CHAPTER-ONE: FUNDAMENTALS OF MANAGEMENT

1.1. Definition of Management

Although management as a discipline is more than 80 years old, there is nocommon agreement
among its experts and practitioners about its precisedefinition. In fact, this is so in case of all
social sciences like psychology, sociology, anthropology, economics, political science etc. As a
result ofunprecedented and breath-taking technological developments, businessorganizations
have grown in size and complexity, causing consequentialchanges in the practice of
management. Changes in management styles andpractices have led to changes in management
thought. Moreover,management being interdisciplinary in nature has undergone changesbecause
of the developments in behavioral sciences, quantitativetechniques, engineering and technology,
etc. Since it deals with theproduction and distribution of goods and services, dynamism of
itsenvironments such as social, cultural and religious values, consumers' tastesand preferences,
education and information explosion, democratization ofgovernments, etc., have also led to
changes in its theory and practice. Yet, adefinition of management is necessary for its teaching
and research, andalso for improvement in its practice. Many management experts have tried to
define management. But, nodefinition of management has been universally accepted. Let us
discusssome of the leading definitions of management:
 Peter F. Drucker defines, "management is an organ; organs can be described and defined
only through their functions".
 According to Terry, "Management is not people; it is an activity like walking, reading,
swimming or running. People who perform Management can be designated as members,
members of Management or executive leaders."
 Ralph C. Davis has defined Management as, "Management is the function of executive
leadership anywhere."
 According to McFarland, "Management is defined for conceptual, theoretical and analytical
purposes as that process by which managers create, direct, maintain and operate purposive
organization through systematic, co-ordinated co-operative human effort."
 Henry Fayol, "To manage is to forecast and plan, to organize, to compound, to co-ordinate
and to control."
 Harold Koontz says, "Management is the art of getting things done through and within
formally organized group."

Page | 1
 William Spriegal, "Management is that function of an enterprise which concerns itself with
direction and control of the various activities to attain business objectives. Management is
essentially an executive function; it deals with the active direction of the human effort."
 Kimball and Kimball, "Management embraces all duties and functions that pertain to the
initiation of an enterprise, its financing, the establishment of all major policies, the provision
of all necessary equipment, the outlining of the general form of organization under which the
enterprise is to operate and the selection of the principal officers."
 Sir Charles Reynold, "Management is the process of getting things done through the agency
of a community. The functions of management are the handling of community with a view of
fulfilling the purposes for which it exists."
 E.F.L. Brech, "Management is concerned with seeing that the job gets done, its tasks all
center on planning and guiding the operations that are going on in the enterprise."
 Koontz and O'Donnel, "Management is the creation and maintenance of an internal
environment in an enterprise where individuals, working in groups, can perform efficiently
and effectively toward the attainment of group goals. It is the art of getting the work done
through and with people in formally organized groups."
 James Lundy, "Management is principally a task of planning, coordinating, motivating and
controlling the efforts of other towards specific objective. It involves the combining of the
traditional factors of production land,labor, capital inan optimummanner,payingdue attention,
ofcourse, to the particulargoals oftheorganization."
 Wheeler, "Management is centered in the administrators ormanagers of the firm who
integrate men, material and money intoan effective operating limit."
 J.N. Schulze, "Management is the force which leads guides anddirects an organization in the
accomplishment of a pre-determinedobject."
 Oliver Scheldon, "Management proper is the function in industryconcerned in the execution
of policy, within the limits set up bythe administration and the employment of the
organization for theparticular objectives set before it."
 Keith and Gubellini, "Management is the force that integrates menand physical plant into an
effective operating unit."

Page | 2
 Newman, Summer and Warren, "The job of Management is tomake co-operative endeavor to
function properly. A manager isone who gets things done by working with people and
otherresources in order to reach an objective."
 G.E. Milward, "Management is the process and the agencythrough which the execution of
policy is planned and supervised."
 Ordway Tead, "Management is the process and agency whichdirects and guides the
operations of an organization in therealizing of established aims."
Amanager is one who contributes to the organization’s goals indirectly bydirecting the efforts of
others; not by performing the task himself. On theother hand, a person who is not a manager
makes his contribution to theorganization’s goals directly by performing the task himself.
Sometimes, however, a person in an organization may play both these rolessimultaneously. For
example, a sales manager is performing a managerialrole when he is directing his sales force to
meet the organization’s goals,but when he himself is contacting a large customer and negotiating
a deal,he is performing a non-managerial role. In the former role, he is directingthe efforts of
others and is contributing to the organization’s goalsindirectly; in the latter role, he is directly
utilizing his skills as a salesman.
A somewhat more elaborate definition of management is given by GeorgeR. Terry. He defines
management as a process "consisting of planning,organizing, actuating and controlling,
performance to determine andaccomplish the objectives by the use of people and other
resources".According to this definition, management is a process; a systematic wayof doing
things. The four management activities included in this processare: planning, organizing,
directing and controlling. To conclude, we can say that various definitions of management do not
runcontrary to one another. Management is the sum-total of all those activitiesthat:
a. Determine objectives, plans, policies and programs;
b. Securemen, material, machinery cheaply
c. Put all these resources intooperations through sound organization
d. Direct and motivate the men atwork,
e. Supervises and control their performance and
f. Providemaximum prosperity and happiness for both employer and employees andpublic at
large.

Page | 3
1.2. Significance of Management
Management is concerned with acquiring maximum prosperity with aminimum effort.
Management is essential wherever group efforts arerequired to be directed towards achievement
of common goals. The significance of management in business activities is relatively greater.The
inputs of labor, capital and raw material never become productivewithout the catalyst of
management. Management is an important factor of growth of any country. The following points
highlight the significance of management:
 Achievements of Group Goals: Management makes group effortsmore effective. The group
cannot realize its objectivesunless and until there is mutual co-operation and co-
ordinationamong the members of the group. Management creates team workand team spirit
in an organization by developing a soundorganization structure. It brings the human and
material resources together and motivates the people for the achievement of the goals ofthe
organization.
 Optimum Utilization of Resources: Management alwaysconcentrates on achieving the
objectives of the enterprise. Theavailable resources of production are put to use in such a way
that allsort of wastage and inefficiencies are reduced to a minimum.Workers are motivated to
put in their best performance by theinspiring leadership. Managers create and maintain an
environmentconducive to highest efficiency and performance. Through theoptimum use of
available resources, management accelerates theprocess of economic growth.
 Minimizationof Cost: In the modern era of intense competition,every business enterprise
must minimize the cost of production anddistribution. Only those concerns can survive in the
market, whichcan produce goods of better quality at the minimum cost. A study ofthe
principles of management helps in knowing certain techniquesused for reducing costs. These
techniques are production control,budgetary control, cost control, financial control, material
control,etc.
 Change and Growth: A business enterprise operates in a constantlychanging environment.
Changes in business environment createuncertainties and risk and also produce opportunities
for growth. Anenterprise has to change and adjust itself in the ever-changingenvironment.
Sound management molds not only the enterprise butalso alters the environment itself to
ensure the success of thebusiness.

Page | 4
 Efficient and Smooth Running of Business:Management ensuresefficient and smooth
running of business, through better planning,sound organization and effective control of the
various factors ofproduction.
 Higher Profits: Profits can be enhanced in any enterprise either byincreasing the sales
revenue or reducing costs. To increase the salesrevenue is beyond the control of an
enterprise. Management bydecreasing costs increases its profits and thus provides
opportunitiesfor future growth and development.
 Provide Innovation: Management gives new ideas, imagination and visions to an enterprise.
 Social Benefits: Management is useful not only to the business firms but to the society as a
whole. It improves the standard of livingof the people through higher production and more
efficient use ofscarce resources. By establishing cordial relations between differentsocial
groups, management promotes peace and prosperity insociety.
 Useful for Developing Countries: Management has to play a moreimportant role in
developing countries, like Ethiopia. In such countries,the productivity is low and the
resources are limited. It has beenrightly observed, "There are no under-developed countries.
They areonly under-managed ones".
 Sound Organization Structure: Management establishes properorganization structure and
avoids conflict between the superiors andsubordinates. This helps in the development of
spirit of cooperationand mutual understanding, and a congenial environment is providedin
the organization.
1.3. Managerial Functions an Overview
There is no agreement among management writers on theclassification of managerial functions.
Newman and Summer recognized four functions, namely, organizing, planning, leading and
controlling. Henri Fayol identifies five functions of management, viz. planning,organizing,
commanding, coordinating and controlling. Luther Gulickstates seven functions under the catch
word "POSDCORB' whichstands for planning, organizing, staffing, directing, coordinating,
reportingand budgeting. Warren Haynes and Joseph Massie classify it into decision-making,
organizing, staffing, planning, controlling,communicating and directing. Koontz and O'Donnell
divide these functionsinto planning organizing, staffing, directing and controlling. For our
purpose, we shall designate the following six as the functions of amanager: planning, organizing,
staffing, directing, coordinating andcontrolling.

Page | 5
1. Planning:Planning is the most fundamental and the most pervasive of all management
functions. If people working in groups have to perform effectively, they should know in
advance what is to be done, how it will be done, and when it is to be done. Planning is
concerned with 'what', 'how, and 'when' of performance. It is deciding in the present about the
future objectives and the courses of action for their achievement. It involves; determination
of long and short-range objectives, development of strategies and courses of actions to be
followed for the achievement of these objectives, and formulation of policies, procedures,
and rules, etc., for the implementation of strategies, and plans.
The organizational objectives are set by top management in the context of its basic purpose
and mission, environmental factors,business forecasts, and available and potential resources.
Theseobjectives are both long-range as well as short-range. They are divided into divisional,
departmental, sectional and individualobjectives or goals. This is followed by the
development ofstrategies and courses of action to be followed at various levels
ofmanagement and in various segments of the organization. Policies,procedures and rules
provide the framework of decision making, andthe method and order for the making and
implementation of thesedecisions. Every manager performs all these planning functions, or
contributesto their performance. Planning is thus the most basic function ofmanagement. It is
performed in all kinds of organizations by allmanagers at all levels of organizational
hierarchy.
2. Organizing:Organizing involves identification of activitiesrequired for the achievement of
enterprise objectives andimplementation of plans; grouping of activities into jobs;
assignmentof these jobs and activities to departments and individuals;delegation of
responsibility and authority for performance, andprovision for vertical and horizontal
coordination of activities. Everymanager has to decide what activities have to be undertaken
in hisdepartment or section for the achievement of the goals entrusted tohim. Having
identified the activities, he has to group identical orsimilar activities in order to make jobs,
assign these jobs or groupsof activities to his subordinates, delegate authority to them so as
toenable them to make decisions and initiate action for undertakingthese activities, and
provide for coordination between himself and his subordinates, and among his subordinates.
Organizing thusinvolves the following sub-functions; identification of activities required for
the achievement ofobjectives and implementation of plans, grouping the activities so as to

Page | 6
 create self-contained jobs, assignment of jobs to employees, delegation of authority so as to
enable them to perform theirjobs and to command the resources needed for theirperformance,
establishment of a network of coordinating relationships. Organizing process results in a
structure of the organization. Itcomprises organizational positions, accompanying tasks
andresponsibilities, and a network of roles and authority-responsibilityrelationships.
Organizing is thus the basic process of combining and integratinghuman, physical and
financial resources in productiveinterrelationships for the achievement of enterprise
objectives.
3. Staffing:Staffing is a continuous and vital function of management.After the objectives have
been determined, strategies, policies,programs, procedures and rules formulated for their
achievement,activities for the implementation of strategies, policies, programs,etc. identified
and grouped into jobs, the next logical step in the management process is to procure suitable
personnel for manningthe jobs. Since the efficiency and effectiveness of an
organizationsignificantly depends on the quality of its personnel and since it isone of the
primary functions of management to achieve qualified andtrained people to fill various
positions, staffing has been recognizedas a distinct function of management. It comprises
several sub functions like; manpower planning involving determination of the numberand the
kind of personnel required, recruitment for attracting adequate number of potentialemployees
to seek jobs in the enterprise, selection of the most suitable persons for the jobs
underconsideration, placement, induction and orientation, transfers, promotions, termination
and layoff, training and development of employees. As the importance of human factor in
organizational effectiveness isbeing increasingly recognized, staffing is gaining acceptance
as adistinct function of management. It needs hardly any emphasize thatno organization can
ever be better than its people, and managersmust perform the staffing function with as much
concern as anyother function.
4. Directing: Directing is the function of leading the employees toperform efficiently, and
contribute their optimum to the achievementof organizational objectives. Jobs assigned to
subordinates have tobe explained and clarified, they have to be provided guidance in
jobperformance and they are to be motivated to contribute their optimum performance with
zeal and enthusiasm. The function ofdirecting thus involves the following sub-functions :
a. Communication b. Motivation c. Leadership

Page | 7
5. Coordination:Coordinating is the function of establishing suchrelationships among various
parts of the organization that they alltogether pull in the direction of organizational
objectives. It is thusthe process of tying together all the organizational decisions,operations,
activities and efforts so as to achieve unity of action forthe accomplishment of organizational
objectives. The manager shouldensure that he has an organization "with all its parts
coordinated, moving together in their closely knit and adjusting activities,linking, and
interrelation, that they make a workingunit, which is not a congeries of separate pieces, but
what have a functional whole or integrative unity". Coordination involves the following sub
functions; clear definition of authority-responsibility relationship, unity of direction, unity of
command, effective communication and leadership.
6. Controlling:Controlling is the function of ensuring that thedivisional, departmental, sectional
and individual performances areconsistent with the predetermined objectives and goals.
Deviationsfrom objectives and plans have to be identified and investigated, andcorrection
action taken. Deviations from plans and objectivesprovide feedback to managers, and all
other management processesincluding planning, organizing, staffing, directing and
coordinatingare continuously reviewed and modified, where necessary. Controlling implies
that objectives, goals and standards ofperformance exist and are known to employees and
their superiors. Italso implies a flexible and dynamic organization which will permitchanges
in objectives, plans, programs, strategies, policies,organizational design, staffing policies and
practices, leadershipstyle, communication system, etc., for it is not uncommon thatemployees
failure to achieve predetermined standards is due todefects or shortcomings in any one or
more of the above dimensions of management. Thus, controlling involves the following
process; measurement of performance against predetermined goals, identification of
deviations from these goals, corrective action to rectify deviations.
1.4. Levels of Management and Types of Managers
An enterprise may have different levels of management. Levels ofmanagement refer to a line of
demarcation between various managerial positions in an enterprise. The levels of management
depend upon its size, technical facilities, and the range of production. We generally come across
two broad levels of management, viz. (i) administrative management (i.e., the upper level of
management) and (ii) operating management (i.e., the lower level of management).
Administrative management is concerned with "thinking" functions such as laying down policy,

Page | 8
planning and setting up ofstandards. Operative management is concerned with the "doing"
function such as implementation of policies, and directing the operations to attain the objectives
of the enterprise. But in actual practice, it is difficult to draw any clear cut demarcation between
thinking function and doing function because the basic/fundamental managerial functions are
performed by all managers irrespective of their levels or ranks. For instance, wage and salary
director of a company may assist in fixing wages and salary structure as a member of the Board
of Directors, but as head of wages and salary department, his job is to see that the decisions are
implemented.
The real significance of levels is that they explain authority relationships in an organization.
Considering the hierarchy of authority and responsibility, one can identify three levels of
management namely:
1. Top management:Top management is the ultimate source of authorityand it lays down goals,
policies and plans for the enterprise. It devotes moretime on planning and coordinating
functions. It is accountable to the ownersof the business of the overall management. It is also
described as the policymaking group responsible for the overall direction and success of
allcompany activities. It consists of owners/shareholders, Board ofDirectors, its Chairman,
Managing Director, or the Chief Executive, or theGeneral Manager or Executive Committee
having key officers. The important function of top management includes; establishing the
objectives or goals of the enterprise, making policies and frame plans to attain the objectives
laid, setting up an organizational frame work to conduct the operations asper plans,
assembling the resources of money, men, materials, machines andmethods to put the plans
into action, exercising effective control of the operations, and providing overall leadership to
the enterprise.
2. Middle management:The job of middle management is to implement thepolicies and plans
framed by the top management. It serves as an essentiallink between the top management and
the lower level or operativemanagement. They are responsible to the top management for
thefunctioning of their departments. They devote more time on theorganization and
motivation functions of management. They provide theguidance and the structure for a
purposeful enterprise. Without them the top management’s plans and ambitious expectations
will not be fruitfullyrealized. It consists of heads of functionaldepartments viz. Purchase
Manager, Production Manager, MarketingManager, Financial controller, etc. and Divisional

Page | 9
 and Sectional Officersworking under these Functional heads. The following are the main
functions of middle management; interpreting the policies chalked out by top management,
preparing the organizational set up in their own departments forfulfilling the objectives
implied in various business policies, recruiting and selecting suitable operative and
supervisory staff, assigning activities, duties and responsibilities for timelyimplementation of
the plans, compiling all the instructions and issue them to supervisor undertheir control,
motivating personnel to attain higher productivity and to rewardthem properly, cooperate
with the other departments for ensuring a smoothfunctioning of the entire organization,
collect reports and information on performance in theirdepartments, report to top
management, make suitable recommendations to the top management for thebetter execution
of plans and policies.
3. Lower or operative management: It is placed at the bottom of thehierarchy of management,
and actual operations are the responsibility ofthis level of management. It consists of
foreman, supervisors, sales officers,accounts officers and so on. They are in direct touch with
the rank and fileor workers. Their authority and responsibility is limited. They pass on
theinstructions of the middle management to workers. They interpret and divide the plans of
the management into short-rangeoperating plans. They are also involved in the process of
decisions-making.They have to get the work done through the workers. They allot
variousjobs to the workers, evaluate their performance and report to the middlelevel
management. They are more concerned with direction and controlfunctions of management.
They devote more time in the supervision of theworkers.
1.5. Managerial Roles and Skills
A. Managerial Roles: Management performs the functions of planning, organizing, staffing,
directing and controlling for the accomplishment of organizational goals. So far, we have
described managerial work by focusing on the functions of management. Managers fulfill
three major roles while performing their jobs. Specific categories of managerial behavior are;
Interpersonal roles involve people and other duties that are ceremonial and symbolic in
nature, Informational roles involve receiving, collecting and disseminating information,
Decisional roles involve around making decisions on resource and on other organizational
activities for attaining of predetermined of organizational objectives.

