to non-conventional thinking. It entails establishment of a relationship
between the hitherto unrelated things, ideas or concepts. A close examination of
many products enable us to understand how too otherwise unrelated things are
related to produce a new product. The ubiquitous wet grinder found in any of the
kitchens may be cited as a best example where a relationship is established

320
between the electric motor and the conventional stone used, since times
immemorial, in the Indian homes for grinding purposes. Similar is the case with
the electric bulb and the lens that are combined to develop the overhead
projector used in the classrooms. The same logic holds good in the case of many
products that we see around.
CREATIVITY AND INNOVATION
Though, at times creativity and innovation are used interchangeably, it is
appropriate to know that both are different. While creativity is the generation of
a new idea, innovation is the translation of such an idea into a product, service
or method of production. In Lawrence B.Mohr’s Woods, creativity implies
“bringing something new into being; innovation implies bringing something
new into use”. According to Rosabeth Kanter, “innovation is the generation.
Acceptance and implementation of new ideas, processes, products or services”.
Such a distinction is necessary because the skills required to generate
new idea (creativity) are not the same as those required to make the ideas take
the shape of products or services. Since both creativity and innovation are two
different functions, organizations need people good at both the functions.
Further, creativity alone does not contribute for organizational effectiveness,
unless the creative ideas can in some way be used or implemented/ a new idea,
however good it its, must be capable of implementation and must actually be
implemented for the organization to benefit from it.

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THE PROCESS
Creative people in general, are few and far between in any society. Many
products and services that we take for granted these days are the result of their
creative thinking.
It was J.P. Guildford, a noted psychologist who coined the phrases
‘divergent’ and ‘convergent’ in the early 1950s to describe different thinking
styles. Accordingly, Convergent thinking is the sort of thinking most of us are
trained to do. Divergent thinking is quite different from convergent thinking. It
is intuitive thinking useful to deal with problems permitting several possible
solutions, where novel, unexpected answers emerge.
Physiologically, our brain has two distinct hemispheres: one on the left
side, and the other on the right. Psychologists have long back established that
these two halves have totally different jobs. The function of the left side of the
brain is linear thought, the type of thinking involved when you solve a
mathematical problem. The right side of the brain acts or behaves in a different
way. Its functions are connected with imagery, and with intuition or ‘gut-feel’.
There is an obvious parallel between convergence / divergence and the
left brain / right brain model. In other words, convergent thinking takes place in
the left brain while divergent thinking in the right brain. Creativity has the
following steps.
Idea generation: The individual selects a problem to work on or, more likely,
becomes aware that a problem or need exists. This is the starting points for the
new product development indeed. This refers to the awareness about the ‘gaps’
in the market.
Preparation: The individual becomes obsessed with the idea / problem,
recalling and collecting information that seems relevant and dreaming up
hypothesis without evaluating them. Openness to experience, tolerance for

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ambiguity and willingness and courage to redefine the existing concepts, beliefs
are the important psychological attributes required at the stage.
Incubation: After assembling the available information, the individual relaxes
and the subconscious mind becomes active. In this not much understood but
crucial step, the individual often appears to be idle or day dreaming, but the
subconscious is in fact trying to arrange the facts into a new pattern.
Psychological freedom and safety are important at this stage.
Illumination: This is something which we experience quite often. Often when
least expected – while eating, or falling asleep or walking – the new, integrative
idea will flash into the individual’s mind. Such insights must be recorded
quickly, because the conscious mind may forget them in the course of other
activities.
Verification and Application: The individual sets out to prove by logic or
experiment that the idea can solve the problem and can be implemented.
Tenacity may be required at this point. It is at this state the individual thatches
over to the logical, analytical or convergent thinking. The practical implications
are examined what is known as feasibility, both technical and economic.

ACTIVITY-C
Define creativity and write the process of creativity.
……………………………………………………………………………
……………………………………………………………………………

ORGANIZATIONAL CREATIVITY AND INNOVATION

Just as individuals differ in their ability to translate their creative talents into
results, organizations also differ in their ability to translate the talents of their
members into new products, process or services. To make the organizations’

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creative, managers need to know the steps involved in the individual creativity
process analyzed above and take initiative to encourage the process.
THE CLIMATE FOR ORGANIZATIONAL CREATIVITY
Creativity is best nurtured in a permissive climate which encourages the
exploration of new ideas and new ways of doing things. The following aspects,
if practiced, would contribute to fostering creativity in organization.

Some Prescriptions
Accept change: Organization members must believe that change will benefit
them and the organization. Some resistance to change is found in many
organizations for fear of losing positions, learning new skills, etc. Such a
resistance to change has to be overcome by clarifying the need and urgency for
change. The adage that routine drives out the non-routine has to be revised and
must be made the other way.
Encourage new ideas: Managers in the organization, from top to the down must
make it clear in word and deed that they welcome new approaches. To
encourage creativity, managers must listen to their sub-ordinates ideas and
suggestions. They must have an open mind.
Permit more interaction: A permissive, creative climate can be fostered if
individuals have the opportunity to interact with other members of the group and
other groups in the organization. Such interaction encourages the exchange of
useful information, the free flow of ideas, and fresh perspectives on problems.

Tolerate failure: Many new ideas prove impractical or useless. Effective

managers accept and allow for the fact that time and resources will be invested
in experimenting with new ideas that may not work out.

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Freedom to achieve: Organization members must have a purpose and direction
for their creativity. Proper guidance will help mangers gain control over the time
and money invested in creative behaviour.
Offer recognition: Creative individuals are motivated to work hard on tasks
that interest them. But like individuals, they must be remarked for the tasks well
done. By offering recognition in such tangible forms as salary increases,
recognition, the message can be conveyed that creative behaviour is valued and
rewarded.
TEN FACTORS STIFLING INNOVATION
Rosabeth Kanter has developed a list of ten managerial attitudes that sniffle
creative and innovative attempts. Such attitude will have a dampening affect at
organizational effectiveness. An understanding of the following ten points may
help you avoid getting into the trap.
1. Regard any new idea from below with suspicion – because it is new, and
because it is from below.
2. Insist that people who need your approval to act first go through several
other levels of management to get their signatures.
3. Ask departments or individuals to challenge and criticize each other’s
proposals.
4. Express your criticism freely, and withhold your praise. (That keeps the
people on their toes). Let they know they can be fired at any time.
5. Treat identification of problems as signs of failure, to discourage people
form letting you know when something in their area is not working.
6. Control everything carefully. Make sure people count anything that can
be counted, frequently.
7. Make decisions to reorganize or change policies in secret, and spring
them on people unexpectedly.