Page | 10
1. Interpersonal Roles: More than anything else, management jobs are people intensive.
Estimates vary with the level of management, but most managers spend between two-thirds
and four-fifths of their time in face-to-face communication with others. In fulfilling the
interpersonal role of management, managers perform three sub-roles.
a. Figurehead role:In this role, every manager has to perform some dutiesof a ceremonial
nature, such as greeting the touring dignitaries,attending the wedding of an employee, taking
an important customerto lunch, speaking at the opening of the new facility, representing the
company at a community meetings and so on.
b. Leader role: As a leader, every manager must motivate and encouragehis employees to
accomplish organizational objectives. He must also try to reconcile their individual
needswith the goals of the organization. Managers regularly thank employees with
celebratory lunches and gift certificates.
c. Liaison: In this role of liaison, every manager must cultivatecontacts outside his vertical
chain of command to collect informationuseful for his organization. In this role managers
deal without side their organizations.
2. Informational Roles: Managers spend much of it obtaining and sharing information. In this
regard, management can be viewed as processing information, gathering information by
scanning the business environment and listening to others in face-to-face conversion and then
sharing that information with people inside and outside of the company. There are also three
informational roles that managers play in their organization:
a. Monitor: As monitor, the manager has to perpetually scan hisenvironment for information,
interrogate his liaison contacts and hissubordinates, and receive unsolicited information,
much of it asresult of the network of personal contacts he has developed.
b. Disseminator: In the role of a disseminator, the manager passessome of his privileged
information directly to his subordinates whowould otherwise have no access to it. Managers
share the information they have collected with their subordinates and others in their
organization.
c. Spokesman: In this role, the manager informs and satisfies variousgroups and people who
influence his organization. Thus, he advisesshareholders about financial performance, assures
consumer groupsthat the organization is fulfilling its social responsibilities andsatisfies
government that the origination is abiding by the law.

Page | 11
3. Decisional Roles: Obtaining and sharing information with people inside and outside of the
organization is useful to managers because it helps them make good decision. Managers
engage in four sub-decisional roles:
a. Entrepreneur: In this role, the manager constantly looks out fornew ideas and seeks to
improve his unit by adapting it to changingconditions in the environment. In this role
managers adapt themselves, their subordinates and their units to change.
b. Disturbance Handler: In this role, the manager has to work like afire fighter. He must seek
solutions of various unanticipated problems; a strike may loom large a major customer may
gobankrupt; a supplier may renege on his contract, and so on. Managers respond to pressures
and problems so severe that they demand immediate attention and actions. Managers often
play the role of disturbance handler when the board of failing company hires a new CEO,
who is charged with turning the company around.
c. Resource Allocator: In this role, the manager must divide workand delegate authority among
his subordinates. He must decide whowill get what resources and how much of each resource
they will get.
d. Negotiator: The manager has to spend considerable time innegotiations. Thus, the chairman
of a company may negotiate withthe union leaders a new strike issue; the foreman may
negotiate withthe workers a grievance problem, and so on. In addition, managers in any
organization work with each other toestablish the organization’s long-range goals and to plan
how toachieve them. They also work together to provide one another withthe accurate
information needed to perform tasks.
B. Managerial Skills: A skill is an individual's ability to translate knowledge into action.
Hence, it is manifested in an individual's performance. Skill is not necessarily inborn. It can
be developed through practice and through relating learning to one's own personal experience
and background. In order to be able to successfully discharge his roles, a manager should
possess three major skills.
a. The conceptual skill: refers to the ability of a manager to take a broad andfarsighted view of
the organization and its future, his ability to think inabstract, his ability to analyze the forces
working in a situation, his creativeand innovative ability and his ability to assess the
environment and thechanges taking place in it. In short, it is his ability to conceptualize
theenvironment, the organization, and his own job.

Page | 12
b. The technical skill:is the manager's understanding of the nature of job that people under him
had to perform. It refers to a person's knowledge and proficiency in any type of process or
technique. In a production departmentthis would mean an understanding of the technicalities
of the process ofproduction. Whereas this type of skill and competence seems to be
moreimportant at the lower levels of management, its relative importance as apart of the
managerial role diminishes as the manager moves to higherpositions. In higher functional
positions, such as the position of a marketingmanager or production manager, the conceptual
component, related to thesefunctional areas becomes more important and the technical
componentbecomes less important.
c. Human relations skill: is the ability to interact effectively with people at alllevels. This skill
develops in the manager sufficient ability (a) to recognizethe feelings and sentiments of
others; (b) to judge the possible actions to,and outcomes of various courses of action he may
undertake; and (c) toexamine his own concepts and values which may enable him to
developmore useful attitudes about himself. This type of skill remains consistentlyimportant
for managers at all levels. At the top level, technical skillbecomes least important and at the
lower level conceptual skill do the same.
1.6. Universality of Management (Characteristics of Management)
Management is a distinct activity having the following salient features:
a. Economic Resource: Management is one of the factors ofproduction together with land,
labor and capital. Efficient management is the most critical input in the success of
anyorganized group activity as it is the force which assembles andintegrates other factors of
production. Inputs of labor, capital and materials do not bythemselves ensure production;
they require the catalyst ofmanagement to produce goods and services required by the
society.
b. Goal Oriented: Management is a purposeful activity. It coordinatesthe efforts of workers to
achieve the goals of the organization. Thesuccess of management is measured by the extent
to which theorganizational goals are achieved.
c. Distinct Process: Management is a distinct process consisting ofsuch functions as planning,
organizing, staffing, directing andcontrolling. These functions are so interwoven that it is not
possibleto lay down exactly the sequence of various functions or theirrelative significance.

Page | 13
d. Integrative Force: The essence of management is integration ofhuman and other resources to
achieve the desired objectives. Allthese resources are made available to those who manage.
Managersapply knowledge, experience and management principles for gettingthe results
from the workers by the use of non-human resources.Managers also seek to harmonize the
individuals' goals with theorganizational goals for the smooth working of the organization.
e. System of Authority: Management as a team of managersrepresents a system of authority, a
hierarchy of command andcontrol. Managers at different levels possess varying degree
ofauthority. Generally, as we move down in the managerial hierarchy,the degree of authority
gets gradually reduced. Authority enables themanagers to perform their functions effectively.
f. Multi-disciplinary Subject: Management has grown as a field ofstudy (i.e. discipline) taking
the help of so many other disciplinessuch as engineering, anthropology, sociology and
psychology. Muchof the management literature is the result of the association of
thesedisciplines. For instance, productivity orientation drew its inspirationfrom industrial
engineering and human relations orientation frompsychology. Similarly, sociology and
operations research have alsocontributed to the development of management science such
quantitative management.
g. Universal Application:Management is universal in character. The principles and techniques
of management are equally applicable in the fields of business, education, military,
government and hospital. Henri Fayol suggested that principles of management would apply
more or less in every situation. The principles are working guidelines which are flexible and
capable of adaptation to every organization where the efforts of human beings are to be
coordinated.
Principles of Management
A body of principles of management has been developed by Henri Fayol,the father of modern
management. Fayol wrote perceptibly on the basis ofhis practical experience as a manager.
Although, he did not develop anintegrated theory of management, his principles are surprisingly
in tunewith contemporary thinking in management theory. Fayol held that there is a single
"administrative science", whose principlescan be used in all management situations no matter
what kind oforganization was being managed. This earned him the title of"Universality". He,
however, emphasized that his principles were notimmutable laws but rules of thumb to be used
as occasion demanded. Fayol held that activities of an industrial enterprise can be grouped in

Page | 14
sixcategories: (i) technical (production), (ii) commercial (buying, selling andexchange), (iii)
financial (search for and optimum use of capital), (iv)security (protection of property and
persons), (v) accounting (includingstatistics); and (vi) managerial. However, he devoted most of
his attentionto managerial activity. He developed the following principles
underlyingmanagement of all kinds of organizations:
1. Authority and Responsibility Are Related:Managers who exerciseauthority over others
should assume responsibility for decisions aswell as for results. Authority is official as well
as personal. Official authority is derived from the manager's position in
organizationalhierarchy and personal authority is compounded of intelligence,experience,
moral worth, past services, etc. A corollary of the principle that no manager should be
givenauthority unless he assumes responsibility is that those who haveresponsibility should
also have commensurate authority in order toenable them to initiate action on others and
command resourcesrequired for the performance of their function.
2. Unity of Command:This principle holds that one employee shouldhave only one boss and
receive instructions from him only. If this principle is violated authority will beundermined,
discipline will be jeopardy, order will be disturbed andstability will be threatened. Dual
command is a permanent source ofconflict. Therefore, in every organization, each
subordinate shouldhave one superior.
3. Unity of Direction:This means that all managerial and operationalactivities which relate a
distinct group with the same objectiveshould be directed by "one head and one plan. This is
essential for the "unity ofaction, coordination of strength and focusing of effort". Violation
ofthis principle will cause fragmentation of action and effort, andwastage of resources.
4. Scalar Chain of Command:According to Fayol scalar chain is thechain of superiors ranging
from the ultimate authority to the lowestranks. The line of authority is the route followed via
every link in thechain by all communication which start from or go to the ultimateauthority.
5. Division of Work:This is the principle of specialization applies to all kinds of work,
managerial as wellas technical. It helps a person to acquire an ability and accuracy withwhich
he can do more and better work with the same effort.
6. Discipline:Members of an organization are required toperform their functions and conduct
themselves in relation to othersaccording to rules, norms and customs. Discipline can best be
maintained by: (i) having good superiors at alllevels; (ii) agreements (made either with the

Page | 15
 individual employees orwith a union as the case may be) that are as clear and fair aspossible;
and (iii) penalties judiciously imposed.
7. Subordination of Individual Interest to General Interest: Theinterest of the organization is
above the interests of the individualand the group. It can be achieved only when managers in
highpositions in the organization set an example of honesty, integrity,fairness and justice. It
will involve an attitude and a spirit ofsacrificing their own personal interests whenever it
becomesapparent that such personal interests are in conflict withorganizational interests. It
emphasized that socialand national interests should have precedence over
organizationalinterests whenever the two run counter to each other.
8. Remuneration: Employees should be paid fairly and equitably.Differentials in remuneration
should be based on job differentials, in terms of qualities of the employee, application,
responsibility,working conditions and difficulty of the job. It should also take intoaccount
factors like cost of living, general economic conditions,and demand for labor and economic
state of the business.
9. Centralization:In a small firm with alimited number of employees, the owner-manager can
give ordersdirectly to everyone. In large organizations, where theworker is separated from
the chief executive through a long scalarchain, the decision making authority has to be
distributed amongvarious managers in varying degrees.Thedegree of centralization and
decentralization also depends on thequality of managers.
10. Order: Order, in the conception of Fayol, means right person on theright job and everything
in its proper place. This kind of order,depends on precise knowledge of human requirements
and resourcesof the concern and a constant balance between these requirementsand
resources.
11. Equity:It means that subordinates should be treated with justiceand kindliness. This is
essential for eliciting their devotion andloyalty to the enterprise. Therefore, it is the duty of
the chiefexecutive to introduce a sense of equity throughout all levels of scalarchain in the
organization.
12. Stability of Tenure of Personnel:The managerial policies shouldprovide a sense of
reasonable job security. The hiring and firing ofpersonnel should depend not on the urges of
the superiors but onthe well-conceived personnel policies.It takestime for an employee to
learn his job; if they quit or are dischargedwithin a short time, the learning time has been

Page | 16
 wasted. At the sametime those found unsuitable should be removed and those who arefound
to be competent should be promoted.
13. Initiative:It focuses on the ability, attitude and resourcefulness toact without prompting from
others. Managers must create anenvironment which encourages their subordinates to take
initiativeand responsibility. Since it provides a sense of great satisfaction tointelligent
employees, managers should sacrifice their personalvanity in order to encourage their
subordinates to show initiative.
14. Esprit de Corps:Cohesiveness and team spirit should beencouraged among employees. It is
one of the chief characteristics oforganized activity that a number of people work together in
closecooperation for the achievement of common goals. An environmentshould be created in
the organization which will induce people tocontribute to each other's efforts in such a way
that the combinedeffort of all together promotes the achievement of the overallobjectives of
enterprise. Fayol warns against two enemies of espritde corps, viz. (i) divide and rule, and (ii)
abuse of writtencommunication. It may work to the benefit of the enterprise to divideits
enemy but it will surely be dangerous to divide one's ownworkers. They should rather be
welded in cohesive and highlyinteracting work-groups. Overreliance on written
communicationalso tends to disrupt team spirit. Written communication, wherenecessary,
should always be supplemented by oral communicationbecause face-to-face contacts tend to
promote speed, clarity andharmony.
1.7. Is Management an Art, Science, or Profession? (Nature of Management)
Management has been conceptualized as the social process by which managers of an enterprise
integrate and coordinate itsresources for the achievement of common, explicit goals. It has
developedinto a body of knowledge and a separate identifiable discipline during thepast six
decades. Practice of management as an art is, of course, as old asthe organized human effort for
the achievement of common goals.Management has also acquired several characteristics of
profession duringrecent times. The nature of management as a science, as art and as a profession
isdiscussed below:
 Management as a Science: Fredrick W. Taylorwas the first manager-theorist who made
significant contributions to thedevelopment of management as a science. He used the
scientific methods ofanalysis, observation and experimentation in the management of
productionfunction. During the last few decades, great strideshave been made in the

Page | 17
 development of management as a systematized body of knowledge which can be learnt,
taught and researched. It has alsoprovided powerful tools of analysis, prediction and control
to practicingmanagers. The scientific character of management has been
particularlystrengthened by management scientists who have developed mathematicalmodels
of decision making. Another characteristic of science in management is that it uses the
scientificmethods of observation, experimentation and laboratory research.Management
principles are firmly based on observed phenomena, andsystematic classification and
analysis of data. These analyses and study ofobserved phenomena are used for inferring
cause-effect relationshipsbetween two or more variables. Generalizations about these
relationshipsresult in hypotheses. The hypotheses when tested and found to be true arecalled
principles. These principles when applied to practical situations helpthe practitioner in
describing and analyzing problems, solving problems andpredicting the results. Even though
management is a science so far as to possess a systematizedbody of knowledge and uses
scientific methods of research, it is not anexact science like natural sciences. This is simply
because management is asocial science, and deals with the behavior of people in
organization.As a result, management principles lack therigor and exactitude which is found
in physics and chemistry. Management is a social science likeeconomics or psychology, and
has the same limitations which these andother social sciences have. But this does not in any
way diminish the valueof management as a knowledge and discipline. It has provided
powerful tools of analysis, prediction and control to practicing managers and helpedthem in
performing their material tasks more efficiently and effectively.
 Management as An Art: Just as an engineer uses the science ofengineering while building a
bridge, a manager uses the knowledge ofmanagement theory while performing his
managerial functions.Engineering is a science; its application to the solution of
practicalproblems is an art. Similarly, management as a body of knowledge and adiscipline is
a science; its application to the solution of organizationalproblems is an art. The practice of
management, like the practice ofmedicine, is firmly grounded in an identifiable body of
concepts, theoriesand principles. A medical practitioner, who does not base his diagnosis
andprescription on the science of medicine, endangers the life of his patient.Similarly, a
manager who manages without possessing the knowledge ofmanagement creates chaos and
jeopardizes the well-being of hisorganization. Principles of management like the principles of

Page | 18
 medicine are used by thepractitioner not as rules of thumb but as guides in solving
practicalproblems. It is often said that managerial decision making involves a largeelement of
judgment. The raging controversy whethermanagement is a science or an art is fruitless. It is
a science as well as anart.
 Management as a Profession:By a professional manager, we generally meana manager who
undertakes management as a career and is not interested inacquiring ownership share in the
enterprise which he manages. But, ismanagement a profession in the true sense of the word?
Or, is management a profession like the professions of law and medicine? According
toMcFarland a profession possess the following characteristics: (i) a body ofprinciples,
techniques, skills, and specialized knowledge; (ii) formalizedmethods of acquiring training
and experience; (iii) the establishment of arepresentative organization with
professionalization as its goal; (iv) theformation of ethical codes for the guidance of conduct;
and (v) the chargingof fees based on the nature of services. Management is a profession to
the extent it fulfills the above conditions. It isa profession in the sense that there is a
systematized body of management,and it is distinct, identifiable discipline. It has also
developed a vast numberof tools and techniques. Management is also a profession in the
sense that formalized methods oftraining is available to those who desire to be managers. We
have a numberof institutes of management and university departments of managementwhich
provide formal education in this field. Some individual business organizations, try to
develop acode of conduct for their own managers but there is no general and uniformcode of
conduct for all managers. In fact, bribing public officials to gainfavors, sabotaging trade
unions, manipulating prices and markets are byno means uncommon management practices.
Furthermore, managers ingeneral do not seem to adhere to the principle of "service above
self".However little regard is paid to the elevation of service over the desire formonetary
compensation is evidenced by switching of jobs by managers.Indeed, such mobile managers
are regarded as more progressive andmodern than others. It may be concluded from the
above discussion that management is ascience, an art as well as a profession.
CHAPTER-TWO: MANAGERIAL PLANNING
2.1. Concepts and Needs for Planning

Planning is the most fundamental function of management. An organizationcan succeed in

effective utilization of its human, financial and materialresources only when its management

Page | 19
decides in advance its objectives, andmethods of achieving them. Without it purposive and
coordinated effort isnot possible, and what results are chaos, confusion and wastage ofresources.
Planning involves determination of objectives of the business,formation of programs and courses
of action for their attainment,development of schedules and timings of action and assignment
ofresponsibilities for their implementation. Planning thus precedes all effortsand action, as it is
the plans and programs that determine the kind ofdecisions and activities required for the
attainment of the desired goals. Itlies at the basis of all other managerial functions. In the absence
of planning, it will beimpossible to decide what activities are required, how they should
becombined into jobs and departments, who will be responsible for what kindof decisions and
actions, and how various decisions and activities are to becoordinated. Planning is also an
essential prerequisite for the performance ofcontrol function, as it provides criteria for evaluating
performance.