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 8. Make sure that requests for information are fully justified, and make
sure that it is not given out to managers freely.
9. Assign to lower-level mangers, in the name of delegation and
participation, responsibility for figuring out how to cutback, lay off,
move people around, or otherwise implement threatening decisions you
have made.
10. And above all, never forget that you, the higher-ups, already know
everything important about this business.

ACTIVITY-D
Write the factors stifling innovation.
……………………………………………………………………………
……………………………………………………………………………

SELF-ASSESSMENT QUESTIONS
1. Describe the salient features of the Japanese management practices.
2. Critically examine the feasibility of Japanese management approaches
for the management of Indian industry.
3. Explain the importance of creativity in the organizational context.
4. Describe the process of creativity and the important steps to be taken to
develop new products and services.
5. Explain the various measures to promote innovative spirit in the
organizations. Also describe the factors that stifle innovation.

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FURTHER READINGS
1. Harold Koontz and Heinz Weihrich, Essentials of Management, McGraw-
Hill, Singapore, 1990
2. Global Strategic Management Case Studies on Fortune 500
Companies, Transworld University, Volume VI.

KEY TERMS
 Job Rotation
 Work Groups
 Appraisal System
 Creativity
 Innovation

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unite
LESSON

23 ENTREPRENEURIAL MANAGEMENT AND

BENCHMARKING

LESSON OUTLINE

 Importance of entrepreneur.
 Entrepreneurship
 Characteristics of
entrepreneur.
 Intrapreneurship
 Benchmarking
 Advantages of Benchmarking
 Types of Benchmarking
 Phases of Benchmarking
 Benchmarking Model

LEARNING OBJECTIVES

After reading this lesson you should be

able to

 Explain the importance of

entrepreneur.
 Understand the concept of
entrepreneurship.
 Give the characteristics of
entrepreneur.
 Define Benchmarking.
 Explain the advantages of
Benchmarking.
 Present the limitations and pitfalls of
Benchmarking.
 Explain different phases of
Benchmarking.

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INTRODUCTION
Entrepreneurial development is a complex phenomenon. Productive activity
undertaken by him and constant endeavour to sustain and improve it are the
outward expression of this process of development of his personality. Such
process is crystallization of social milieu from which he comes, family imbibes,
make-up of his mind, personal attitudes, caste system, educational level, parental
occupation, and so on.
The words entrepreneur, entrepreneur and entrepreneurship have
acquired special significance in the context of economic growth in a rapidly
changing socio-economic and socio-cultural climates, particularly in industry,
both in developed and developing countries. The experience in the industrialized
countries like the United States of America, Germany, Japan and the United
Kingdom are authoritatively cited in support of this claim. An in-depth study of
the subject thus becomes not only relevant but also necessary.
Who is an Entrepreneur?
The entrepreneur brings in overall change through innovation for the maximum
social good. Human values remain scared and inspires him to serve society. He
has firm belief in social betterment and he carries out this responsibility with
conviction. In the process, he accelerates personal, economic as well as human
development. The entrepreneur is a visionary and an integrated man with
outstanding leadership qualities. With a desire to excel, the entrepreneur gives
top leadership qualities. With a desire to excel, the entrepreneur gives top
priority to Research and Development. He always works for the well-being of
the society. More importantly, entrepreneurial activities, encompasses all
fields/sectors and fosters a sport of enterprise for the welfare of mankind.

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Importance of an Entrepreneur
Entrepreneur is one of the most important inputs in the economic development
of a country or of regions within the country. Entrepreneurial competence makes
all the difference in the rate of economic growth. In India, state and private
entrepreneurship co-exist. The small-scale industrial sector and business are left
completely to private entrepreneurs. It is, therefore, in this context that an
increasingly important role has been assigned to the identification and
promotion of entrepreneurs for this sector.
The need for a broad-based entrepreneurial call in the India arises from
the need to speed up the process of activating the factors of production, leading
to a higher rate of economic growth, dispersal of economic activities,
development of backward and tribal areas, creation of employment
opportunities, improvement in the standard of living of the weaker sections of
the society and involvement of all sections of the society in the process of
growth.
Several factors go into the making of an entrepreneur. Individuals who
initiate, establish, maintain and expand new enterprises constitute the
entrepreneurial class. The socio-political and economic conditions, the
availability of industrial technology and know-how, state of art and culture of
business and trading, existence of markets for products and services and the
incentives and facilities available for starting an industry or business, all have a
bearing on the growth of entrepreneurship. A conducive environment is created
through the policies and interest of the government in economic and industrial
development.

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ENTREPRENEURSHIP
Entrepreneurship may be defined as the ability to use the factors of production-
and, labour, and capital – to produce new goods and services. Entrepreneurship
may also be defined as the managerial process of organizing, operating, and
assuming the risk of a new business venture. An entrepreneur is a person who is
involved in entrepreneurship. It is important to note the difference between
entrepreneurship and management. For example:
Entrepreneurship… involves combining to initiate changes in production
where [management] involves combining to produce. Management therefore
refers to the ongoing coordination of the production process, which can be
visualized as a continual combining of the factors of production. But
entrepreneurship is a discontinuous phenomenon, appearing to initiate changes
in the production process…. and then disappearing until it reappears to initiate
another change.
Another way to distinguish between management and entrepreneurship is
to recognize that entrepreneurs create wealth and managers administer it. It is
the entrepreneur who creates the new products, the new service. It is the
entrepreneur who finds a new use for an old product or process. It is the
entrepreneur who has the courage to try the new, the creative, the innovative, as
illustrated in figure – 23.1

331
 Constructions
Communicati
ons Manufacturing

Health Care Insurance

Laser
Technology Microelectronics

Real Restaurants
Estate

Home Genetic
Electronics Engineering
Retail
Trade Recreation

Entertainment

Figure – 23.1 World of Entrepreneurs limited only by imagination (Source:

Hold, 1990, p679).
Above all, entrepreneurs deal with change. According to Robert Wilken (1979),
entrepreneurs contribute change that can be categorized into five types;
1. Initial expansion – the original production of goods.
2. Subsequent expansion – the subsequent change in the amount of goods
produced.