 Definition of Planning:Planning is the process of deciding in advancewhat is to be done,

who is to do it, how it is to be done and when it is to bedone. It is the process of determining
a course of action, so as to achievethe desired results. It helps to bridge the gap from where
we are, to wherewe want to go. It makes possible for things to occur which would not
otherwise happen. Planning is a higher order mental process requiring theuse of intellectual
faculties, imagination, foresight and sound judgment.According to Koontz, O'Donnell and
Weihrich, "Planning is anintellectually demanding process; it requires the conscious
determinationof courses of action and the basing of decisions on purpose, knowledge
andconsidered estimates". Planning is a process which involves anticipation of future course
of eventsand deciding the best course of action. It is a process of thinking beforedoing. To
plan is to produce a scheme for future action; to bring aboutspecified results, at specified
cost, in a specified period of time. It isdeliberate attempt to influence, exploit, bring about,
and control the nature,direction, extent, speed and effects of change. It may even
attemptdeliberately to create change, remembering always that change (likedecision) in any
one sector will in the same way affect other sectors.Planning is a deliberate and conscious
effort done to formulate the designand orderly sequence actions through which it is expected
to reach theobjectives. Planning is a systematic attempt to decide a particular course ofaction
for the future; it leads to determination of objectives of the groupactivity and the steps
necessary to achieve them. Thus, it can be said thatplanning is the selecting and relating of

Page | 20
 facts and the making and using ofassumptions regarding the future in the visualization and
formulation ofproposed activities believed necessary to achieve desired results. Planning is
thus deciding in advance the future state of business of anenterprise, and the means of
attaining it. Its elements are:
1. What will be done; what are the objectives of business in the shortand in the long run?
2. What resources will be required; this involves estimation of theavailable and potential
resources, estimation of resources requiredfor the achievement of objectives, and filling
the gap between thetwo, if any.
3. How it will be done;this involves two things: (i) determination oftasks, activities,
projects, programs, etc., required for theattainment of objectives, and (ii) formulation of
strategies, policies,procedures, methods, standard and budgets for the above purpose.
4. Who will do it;it involves assignment of responsibilities to variousmanagers relating to
contributions they are expected to make for theattainment of enterprise objectives. This is
preceded by the breakingdown of the total enterprise objectives into segmental
objectives,resulting into divisional, departmental, sectional and individualobjectives.
5. When it will be done; it involves determination of the timing andsequence, if any, for the
performance of various activities andexecution of various projects and their parts.
Importance of Planning
Some of the reasons as to why planning isconsidered a vital managerial function are given
below:
a. Planning Is Essential In Modern Business:The growingcomplexity of the modern business
with rapid technologicalchanges, dynamic changes in the consumer preferences andgrowing
tough competition necessities orderly operations, notonly in the current environment but also
in the future environment. Since planning takes a future outlook, it takesinto account the
possible future developments.
b. Planning Affects Performance: A number of empiricalstudies provide evidence of
organizational success being afunction of formal planning, the success being measured
bysuch factors as return on investment, sales volume, and growth inearnings per share and so
on. An investigation of firms invarious industrial products as machinery, steel, oil,
chemicalsand drugs revealed that companies that engaged in formalplanning consistently
performed better than those with noformal planning.

Page | 21
c. Planning Puts Focus on Objectives:The effectiveness offormal planning is primarily based
upon clarity of objectives.Objectives provide a direction and all planning decisions
aredirected towards achievement of these objectives. Planscontinuously reinforce the
importance of these objectives byfocusing on them. This ensures maximum utility
ofmanagerial time and efforts.
d. Planning Anticipates Problems and Uncertainties: Asignificant aspect of any formal
planning process in collectionof relevant information for the purpose of forecasting thefuture
as accurately as possible. This would minimize thechances of haphazard decisions. Since the
future needs of theorganization are anticipated in advance, the proper acquisitionand
allocation of resources can be planned, thus minimizingwastage and ensuring optimal utility
of these resources.
e. Planning Is Necessary to Facilitate Control: Controllinginvolves the continual analysis and
measurement of actualoperations against the established standards. These standardsare set in
the light of objectives to by achieve. Periodicreviews of operations can determine whether
the plans arebeing implemented correctly. Well-developed plans can aidthe process of
control in two ways. First, the planning process establishes a system of advancewarning of
possible deviations from the expectedperformance. Second contribution of planning to the
controlprocess is that it provides quantitative data which would makeit easier to compare the
actual performance in quantitativeterms, not only with the expectations of the organization
butalso with the industry statistics or market forecasts.
f. Planning Helps In The Process of Decision Making: Sinceplanning specifies the actions
and steps to be taken in order toaccomplish organizational objectives, it serves as a basis
fordecision-making about future activities. It also helpsmanagers to make routine decisions
about current activitiessince the objectives, plans, policies; schedules and so on areclearly
laid down.
2.2. Types of Plans

Planning can be classified on different bases which are discussed below:

1. Strategic and Functional Planning: In strategic or corporateplanning, the top management
determines the general objectives ofthe enterprise and the steps necessary to accomplish them
in the lightof resources currently available and likely to be available in thefuture. Functional

Page | 22
 planning, on the other hand, is planning thatcovers functional areas like production,
marketing, finance andpurchasing.
2. Long-range and short-range Planning:Long-range planning setslong-term goals of the
enterprise and then proceeds to formulatespecific plans for attaining these goals. It involves
an attempt toanticipate, analyze and make decisions about basic problems andissues which
have significance reaching well beyond the present operating horizon of the enterprise.
Short-range planning, on theother hand, is concerned with the determination of short-
termactivities to accomplish long-term with the determination of short-termactivities to
accomplish long-termobjectives. Short rangeplanningrelates to a relatively shortperiodand
has tobe consistentwiththelong-rangeplans.Operationalplans are generally related
toshortperiods.
3. Adhoc and Standing Planning: Adhoc planning committees maybe constituted for certain
specific matters, as for instance, for projectplanning. But standing plans are designed to be
used over and overagain. They include organizational structure, standard procedures,standard
methods etc.
4. Administrative and Operational Planning:Administrativeplanning is done by the middle
level management which providesthe foundation for operative plans. Operative planning, on
the otherhand, is done by the lower level managers to put the administrativeplans into action.
5. Physical Planning:It is concerned with the physical location andarrangement of building and
equipment.
6. Formal and Informal Planning:Various types of planningdiscussed above are of formal
nature. They are carried onsystematically by the management. They specify in black and
whitethe specific goals and the steps to achieve them. They also facilitatethe installation of
internal control systems. Informal planning, on theother hand, is mere thinking by some
individuals which may becomethe basis of formal planning in future.
Levels of Planning
In management theory it is usual to consider that there are three basic level of planning, though
in practice there may be more than three levels of management and to an extent there will be
some overlapping of planning operations. The three level of planning are discussed hereunder
below:

Page | 23
1. Top Level Planning: Also known as overall or strategic planning done by the top
management, i.e. board ofdirectors or governing body. It encompasses the long-
rangeobjectives and policies of organization and is concerned withcorporate results rather
than sectional objective. Top level planningis entirely long-range and is inseparably linked
with long-termobjectives.
2. Second Level Planning:Also known as tactical planning, it is doneby middle level mangers
or department heads. It is concerned with'how' of planning. It deals with deployment of
resources to the bestadvantage. It is concerned mainly, but not exclusively, with long-
rangeplanning,but its nature is suchthat the time spans are usuallyshorterthanthose of
strategicplanning.This is because its attentionsareusually devoted to the stepby
stepattainment of theorganization’smainobjectives. It is,in fact, oriented to
functionsanddepartmentsrather than to theorganization as a whole.
3. Third Level Planning: Also known as operational or activityplanning, it is the concern of
department managers and supervisors.It is confined to putting into effect the tactical or
departmental plans.It is usually for short-term and may be revised quite often to be intune
with the tactical planning.
2.3. Planning Process
Planning is a process which embraces a number of steps to be taken. It is anintellectual exercise
and a conscious determination of courses of action. Therefore, it requires a serious thought on
numerous factors necessary to be considered in making plans. The planning process, valid for
one organization and for one plan, may not be valid for all other organizationsor all types of
plans, because various factors that go into planning process may differ from organization to
organization or plan to plan. For example, planning process for a large organization may not be
the same as for a small organization. The steps generally involved in planning are discussed
under the following points:
1. Establishing Verifiable Goal or Set of Goals to be Achieved:The first step in planning is to
determine the enterprise objectives.These are most often set by upper level or top managers,
usuallyafter a number of possible objectives have been carefully considered.There are many
types of objectives managers may select: a desiredsales volume or growth rate, the
development of a new product orservice, or even a more abstract goal such as becoming
more activein the community. The type of goal selected will depend on numberof factors: the

Page | 24
 basic mission of the organization, the values itsmanagers hold, and the actual and potential
ability of theorganization.
2. Establishing Planning Premises: The second step inplanning is to establish planning
premises, i.e. certain assumptionsabout the future on the basis of which the plan will be
intimatelyformulated. Planning premises are vital to the success of planning as they supply
economic conditions, production costs and prices,probable competitive behavior, capital and
material availability,governmental control and so on.
3. Deciding the Planning Period:Once top level managers haveselected the basic long-term
goals and the planning premises, thenext task is to decide the period of the plan. Business
variesconsiderably in their planning periods. In some instances plans aremade for a year only
while in others they span decades. Companies generally base their period on afuture that can
reasonably be anticipated. Other factors whichinfluence the choice of a period are as follows:
(a) lead time indevelopment and commercialization of a new product; (b) timerequired
recovering capital investments or the payback period; and(c) length of commitments already
made.
4. Findings Alternative Courses of Action: The fourth step isplanning is to search for and
examining alternative courses of action.For instance, technical know-how may be secured by
engaging aforeign technician or by training staff abroad. Similarly, productsmay be sold
directly to the consumer by the company's salesmen orthrough exclusive agencies. There is
seldom a plan for whichreasonable alternatives do not exit, and quite often an alternative
thatis not obvious proves to be the best.
5. Evaluating and Selecting a Course of Action: Having soughtalternative courses, the fifth
step is to evaluate them in the light ofthe premises and goals and to select the best course or
courses ofaction. This is done with the help of quantitative techniques andoperations
research.
6. Developing Derivative Plans:Once the plan has been formulated,its broad goals must be
translated into day-to-day operations of theorganization. Middle and lower-level managers
must draw up theappropriate plans, programs and budgets for their sub-units.These are
described as derivative plans. In developing thesederivative plans, lower-level managers take
steps similar to those taken by upper-level managers; selecting realistic goals, assessingtheir

Page | 25
 sub-units particular strength and weaknesses and analyzingthose parts of the environment
that can affect them.
7. Measuring and Controlling the Progress: Obviously, it is foolishto let a plan run its course
without monitoring its progress. Hence theprocess of controlling is a critical part of any plan.
Managers need tocheck the progress of their plans so that they can (a) take whateverremedial
action is necessary to make the plan work, or (b) changethe original plan if it is unrealistic.
2.4. Objectives
An objective generally is an end in view. It represents the point anorganization wants to attain
and it is futuristic, that is, it concerns thefuture. Since an objective is an end in view, it represents
futureexpectation of management. That is why enterprise activities must bedirected towards the
attainment of the set objectives.
Characteristics
Objective has important characteristics which must be taken intoconsideration. These features
stamp the mark of seriousness inbusiness objective or any objective in non-business organization
set by aserious manager. These featuresa good objectiveare:
a. It mustbe Specific: An objective should be targeted at specific result. This is necessary so as
to avoid too many generalizationswhich make it difficult for an organization to know
whether it ison the right track or not. A good business objective should betargeted and
focused at a specific spot. This will enablemanagement to concentrate at that point for the
fulfillment of theobjective.
b. Action:Management by itsvery nature as a process is action oriented which is ongoing.
Butthe action must be in the desired direction which has beenprovided by the specificity of
the business objective. Actiondemands that the required resources in terms of human,
material, time, information and other necessary resources must be put inplace toward the
attainment of the objective.
c. Realistic:A realisticassessment needs to be made concerning the organizationsstrengths and
weaknesses. This is important so that right from theearly stage the organization will be able
to determine whether ithas the required resources with which to accomplish theobjective. If
the resources are not available in sufficient qualityand quantity, then a more realistic
objective compared to theresources available should be set.

Page | 26
d. Measurable: An objective should be quantified, that is some figures should be attached. This
is necessary for verificationwhich means that at a required time, performance must
becompared with the standard. The essence is to find out if effortsbeing made are in the right
direction. If this is not the case, thenecessary corrective measure should be put in place to
rectify thesituation.
e. Time: The objective should be time bound. This indicates that within specific period, the
objective must be accomplished.Another element concerning this feature of an objective is
that ithas to be formulated at the relevant period. In other words, thetimeliness of the
objective is important otherwise, events wouldovertake it. All these features and attributes of
an objective go together; they cannot be separated from one another. This is why they should
all be consideredin the process of objective formulation, objective implementation
andobjective evaluation.
2.5. Planning Techniques
There are many tools you can use when you do your planning. We have included some ofthem.
This does not mean that you have to use them. It is possible to do your planning without any
clever techniques or tools at all,simply by asking the right questions. The techniques simply help
you tofocus your thinking. These techniques include:
1. The SWOT Analysis
Identify the internal strengths and weaknesses of an organization or project, and the external
opportunities and threats the organization or project face. The best time to use a SWOT Analysis
is after you review progress and after you have done some sort of environmental scan. The
process can be done for the organization, departments, projects and units. It can make a useful
contribution to an organizational diagnosis.
SWOT stands for:
S = Strengths O = Opportunities
W = Weaknesses T = Threats
Strengths and weaknesses are factors that are internal to the organization and can be addressed
within the organization. Opportunities and threats are external to the organization and provide
challenges to the organization.
Strengths: are those company attributes or activities that you do better than most, or betterthan
anyone else, in your competitive environment. Include categories important tosuccess in your

Page | 27
business. Supply Chain, Marketing, Operations, Technology, and ProductDevelopment and of
course People are all SWOT candidates. Build your selection ofareas based on your industry
requirements for success. Think and analyze questions suchas: What do we do well? What do
we do better than most? Following are someexamples of company strengths:
SWOT: Strengths
 Well established reputation  Geographic location to suppliers
 Financial resources  Management experience in the industry
 Certain market profitably  Marketing support levels
 Geographic location to customers  Management information systems
Weaknesses: are the attributes and activities that, if substantially improved, would providethe
company additional probability for success. In this area it is important to obtain twodistinct
views of the current situation. First, get multiple views from key functionalmanagers within the
company. Multiple points of view will help to assure that differingpoints of view are aired and
all key weaknesses are surfaced. Second, get the perspectiveoutside the company by bringing
customers and suppliers into the discussion. Oftenweaknesses are seen differently from outside
the company. The key questions are: Whatdo we do not so well? What should be improved?
Are there mistakes we need to avoid?
SWOT: Weaknesses
 Lack of expertise in certain markets  Lack of technological expertise
 Lack of clear strategy  Too much inventory
 High outside sales turnover  Too many products and market segments
 Out of touch with marketplace  Serving unprofitable markets
 No marketing/advertising  Did not invest in technology
 No focus on margin management  Did not exploit product opportunities
 Sales/price controls lapsed
Opportunities: Is often the product of fundamental trends or conditions developing orappearing
outside of the company. Some examples are changes in Specialization,Consolidation,
Diversification, Economic Conditions, Lifestyles, and Technology.Seeing or recognizing the
development of trends or changes comes from a number ofimportant activities that are expected
of the key leaders, managers and owners of the business. Two suggested activities include
reading industry and general interestpublications and constantly benchmarking inside and outside

Page | 28
your own company andindustry to identify and evaluate potential opportunities. Following are
examples ofcompany opportunities:.
SWOT: Opportunities
 Growth through market segmentation  Realign key management responsibilities
 Regional growth trends  New distribution model needed
 Inside sales optimization by training  Master technology strategy
Threats: are the obstacles the company faces in trying to accomplish its Mission, Visionand
Strategic Goals. Threats may include items such as competitor first mover advantageon new
technology or new products. Threats may come from changes in governmentregulation, or
lender covenants. Recognition of real or perceived threats is important inthe development of a
strategic plan and critical to avoiding surprises that hinder goalachievement. Following are
examples of threats:
SWOT: Threats
 Distribution channel is maturing  Prices and consumer market changes
 Strength of competition  Maturing markets in core competency
 Misreading trends in market  Banking covenants
A thorough SWOT analysis, with participation across the company and across key external
relationships will provide an important building block for the Strategic Plan. It will be a joint
exercise that yields consensus and a map for predictable performance. Along each step of the
SWOT process prioritize and value each of the items. This will focus the organization’s
attention and set financial parameters or values that the SWOT analysis represents. You can
make SWOT a valuable, proven, effective management tool for your company by following
these few simple guidelines.

2. The PEST Analysis

Scan the external environment for forces and trends that may be opportunities or threats for the
project or organization. The best time to use a PEST Analysis is probably after you have had
input on “the big picture” and before you do a SWOT.
PEST stands for:
P = Political E = Economic

Page | 29
S = Social T = Technological
You could add other categories if you thought they might be useful. e.g. Legislative,
Psychological, Cultural, Ecological.
Political Environment: Government policies determine business practices and
investmentclimate in the economy. As a result, the stability of government, thepriority of the
political party in power etc. would definitely affectbusiness operations.
Economic Environment: The manager, in order to ensure that the business is viable has to
befamiliar with
a. The general state of the economy. If the economy is buoyant, there will be more demands for
goods and services and as aresult, more revenue for the organization. Similarly, if
theeconomy is depressed, fewer goods will be demanded and fewerrevenue for the
organization.
b. Income distribution, expenditure patterns, saving capability of consumers all affect demands.
The manager should always findout information concerning all these.
Social Environment: The social environment concerns the norms, tastes, and habit of thetarget
population in the community.These must be taken into consideration in deciding what product
and/orservice to produce.
Technological Environment: Technological changes make previous practices obsolete, such as
the useof computer in business operations. The manager has to adjust positively to changes in
technology. Remember that technology is simply themanner of doing something. It has to be
updated from time to time.
3. Futuring
Enable a group to free itself of the constraints of current work and context in order to develop a
true vision of how they would like the future to look.This is probably best done before the group
tries to develop a vision or mission statement.
4. Stakeholder Analysis
Identify the organization’s, or project’s, key stakeholders and their concerns and expectations,
and to explore how they influence theorganization. A stakeholder is anyone or any group or any
institution or structure that has any kind of stake in your organization or project. This is a useful
exercise to do when you are thinking about partnerships and also before you do your action
planning.