332
 3. Factor innovation – the increase in supply or productivity of the factors
of production.
(a) Financial – the procurement of capital from new sources or in
new form.
(b) Labour – the procurement of labour from a new source or of a
new type; the upgrading of existing labour.
(c) Material – the procurement of old material from a new source or
the use of a new material.
4. Production innovations – changes in the production process.
(a) Technological – the use of a new production technique.
(b) Organizational – change in the form of structure or relationships
among people.
5. Market innovation – changes in the size or composition of the market.
(a) Product – the production of a new good or the change in quality
or cost of existing goods.
(b) Market – the discovery of a new market.
Concept of Entrepreneurship

Entrepreneur Entrepreneurship Enterprise

Person Process of Action Object

Figure – 23.2 Concept of Entrepreneurship

333
CHARACTERISTICS OF THE ENTREPRENEUR
Considerable research has been dedicated to the task of identifying the traits and
characteristics of the typical entrepreneur. According to John Hornaday (1982, p
28), the characteristics of successful entrepreneurs are as follows:

Self-Confidence
Energy, diligence
Ability to take calculated risks
Creativity
Flexibility
Positive response to challenges
Dynamism, leadership
Ability to get along with people
Responsiveness to suggestions
Responsiveness to criticism
Knowledge of market
Perseverance, determination
Resourcefulness
Need to achieve
Initiative
Independence
Foresight
Profit orientation
Perceptiveness
Optimism
Versatility
Knowledge of product and technology

334
 Accepting
Challenges

Decision-Making Organization

Skilful
Risk – Taking Management

Making the
Innovation Enterprise a Success

Entrepreneurship

Figure – 23.3 Characteristics of Entrepreneurship

Most entrepreneurial activity of the past has largely been limited to small
organizations, because size has typically been the enemy of creation and
innovation. With the increasing competitiveness of the global arena of business,
large firms are seeking to make use of this innovative trend. Entrepreneurship is
the inculcation of the entrepreneurial spirit within a large organization.
Entrepreneurial Process
The process of entrepreneurship involves both analytical and creative activities.
According to Pierce and Dunham (1990, p 535), the entrepreneurial process
takes place in four sequential steps:

335
Step 1: Solo Phase
During this step, the typical entrepreneur works alone. The first task for the
entrepreneur is to clearly identify the entrepreneurial idea. Then, the idea is
developed and subjected to three feasibility tests.
1. Will the idea provide clearly identifiable benefits for customer or clients?
2. Is the idea compatible with the organization’s resources and overall
strategy?
3. Are the idea and its potential implementation compatible with the
entrepreneur’s personal character and skills?
Step 2: Network Phase
During this step the entrepreneur shares the idea with other organizational
members, seeking feedback and suggestions for improvement of the idea.
Step 3: Bootlegging Phase
During this step, the entrepreneur begins to form a project team and some levels
of product prototype development outside the normal operational mode of the
company.
Step 4: Formal Team Phase
During this step, the idea becomes a formal organizational venture with formal
organizational support.

ACTIVITY-A
Define entrepreneur and entrepreneurship.
……………………………………………………………………………
…………………………………………………………………………

336
ACTIVITY-B
Write the characteristics of entrepreneur.
……………………………………………………………………………
……………………………………………………………………………

BENCHMARKING
Benchmarking is a systematic method by which organizations can measure
themselves against the best industry practices. Benchmarking is the search for
best practices that will lead to superior performance. Benchmarking helps a
company learn its strengths and weaknesses and those of other industrial leaders
and incorporate the best practices into its own operations. It promotes superior
performance by providing an organized framework through which organizations
can learn how the “best-in-class” do things, understand how these best practices
differ from their own and implement changes to close the gap. It is a tool for
continuous improvement.
Definition:
Benchmarking is defined as “measuring our performance against that of best-in-
class companies, determining how the best-in-class achieve those performance
levels and using the information as a basis for our own company’s targets,
strategies and implementation.” Or more simply, “the search of industry best
practices that lead to superior performance”. The term “best practices” refers to
the approaches that produce exceptional results, are usually innovative in terms
of the use of technology or human resources and are recognized by customers or
industry experts.

337
What is a benchmark? : A benchmark is a point of reference against which
things are measured. In business, these points of reference or standards can take
many forms. They are measured by questions about the product or service (e.g.
how many how much time, how much money, how reliable or how well made is
it?). By studying other organizations and comparing the answers to these
questions, we will be able to measure our performance against that of others.
As a result, we will be able to set new goals and adapt the best practices
to our organization. This, in turn, will help us to satisfy our customers with the
best quality, cost product and service.

ACTIVITY – C
Define Benchmarking and Benchmark.
……………………………………………………………………………
……………………………………………………………………………
Background of Benchmarking
The concept of benchmarking is not new. In the early 1800s, Francis Lowell, a
New England industrialist, traveled to England to study manufacturing
techniques at the best British factories. Henry Ford created the assembly line
after taking tour of a Chicago slaughterhouse and watching carcasses hung on
hooks mounted on a monorail move from one workstation to another. Toyta’s
just-in-time production systems was influenced by the replenishment practices
of U.S. supermarkets. Modern benchmarking was initiated by Xerox (in the
1980s), an eventual winner of the Malcolm Baldrige national Quality Award.
IBM, Motorola and Xerox became the pioneers in instituting the benchmarking
process. Xerox initially studied their direct competitors and discovered that:
 their unit manufacturing cost equaled the Japanese selling price in the
United States.

338
  the number of production suppliers was nine times that of the best
companies
 assembly line rejects were 10 times higher
 product lead times were twice as long and
 defects per hundred machines were seven times higher.
These results helped them to understand the amount of change that
would be required to set realistic targets to guide their planning efforts.
Advantages of Benchmarking
(i) Benchmarking promotes a thorough understanding of the
company’s own process i.e., the company’s current profile (strength
and weaknesses) is well understood.
(ii) Benchmarking process involves limitation and adaptation of the
practices of superior competitors, rather than invention, thereby
saving time and money for the company practicing benchmarking.
(iii) Intensive studies of existing practices often lead to identification of
non-value-added activities and plans for process improvement.
(iv) Benchmarking enables comparison of performance measures in
different dimensions, each with best practices for that particular
measure. It involves comparison with several companies who are
best for the chosen measure. (some common performance measures
are return on assets, cycle time, percentage of on-time delivery,
proportion of defects, percentage of damaged goods and time spent
on administrative functions).
(v) Benchmarking focuses on performance measures and processes and
not on products. Thus, it is not restricted to the industry to which
the company belongs. It extends beyond thee boundaries and

339
 identifies organizations in other industries that are superior with
respect to chosen measures.
(vi) Benchmarking allows organizations to set realistic, rigorous new
performance targets and this process helps convince people of the
credibility of these targets.
(vii) Benchmarking allows organizations to define specific gaps in
performance and to select the processes to improve. It enables the
company to redesign its products and services to achieve outcomes
that meet or exceed customer expectations.
(viii)Benchmarking provides a basis for training human resources.