Page | 30
5. Gap Analysis
Identify the gaps that need to be addressed between where the organization is now and where it
aims to be in the future. This is a good technique to use after you have done a vision and
missionstatement, an organizational diagnosis, and an environmental scan, andprogram planning.
It is a good introduction to planning the internalchanges needed to meet your targets and goals.
You need to know whereyou are, and where you want to be.
6. Logical Framework Analysis (LFA)
The LFA is an overall planning tool. It uses a log frame or matrix (table) with columns and rows
to help you plan a project. The rows represent a hierarchy(top to bottom) of goals and
objectives, from overall goal to activities, and thecolumns represent the way in which
achievement of these goals andobjectives can be verified (shown to have taken place). This
makes the LFAa very good tool for planning for monitoring and evaluation. Many donors now
insist that organizations use the LFA todo their planning. It is, however, a very complex tool and
it does not work if itis not used rigorously. It really requires a toolkit ofits own to take you
through the process.

3. DECISION MAKING

3.1. Meaning of Decision Making

Decision-making and problem-solving are basic ingredients of managerialleadership. More than
anything else, the ability to make sound and timelydecisions separates a successful manager from
a non-successful. It is theresponsibility of managers to make high quality decisions that are
acceptedand executed in a timely fashion. On the face of it the decisions should becohesive,

Page | 31
conjectured, contingent, flexible, improved, influencing,intuitional, non-judgmental, objective,
operational one. One of the mostimportant functions of a manager is to take decisions. Whatever
a managerdoes, he does through decision-making. Each managerial decision isconcerned with
the process of decision-making. It is because of thispervasiveness of decision-making that
Professor Herbert Simon has said theprocess of managing as a process of decision-making.
According to him, apost or position cannot be said to be managerial level until and unless
theright of decision-making is attached to it. As a matter of act, it is the core ofexecutive
activities in a business organization.Decision-making is a mental process. It is a process of
selecting one bestalternative for doing a work. Thus, it is a particular course of action chosenby a
decision maker as the most effective alternative for achieving hisgoals. According to D.E.
McFarland, "A decision is an act of choice whereinan executive forms aconclusion aboutwhat
mustbe done in a givensituation.
A decisionrepresentsa course of behaviorchosenfromanumberof possible alternatives”. In
thewords of Haynes and Massie, "Adecisionis a course ofactionwhichis consciouslychosen for
achieving adesiredresult". Hence decision-making is a typical form of planning. It involves
choosingthe best alternative among various alternatives, in order to realize certainobjectives. A
decision represents a judgment, a final word, and resolution of conflicts or a commitment to act
in certain manner in the given set ofcircumstances. It is really a mental exercise which decides
what to do.
Leaders must be able to reason under the most critical conditions anddecide quickly what action
to take. If they delay or avoid making adecision, this indecisiveness may create hesitancy, loss of
confidence, andconfusion within the unit, and may cause the task to fail. Since leaders
arefrequently faced with unexpected circumstances, it is important to beflexible - leaders must be
able to react promptly to each situation. Then,when circumstances dictate a change in plans,
prompt reaction buildsconfidence in them.
3.2. Rational Decision Making Process
The following procedure should be followed in arriving at a correctdecision:
1. Setting objectives: Rational decision-making involves concreteobjectives. So the first step in
decision-making is to know one'sobjectives. An objective is an expected outcome of future
actions. So before deciding upon the future course of efforts, it is necessary toknow
beforehand what we are trying to achieve. Exact knowledge ofgoals and objectives bring

Page | 32
 purpose in planning and harmony inefforts. Moreover, objectives are the criteria by which
final outcomeis to be measured.
2. Defining the Problem: It is true to a large extent that a problemwell defined is half solved. A
lot of bad decisions are made becausethe person making the decision does not have a good
grasp of theproblem. It is essential for the decision maker to find and define theproblem
before he takes any decision. Sufficient time and energy should be spent on defining the
problemas it is not always easy to define the problem and to see thefundamental thing that is
causing the trouble and that needscorrection. Practically, no problem ever presents itself in a
mannerthat an immediate decision may be taken. It is, therefore, essential todefine the
problem before any action is taken, otherwise the managerwill answer the wrong question
rather than the core problem. Cleardefinition of the problem is very important as the right
answer canbe found only to a right question.
3. Analyzing the Problem: After defining the problem, the next step in decision-making is
analyzing it. The problem should be thoroughly analyzed to find out adequate background
information and data relating to the situation. The problem should be divided into many sub
problems and each element of the problem must be investigated thoroughly and
systematically. There can be a number of factors involved with any problem, some of which
are pertinent and others are remote. These pertinent factors should be discussed in depth. It
will save time as well as money and efforts. In order to classify any problem, we require lot
of information. So long as the required information is not available, any classification would
be misleading. This will also have an adverse impact on the quality of the decision. Trying to
analyze without facts is like guessing directions at a crossing without reading the highway
signboards. It would not be an exaggeration to say that a decision is as good as the
information on which it is based. Collection of facts and figures also requires certain
decisions on the part of the manager.
4. Developing Alternatives: After defining and analyzing the problem, the next step in the
decision making process is the development of alternative courses of action. Without
resorting to the process of developing alternatives, a manager is likely to be guided by his
limited imagination. It is rare for alternatives to be lacking for any course of action. But
sometimes a manager assumes that there is only one way of doing a thing. In such a case,
what the manager has probably not done is to force himself consider other alternatives.

Page | 33
 Unless he does so, he cannot reach the decision which is the best possible. From this can be
derived a key planning principle which may be termed as the principle of alternatives.
Alternatives exist for every decision problem. Effective planning involves a search for the
alternatives towards the desired goal. Once the manager starts developing alternatives,
various assumptions come to his mind, which he can bring to the conscious level.
Nevertheless, development of alternatives cannot provide a person with the imagination,
which he lacks. But most of us have definitely more imagination than we generally use. It
should also be noted that development of alternatives is no guarantee of finding the best
possible decision, but it certainly helps in weighing one alternative against others and, thus,
minimizing uncertainties. While developing alternatives, the principle of limiting factor has
to be taken care of. A limiting factor is one which stands in the way of accomplishing the
desired goal. It is a key factor in decision making. If such factors are properly identified,
manager can confine his search for alternative to those which will overcome the limiting
factors. In choosing from among alternatives, the more an individual can recognize those
factors which are limiting or critical to the attainment of the desired goal the more clearly and
accurately he or she can select the most favorable alternatives.
5. Selecting the Best Alternative: After developing alternatives onewill have to evaluate all the
possible alternatives in order to selectbest alternative. There are various ways to evaluate
alternatives. The most common method is through intuition, i.e., choosing a solution that
seems to be good at that time. There is an inherent danger in thisprocess because a manager's
intuition may be wrong on severaloccasions. The second way to choose the best alternative is
to weigh theconsequences of one against those of the others. Peter F. Drucker haslaid down
four criteria in order to weigh the consequences of various alternatives. They are:
a. Risk: A manager should weigh the risks of each course ofaction against the expected gains.
As a matter of fact, risksare involved in all the solutions. What matters is the intensity of
different types of risks in various solutions.
b. Economy of Effort: The best manager is one who canmobilize the resources for the
achievement of results with theminimum of efforts. The decision to be chosen should
ensurethe maximum possible economy of efforts, money and time.
c. Situation or Timing: The choice of a course of an actionwill depend upon the situation
prevailing at a particular pointof time. If the situation has great urgency, the

Page | 34
 preferablecourse of action is one that alarms the organization thatsomething important is
happening.
d. Limitation of Resources: In choosing among thealternatives, primary attention must be
given to those factorsthat are limiting or strategic to the decision involved. Thesearch for
limiting factors in decision-making should be a never ending process. Discovery of the
limiting factor lies atthe basis of selection from the alternatives and hence ofplanning and
decision making. There are three bases whichshould be followed for selection of alternatives
and these areexperience, experimentation and research and analysis whichare discussed
below: In making a choice, a manager is influenced to a great extentby his past experience.
He can give more reliance to pastexperience in case of routine decisions; but in case
ofstrategic decisions, he should not rely fully on his pastexperience to reach at a rational
decision. Under experimentation, the manager tests the solution underactual or simulated
conditions. This approach has proved tobe of considerable help in many cases in test
marketing of anew product. But it is not always possible to put thistechnique into practice,
because it is very expensive. Research and Analysis is considered to be the most
effectivetechnique of selecting among alternatives, where a majordecision is involved. It
involves a search for relationshipsamong the more critical variables, constraints and
premisesthat bear upon the goal sought.
6. Implementing the Decision: The choice of an alternative will notserve any purpose if it is
not put into practice. The manager is notonly concerned with taking a decision, but also with
itsimplementation. He should try to ensure that systematic steps aretaken to implement the
decision. The main problem which themanager may face at the implementation stage is the
resistance by the subordinates who are affected by the decision. If the manager isunable to
overcome this resistance, the energy and efforts consumedin decision making will go waste.
In order to make the decisionacceptable, it is necessary for the manager to make the
peopleunderstand what the decision involves, what is expected to them andwhat they should
expect from the management. In order to make the subordinates committed to the decision it
isessential that they should be allowed to participate in the decisionmaking process. The
managers who discuss problems with theirsubordinates and give them opportunities to ask
questions and makesuggestions find more support for their decisions than the managerswho
don't let the subordinates participate. The area where thesubordinates should participate is the

Page | 35
 development of alternatives.They should be encouraged to suggest alternatives. This may
bringto surface certain alternatives which may not be thought of by themanager. Moreover,
they will feel attached to the decision. At thesame time, there is also a danger that a group
decision may be poorerthan the one man decision. Group participation does not
necessarilyimprove the quality of the decision, but sometimes impairs it.Someone has
described group decision like a train in which everypassenger has a brake. It has also been
pointed out that all employeesare unable to participate in decision making. Nevertheless, it
isdesirable if a manager consults his subordinates while makingdecision.
7. Follow-up the Decisions:It is always better to check the results afterputting the decision into
practice. He has given reasons for followingup of decisions and they are as follows:
a. If the decision is a good one, one will know what to do iffaced with the same problem again.
b. If the decision is a bad one, one will know what not to do thenext time.
c. If the decision is bad and one follows-up soon enough,corrective action may still be
possible.
In order to achieve proper follow-up, the management should devise anefficient system of
feedback information. This information will be veryuseful in taking the corrective measures and
in taking right decisions in thefuture.
3.3. Types (Programmed and Non-programmed Decisions)
Decisions have been classified by various authorities in various ways. Themain types of
decisions are as follows:
1. Programmed and non-programmed decisions: Professor Herbert Simonhas classified all
managerial decisions as programmed and non-programmeddecisions. He has utilized
computerterminology in classifyingdecisions.The programmed decisionsare the routine and
repetitivedecisionsforwhichtheorganizationhasdevelopedspecific processes.Thus,they involve
no extraordinaryjudgment, analysisand authority.Theyare basically devised so that the
problem may not be treated as auniquecase each time it arises. On the other hand, the non-
programmed decisions are the one-shot, illstructured, novel policy decisions that are handled
by general problem-solvingprocesses. Thus, theyare ofextraordinary nature and require
athoroughstudy of theproblem,its in-depthanalysis and solvingtheproblem. They are basically
non-repetitive in nature.

Page | 36
2. Basic and routine decisions:Routine decisionsare of repetitive nature and they involve the
application of familiarprinciples to a situation. Basic or genuine decisions are those which
requirea good deal of deliberation on new principles through conscious thoughtprocess, plant
location, and distributions are some examples of basic decisions.
3. Policy and operative decisions: Policy decisions are important decisionsand they involve a
change in the procedure, planning or strategy of theorganization. Thus, they are of a
fundamental character affecting the wholebusiness. Such decisions are taken by the top
management. On the contrary,operating decisions are those which are taken by lower levels
ofmanagement for the purpose of executing policy decisions. They aregenerally concerned
with the routine type of work, hence unimportant forthe top management. They mostly relate
to the decision-makers own workand behavior while policy decision influences the work and
behavior ofsubordinates.
4. Individual and group decisions: Individual decisions are those decisionswhich are made by
one individual; whether owner of the business or by atop executive. On the other hand,
group-decisions are the decisions taken by a group of managers; board, team, committee or a
sub-committee.

CHAPTER-THREE: THE ORGANIZATION FUNCTION

4.1. Concept of Organizing and Organization

Organization is the backbone of management. Without efficient organization, no management
can perform its functions smoothly. Sound organization contributes greatly to the continuity and
success of theenterprise. However, good organization structure does not by itselfproduce good
performance; just as good constitution does not guaranteegreat presidents or good laws a moral
society. But a poor organizationstructure makes good performance impossible, no matter how

Page | 37
good theindividuals may be. The right organizational structure is the necessaryfoundation;
without it the best performance in all other areas ofmanagement will be ineffectual and
frustrated.
The term 'organization' connotes different meanings to different people.Many writers have
attempted to state the nature, characteristics and principles of organization in their own way. For
instance, to the sociologists organization means a study of the interactions of the people, classes,
or the hierarchy of an enterprise; to the psychologists organization means an attempt to explain,
predict and influence behavior of individuals in an enterprise; to a top level executive it may
mean the weaving together the functional components in the best possible combination so that an
enterprise can achieve its goals. The word 'organization' is also used widely to connote a group
of people and the structure of relationships. Some important definitions of organization are given
below:
Organizing is grouping of activities necessary to attain enterprise objectives and theassignment
of each grouping to a manager with authority necessary tosupervise it.The process of identifying
and grouping the work to be performed,defining and delegating responsibility and authority and
establishingrelationship for the purpose of enabling people to work more effectivelytogether in
accomplishing objects.The structure and process by which a cooperative group of human
beingsallocates its tasks among its members, identifies relationship, andintegrates its activities
towards common objectives.From the above definitions, it is clear that organizing is the process
ofdetermining the total activities to achieve a given objective, grouping andassigning of activities
to individuals, delegating them authority necessary to perform the activities assigned and
establishing authority relationship among different positions in the organization. An analysis of
the above definitions reveals the following characteristics of an organization:It is a group of
individuals which may be large or small, the group in the organization works under the executive
leadership,it is a machine or mechanism of management, it has some directing authority or power
which controls the concerted efforts of the group, the division of labor, power and
responsibilities are deliberatelyplanned,it implies a structure of duties and responsibilities, it is
established for accomplishment of common objectives and it is a functional concept. Sound
organization brings about the following advantages: Facilitates attainment of the objectives of
the enterprise, facilitates optimum use of resources and new technological development,
facilitates growth and diversification,stimulates creativity and innovation, facilities effective

Page | 38
communication, encourages better relations between the labor and the management, increase
employee satisfaction and decreases employee turnover.
4.2. Formal and Informal Organization
Formal organization refers to the structure of relationships deliberately builtup by the top
management to realize the objectives. In these form instructions, responsibility, authority,
accountability, lines of command,and positions and authority are clearly defined and declared.
Each person isaware of his duties and authority. Every subordinate is expected to obey
hissupervisor in the formal chain of command. Each individual is fitted in theorganization like a
cog in the machine. It is designed after carefulidentification, classification and assignment of
business activities. So, it isconscious creation of relationships.
Informal organization refers to the network of personal and socialrelationships which arise
spontaneously when people working togetherinteract on personal whims, likes and prejudices.
Such relations are notcreated by the top management and they are not recognized formally.
Theinformal groups sometimes run parallel to the formal ones. Informalrelations are not
portrayed on organization charts and manuals. An informalorganization provides an opportunity
to workers to come close to eachother, develop a feeling of cooperation and coordination among
themselves.
Difference between Formal and Informal Organizations
The difference between formal and informal organizations can beenumerated briefly as below:
a. Formation: Formal organization is deliberately created bymanagement. It is the result of a
conscious and deliberate effortinvolving delegation of authority. On the other hand,
informalorganization arises spontaneously and no conscious efforts are madeto create it. It
takes place on the basis of relationships, caste, culture, occupations and on personal interests
etc. No delegation of authorityis essential in informal organization.
b. Basis: A formal organization is based upon rules and procedures,while an informal
organization is based upon attitudes and emotionsof the people. It depends on informal,
social contacts between peopleworking and associating with one another.
c. Nature: A formal organization is stable and predictable and itcannot be changed according to
the whims or fancies of people. Butan informal organization is neither stable nor predictable.
d. Set up:A formal organization is a system of well-defined relationships with a definite
authority assigned to every individual. Itfollows predetermined lines of communication. On

Page | 39
 the contrary, aninformal organization has no definite form and there are no definiterules as to
who is to report to whom. Even a low-placed employeemay have an informal relationship
with an officer far above him inthe formal hierarchy.
e. Emphasis:In a formal organization, the main emphasis is placed onauthority and functions.
In an informal organization the stress is onpeople and their relationships.
f. Authority: Formal authority is attached to a position and it flowsfrom top to bottom.
Informal authority is attached to a person and itflows either downwards or horizontally.
g. Existence: A formal organizations exists independently of theinformal groups that are
formed within it. But an informalorganization exists within the framework of a formal
structure.
h. Rationality: A formal organization operates on logic rather than onsentiments or emotions.
All activities follow a predetermined course. As an association between like-minded people,
an informalorganization has little rationality behind it. In an informalorganization, activities
are influenced by emotions and sentiments ofits members.
i. Depiction:Formal organization can be shown in an organizationchart or a manual. But an
informal organization cannot be depictedin the chart or manual of the enterprise.
4.3. Organization Chart
When the structure of an organization is shown in a diagrammatic form,it is known as an
organization chart. Remember that what we have saidconcerning the structure of an
organization. It consists of levels andposition which indicate the main activities that are being
performed inorder to attain the objectives of an organization.
The organizational charts indicate the formal organizationalrelationships among executives. The
chart also clarifies who supervises as well as the main lines of communications. The flow of
authority and responsibilities are shown in the chart. You can see the importance of good
organization chart. You can then see the need why an organization should have a good
organization chart. But a chart cannot possibly supply all the detailed information required to
have a clear understanding of an organization. This is why another document called organization
manual is prepared alongside the organization chart. The manual takes over such information
include: organization history, the culture of an organization, careful description of jobs among
other relevant information.
Criteria for Drawing a Chart

Page | 40
There are standard criteria which are necessary for proper drawing of a chart so as to carry to the
reader the actual information that is intended. These criteria are sometimes called rules for
drawing a chart and they include the following:
a. Title: There should be a title for every position in the chart. This is necessaryso that one
position will be distinguished from the others. Care shouldbe taken so that titles are not
repeated. That is why before a position iscreated, careful consideration as to what the title
should be would havebeen thrashed out.
b. Position:There should be positions which must be clearly indicated. Positions ofthe same
status that is, of the same line must occupy the same horizontalline. For example, the
functional managers which identified to be production manager, personnel manager,
financemanager and the marketing manager must occupy the same horizontalline. Any one
of the positions dropping below means that the position isinferior to the others. Note that
authority resides in the position. That iswhy we always stress that each position with
responsibility must attractcommensurate authority.
c. Heads:At the introduction stage in our discussion of the management functionof organizing,
we noted that the assignments must be given toindividuals and groups having identified and
tied together the basicactivities necessary to achieve organizational objectives That is
whythere are groups of personnel such as personnel department, productiondepartment,
marketing department and finance department allperforming specific duties relating to their
departments. Each of thesedepartments must have a head commonly referred to as head
ofdepartment. All the other personnel in the department are answerable tothe head of
department, who carries out the management functions.
d. Lines of Communication:These lines are provided indication to the flow of communication
in theorganization. You have to note that the flow of communication vertical, that is four
the superior officer drawn to the subordinates, from thesubordinates to the superior officer.
It can be horizontal, that is,managers for example communicating with one another.
Communication can still be diagonal. This is seen when an employeecommunicates with
another employee through his head of department toanother employee in the organization.
e. Lines of Authority: Line of authority is another criteria or rule to be observed in the
processof drawing up a chart. Authority, you may recall flows from the top tothe bottom
and never from bottom to top. You must also remember thateach position is a position of

Page | 41
 authority. That is why such authority iscalled position authority or legitimate authority. It is
the authority thatthe person occupying the position uses to influence the behaviors ofthose
working under him.
f. Relationships:Important relationships should be clearly indicated in the organization. A part
from the line relationship or line authority which we have justdiscussed, staff relationship,
that is, those who offer advisory servicesshould be clearly indicated in the chart.
Advantages of a chart
It helps executives to appreciate them by providing clear pictures withregard to job position and
duties and how they fit into the organizationas a whole.It helps to avoid overlapping authority by
providing clear visual anddetailed picture of lines of authority and responsibilities. Together
withmanuals, they help to foster unity of command.It affords managers to think of ways of
improving the organizationswhen marking new editions of charts. This is because they must
analyze the activities necessary to accomplish objectives. Only the essentialones are included in
the chart, and resources deployed accordingly. A chart provides source of authoritative
information It facilitates management developing and training.
Limitations of Organization Chart
Organization Charts and manuals do not guarantee good management. Managers still need to
apply their skills in the process of management.In practice there are frequent changes which are
unavoidable. It isdifficult to revise the chart each time these changes occur, therebymaking the
chart out of death.It is difficult to include in the chart everything that is going on in
theorganization. The chart only shows a static picture. Also a chart onlyprovides formal
relationships. The informal ones are excluded.Human beings are generally sensitive to their
relative positions andstatus in the chart. Hard feelings and resentments may be caused
byshowing their positions and status to the outsiders.