ACTIVITY – D
List the Advantages of Benchmarking
……………………………………………………………………………
……………………………………………………………………………
Limitations of Benchmarking
(i) The primary limitation or weakness of benchmarking is the fact that
best –in-class performance is not a static but a moving target.
(ii) Benchmarking is not a panacea that can replace all other quality
efforts or management processes that can improve the competitive
advantage of a company.
(iii) Benchmarking is not an “instant pudding’.

Pitfalls of benchmarking
The potential pitfalls of benchmarking include the failure to do the following:
(i) Involve the employees who will ultimately use the information and
improve the process (participation can lead to enthusiasm).

340
 (ii) Relate process improvement to strategy and competitive positioning.
(iii) Define the firm’s own process before gathering data for the purpose
of comparison.
(iv) Perceive benchmarking as an ongoing process and not as an one-time
project with a finite start and completion dates.
(v) Expand the scope of the companies studied instead of confining to
one’s own areas, industry or to direct competitors, which is a narrow
approach in identifying excellent performance that are appropriate to
one’s own processes.
(vi) Perceive benchmarking as a means to process improvement, rather
than an end itself. Benchmark (what can be).
(vii) Set goals for closing the gap between the existing performance (what
is) and the benchmark (what can be).
(viii) Empower employees to achieve improvements that they identify and
for which they solve problems and develop action plans.
Approach of Benchmarking
To compare one’s business practices with those of other organizations, four
common approaches to benchmarking are adopted. They are:
(i) Internal benchmarking
(ii) Competitive benchmarking
(iii) Non-competitive benchmarking and
(iv) World-class benchmarking.

Internal benchmarking: is done within one’s organization or perhaps in

conjunction with another division or branch office. Internal benchmarking is the
easiest to conduct since data and information should be readily available and
confidentiality concerns are minimized.

341
Competitive benchmarking: involves analyzing the performance and practices
of best-in-class companies. Their performance becomes a benchmark to which a
firm can compare its own performance and their practices are used to improve
that firm’s practices. However benchmarking the competition could be difficult
since it might be impossible to collect or learn a competitor’s secrets. This type
of information can often be obtained through a confidential survey of all
competitors, usually conducted by a third party consulting firm.
Non-competitive benchmarking: is learning something about a process a
company wants to improve by benchmarking including –
 a related process in the industry with a firm, the company does not
directly compete with
 a related process in a different industry
 an unrelated process in a different industry.
An advantage of this type of benchmarking is that new processes which
could easily be adapted to one’s organization might be discovered.
World-class benchmarking: This approach to benchmarking is the most
ambitious. It involves looking towards the recognized leader for the process
being benchmarked – an organization that does it better than any other.

ACTIVITY – E
Describe the approaches of Benchmarking
……………………………………………………………………………
……………………………………………………………………………
Types of Benchmarking
Three major types of benchmarking that have emerged in business are:
(i) Performance benchmarking or operational benchmarking.
(ii) Process benchmarking or functional benchmarking and
(iii) Strategic benchmarking.

342
Performance benchmarking involves pricing, technical quality, features and
other quality or performance characteristics of products and services.
Performance benchmarking is usually performed by direct comparisons or
“reverse engineering” in which competitor’s products are taken apart and
analyzed. This process is also known as “operational benchmarking: or
“competitive benchmarking” and involves studying of products and processes of
competitors in the same industry.
Process benchmarking centres on work process such as billing, order entry or
employee training. This type of benchmarking identifies the most effective
practices in companies that perform similar functions, no matter in what
industry. For example, the warehousing and distribution practices of L.L.Bean
were adapted by Xerox for its spare parts distribution system. Texas Instruments
studied the kitting (order preparation) practices of six companies, including
Mary Kay Cosmetics and designed a process that captured best practices of each
of them and thereby cutting the cycle time by 50 percent. Companies should not
aim benchmarking solely at direct competitors and it would be mistake if they
do so. If a company simply benchmarks within its own industry, it may be
competitive and have an edge in those areas in which it is the industry leader.
However, if benchmarks are adopted from outside the industry, a company may
learn ideas and processes as well as new applications that allow it to surpass the
best within its own industry and to achieve distinct superiority.
Strategic benchmarking examines how companies compute and seeks the
winning strategies that have led to competitive advantage and market success.
One way to determine how well a company is prepared to compete in a segment
and to help define a best-in-class competitor is to construct a Key Success
Factor (KSF) matrix similar to the one shown in figure – 23.4

343
 Figure – 23.4 Key Success Factor Matrix
Competitive Analysis – Computer Industry… Segment
Performance Rating
Key Success
Weight Our company Competitor A Competitor B Competitor C

Sales force
Distribution
Suppliers
R&D
Service
Cost
structure

Areas to benchmark: Specific areas to benchmark at the operating level might

include the following:

(i) Customer service levels

(ii) Inventory management
(iii) Inventory control (extent of automation)
(iv) Purchasing
(v) Billing and collection
(vi) Purchasing practices
(vii) Quality process
(viii) Warehousing and distribution and
(ix) Transportation.

Guidelines to benchmarking: Companies approach benchmarking in different

ways. IBM has a four step approach. AT & T has a nine step approach and
Xerox a ten step approach. All these approaches have the general guidelines
given below:
(i) Do not go on a fishing expedition: When preparing a benchmarking
study, pickup a specific area in the organization that needs improvement.

344
 This may be quality, customer satisfaction, accounts payable or delivery
time. Then do your homework, including thoroughly reviewing your own
process and procedures before picking a company that excels in the
particular area chosen.
(ii) Use Company people: The people who are going to implement changes
need to see and understand for themselves, so it is they who should make
the visits to other firms which are benchmarked and have the discussions
with the concerned people. Further the visits should be short and the
working teams small.
(iii) Exchange information: You should be ready to exchange information and
provide answers in turn to any questions you might ask another company.
(iv) Legal concerns: Avoid legal problems which might arise as a result of
discussions that might imply price fixing, market allocation or other illegal
activities. This could lead to problems. Do not expect to learn much about
new products of competitors by the benchmarking process. Most
benchmarking missions focus on existing products, business practices,
human resources and customer satisfaction.
(v) Confidentiality: Respect the confidentiality of data obtained. Companies
that agree to share information with you may strongly object if that
information leaks out to a competitor.
Phases of Benchmarking
There are four phases of Benchmarking they are:
(i) Planning: Identify the product, service or process to be benchmarked
and the firm(s) to be used for comparison, determine the measure of
performance for analysis and collect the relevant data.

345
 (ii) Analysis: Determine the gap between the firm’s current performance
and that of the firm(s) benchmarked and identify the causes of
significant gaps.
(iii) Integration: Establish goals and obtain the support of managers who
must provide the resources for accomplishing the goals.
(iv) Action: Develop cross-functional teams of those most affected by the
changes, develop action plans and team assignments, implement the
plans monitor progress and recalibrate benchmark as improvements
are made.
Benchmarking Process: Specific steps in benchmarking vary from company to
company but the fundamental or basic approach is the same. One company’s
benchmarking may not work at another organization because of differences in
their operating concerns. Successful benchmarking reflects the culture of the
organization, works within the existing infrastructure and is harmonious with the
leadership philosophy.
Motorola Inc., uses a five step benchmarking process: They are:
(i) decide what to benchmark
(ii) select companies to benchmark
(iii) obtain data and collect information
(iv) analyze data and form action plans and
(v) recalibrate and start the process again.

ACTIVITY – G
Explain the phases and process of benchmarking
……………………………………………………………………………
……………………………………………………………………………

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The Seven Step Benchmarking Model
Benchmarking is an ongoing process that requires data gathering, goal setting
and analysis. These are accomplished by a seven step model. The seven steps
are:
Step 1 : Identify what to benchmark
Step 2 : Determine what to measure
Step 3 : Identify who to benchmark
Step 4 : Collect the data
Step 5 : Analyze data and determine the gap
Step 6 : Set goals and develop action plan and
Step 7 : monitor the process.
Factors to be kept in mind to ensure success with benchmarking
(i) Benchmarking must have the full support of senior management.
management should also be actively involved.
(ii) Training is critical for the benchmarking team and process.
(iii) Benchmarking should be a team activity. The team should include
management, experts, consultants and especially those people
directly involved in the process.
(iv) Benchmarking is an ongoing process. It must be part of an
organization’s strategy and development. If well monitored, it serves
as an important segment of a total quality management system.
(v) Benchmarking efforts must be organized, planned and carefully
managed. It is a structured approach and requires planning and
monitoring just like any other management tool:
Ultimately, benchmarking can be your best weapon against complacency. Used
correctly, benchmarking can lead you to the competitive edge in today’s
business market place.

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SELF – ASSESSMENT QUESTIONS
1. What is entrepreneurship? Explain its relevance to management.
2. What are the characteristics of entrepreneur?
3. What is meant by “benchmarking” and Benchmark.
4. Trace the evolution of ‘benchmarking’ giving some examples of U.S.
firms who could achieve dramatic results by implementing
benchmarking process.
5. Discuss the reasons for benchmarking stating their advantages and
limitations.
6. Mention some of the pitfalls of benchmarking.
7. What do you understand by “approaches of benchmarking”? Explain.
8. Discuss the various types of benchmarking.
9. List out some of the guidelines to benchmarking.
10. What are the four phases of benchmarking? Discuss briefly.
FURTHER – READINGS
1. Gene Burton, Manab thakur, Management Today, Tata, Mc-Graw Hill,
New Delhi, 1998.
2. Vasant Desai, Small-Scall Industries and Entrepreneurship, Himalaya
Publications House Bombay, 1996.
KEY TERMS

 Entrepreneur  Competitive Benchmarking

 Entrepreneurship  World–Class Benchmarking
 Entrepreneurship  Performance Benchmarking
 Benchmarking  Process Benchmarking
 Benchmark  Strategic Benchmarking
 Internal Benchmarking

348
unite
LESSON

24 THE BEST MANAGEMENT PRACTICES

LESSON OUTLINE

 Japanese Management
 Samsung adoption of Theory
Z
 Japanese Management
Practice
 Toshiba Corporation LEARNING OBJECTIVES
 Japanese Vs US Management
Practices After reading this lesson you should be
 Theory Z able to

 Understand the Concept of Japanese

Management.
 Explain the case of Samsung
adoption of Theory Z.
 Describe the Japanese Management
Practice.
 Explain how Toshiba is distinguished
Japanese corporation.
 Compare Japanese Management and
US Management Practices.

349
INTRODUCTION

When we talk about the best management practices in world, Japanese

Management Practices and American Management Practices stand first. In this
contest it should be noted that some of the American companies and the
companies of other countries are adapting a combination of both Japanesis and
American styles which Guchi called theory Z. As such in this lesson Japanese
management practices and Japanese Vs American Management practices are
explained.
Japanese Management
The managerial practices followed in Japan are quite different form those
followed in economically advanced countries in the west. In recent years, more
and more companies have started using Japanese management practices to
increase productivity. For example, Samsung a Korean Company used theory Z
to improve its efficiency.
Samsung Uses Theory Z to Become a Living Organization
Many American firms are beginning to experiment with Japanese management
philosophy. In order to get the best out of both Japanese and American
management philosophies, many American firms have adopted Theory Z which
combines both these philosophies. Some Korean companies, such as Samsung
Group, Lucky Goldstar, Hyundai, Daewoo and Samsung have also adopted
Theory Z. The Samsung Group has achieved success through the adoption of
Theory Z. In line with the Theory Z style of management, the company follows
the practices described below.

 Employment in Samsung is neither short-term nor lifelong in nature.