Fig. 4-1: Simple Organization Chart

Board of Directors

Managing Director

Ass. Managing Director

Page | 42
 Deputy Manager

Marketing Manager Production Manager Finance Manager

Personnel Manager

Supervisors Supervisors Supervisors

4.4. Departmentalization and Span of Management

A. Departmentalization
Departmentalization is the process of groupingactivities into units for purposes of administration.
In other words, itdenotes grouping of related jobs and activities without violating theprinciple of
homogeneity over which an executive has authority toexercise and assert. The main advantages
of depart mentation are that it enables individual executive to manage his subordinates
effectivelysince a manageable number of persons are brought under the directsupervision
of individual executive. The followings are different ways of departmentalization:
1. By function: This form of departmentalization is to group the activities being
performedalong the line of functions of the organization. Since every enterprisesaims at
creating or producing something that is desirable by others thebasic enterprise functions are:
a. Production:Production is to add utility to goods or services. This means getting raw
materials and transforming them into finished products or taking an ideaand using it as a
basis for providing service to others.
b. Selling: This necessitates finding customers/clients who will agree to accept the product or
service at a price.
c. Financing:This involves raising funds, safeguarding the funds against waste andexpending
the funds in a manner that will maximize the objectives of theorganization. All these
activities can logically be grouped into:engineering, production, marketing and finance

Page | 43
 departments. Note thatthere can be variation of names concerning these departments.
Forexample there may be no engineering or production in a ministry or church. But
appropriate names reflecting the major functions can still beused.
Advantages
a. It shows in a logical manner the basic functions that are being performed in the organization.
By merely glancing at the chart,one would quickly see these functions
b. Its main the power and prestige of the major functions. We have earlier discussed that
positions should only be created if suchpositions have positive roles to play in the attainment
of theorganizations objectives. By looking at the diagrams one can seethe departments and
positions that are playing such roles.
c. The form of departmentalization again follows the principles of occupational specialization.
These are in engineering, production, marketing and finance. As a result, any one that has a
flair for anyof these areas can move in to such area and contribute his quotatoward the
realization of the organization's objective.
d. The form of departmentalization simplifies training. This means that whenever there is a new
employee on the job, training can beorganized for such employee. The older person in the
departmentcan put him through in the fine rope of the department's jobwithout moving
outside the department.

Disadvantages
There are recognized disadvantages in this form of departmentalization which are stated below.
a. It tends to create over specialization. And when employees in a department over specialize, it
tends to narrow their view pointsand orientations to the extent that problems of the
otherdepartments are not appreciated.
b. This form of departmentalization makes the development of the specialist managers to be
difficult. This is because as specialists,their view points are narrowed and cannot readily be
made ageneral manager because a general manager as the name impliesis a generalist; as
such, his mind is sufficiently broadened to takebalanced decision for the overall interest of
the organization.

Page | 44
c. Because managers see themselves along specialist lines, it makes coordination which is the
essence of management to be difficult.Coordination demands that an activity should be
linked logicallyto another activity and thereby makes the entire organization tooperate as a
unit..
d. The departmentalization creates another limitation of preventing to grow economically as a
system. Each department tends to operate along its own area of specialization. But an
organizationis supposed to operate as a unit, to the extent that what affects apart will
automatically have effect on other parts.

Managing Directors

Ass. Managing Director Personnel

Marketing Engineering Production Finance

Fig. 4-2: Departmentalization by Enterprise Function

2. By Geographical Area: This form of departmentalization ensures that all activities in a

geographicarea or territory are grouped and assigned to a manager who has otherstaff
working under him. This form of departmentalization is attractive tolarge scale organizations
whose organizations spread over largegeographic areas. There are advantages as well as
disadvantages of thisform of departmentalization.
Advantages
a. Profit making is placed at a lower level that is, the respective managers in the field are
charged with the responsibility ofmaking profit for the organization. This leaves the

Page | 45
 headquartersand the top level manager to have the time to plan for overallgreater growth of
the organization.
b. Emphasis is placed on the local market. This is important because there is no point producing
goods and services that are not readilysold to the customers. This is a problem which arises
eitherbecause the goods do not meet the needs of the customers and/orthe goods are not sold
with the correct marketing strategies. Butby operating close to the customers, their peculiar
needs andproblems are taking into consideration in producing andmarketing the goods in the
specified areas.
c. Since the field managers and the staff are more or less experts in the local area, they can
gather good results in terms of greatersales revenue compared to somebody who does not
know thelocal environment. The field managers know the captains andother channel
members through whom they can distribute thecompany's products. They also know the
customs, norms andtraditions and will not adopt strategies that will be offensive tothe culture
of the local people. All these and more a stranger cannever appreciate let alone observe. The
field officers also knowtheir competitors and are better prepared to compete with them.
d. The form of departmentalization provides a fertile ground to train managers who can become
general managers in future. This isbecause while in the field, he has got experiences in
dealing withspecialists in accounting, marketing/sales, personnel,production or engineering
and was successful. The same experiencecan be brought to bear in his future role as a general
managerwithout being unduly biased to any specialist.

Disadvantages
a. There is high cost of coordination and control from theheadquarters. In an attempt to ensure
that the entire organizationwork as a team there is the need to link together the activities
ofone geographic area to the activities operating in anothergeographic area. This is not an
easy task because it maynecessitate staff transfers with the attendant costs. Visits alsofrom
the headquarters and other forms of communication mayalso demand enormous resources of
the organization.
b. The form of departmentalization demands creating more levels ofmanagement. At each
level, there are supporting staff. Beyondthe payment of salaries and wages, workers must be
providedwith offices. And these offices must be furnished. Cars and otherstatus symbols

Page | 46
 associated with each position must be madeavailable. All these and more put demands on
organizationalresources.
c. It requires personnel with general managerial abilities who can not only be in the
headquarters but more importantly in the field. But to find managers with general
managerial ability that can take balanced and matured decisions is not easy.

Managing Director

Marketing Purchasing Personnel Finance

West East South Central North

Fig. 4-3: Geographical Departmentalization

3. By Product
Product departmentalization is the identification of necessary activities
for the production and sales of product. These activities are then
grouped and assigned to managers along product lines. This is a
strategy and it is a way that top level management uses to delegate to
a lower level extensive authority. The authority is used not only to
produce and to market but also to carry out the required engineering
and services associated with the products. Consequently, each

Page | 47
manager is responsible for every issue that has a bearing in respect of
the product that has been placed under him.
Advantages
This form of departmentalization has its own set of advantages:
a. Since each product has a manager, it has been made possible for the manager to concentrate
all his efforts and those of the teammembers, that is, those subordinates working under him
on thesuccess of the product. Every thinking and action is necessaryso that the product will
be successful in the market.
b. Responsibility for profit making is again placed at a lower level, just as the case in respect of
geographic form of departmentalization.The product manager must justify this confidence
and exerciseshis initiative by taking good decisions that will ensure the successof the product
in the market and as a result brings in money to theorganization. To achieve this, beyond
bringing out a product thatcan satisfy the need(s) of the consumers, expenses must
becontrolled.
c. This form of departmentalization improves the coordination of functional activities. This is
possible because each productmanager has been given the charge to make profit.
Butresponsibility cannot be given without the commensurateauthority. As a result the
necessary authority has also been given tothe manager to do all he can to ensure success.
Within him, hecan be able to ensure that there is cooperation and understandingamong all the
departments.
d. It provides good training ground for the position of the General Manager or the Managing
Director. This is possible because atthe lower level, the product manager is already familiar
with thepolitics of dealing constructively with the functional managers who are specialists.
By the time the product manager is appointeda General Manager, he brings his experiences
to his new job as ageneralist.
e. The product and/or service can be diversified. Market and Marketing researches can be
conducted in order to achieve this.In fact, anything that can be done to ensure
continuousprofitability and survival of the product needs to be done by themanager, more so,
when the commensurate authority has alreadybeen provided. Consequently, anything that
will permitreasonable growth and diversity of products and/or servicesshould be undertaken
by the manager.

Page | 48
Disadvantages
There exist disadvantages too of this form of departmentalization:
a. It requires not specialists as product manager but generalists who have the ability to
coordinatefunctional activities. If a specialist, say an engineer is appointedwho lacks general
managerial ability; possibility does exist thathe may take a decision favorable to engineering
and/orproduction.
b. It tends to make it impossible to have economical central services such as making bulk
purchases by the headquarters for theproduct managers. This will naturally attract some
discounts,such as quantity discount, price discounts etc. But these benefitsmay not occur at
this scale because it has been made that productmanagers resent the idea of having goods
purchased for their usewithout any contribution being made by them to the decision tobuy the
items.
c. It increases the cost of having product managers and other sub-ordinates reporting to them.
Levels of positions are created whichneed finance. The finance for the payment of their
salaries,running their offices and so on. These are called overhead costwhich the organization
has to bear.

Managing Director

Page | 49
 Marketing Purchasing Personnel Finance

Toothpaste Soap Disinfectant Margarine Others

Personnel

Engineering
Accounting

Production Sales
Fig. 4-4: Departmentalization by Products
4. By Customers
This is grouping of activities so that they can reflect a primary interest incustomers. As a result,
the customers represent the key to the way activities are grouped when each of the different
activities the organization does for them is managed by one department head. The customer
groups must be clearly defined to make this form of departmentalization meaningful.
Educational institutions offer regular and extension courses to serve different groups of
customers. Banks also have departments that address the special needs of customers such as
savings, current, agriculture, and housing, among others.

Advantages
a. It encourages concentration on customer needs: This is one good reason for this type of
departmentalization. The customer has needswhich could be regarded as unfulfilled desires.
Because thedesires are not fulfilled, they create tension and human beings donot like to live
in a situation of tension. They take action whichthey hope will reduce the tension. This is
why an organizationmust try to assist in the tension reduction behaviors of thecustomers by

Page | 50
 concentrating their efforts on these needs with the hope of satisfying them. Customer form of
departmentalizationassists along this line.
b. Arising from the point made in "a" above this form of departmentalization gives the customer
the feeling that they have anunderstanding organization. This feeling of satisfaction
isimportant because it creates good relationship between theorganization and the customers.
And when customers aresatisfied with an organization, they will always make
repeatpurchases, that is, when the need arises to buy, they go for theproduct of the
organization that they are satisfied with. You mustnote that repeat purchases create brand
loyalty and this is thewish of every organization.
c. Customer departmentalization develops some level of expertise on the organization
members of staff. The measure of expertiseensures continuous improved services to the
satisfaction of theconsumers of the organization's products and/or services. This iscrucial
because when the customers are always made happy, theword of mouth from them will go
round, thereby encouragingpotential customers to try the services of the organization.
Whenthis is done, the market share of the organization is increased.
Disadvantages
There are also disadvantages of customer form of departmentalization which can be seen from
the following:
a. Operations may be difficult to coordinate. The difficulty arises because of the competing
customer demands. Taking the bank asan example, it may be difficult to link the activities of
agriculturalbanking to that of housing. The demands from both forms ofbanking are different
because of the different needs of thecustomers.
b. Customer form of departmentalization demands expertise. This means that it is only
managers who have the requisite skills thatshould be employed. These managers may be
difficult to find insufficient quantity and quality.
c. Sometimes, it may be difficult to clearly define customer groups so as to know the special
services that they need. For example,difficulty sometimes arises as to the distinction between
smallscale businesses and agricultural business so as to work outspecial products for each.
d. Again, during the lean season, that is the period that the numberof customer reduces before it
picks up again, the resources of theorganization will be idle.

Managing Page | 51
 Current Account Agricultural Housing
Banking Banking Saving Banking
Banking

Fig. 4-5: Departmentalization by Customers

B. Span of Management (Span of Control)
Span of management also refers to span of control signifying the number of subordinates
reporting directly to any executive. It is an established fact that larger the number of
subordinates reporting directly to the executive, the more difficult it tends to be for him to
supervise and coordinate them effectively. This important principle of management should also
be kept in mind.
Span of control is simply the desirable member of subordinates that reports to the manager. It is
often saidthat at the top level ofcandidates of about four to weight subordinate at a lower level.
Wemust point out that there is hard and fast rule concerning the desirablenumber that should
report to a manager in an organization. What isdesirable in one organization may not work well
in another organization. This means that span of control is a matter of trial by error. Also, spanof
control varies from one organization to another.
A. Narrow Span of Control
This refers to a situation where few subordinates reports to a manager. Due to the number, many
levels of position are created. Because many levels are created, the structure of the organization
that will result it is Tall-Shaped one.

Page | 52
Fig. 4-6: Tall-shaped Structure
There are advantages as well as disadvantages associated withorganizations having tall shaped
structure. We will consider them below:
Advantages
a. Close Supervision: There is closesupervision which is necessary in a situation where a
subordinate is newon the job and can easily make mistakes that can be fatal to
theorganization. The incidence of mistakes is minimized. Close supervision is also necessary
where the work of subordinate is ofsensitive nature or where the work of the subordinate is
such that if thereis an error of judgment it could be dangerous to his life and the effectcould
spread to the entire organization.
b. Close Control: Close control demands that the manager looks at the work of thesubordinate
and companies that output again the standard that has beenset. This is to detect if the
subordinate is doing the right thing. If hedoes, it means the standard is being achieved. But if
a different picture results, this means that there is a negative deviation, that is, thesubordinate
has deviated from the standard set. A controlling measureshould be quickly put in place so
as to correct the situation. The abilityand urge to detect the deviation and putting the
corrective measure is asa result of close supervision. The mistake has been detected in
timebefore creating a damaged effect.

Page | 53
c. Fast Communication between the Subordinate and Superior: When to the smallness in
number, the subordinates can easily interactwith their manager. Whatever the firm of
communication, either byoral or written, the level of interaction is less cumbersome, time
saving,and satisfactory. A problem can quickly be brought in promptlyinvestigated, analyzed
and solution suggested and effected.
d. Quick Decision Making: The manager and his subordinates can spend less time in
takingdecision. This is due to few persons involved. Unnecessary argumentsare reduced and
opinions needed to arrive at a decision are from the fewpersons involved. In the same venue,
decisions can easily be evaluatedin the light of the organization’s objectives.
Disadvantages
a. Too much involvement in subordinate’s job:One disadvantage of a tall shaped structure is
that superior tends to gettoo involved in the work of the subordinates. This sometimes gets
intothe nerves of the subordinates resulting in cold behaviors. Sometimes,the subordinates
argue that they are not allowed to exercise initiative andthis reduces their level of creativity.
This is also the feeling of less jobsatisfaction because of the closeness of supervision. The
subordinate istoo proud of the outcome of the job because he finds it difficult toseparate his
own efforts which he was to admire and be proud of and theefforts of the superior officer.
b. Too Many Levels:The tendency to divide activities and assigning the activities to
theindividuals and few individuals to a manager result in tall shapedstructure with too many
levels. This creates problem of communicationfrom the lowest level in the organization to
the top levels. This isbecause information from below has to pass through the various levels.
In the process, some piece of the information will be distorted and modified, the information
itself travels slowly and in some cases it may get lost on the way.
c. High Costs:Too many levels again create high costs. This is because the levels andthe
positions arising from them must be filled with personnel who willdraw their salaries and
wages. Officers need to be provided and theseofficers must be furnished and equipped. All
these and more are whatthe accountants call overhead costs.
B. Wide Span of Control
On the other hand, when many subordinates report to a manager,
theresult is fewer levels of positives and a flat shaped organization.