Samsung is one of the preferred places of employment for university
graduates because of its prestigious image and its attractive salaries and

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 benefits. This aspect of Samsung motivates most of its employees to
remain with it for a long time. At the same time, Samsung cannot be
regarded as a place for lifetime employment because its policy of strict
performance appraisal leads to vigorous competition among the
employees, causing may employees to exit the organization.
 Unlike other organizations, Samsung practices collective decision-
making. All decisions in the organization begin with the circulation of a
written proposal from the bottom of the organization to the top. the
proposal moves upwards only when it has been approved by a manager
at each stage. An important aspect of decision-making at Samsung is
that the task of writing the proposal is given to they youngest and
newest member of the department.
 At Samsung, clear lines of authority and responsibility are established.
The organization does this by setting up a responsibility centre system,
an individual reward system and an individual responsibility centre
system. The establishment of such line of authority and responsibility
encourage managers to work independently).
 The frequency of evaluation at Samsung is low. This is because the
Chairman believes that it takes time to accurately assess the
performance of on employee. Hence, at Samsung, an employee is
evaluated only after he has been trained and his performance has been
observed for a certain number of years.
 Employees have a specialized career path. At Samsung, the specialties
of employees are respected and people are given positions which suit
them and in which they can work effectively.
 The organizational controls both informal and formal.

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 Samsung combines the Japanese style of future direction and American
style of quantifiable objectives. Informal evaluation at Samsung is supplemented
with various formal evaluation methods such as the personnel evolution system.
This system includes manager appraisal, output appraisal and self-evaluation.
Adapted from Mushin Lee, “Samsung Uses Theory Z to Become
Living Organization,” organization,”: Industrial Management Vol.
34, lssue 5(Sep/Oct 1992) ;p29,2p

ACTIVITY-A
……………………………………………………………………………
……………………………………………………………………………

Describe how Samsung uses Theory Z to become living organization.

The following are some of the Japanese Management Practices
commonly cited by researchers and writers.

The Japanese Management Practices

They are circle employees immediately after gradation and guarantee
employment until retirement, and mandatory retirement. The employers and
employees have an unwritten mutual understanding regarding their execrations
about the job. An employee spends his entire working life with a single
enterprise in life time employment. This helps generate a feeling of job security
in the employees and a feeling of belongingness towards the enterprise. The
concept of lifetime employment brings about “harmony” in the enterprise. With
this harmony employee works with loyalty and it helps him/her identity closely
with the aims of the organization. The success of this practice depends on both
employer and employee

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 The disadvantages as the lifetime employment is that it increases the
labour cost of the company firm is forced to maintain a large workforce even
though it may not have work to keep them all sufficiently occupied. Therefore,
many firms have begun to question the practicality of the concept of lifetime
employment. This permanent employment policy is generally used only be large
firms.
Seniority system
All privileges are give to order employees based on security. Promotion and
wage increases are based on an employee’s length of service in the company,
not job performance. The seniority system seems to be unfair to young and able
people. But they are to some extent compensated psychologically by being
assigned challenging tasks and being placed in positions which everybody in the
company knows lead to future managerial positions. Almost all promotions to
management jobs are from within the organization.
Continuous training
This is secret of the success of Japanese managers. There is continuous training
to Japanese management practice. In Japanese firms every young manager has a
“godfather,” who is never his boss or anyone in the direct line of authority. The
“godfather” is not part of the top management, but is highly respected by others
and is over 45 years of age. He is expected to advise, counsels and looks after
his “godchild.

Emphasis on group work

In most Japanese organizations takes are assigned to small group of employees.
They all feel like a family members and feel pride of working there.

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Decision-making
The practice of managerial decision-making in Japan is built on the concept that
new should come primarily from personnel belonging to lower levels in the
hierarchy. They feel that change and improvement come frame this. The lower
level employees prepare proposals for higher-level personnel. The “ringi
system” refers to decision-making by consensus.
The word ringi consists of two parts ‘rin,’ which means submitting a
proposal to one’s superior and getting his approval, and ‘gi,’ meaning
deliberations and decisions. Before a proposal is finally approved, it is discussed
at many group meetings. Once the proposal receive the green signal, things
move fast. Thus, Japanese firms expect decision-making to take place in groups
and decisions to be based on be based on principles of full information-sharing
and consensus.
Performance evaluation by complicated interview system
When job descriptions are not well-defined. Because of this, when tasks are
performed by groups, it becomes difficult to evaluate individual job
performance objectively. The evaluation of workers and managers in Japanese
corporations takes a very long time – upto ten years – and requires the use of
qualitative and quantitative information about performance.
This is the reason why promotion in Japanese firms is relatively slow,
and promotion decisions are made only after interviews with many people who
have had contact with the person being evaluated. Since jobs are done on a
group basis, individual merit rating system cannot be used. In addition, since no
one tries to demonstrate individual brilliance or dynamic leadership, it is
extremely difficult to isolate individual competence or job responsibility to carry
out a fair rating of each employee.

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Concept of Father Leadership
As a Kacho (manager), the task of a leader is not only to supervise his people at
work, but also to show fatherly concern for their subordinate’s private life.
Since, promotion is based on seniority, it is not easy to move on to a kacho
position. Sufficient training and experience are essential for an individual to be
promoted to this position.
Employee benefits while on the job and after retirement.
Japanese companies provide substantial benefits to their employees. Employees
are provided benefits such as family housing and transportation allowances.
Some companies also provide bachelor accommodations, scholarships for
employees’ children, and low-interest housing loans. Salary enhancements
become rapid after about seven years of employment with the firs. Since the
seniority-based wage system assumes that the longer the experience, the more
valuable the employee. Japanese factory workers also get considerable amount
overtime work pay.
Some Japanese companies pay upto half the interest charged on mortgages for
all employees. As an employee moves to the top of the corporate leader, his
company provides him with a car and a chauffer, and membership in social
clubs including a golf club. Highly qualified managers may retain their positions
till their death or until they retire voluntarily, in which case there is a handsome
pension retirement income. In case of voluntary retirement at 55, a lumpsum
payment is made. In addition, Japanese companies attempt to place these
employees in subsidiary company positions or in advisory positions.
Simple and flexible organization
In Japanese firms, very often, people are trained to be generalists. For this
reason, the organization structure in Japan is relatively simple and flexible, and
it is possible for people to take up a new challenge or a new task by forming a

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new formal or informal group. Informal organizations (referred to as habatsu),
wield considerable power in formal organizations. Habatsu membership doesn’t
overlap with other memberships and there is total commitment form the
employees. The habatsu leader enjoys a high status in the formal organization
and he patronizes his followers. Following case explains the Japanese
management practices at Toshiba.

Toshiba: The Japanese Company with a Difference

Toshiba Corporation is Japan’s oldest manufacturing enterprise. It resembles

may other distinguished Japanese corporate giants, with regard to its range of
activities. The well-diversified company is involved in a wide variety of
business, ranging from common household items to high technology products
such as computer chips, laptops and hospital equipment. Like other famous
Japanese corporations, Toshiba followed practices such as lifelong employment,
long working hours and a rigid pay ladder. The company’s uniqueness lay in the
manner in which it recruited employees and the conditions it created for
encouraging innovation. Unlike many comparable Japanese companies, which
were vertically integrated and usually worked in isolation, Toshiba never
hesitated to turn to outside sources to access technological expertise. The
company has a history of forming strategic alliances with leading foreign
companies. Some of Toshiba’s partners include IBM, Time Warner, General
Electric, Siemens, United Technologies, Ericsson, Olivetti and Motorola.
Toshiba, IBM and Siemens eased trade tensions among Japan, the US and
Europe by signing an eight year, $1 billion deal in 1992. The company also tied
up with IBM and Apple to make multimedia equipment. In the same year, the
company entered the US entertainment industry, paying $500 million for a 6.1%
stake in Time Warner.

356
 The company did not give too much importance to selecting top raking
students from prestigious universities. Most of the shop floor workers at Toshiba
were high school graduate. They joined the company at the age of eighteen and
were given on-the-job training for a year in key technical skills such as welding,
lathe operations and hand finishing operations. After a few years on the job,
Toshiba arranged for an additional year of schooling (involving lectures and
practical work) to enable workers to upgrade their skills. One worrying trend
which Toshiba executives noted in the mid-1190s was that many Japanese high
school graduates wished to avoid shop floor jobs and instead preferred white
collar assignments.
Toshiba laid great emphasis on safety procedures. Workers were covered
from head to toe in protective clothing. Before entering the manufacturing room,
the workers had to put on a protective suit, long boots, tight rubber gloves that
extended over the arm of the suit, a cloth helmet covering the head and neck and
a gauge face mask.
Toshiba planned to recruit more engineers with an international
background. The company also had plants to enter into more alliances with US
companies and recruit foreigners to Toshiba’s board of directors.
Adapted from “Toshiba, Global Strategic Management Case Studies on
Fortune 500 Companies”, Transworld University, Volume VI.

ACTIVITY-B
Describe the Japanese Management practices
……………………………………………………………………………
……………………………………………………………………………

357
Japanese vs US Management Practice and Theory Z
It is seen in America that Americans are turning to Japanese management
practices to find a solution to the declining growth rte in productivity in the
United States. The characteristics that distinguish Japanese from American
management practices, are presented here
COMPARISON OF JAPANESE AND U.S. MANAGEMENT
PRACTICES
Japanese Management U.S. Management
PLANNING
Long – term orientation Short-term orientation
Collective decision making Individual decision-making
Many people are involved in Few people are involved decision
decision making making
Decisions flow bottom-up and Initiated at the top and flow down
back
Decision making takes a long Decision-making is fast, but
time. But implementation is fast. implementation is slow
People share decision power and It vests in designated individuals
responsibility
Individual goal ambiguity Individual goal clarity.

ORGANIZING
Collective responsibility and Individual responsibility
accountability
Ambiguity of decision Clarity
responsibility

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Informal organization structure Formal
Organization culture and Common organizational culture is
philosophy are well known lacking
Identification with company Identification with profession

Organizational change by By external change agent

internal change agent
STAFFING

Hiring young people out of From institutions and other companies

school
Slow promotions through ranks Rapid promotions desired and demanded
Loyalty to the company Loyalty to the profession
Infrequent performance appraised Performance appraisal is frequent
for new employees
Appraisal of long-term Appraisal of short-term performance
performance
Reward for long-term Reward for short-term performance
performance
Small differences in pay Substantial differences
increases
Reward for group performance Reward for individual performance
Promotions based on multiple Based on individual performance
criteria
Training and development Training and development is on a low
considered a long-term key due to high employee
investment turnover

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Exposure to many functions Narrow career paths
Life time employment Absence of job security
Leader as a social facilitator Leader as decision maker
Leader is part of the group Leader as head of the group
Paternalistic style Directive style
Common company values Often divergent values; individualization
facilitate cooperation often hinders corporations
Avoidance of confrontation; Face-to-face confrontation is common
emphasis in an harmony
Confluence of working and Highly separated
private life
Emphasis on oral communication On written communication
CONTROLLING
Self control and control by peers Control by superiors
Focus is on group performance Focus is on individual performance
The objective of control is to To fix the blame
save face
Extensive use of quality circles Limited use

Source: Harold Koontz and Heinz Weihrich, Essentials of Management

(Singapore: McGraw-Hill, Fifth edition, 1990) 495.
However, one should be cautious when interpreting this table. Just as not
all American firms are managed the same way, not all Japanese firms follow the
same managerial principles.

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ACTIVITY-C
Compare Japanese and American Management Practices.
……………………………………………………………………………
……………………………………………………………………………
After researching both American and Japanese management approaches,
management expert William Ouchi outlined Theory Z. Ouchi began his study
by identifying the contrasting characteristics of Japanese and American
companies. He discovered that certain successful US-based companies –
including IBM, Intel, Heweltt-Packard, Eastman Kodak, and Eli Lilly –
exhibited a style of management that effectively combined the traits of typical
American and Japanese companies. He called these hybrid companies – Theory
Z organizations. Theory Z firms grew out of a desire to improve upon the typical
American way of managing. Theory Z companies were American in origin, but
Japanese in conduct and experience. They used some Japanese managerial
practices, but Japanese in conduct and experience. They used some Japanese
managerial practices, but made adjustments according to the environment
prevailing in the United States. Ouchi’s work showed that American
organizations could benefit from thoughtful incorporation of the Japanese
management practices.

SELF-ASSESSMENT QUESTIONS
1. What is the concept of Japanese Management?
2. Explain the Japanese Management Practices.
3. Describe Theory Z through an example of a company.
4. Compare Japanese Management and US Management Practices.

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FURTHER READINGS

1. Harold Koontz and Heinz Weihrich, Essentials of Management, McGraw-

Hill, Singapore, 1990
2. Global Strategic Management Case Studies on Fortune 500
Companies, Transworld University, Volume VI.