Page | 54
Fig. 4-7: Flat-shaped Structure
Advantages of Flat-Shaped Structure
a. Superiors are forced to delegate:In flat-shaped structured, superior officers must delegate.
This meansthere is a limit to the activities a manager has to perform, and ofnecessity he has
to give excess activities to the subordinates with theaccompanying authority.
b. Clear Policies must be made:Every member of the organization should be able to know what
thepolicy of the enterprise is, what objective(s) that has emanated from thepolicy and so on.
This is important because the manager has no time tobe explaining to the many subordinates
what the organization policy isand the objectives necessary to implement the policy are.
c. Subordinates must be carefully selected: This is important and is advantageous. It ensures
good qualityworkforce. They should understand what is to be done, how to do it andwhen to
do it without the prompting of the manager. In other words, inthe absence of the manner for
whatever reason the work must go onsmoothly.
d. Good Quality Decisions: Due to the large number of subordinates that is usually participated
indecision making, the quality of such decision is high. Manysubordinates are involved and
all shades of opinion considered beforethe final decision.
Disadvantages of Flat-shaped Structure:
There are also a set of disadvantages associated with flat-shaped structure. The major ones are
the following:

Page | 55
a. Overloaded superiors can become bottlenecks: When superiors are loaded with many
subordinates to supervise, to takea decision demands a great deal of time. Decisions can
further bedelayed if the superior does not know the techniques of organizing andmanaging
meetings.
b. Danger of supervisor’s loss of control:Some superiors may lose control of their
subordinates. Instead tochecking, monitoring and evaluating subordinates actions to
ensurecompliance with organization’s objectives, due to loss of control, thesubordinates do
thing they feel like performing.
c. Requires exceptional quality of Mangers: Wide span of control demands that the manager
should possess thoseexceptional qualities that will make them to handle those sub-
ordinatesunder them. In practice, however, it is often found out that the quality isnot there.
4.5. Authority and Power: Source of Power
A. Authority
Authority is a legal power which is possessed by a person from his superior officers and
with the help of which he succeeds in getting the things doneby his sub-ordinates. Authority is
the key to managerial functions. A manager is in a position to influence hissubordinates only by
the use of his authority. It is the authority whichenables him to discharge the important functions
of planning, coordination,motivationand controlling etc.in an enterprise. If properauthorityis not
vested in him,he cannotperformthese functions in therequiredmannerandhe cannot beheld
responsiblefor all these functions intheabsence of proper authorities.

Definitions of Authority
Authority is the right to give order and the power to exactobedience. Authority is the power to
command, to act or not to act in a mannerdeemed by the possessor of the authority to further
enterprise or departmental performance. It empowersan individual to take decisions and givens
a right to command and toexercise control over those who are responsible for the execution of
policiesand programs of the enterprise. For decisions taken the authorizedperson is held
responsible.
Sources of Authority
There are three different schools of thought about the sources of authoritywhich are discussed
below:

Page | 56
a. Formal Authority Theory: According to this theory, all authority originates in the
formalstructure of an organization. The ultimate authority in a joint stockcompany lies with
the shareholders. Shareholders entrust themanagement of the company to the Board of
Directors and delegateto it most of their authority. The Board of Directors delegatesauthority
to the chief executive and chief executive in turn to thedepartmental managers and so on.
Every manager or executivepossesses authority because of his organizational position and
thisauthority is known as formal authority. Authority conferred by law isalso regarded as
formal authority. Subordinates accept the formalauthority of a manager because of his
position in the organization.The subordinates are aware of the fact that if they disregard
theformal authority they will be punished according to the rules andregulations of the
company. The formal authority theory furtherstates that the superiors have the right to
delegate their authority.
b. Acceptance Theory: This theory states that authority is the power that is accepted byothers.
Formal authority is reduced to nominal authority if it is notaccepted by the subordinates. The
subordinates accept the authorityif the advantages to be derived by its acceptance exceed
thedisadvantages resulting from its refusal. The subordinates giveobedience to the managers
because they visualize the followingadvantages :
 Receipt of financial incentives.  Appreciation from colleagues.
 Contribution in attaining objectives  Setting of an example for others.
 Fulfillment of responsibilities.  Responsibility to leadership
 Moral obligation because of regard for old age, experience,competence, etc.
According to acceptance theory, authority flows from bottom to top. A manager has authority if
he gets obedience from the subordinates. Subordinates obey the manager because of the fear of
losing financial rewards. This theory emphasizes sanctions that a manager can use and overlooks
the influence of social institutions like trade unions.
c. Competence Theory: The supporters of this view assert that an individual derivesauthority
because of his personal qualities and technical competence.Many persons derive informal
authority because of theircompetence. For instance a person possesses expert knowledge in
aparticular subject. People will go to him for guidance in that mattereven though he has got
no formal authority.
B. Meaning and Sources of Power

Page | 57
Power is a method of operating in order to influence the behavior ofothers. It is the power
politics within the organization that gives rise topower centers in the organization. The power
centers need not necessarilybe located at the position of higher authority. Nobody wants to lose
powerbecause power can be used in desirable or undesirable ways. Power may be defined as "the
ability to exert influence. If a person haspower it means that he is able to change the attitude of
other individuals". In any organization for sound organizational stability, power and right to
dothings must be equated, when power and authority for a given person orposition are roughly
equated, we may call the situations as "LegitimatePower".
Sources of Powers
If we study the origin and sources of power we cannot forget the name of John French and
Berhram Raven. They have written that there are five sources of power which are found at all
levels of the organization. They are as follow:
1. Legitimate Power: The power corresponds to the term authority. Itexists when an influencer
acknowledge that the influencer islawfully entitled to exert influence. In this the influence
has anobligation to accept this power.
2. Reward Power: This power is based on the influencer having theability to reward the
influence for carrying out orders.
3. Corrective Power:It is based on the influencer's ability to punishthe influence for not
carrying out orders or for not meetingrequirements.
4. Referent Power: It is based on the influencer's, desire to identifywith or imitate the
influence. For example – a manager will havereferent power over the subordinates if they are
motivated to emulatehis work habits.
5. Expert Power: This power is based on belief that the influencer hassome relevant expertise
or special knowledge that the influence doesnot have. For example a doctor has expert
power on his patients.
In having the study of power the role of the influence in accepting or rejecting the attempted
influence is very important. It must be noted that each of the five power bases is potentially
inherent in a manager's position and his activities.
Difference between 'Authority' and 'Power'
If we study from close in practice the terms 'Authority' and 'Power' are generally used
interchangeably but there is a clear-cut difference between these two words and they are as

Page | 58
follows :
a. Right to Command: Authority is the right to command whereaspower is the ability or power
to command.
b. Right to Exercise: Authority usually resides in the position in theorganization, but power is
exercised by the person. Authorityincludes the right to exercise which have been
institutionalized.
c. Positional and Legitimate:Authority is always positional andlegitimate and is conferred on
the position. But power is notinstitutional, rather it is personal. It is acquired by people in
variousways and then exercised upon others. It is acquired through politicalmeans or by
having certain personal attributes.
d. Authority Increases: It has been observed that authority increasesas soon as one goes up in
the organizational hierarchy, but it neednot necessary be accompanied by more power. In
actual practice; the power centers may be located at the powerlevels in the organization.
Therefore, one cannot have an idea ofpower centers in an organization by merely looking at
itsorganization chart.
e. Authority Relationships: In practice, authority relationships aremodified by power politics in
the organization. Some individualsmay have more power and less authority or more authority
and lesspower. It is the operating mechanism of the organization which isrelevant for
studying organizational behavior.
f. Authority a Downward Concept: Authority is a downwardflowing concept; whereas power
flows in all directions.
g. Delegation of Authority: Authority can be delegated to the lowerlevels in the organization.
The lower we go down the lesser is theauthority.
4.6. Line and Staff Authority
A. Line Authority
This implies the authority to take action and make decisions. We have stressed the fact that a
manager should not be given responsibilitywithout the commensurate authority. This is
ridiculous. Being givenauthority without the corresponding responsibility is dangerous.
Therefore to avoid these two extremes authority must be matched withcorresponding
responsibility and vice versa. But the authority of themanager is to enable him to take decisions
necessary for the attainmentof the defined objectives of the organization. He must possess

Page | 59
theauthority to use the organizations resources, direct the subordinatesunder him and carry out
those necessary things that are required, all forthe interest of the organization. The line
indicating the relationship in anorganization chart is usually a straight one that is not broken. It
showsthat line authority is exercise at each level from the managing director tothe last person
down the organization line. This is why; the linerelationship is seen as the flow or exercise of
authority from the top to the bottom.
Advantages of Line Authority
a. One major advantage of line relationship is the clarity it gives to the manager. He appreciates
his position, the role created in thatposition and how he intends to achieve such roles through
theexercise of the authority entrenched in the position.
b. It makes the manager to know who the subordinates are that will report directly to him. If he
is to exercise authority by informingindividuals, it stands to reason that he should know
thoseindividuals that will be answerable to him.
c. It creates confidence in the mind of the manager. This is because his position in the
organization is not an empty one, he has theauthority. And the authority is backed up by the
organization. Consequently, when he is directing the subordinates as well asproviding the
desired leadership, he does all these things becausehe has the authority backing him. This
type of authority is alsocalled power, that is legitimate or position power. We shall
bediscussing this concept in another future unit.
d. Line authority also enables the subordinates to appreciate and recognize their boss. They
know that they must report to amanager whom they depend on for a variety of things. They
getassignments from the manager, and specific ways the job has tobe performed are clear by
communicated to them.
e. Line relationship makes the subordinates to respect the directives of their boss since they
know that he has the backup of theorganization and can give out the necessary punishment
on theevent of non-compliance to the directors.
B. Staff Authority
This means the provision of special services to the line managers. Thisenables the line manager
to achieve the best result on organization wide basis. This is done by the staff managers who
studies on existing problems. Through careful analyses after thorough investigation, a considered
opinion by way of professional advice is offered to the line manager. Let us repeat again, the

Page | 60
staff manager does not exercise authority over the line manager. Question of exercise of
authority alongthis point should be completely erased. All that the staff manager doesnot
research study and investigate the problem. Therefore, an advice is offered. However the staff
manager is a boss in his own right in his own department. He has subordinates that de report to
him from time to time. Consequently, even though the staff manager does not exercise authority
over and above the subordinates that do report to him.
Advantages of Staff Authority
a. Though the professional advice that the staff manager provides from time to time manager
make the work of the line manager tobe easier. He can concentrate on the main aspects of
his jobwhile the staff manager comes out his investigation and analysisof a problem with a
view to advising the line manager correctly.
b. Rising from “a” above, there is improvement on the quality of the work of the line manager
in two ways. He has more time toconcentrate on his job and secondary, the advice from the
staffmanager provides the best option
c. Through the clarification of issues which the staff manager makes from time to time further
illuminates the situation surroundingline manager’s environment. In such circumstance, he
can takethe best decision in the overall interest of the organization.
d. Staff manger may recommend necessary desirable changes in line with the changes in the
external environment of the organization,which in turn make the organization to adjust
positively andhence be able to compete favorably with their competitors.
Limitations of staff Relationships
The staff concept even though it has some usefulness in an organization and also has some
limitations which can be seen from the following:
a. Absence of responsibilities for results
The role of the staff manager is simply to advice. The outcome of such advice rests on the door
step of the line manager, on the acceptance of the advice or plan. As a result, when a plan fails,
the line manager will like to blame the staff manager for providing a poor plan. The staff
manager can return the blame on the line manager for not acting correctly accordingly to
guidelines provided in the advice. He could go on to extend the argument that the plan wasgood
but the incompetence of the line manager to execute the planproperly created the poor result.
b. Undermining line authority

Page | 61
Sometimes, it get into the head of a staff manager to start undermining the authority of the line
managers. Such situation arises if the staff officer is seen to be good in his job and as a results, a
superior officer starts having greater confidence and reliance on him. By reason of the new
importance being placed on him, he starts undermining the authority of line manager. Such
situation is dangerous because it canresult in anger, frustration and outright concerned and the
staff officer.
c. Feeling of sense of superiority
To counter the point raised in above, the line manager is one of those formulating personnel
policy administering salaries and wages among other personnel duties. Consequently, he is not
qualified to do them. As the organization keeps developing, a stage will reach when it becomes
necessary to remove these personnel duties from the production manager and assign them to a
personnel manager who has been trained and possesses the necessary expertise to handle
personnel issues. When the decision is taken and implemented the production manager may not
like it. For one reason, while performing these personnel tasks as well as his normal production
duties, he arrogates to himself more power, more prestige and even more status symbols. Some
of these vanish overnight and to this extent brings conflict between him and the new personnel
manager.
d. Due to changes in technology
Technology is simply the manner of doing something to get a desired output. As a result of
changes in technology, the work of the line managers may become simplified. Some aspects of
the job may even be taken away by computers and robots. As a result, those skills which have
been developed by the line managers over many years are lost overnight to machines. And these
machines are manned by staff specialists. Take the case of an accountant boasting his unique
skills of having a flair for figures and can balance manually. With the introduction of computer,
this can be done in split second. Even when the accountant is computer literate, his level of
mastery of computer cannot be compared to a computer graduate who is a staff specialist. This
is another source of conflict.
4.7. Delegation, Centralization and Decentralization
A. Delegation
Delegation means devolution of authority on subordinates to make them toperform the assigned duties or
tasks. It is that part of the process of organization by which managers make it possible for others to share

Page | 62
the work of accomplishing organizational objectives. Delegation consists of granting authority or the right
to decision-making in certain defined areas and charging the sub-ordinate with responsibility for carrying
through the assigned tasks. Delegation refers to the assignment of work to others and confer them
therequisite authority to accomplish the job assigned.
 Delegation means assigning work toothers and gives them authority to do it.
 Delegation is the dynamics ofmanagement, it is the process a manager follows in dividing thework
assigned to him so that he performs that part which only he,because of his unique organizational
placement, can performeffectively and so that he can get others to help him with whatremains.
 Delegation is a process of sharing afew or all of the four elements of the management process,
i.e.command, planning, co-ordination and control. Delegation is not a question of issuing instructions
but is abringing down of the executive's responsibility and transmission ofpart or all of it to other
persons. Delegation, therefore, is necessary for enlarging his capacity byasking trusted subordinates
to share his burdenIfthere are no duties to be divided and no authorities to be shared in theenterprise,
the existence of an organization structure is nullified andbecomes absurd. Management of that
organization becomes impossiblewithout delegation. For this reason activities are to be integrated,
coordinatedandunity ofpurpose tobe achieved.
Methods of Delegation
In a big manufacturing concern the following may be the methods ofdelegation of authority to
ensure better result, unified direction andcommand and effective delegation:
a. Administrative Delegation: When a few of the administrativefunctions are delegated to sub-
ordinate staff it is calledadministrative delegation. These functions are generally of
routinenature.
b. Geographical Delegation: When the work of enterprise is locatedat different distant places it
is not possible for an executive to managethe whole affairs single handed. He then proceeds
to delegate hisauthority to those who are posted at the places where physically hecannot be
present round the year. This is known as geographicalmethod of delegating the authority.
c. Functional Delegation: When the enterprise is organized on thebasis of functional
organization, the delegation of authority is alsodone on the functional basis. All the heads are
given to manage theirdepartments according to their skill, knowledge and experience
ofcourse of action.
d. Technical Delegation: This method of delegation of authority isbased on technical
knowledge and skill. Here the authority isdelegated in order to get the advantages of expert

Page | 63
 and experiencedhands and their technical skill.
Elements of Delegation
The elements of delegation of authority involve three steps:
1. Authority:Authority is the sum of the rights entrusted to an individual to make possible the
performance of the work delegated. It includes such rights or powers as that spending money,
of using certain kinds of quantities of materials, of hiring and firing people. Legal authority is
the authority which is entrusted to a person by the law of the organization. A company is a
legal person which enjoys several rights under the Companies Act. The organizations are
built on authority relationships between their members. Authority is a building force in an
organization and is the key to the executive job.
2. Responsibility:Responsibility represents the work or dutiesassigned to a person by virtue of
his position in the organization. Itrefers to the mental and physical activities which must be
performedto carry out the task or duty. That means every person who performssome kind of
mental or physical activities as an assigned task hasresponsibility. In order to enable the
subordinates perform hisresponsibility well, the superior must clearly tell the former as
towhat is expected of him. In other words, the delegator mustdetermine clearly the task or
duty that is assigned to the delegatee.
3. Accountability:Accountability is a logical derivative of authority.When a subordinate is
given an assignment and is granted thenecessary authority to complete it, the final phase in
basicorganization relationship is holding the subordinate responsible forresults. In other
words, the subordinate undertakes an obligation tocomplete the assignment by the fair use of
authority and account forthe discharge of responsibility assigned. Accountability is the
obligation to carry out responsibility andexercise authority in terms of performance standards
established bythe superior. An individual should be answerable to onlyone immediate
superior and no more. The extent of accountability depends upon the extent of delegationof
authority and responsibility. A person cannot be held answerablefor the acts not assigned to
him by his superior.
4. Accountability cannot be delegated: Though it is incurred as aresult of assignment of duty
and conferring of authority,accountability in itself cannot be delegated. The diligent
cannotabdicate responsibility. He remains accountable to his superior forthat which the latter

Page | 64
 has delegated to him. Since accountabilitycannot be delegated, the accountability of persons
higher in thehierarchy for the acts of subordinates is unconditional.
Types of Delegation
The important kinds of delegation of authority are as follows:
1. General and Specific Delegation
a. General Delegation: It is that delegation in which theauthority is given to perform general
managerial functions,like planning, organizing, directing etc. The sub-ordinatemanagers
perform these functions and enjoy the authorityrequired to carry out these responsibilities.
The ChiefExecutive exercises over all control and guides thesubordinates from time-to-time.
b. The Specific Delegation: Specific Delegation relates to aparticular function or an assigned
task. The authoritydelegated to the production manager for carrying out thisfunction will be a
specific delegation. Various departmentalmanagers get specific authority to undertake their
departmentduties.
2. Formal or Informal Delegation
a. Formal Delegation: Formal delegation has been consideredas a part of organizational
structure. Whenever a task isassigned to a person, the required authority is also given tohim.
This delegation is a part of the normal functioning of theorganization.
b. Informal Delegation: This delegation does not arise due toposition but it arises according to
the circumstances of thecase. A person may undertake a particular task not because hehas
been assigned it but because it is necessary to do hisnormal work.
3. Written or Unwritten Delegation
a. Written Delegation: Written delegation is normally giventhrough letters, instructions,
circulars etc. Whatever has beendelegated it must be in writing.
b. Unwritten Delegation: Unwritten delegation is given to theperson concerned not in any
particular way but throughconventions, customs and usages the other party has to dowork
accordingly.
4. Downward or Upward Delegation
a. Downwards Delegation: Downwards delegation is acommon type of delegation and is used
in every type of theworking concern. This delegation has been considered as asuperior's
delegation of authority to his immediatesubordinate.

Page | 65
b. Upward Delegation: This type of delegation takes placewhen a subordinate assigns some of
his tasks to his superiors.This is an uncommon type of delegation and its instances arevery
rare.
Principles of Delegation
The following principles may be considered as essential for effective delegation of authority:
1. There must be Proper Planning: An executive must plan as towhat is to be achieved, if
delegation of authority is made. He shoulddefine clearly the objectives to be achieved and the
functions to beperformed by delegating the authority. The job should be designedand divided
in such a way as to achieve the objectives.
2. Select Appropriate Subordinate of Delegation: The subordinateshould be selected in the
light of the work to be achieved. Thequalification of the individual concerned may influence
the nature ofthe delegation of authority. This is the purpose of the managerialfunction of
staffing, most carefully considered.
3. Maintain Purity of Authority and Responsibility: Authorityshould be delegated
commensurate with responsibility. This is on theassumption that where subordinates are held
responsible forperformance of certain duties it is fair that they should be vestedwith the
necessary authority to carry out such duties. Theremust be adequate correlation between duty
and authority delegated.
4. Ensure Unity of Command: This is one of the common principlesof organization advocated
by Henry Fayol which stresses thatsubordinates should have only one boss to whom he
should beaccountable, to avoid confusion and friction. Of course, in practice,it is not possible
to follow this principle.
5. Maintain Adequate Communication: There should be free andcontinuous flow of
information between the superior and thesubordinate with a view to furnish the subordinate
with relevantinformation to help him make decisions and also to interpretproperly the
authority delegated to him. Plans may change anddecisions have to be taken in the light of
the changed conditions.
6. Reward Effective Delegation: Effective delegation and successfulassumption of authority
must be rewarded. This will provide aproper environmental climate for fuller delegation and
effectiveassumption of authority and it is very important for motivating delegated person to
attain more performance results.

Page | 66
7. Establish a Climate of Confidence: The subordinate to whomauthority is delegated must
generally feel free from fear and have afeeling of confidence that delegation will not result in
punishmentbut is an opportunity for his own self-development and growth for further
performance.
8. Establish a Strong Belief in Delegation: For delegation to besuccessful, the man who
delegates must himself be convinced of theneed and benefits of delegation. He must also be
willing to allow hissubordinates to make mistakes although he can be strict if the
samemistake is repeated.
9. Proper Selection and Training of Personnel: Selection ofpersonnel to various jobs should
be fair and just. It should not bearbitrary but it must be based on certain principles. Only
rightpersons should be placed on the right job. The person selected mustalso be given proper
training to enable him to handle the postefficiently and to perform the assigned job properly.
10. Proper Control Techniques Developed: In a good organizationproper control techniques be
developed and major deviations fromstandard should be checked. There should be no
interference in day-to-dayfunctioning ofsubordinates and subordinates should be come
autonomous.

Various Steps in The Process of Delegation

The following steps are essential and they must be kept in mind while delegating:
 The delegation should define the result expected from his subordinates.
 Duties should be assigned according to the qualifications, experienceand aptitude of the
subordinates. They may be described either interms of activity or set of activities to be
performed by a subordinate or in terms of results that are expected from the performance
ofactivities.
 Adequate authority must be given to sub-ordinates;the authority tobe delegated to each
particular sub-ordinate is determined inadvance. The delegator confers upon the subordinate
the right to actin a specified way within limited boundaries. It decides what actionswe may
take and what action we cannot take. Proper authority to anysub-ordinate not given in time,
will not give or produce expectedresults.
 The subordinate must produce expected results from the taskassigned to him. It is obligatory
on the part of the subordinate thathe must give satisfactory performance from the tasks

Page | 67
 assigned. Hebecomes answerable for the proper performance of the assignedduties and for
the exercise of the delegated authority. Authoritywithout accountability is likely to be
misused. Accountabilitywithout authority may be frustrating to the subordinates. The
extentof accountability depends upon the extent of delegated authority andresponsibility. A
subordinate cannot be held responsible for acts not assigned to him by his superior. He is
accountable only to hisimmediate superior.
 Proper Evaluation of the Performance must be made: In the end,information and control
system must be established to check andevaluate the performance of the subordinates to
whom authority hasbeen delegated. Duties, authority and responsibility are the
threeinterdependent essential steps in the process of delegation. In thisconnection an eminent
authority. An executive according to Louise A. Allen can follow theunder mentioned rules
while delegating :
a. Established goals that are to be attained.
b. Define and enumerate the authority which the delegatee canexercise and the responsibility
he is to shoulder.
c. Motivate the subordinate and provide him sufficientguidance. If necessary proper and
adequate training shouldalso be given to the delegatee before authority is delegated tohim.
d. Ask for the completed work. In between if any help is neededby the delegatee he should be
provided with such help eitherdirectly through someone who knows the work and is
writingof help.
e. Establish an adequate control so as to supervise and providenecessary guidance.
Merits of Delegation
a. It avoids wastage of time:Present-day management is a complicatedprocess. A manager has
to perform various functions as a matter ofroutine work. It is not possible for him to give
proper attention to allmatters coming to him. Delegation helps him in transferring the
lessimportant subject to his juniors and attends to more important works.
b. It helps in training the new incumbents:The lower units that use thedelegated power, get a
spontaneous feel of their future responsibility.They become aware of the works at the higher
level to which theymay be promoted. Delegation also helps in developing themanagerial
personnel within the organization.

Page | 68
c. It avoids over-work: Delegation shifts some portions of theresponsibility and work from the
shoulders of the manager. The over worked manager who learns the art of delegation,is at
one and the same time able to relieve himself of some of hisburden, increase the competence
of his men, and raise the level ofsuccess of his unit.
d. It develops increased sense of responsibility: Delegation generatesan increased sense of
responsibility in the subordinate personnel. Italso increases their working capacity and helps
in enhancing theirunspotted caliber which could be helpful for management. Delegation also
helps in avoiding any kind of act at a higher levelwhich may, otherwise undermine the
powers vested in the lowerlevel units.
e. It avoids delay: Delegation helps in taking timely and accuratedecisions. The personnel at
lower level, being delegated, act quicklywhich serves the organization with due economy,
efficiency andrapidly.
Difficulties in Delegation
There is a fear aspect in delegation which plays a dominant role in a decision as to "what to
delegate" and "to whom to delegate". Executive knows for certain that once authority is
delegated they will lose the grip over their subordinates and also control over the operations. It is
natural that the executives may not like to lose either the grip or control over the operation. But
the important psychology is that by their nature executives have no confidence in their
subordinates. They feel that the subordinates are not capable of shouldering the responsibility;
therefore, the question of delegation of authority does not arise. Sometimes, executives suffer
from inferiority psychosis. They know for certain that though they occupy a position of strength
but their knowledge and skill are not up to the mark. Their subordinates are well equipped and
thus they may do the assigned job well. No executive would like to delegate when he feels that
his subordinate may surpass him. From the above discussion we may come to a conclusion that
there are three types of fears which discourage delegation and thus create difficulties in
delegation. They are:
1. Fear of losing the grip and control over the operations;
2. Fear of not a better performance by the sub-ordinate to whom theauthority may be delegated;
and
3. Fear of better performance by the subordinate to whom the authoritymay be delegated.
The above difficulties arise out of:

Page | 69
a. Luck of mutual confidence;
b. Non-existence of atmosphere of team-work;
c. Non independence in thinking and behavior;
d. No proper and ambiguous definition of common goals to beachieved;
e. No inter-exchange of ideas and suggestions;
f. No favorable management climate;
g. Existence of element of fear and frustration ; and
h. Incapable hands manning the executive positions.
Delegation is an important managerial technique. Every effort should be made to encourage
delegation. This creates a sense of belonging among subordinates. It develops the personality of
the subordinates and helps in evaluating the managerial performance. It also induces a sense of
security among both the executives and their subordinates.
B. Centralization
Centralization is the systematic and consistentreservation of authority at central points in an
organization, whiledecentralization refers to consistent and systematic dispersal to the
lowestlevels all authority except that which can only be exercised at centralpoints. Centralization
denotes that a majority of the decisions having to do with the work being performed are not
made by those doing the work but ata point higher in the organization.
Centralization represents certain attitudes and approaches which the management follows. The
major implication of centralization is the reservation of decision-making power in regard to
planning, organizing, directing and control at the top level. The other implications will depend
on the philosophy of management. For instance, in a company where the top management is very
particular about the use of authority, it will make all the operations and decisions at lower levels
subject to its approval.
Centralization of authority has certain merits also. In case of centralization, most of the decisions
are taken not at a point where work is being done, but at a point higher in the organization. They
may involve considerable cost and delay in making the decisions. Centralization of authority
increases the burden on the top managers and hampers the growth of low level managers.
Because of these disadvantages, absolute centralization is not found in practice. Different
organizations follow centralization in different degrees. It should be noted that complete
decentralization is also not a feasible proposition of creating an effective organization structure.

Page | 70
Some authority must be reserved at the highest level of management. Greater the reservation of
authority at the top level, higher is the degree of centralization and lower is the degree of
decentralization and vice-versa.
C. Decentralization
Decentralization is a word that we frequently hear take about by politicalleaders and business
managers. Many of them view decentralization as a panacea or a magical device that will
compensate for poor management,encourage participation, increase efficiency, and raise morale.
Most people do not have a clear view of what decentralization is and, as often as not when an
organization is having "decentralization", it is for the wrong reasons and in the wrong way the
term is understood and used. There are four criteria to measure the extent of decentralization in
an organization.
1. The greater is the number of decisions made at lower levels;
2. The more important are the decisions made at lower levels;
3. The more is the number of areas in which decisions can be made atlower levels; and
4. The fewer are the people to be consulted the less is the checkingrequired on the decision.
The way many people use the term decentralization mean about the same thing as delegation,
simply pushing authority down to subordinates. But decentralization means much more than
simple delegation. Decentralization is a philosophy of the organization and management, one
that implies both selectively determining what authority to push down into the organization;
developing standing plans (such as policies) to guide subordinates who have this authority
delegated to them; and implementing selective but adequate controls for monitoring
performance. Thus, decentralization is a philosophy of organization and management which
involves both selective delegation of authority as well as concentration of authority through the
imposition of policies and selective but adequate controls.
Decentralization is a situation in which ultimateauthority to command and ultimate responsibility
for results is localized asfar down in the organization as efficient management of the
organizationpermits. Decentralization refers to the systematic effortto delegate to the lowest
levels all authority except that which can only beexercised at central points. Thus,
decentralization means reservation ofsome authority (to plan, organize, direct and control) at the
top level anddelegation of authority to make routine decisions at points as near aspossible to
where action takes place.

Page | 71
Essential Characteristics of Decentralization
The essential characteristics of decentralization are:
a. Decentralization not the same thing as delegation: It is somethingmore than delegation.
Delegation means demi-transfer ofresponsibility and authority from one individual to
another. Butdecentralization means scattering of authority throughout theorganization.
Delegation can take place from one person to another andbe a complete process. But
decentralization is completed only whenthe fullest possible delegation is made to all or most
of the people.Under delegation control rests entirely with the diligent, but
underdecentralization, the top management may exercise minimumcontrol and delegate the
authority of controlling to the departmentalmanagers. It should be noted that complete
decentralization may notbe possible or desirable, but it certainly involves more than one
levelin the organization.
b. Decentralization is distinct from dispersion: Decentralizing is oftenconfused with the
separation of physical facilities which is not correct. Dispersion occurs when plants and
offices are located atdifferent places with physical distance between them. Performanceof
work in dispersed plants and offices does not necessarily lead todecentralization.
Decentralization can proceed without separation offacilities and facilities can be separated
without decentralization.
c. Decentralization is not a type of organization: Some people believethat a company can
decentralize by changing its organizationalstructure. This is not true. Decentralization may be
achieved evenwithout changing the organizational structure as it refers primarily tothe
systematic delegation authority throughout the organizationindustries in which markets are
less uncertain, production processestechnologically less dynamic and competitive
relationships morestable tend to become more centralized.
Determining the Degree of Decentralization
There are no hard and fast rules, but the following guidelines may be used to test the degree of
decentralization in a company:
a. The narrower the breadth of the control imposed on managers, the greater the
decentralization. Thus, a company in which eachproduct-division manager simply has to
report once or twice a yearon the rate of return his division has earned on its investment is

Page | 72
 moredecentralized. The division in which a variety of day-to-day production, marketing, and
personnel decisions are monitored is lessdecentralized;
b. The greater the discretion permitted by the company's policies,procedures and rules, the
greater the decentralization;
c. The greater the breadth of decision in terms of the number offunctions they cover, the more
the decentralization. Thus, thecompany in which division managers are authorized to
takeproduction, marketing and personnel decisions is more decentralizedthan one in which
the managers can take only production andpersonnel decisions;
d. The less a subordinate has to check with his superior before takingdecisions, the greater is the
degree of decentralization – Thus, acompany in which a manager does not have to check at
all with hissuperior is more decentralized than one in which the manager mustget most of his
decisions approved beforehand;
e. The closer the level to which the decision is made in the relation tothe point where the
problem arise, the greater the decentralization; Suppose a customer in Maharashtra has a
problem, and the westerndivision manager is authorized to make the necessary decisions,
thento that extent the company is more decentralized than if the boss inthe New Delhi had to
make the decisions; and
f. The more important are the decisions that can be made at the lowerlevels, the greater the
decentralization.
Advantages of Decentralization
The merits of decentralization are listed below:
 It leads to a competitive climate in the organization.
 It relieves the management of much workload;
 It makes jobs at the lower levels of the organization more attractiveand interesting. As a
result, the level of motivation of the employeeincreases;
 It encourages initiative at lower levels where the employees areallowed to participate in the
decision-making process;
 Decision made closer to the actual situations is likely to be morerealistic. Effective decisions
are possible because of the speed andfirst-hand knowledge that decentralization provides.
Disadvantages of Decentralization

Page | 73
 It increases the administrative cost due to duplication of specializedservices and the
appointment of capable executives at lower levels;
 It becomes difficult for top management to exercise control overwhat people at lower levels
are doing or even to know whatdecisions they are taking;
 Emergency situations cannot be tackled properly in decentralizedstructure. Adjustment to
changing conditions may be difficult; and
 It hampers uniformity in decision making and consistency ofprocedures.
Decentralization Vs. Delegation
Though both delegation and decentralization are related concepts, but the distinction between the
two terms must be clearly understood. Decentralization could be differentiated from delegation
in the following way:
a. Delegation creates authority-responsibility relationship between asuperior and his
subordinates, whereas decentralization refers to thecreation of semi-autonomous decision-
making units or even profitcenters functionally related to the top management. In other
words,decentralization is diffusion of decision making authority throughoutthe multiple
layers of the organization;
b. Decentralization is simply not an extension of delegation. Thepurpose of delegation may be
confined to relieve the excessiveburden of key managerial personnel, but decentralization has
adeeper meaning bordering on a new philosophy of organization andmanagement;
c. Delegation is a process whereby the superior assigns certain tasksand responsibilities within
his control to his subordinates,immediately vests part of his decision-making authority in
them andprecisely it is an obligation from them for proper discharge ofauthority conferred
upon them and for effective performance in thearea of delegated activity. But, on the other
hand, decentralizationrefers to structural dispersal of authority for decision making invarious
facts of organizational operations.
d. Delegation takes place between a superior and a subordinate and is acomplete process. It may
consist of certain tasks alone. Butdecentralization involves spreading out the total decision-
makingpower throughout the organization.
e. Sheer pressure of managerial workload forces managers to delegatea part of their burden to
their subordinates, as a matter of necessarywith few alternatives. Decentralization, on the
other hand, could beonly one of the options open to an enterprise out of severalalternative

Page | 74
 ways of organizing expanding operations. This meansthat delegation of authority could take
place withoutdecentralization, whereas there can be no decentralization withoutdelegation of
authority.
f. In case of delegation of authority, the diligent has directiveresponsibility in relation to his
subordinates. But in a decentralized, direction is to a large extent substituted by control by
the topmanagement. The control mechanism is also elaborate so as toensure that the dispersal
of authority; and
g. Delegation could be a routine administrative activity involving onlymanagers and their
subordinates while decentralization is aconscious and deliberate organizational action with
strategyovertones, to manage growth and expansion under conditions ofenvironmental
pressures, challenges and opportunities.
4.8. Groups and Committees
A. Groups
Groups can be defined as a collection of individuals who share common goals, have a collective
identity and related to each other in a meaningful way. Random individuals on the street cannot
be regarded as a group; random individuals in a shopping center cannot be regarded as a group.
However, a collection of students who are studying for the same exam and exchanging ideas
between each other around a table can be regarded as a group. Employees join groups for four
main reasons; security, task achievement, social needs and power.
Table-6.1: Main Reason for Joining Groups
Being in a group gives a sense of security and confidence to employees.
Security Also the power of collective bargaining can balance the relationship
between employees and employer.
A group of employees have a better chance in taking organizational tasks
Task Achievement than individual by putting all their ability, skills and time together which
in return is likely to improve the efficiency and the quality of the outcome.
People are a social being and they have need for a sense of belonging.
Social Needs Social needs play an important role in employee motivation. Building
social relations at work improve communications and employee well-
being which in return increases employee motivation and job satisfaction.