KEY TERMS
 Life time employment
 Seniority system
 Group work

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unite
LESSON

25 DIVERSITY MANAGEMENT

LESSON OUTLINE

 Diversity.
 Need for Diversity
Management.
 Barriers to Diversity
Management.
 Factors influencing Diversity
initiatives.
 Why organizations manage
Diversity.
 Best strategies for managing
LEARNING OBJECTIVES
Diversity
 Requisites for effective
After reading this lesson you should be
Diversity Management
able to

 Understand the concept of diversity.

 Explain the need for diversity
management.
 Present the barriers to diversity.
 Describe the factors influencing
diversity initiatives.
 Explain the strategies and requisites
for diversity management

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INTRODUCTION

Globalization has made us to open gates for foreign companies to establish their
operations in India. The Indian companies are establishing themselves in several
other countries. In this contest, diversity management is very relevant. When the
companies go global, there will be employees in the company belong to
different cultures, languages, races, nationals, ages etc. All these diverse
employees should be managed properly. Otherwise the companies will disappear
very soon.
Diversity refers to: the presence of differing cultures; languages;
ethnicity; races; sexual orientation; religious sects; abilities; classes; ages; and
national origins of the people in an institution or community such as school,
workplace, neighborhood and so forth.
DEFINITION OF DIVERSITY
According to Triandis, Kurowski, and Gelfand’ “Managing diversity means
changing the culture – that is, the standard operation procedures. It requires,
data, experimentation, and the discovery of the procedures that work best for
each group. It is more complex than conventional management but can result in
more effective organization”. Thomas said, “Managing diversity is to empower
or enable employees. Managing diversity prescribes approaches that are
philosophically broad enough to encompass all dimensions of diversity”
NEED FOR DIVERSITY MANAGEMENT
Increasingly, organizations face the challenge of managing programs to
accommodate a diverse workforce. It is, therefore, essential that people form
business and industries understand what types of environments are conducive to
the employment, retention, and promotion of diverse groups to ensure
productivity and remain competitive.

364
 The purpose is to provide diversity initiatives and programs in order to
better understand organizational response to workforce diversity. It also
provides a knowledge base regarding the diversity process utilized by
organizations to help educators and people form business and industry better
understand the current status and future trends of diversity initiatives in
organizations.
 What are the barriers that have inhibited the employment, development,
retention, and promotion of diverse groups in the workplace?
 What are the major factors influencing diversity initiatives in the
workplace?
 Why are organizations managing diversity?
 What are the best strategies for organizations to manage diversity?
 What are the components of effective diversity training programs?
 What are the future trends related to diversity in the workplace?
ACTIVITY-A
Write the meaning and need for diversity management.
……………………………………………………………………………
……………………………………………………………………………
BARRIERS TO DIVERSITY MANAGEMENT
Two types of barriers:
1. Organizational barriers (coming form the workplace
environment),
2. Individual barriers (coming from the employees themselves).

(1) Organizational Barriers

The following six factors which are there in the organization become
barriers to manage the diversity.

365
 1. Negative attitudes and discomfort towards people who are
different,
2. Discrimination
3. Prejudice
4. Stereotyping
5. Racism
6. Bias
(2) Individual Barriers
The following factors in the individual employees become the barriers
for diversity management in an organization.
1. Poor career planning
2. Inadequate skill preparation
3. Lack of organizational political savvy
4. Lack of proper education
5. Low self-esteem
6. Poor self-image
ACTIVITY-B
List out the barriers to diversity management
……………………………………………………………………………
……………………………………………………………………………

FACTORS INFLUENCING DIVERSITY INITIATIVES

The six major factors most frequently influencing diversity initiatives in the
workplace are
(1) Demographic changes
Immigration, increase in women workers, increase in minority workers, increase
in older workers, and more people with disabilities in the workplace.

366
(2) Global marketplace
The globalization has raised the need for a multicultural perspective to compete
successfully abroad. The organizations need to deal with employees, customers,
and suppliers around the world. Employees need skills and cultural awareness
training to be more knowledgeable, understanding, and sensitive to the
differences that exist between them and other nationals.
(3) Economics
Diverse population makes a large percentage of customer bases. Diverse
customers are now earning more money and can afford more and are willing to
pay more to get what they want.
(4) People are more comfortable being different
People bring to the workplace a variety of experiences, values, cultures, physical
abilities, religions. Work styles, and so forth. They are no longer willing to deny
their defenses in order to assimilate into the organization’s mainstream. They
want to maintain their uniqueness and still receive the respect and support of the
people the work with.
(5) Diverse customer base
Diverse customers are more complex and differ in their needs, tastes, and
desires. To understand and respond properly to a diverse customer base,
business need to make their own workforce more diverse.
(6) Equal Employment Opportunity and Affirmative Action programs
Now there are equal employment opportunities for men and women, and people
belong to any country.
ACTIVITY-C
Explain the factors influencing diversity initiative in work place.
……………………………………………………………………………
……………………………………………………………………………

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WHY ORGANIZATIONS MANAGE DIVERSITY
The organizations manage diversity for the following reasons:
1. To Improve Productivity and Remain Competitive
2. To From Better Work Relationships Among Employees
3. Social Responsibility
4. Legal Concerns
BEST STRATEGIES FOR MANAGING DIVERSITY
Six best strategies for managing diversity are…
1. Training and education programs
2. Organizational policies that mandate fairness and equity for all
employees
3. Mentoring programs
4. Career development programs
5. Performance appraisal systems that are non-discriminatory
6. Outreach programs.

Community involvement, internship programs, scholarships, targeting

recruitment in the community, lectures at B-schools, adopting B-schools, and
the creation of partnerships with business schools.
ACTIVITY-D
Why organizations manage diversity and what are the strategies for that.
…………………………………………………
…………………………………………………
…………………………………………………
…………………………………………………

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PRE-REQUISITES FOR EFFECTIVE DIVERSITY MANAGEMENT
For effective management of diversity the following are required:
 Obtain Top Management Support
 Integrate Diversity Into All Company Functions
 Use a Combination of Strategies
 Create a Corporate Culture That Supports Diversity

SELF-ASSESSMENT QUESTIONS
1. What is diversity? Explain the need for diversity management.
2. What factors influence the diversity management at work place? What
are the barriers of diversity management?
3. What are reasons for organizations to go for diversity management and
what are the strategies for diversity management.
KEY TERMS
 Diversity.
 Demographic changes.
 Global market place.
 Diverse customer base.

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