Page | 75
 Groups have more power in enabling change than individuals. For
Power example an employee might not have a little chance in changing the
working conditions that are nor desirable, but if group of employees raise
the issue, the management is more likely to listen.
Group at work can be very powerful in influencing individual behaviors, beliefs and values.
Often individuals will be willing to compromise with their own satisfaction, ideas, norms,
values, beliefs, etc. for the benefit of the group. Thus, groups can exert control over their
members’ behaviors and this makes group leaders powerful individuals.
Types of Group
There are two types of group at work: Informal and Formal group.
 Informal Group: Emerge through the initiative of individuals who are trying to satisfy their
social needs (sense of belonging, support, friendship and development). It often forms
naturally among employees without the involvement of management. Membership for
informal groups is voluntary. A group of employees having tea together after lunch or
employees that form a book club are examples of informal groups. Informal groups are
essential in organizational life as people often feel happier and involved at work if they have
common interests with their colleagues.
 Formal Groups: Are the ones that are established by the management to carry out certain
organizational tasks. Membership to formal groups is not voluntary. It is the management
that decides to put employees in formal groups or to end their membership; employees have
very little choice on the matter. Once the desired organizational task is achieved, formal
groups are often dispersed, until the next time they are needed. Work committees are a good
example of formal groups. They are formed to command, supervise, create, or accomplish
projects or outcome of tasks. Work committees have members that are often put together
according to their seniority or expertise. Although some committees are permanent (e.g.
standing committees), they can be formed temporarily (e.g. ad-hoc committees or task
committees).
Whether in formal or informal groups individuals are expected to have certain roles. A role is an
expected or an attached behavior. In an informal group this expectation can stem from social or
psychological forces. For example; when the group agrees to go to pub often a member of the
group who has a senior role in the organization is expected to buy the drinks. In formal groups,
management has expectations from employees to have certain responsibilities over the duties of

Page | 76
the group. For example; some employees might be allocated to tackle the budgeting issues while
others are responsible for time-tabling of the project. Role conflict occurs when an employee is
given more than one role to fulfill. Firstly, the individual needs to prioritize and plan how much
time and effort to invest in each role. Secondly, the individual needs to decide which role to
perform at work.
Group Formation
There are various theories of how groups developed, but the most influential of all has been
Tuckman’smodel. According to his model, groups go through a number of stages before they can
be fully effective.
1. Forming:Is the first stage, where the groups come together and faces many uncertainties
with regards to its purpose, structures, and leadership and member’s roles. At this stage the
group does not have a clear strategy and group members do not know the norms and the
values of the group, which behaviors are acceptable and which ones are not. Group members
are anxious and do not trust each other; they are unwilling to reveal too much information
about themselves and keep their grounds up.
2. Storming: Is the next stage in group formation and the groups begins to work together to
solve the initial problems and settle any disagreements. Group members focus on resolving
conflicts about behaviors, roles and expectations. Sense of belonging and acceptance
emerges and some members began to show sign of leadership.
3. Norming:where members develop close relationships and set ground rules to keep the order.
A structure is also set to distribute various responsibilities to group members. This helps to
predict future group behaviors and activities. Initial feeling of unrest and uncertainty are
replaced by harmony and peace among group members and the groups become to work
together.
4. Performing:The togetherness of the group is obvious. The group is matured, trust and
commitment are established among the members, and they are concerned about working
towards accomplishing the goals of the group by working collectively. At this stage group
members have the desire to remain in the group and they are happy working under the
leadership of the group leader.The last stage is Adjourning; after accomplishing its goals or
after its members leave the group disbands. Ceremonies or rituals such as going out for a
meal or having speeches often mark the end of a group.

Page | 77
B. Committees
Committee is a group of people set up for a specific purpose. Committees can be convened on a
permanent or temporary basis. Committees may draw on persons from the same level in the
organizations (such as directors and senior management), or they may be composed of people
from different levels, whereby persons of different rank or status are brought together.
Types of Committee
At the most senior level, the Board of Directors is a committee established for a very specific
purpose. In turn, the board is likely to have;
 Standing Committee, such as finance, general purpose, lending and funding, and treasury
Standing committees are permanent with membership drawn from the Board supported by senior
executives where required.
 Special Committee, such as; recruitment and Benefits and information technology. These
tend to be convened for more specific purpose.
 Ad-hoc Committee, which are convened for one off matters such as regional reorganization
or purchase and development of a major new building. Many organizations have a
Management Committee, sometimes called an Executive Committee. This is the body which
will propose policy to the board and take overall responsibility for key business areas.
Membership of a committee will be drawn from executive (i.e. full-time) directors and those
senior managers who are heads of function but not on the board.
CHAPTER-FOUR: STAFFING AND ORGANIZATION

5.1. Definition of Staffing

The management function of staffing is defined as filling and keeping filled, positions created in
the organization structure. This is done by identifying workforce requirements, inventorying ,
selecting, placing ,promoting, appraising or developing job holders or candidates so that they can
be able to accomplish their tasks effectively. Consequently staffing is involved in human
resources management and it is utilize effectively employee’s talents in the attainment of
organizational objectives. For all this to be possiblethere are specific duties which have to be
performed.
5.2. The Procurement Function
Selection of a suitable candidate is the most important function of personnel department. If a
right candidate is not selected, such an error can prove to be very costly for an undertaking.

Page | 78
Many organizations, therefore, have developed sophisticated recruiting and selection methods.
Manpower planning must precede recruitment and selection. The present and future requirements
should also be kept in mind while planning for manpower. Recruitment is a positive process of
searching for prospective employees and stimulating them to apply for the jobs in the
organization. In simple words, the term recruitment stands for discovering the sources from
where potential employees will be available. The scientific recruitment leads to greater
productivity, better wages, high morale, reduction in labor turnover and better reputation. It
stimulates people to apply for jobs andhence it is a positive process.
Bases for Recruitment
 Job analysis means the breaking down of the main content of a job. That is the basic
activities that need to be performed bywhosoever is going to occupy that position.
Consequently, jobanalysis attempts to reveal the degree of skills and personalqualifications
needed to perform the task under consideration.
 Job description: Job description involves a written report which is based on job analysis. In
describing the job, the manager talksabout the expected outcome when the activities already
identified in the job analysis are carried out. It also involves comparing that job with other
jobs in other positions. Job title must also be given to the job because every position must
have a job title. Again job description will entrant showing what mental and physical skills
that will be needed to do the job.
 Job Classification: Job classifications involves the grouping together of several positions
into a single class and then assigncommon rates and benefits to all of them. As an
example,supervisors in personnel department, marketing department andfinance department
can be grouped together into one class andassigned the same rate. Of course the grouping
will be done by considering the qualification (s), job experience among otherfactors.
 Job specification, as the name implies, is to specify what manner of a man or woman that can
reasonably perform the task that hasbeen analyzed and described. It points out among others,
thespecial attributes that will be required to successfully do the job.
Sources of Recruitment
Basically there are two sources of recruitment namely internal and external sources:
1. Internal Sources

Page | 79
Best employees can be found within the organization. When a vacancy arises in the organization,
it is offered to an employee who is already on the pay roll. Internal sources include promotion
and transfer. When a higher post is given to an employee who deserves that post, it stimulates all
other employees of the organization to work hard. The employees can be informed of such a
vacancy by internal advertisement.
a. Transfer: Transfer involves the shifting of an employee from onejob to another. At the time
of transfer, it is ensured that the employeeto be transferred to the new job is capable of
performing it. In fact,transfer does not involve any drastic change in the responsibilitiesand
status of the employee.
b. Promotion:Many companies follow the practice of filling higherjobs by promoting
employees who are considered fit for suchpositions. Promotion leads toshifting an employee
to a higher position carrying higherresponsibilities, facilities, status and pay. Filling
vacancies in higher jobs from within theorganization has the following merits:
i. Improves morale: When an employee from inside theorganization is given the higher post, it
helps in increasing themorale of all employees. Generally every employee expectspromotion
to a higher post (carrying more status and pay) ifhe fulfills the requirements.
ii. No error in selection: When an employee is selected frominside, there is no possibility of
errors in selection since everycompany maintains complete record of its employees and
canjudge them in a better manner.
iii. Promotes loyalty: It promotes loyalty among the employeesas they feel secured on account
of chances of advancement.
iv. No hasty decision: The chances of hasty decisions arecompletely eliminated as the existing
employees are welltried and can be relied upon.
v. Economy in training costs: The existing employees arefully aware of the operating
procedures and policies of the organization. The existing employees require little trainingand
it results in the economy in training costs.
vi. Self-development: It encourages self-development amongthe employees since they can look
forward to occupy higherposts.
Disadvantages: The following are the disadvantages of internal sources:
a. It discourages capable persons from outside to join theconcern.

Page | 80
b. It is possible that the requisite number of persons possessingqualifications/experiences
skills/attitudes required for thevacant posts may not be available in the organization.
c. For posts requiring innovations and original thinking, thismethod of recruitment cannot be
followed.
d. If only seniority is the criterion for promotion then the personfilling the vacant post may not
be really capable. In spite of the disadvantages, this is frequently used as a source
ofrecruitment.
2. External Sources
Every enterprise has to tap external sources for various positions. Running enterprises have also
to recruit employees from outside for filling up positions whose specifications cannot be met by
internally available employees, and for meeting the additional requirements of manpower. The
following external sources of recruitment are commonly used by the enterprises:
a. Direct Recruitment: An important source of recruitment isdirect recruitment by placing a
notice on the notice board ofthe enterprise specifying the details of the jobs available. It
isalso known as recruitment at factory gate. The practice ofdirect recruitment is generally
followed for filling casualvacancies requiring unskilled workers. Such workers areknown as
casual or badly workers and they are paidremuneration on daily wage basis.
b. Unsolicited Applications: Many qualified persons apply foremployment to reputed
companies on their own initiative.Such applications are known as unsolicited applications.
Theyserve as a good source of manpower. A proper record may bekept of such applications
and the candidates may be called forinterview whenever the need arises. A country where
there is large scaleunemployment, unemployed persons also contact theemployment sections
of various organizations to ascertain ifthey can be casually employed. This source is very
useful forrecruiting unskilled workers. It does not involve any cost ofadvertising the
vacancies. Whenever regular workers absentthemselves in a large number or whenever there
is a rush ofwork, this source of recruitment may be used. This is thecheapest method of
getting labor supply on an adhoc basis.
c. Advertisements: Advertising the job has become a fashionof the day with the large scale
enterprises, particularly whenthe vacancy is for a higher post or when there are a
largenumber of vacancies. This helps in informing the candidatesspread over different parts
of the country. This method increases the choice of the management. The

Page | 81
 necessaryinformation about the company, job descriptions and jobspecifications may be
given in the advertisement itself for thebenefit of the candidates. Usually, this method brings
in aflood of response from quite unsuitable candidates. Thisincreases the cost of selection of
employees. Therefore,advertisement copy should be drafted in such a way that onlythe
suitable candidates are tempted to apply.
d. Employment Agencies: Employment exchanges run by theGovernment are regarded as a
good source of recruitment forunskilled, semi-skilled operative jobs. In some
cases,compulsory notification of vacancies to employmentexchange is required by law.
However, in the technical andprofessional areas, private agencies and professional
bodiesappear to be doing most of the work. Employment exchangesand selected private
agencies provide a nation-wide service inattempting to match personnel demand and supply.
Theybring the job givers in contact with the job seekers.
e. Education Institutions: Jobs in industry have becomeincreasingly varied and complexed to
the point where schooland college degrees are widely required. That is why, manybig
organizations maintain a liaison with the colleges,vocational institutes and management
institutes forrecruitment to various jobs. Recruitment from educationalinstitutions is a well-
established practice of thousands ofbusiness and other organizations. Organizations which
requirea large number of clerks or which seek applicants for apprenticeshipprograms usually
recruit from institutionsoffering vocational/professional courses.
f. LaborContractors:Labor contractors continue to be asource of recruitment in some
industries. Workers arerecruited through labor contractors who are themselvesemployees of
the organization. The disadvantage of thissystem is that if the contractor himself decides to
leave theorganization, all the workers employed through him mayfollow suit. This system of
recruitment is losing popularitythese days. It has been abolished in the public sector
enterprises.
g. Recommendations: Applicants introduced by existingemployees, friends and relatives may
prove to be a goodsource of recruitment. Indeed, many employers prefer to takesuch persons
because something about their background isknown. When a present employee or a business
friendrecommends a person, a type of preliminary screening takesplace. Some organizations
have agreements with the unionsof employees to give preference to close relatives of

Page | 82
 existingor retired employees if their qualifications and experience aresuited to the vacant
jobs.
Filling a vacancy from external sources has the following advantages:
a. The employees recruited under this system possess varied andbroader experience.
b. Under this system of recruitment, fresh viewpoints areattracted.
Filling a vacancy through external sources suffers from thefollowing disadvantages:
a. This system is more expensive. The concern has to makehuge expenditure on advertisement,
holding of written test,interview, training, etc.
b. This system of recruitment reduces incentive to good workamong the lower cadres.
c. This system of recruitment results in young men being placedover the older and more
experienced persons of the lowerservices. This causes among them more jealousy.
The Concept of Selection
The process of selection leads to employment of persons having the ability and qualifications to
perform the jobs which have fallen vacant in an organization. This process is more of 'rejection'
since more candidates may be turned away than are hired. That is why; selection is frequently
described as a negative process in contrast with the positive process of recruitment. Thebasic
purpose of the selection process is choosing right type of candidates to many various positions in
the organization. In order to achieve this purpose, a well-organized selection procedure involves
many steps and at each step more and more information is obtained about the candidates.

Stages in Selection Procedure

There cannot be a rigid procedure of selection suitable for all types of organizations. The number
of steps in the selection procedure and the sequence of steps vary from organization to
organization. For instance, some organizations do not hold preliminary interview, test or
screening, whereas in other organizations such as commercial banks, preliminary tests are given
to eliminate a large number of unsuitable applicants. Similarly, in some cases, medical
examination is given before final selection and in others, medical checkup follows final
selection. Thus, every organization designs a selection procedure which suits its requirements.
However, the main steps which could be incorporated in the selection procedure are discussed
below:

Page | 83
1. Preliminary Interview: In most of the organizations, the selection program begins with
preliminary interview or screening. Thepreliminary interview is generally brief and does the
job ofeliminating the totally unsuitable candidates. The preliminaryinterview offers
advantages not only to the organization, but also tothe applicants. If an applicant is
eliminated at this stage, theorganization will be saved from the expenses of processing
himthrough the remaining steps of the selection procedure and theunsuitable candidate will
be saved from the trouble of passingthrough the long procedure. Preliminary interview may
take placeacross the counter in the organization’s employment office. It mayconsist of a short
exchange of information with respect toorganization’s interest in hiring and the candidate's
enquiry. It mayserve primarily to determine whether it is worthwhile for theapplicant to fill
in an application blank. Candidates who pass thiscrude screening are usually asked to fill in
the application blank.
2. Receipt of Applications: Whenever there is a vacancy, it isadvertised or enquiries are made
from the suitable sources, andapplications are received from the candidates. Standard
application forms may be drawn up for all jobs and supplied to the candidates onrequest. The
application form is useful for several reasons. It gives apreliminary idea of the candidate to
the interviewer and helps him informulating the questions to be asked from the candidate.
Thewritten information about age, qualifications, experience, etc. mayprove to be of great
value to the interviewers. Forms make theprocessing of application very easy since there is
uniformity offilling the data in the application form.
3. Screening of Applications: After the applications are received,they are screened by the
screening committee and a list is preparedof the candidates to be interviewed. Applicants
may be called forinterview on some specific criteria like gender, desired age
group,experience and qualifications. The number of candidates to be calledfor interview is
normally five to seven times the number of posts tothe filled up.
4. Employment Tests: Employment tests are used to select personsfor various jobs. They help
in matching the characteristics ofindividuals with the vacant jobs so as to employ right kinds
ofpersonnel. The following types of tests have gained popularity thesedays :
a. Intelligence Tests: Intelligence tests are used to judge themental capacity of the applicant.
They evaluate the ability ofan individual to understand instructions and make decisions.They
are widely used in all types of organizations for thepurpose of proper selection.

Page | 84
b. Aptitude Tests:Aptitude means the potential which anindividual has for learning the skills
required to do a job efficiently. Aptitude tests measure an applicant's capacity andhis
potential of development. Aptitude tests are the mostpromising indices for predicting a
worker's success.
c. Proficiency Tests: Proficiency tests are designed to measurethe skills already acquired by the
individuals. They are alsoknown as performance, occupational or trade tests. They areused to
test the level of knowledge and proficiency acquiredby an applicant. A trade test takes a
sample of individual'sbehavior which is designed as replica of the actual worksituation such
as typing. A trade test should be differentiatedfrom the aptitude test. An aptitude test
measures thepotentials of the applicant to learn skills required on a job.
d. Interest Tests: Interest tests identify patterns of interest inthose areas in which the individual
shows special concern,fascination and involvement. These tests suggest what typesof jobs
may be satisfying to the employees. Interest tests aremore often used for vocational guidance.
e. Personality Tests:Personality tests probe for the qualities ofthe personality as a whole, the
combination of aptitude,interest and usual mood and temperature. It is very difficult todevise
and use personality tests because they are concernedwith discovering clues to an individual's
value system, hisemotional reactions, and maturity.
5. Interview:Although application blank and employment testsprovide a lot of valuable
information about the candidate, yetthey do not provide the complete set of information
required about the applicant. Hence, interview may be used to securemore information about
the candidate. The main purposes ofan employment interview are: (i) to find out the
suitability ofthe candidate, (ii) to seek more information about thecandidate, and (iii) to give
him an accurate picture of the jobwith details of terms and conditions and some idea
oforganization’s policies. The actual data of the applicant givenin the application form may
also be checked and moreinformation may be taken from the candidate. This occasionis also
utilized for testing the capability and personality of theapplicant. Thus, interview affords an
opportunity to develop aclear picture of the candidate.
6. Medical Examination: The pre-employment physical examinationor medical test of a
candidate is an important step in the selectionprocedure. Though in the suggested selection
procedure, medical testis located near the end, but this sequence need not be rigid.
Theorganizations may place the medical examination relatively early inthe process so as to

Page | 85
 avoid time and expenditure to be incurred on theselection of medically unfit persons. Some
organizations either placethe examination relatively early in the selection procedure or
theyadvise the candidates to get themselves examined by a medicalexpert so as to avoid
disappointment at the end. The objectives of physical examination are: (i) to ascertain
theapplicant's physical capabilities to meet the job requirements; (ii) toprotect the
organization against the unwarranted claims and(iii) to prevent communicable diseases
entering the organization.
7. Background Investigation: A referee is potentially an importantsource of information about
the candidate's ability and personality ifhe holds a responsible position in some organization
or has been theboss or employer of the candidate. Prior to final selection, theprospective
employer normally makes an investigation on thereferences supplied by the applicant and
undertakes more or less athorough search into the candidate's past employment,
education,personal reputation, financial condition, police record, etc. However,it is often
difficult to persuade a referee to give his opinion frankly.The organization may persuade him
to do so by giving an assurancethat all information will be treated as strictly confidential.
8. Final Selection:After a candidate has cleared all the hurdles in theselection procedure, he is
formally appointed by issuing him anappointment letter or by concluding with him a service
agreement.The appointment letter contains the terms and conditions ofemployment and pay
scale and other benefits associated with the job.
Induction and Placement
Induction:When an individual successfully clears all the steps involved in selection, he is
selected. Induction is concerned with the problem of introducing or orienting a new employee to
the organization. It consists of familiarizing new employees with their jobs, introduction with his
fellow workers, company policies etc. A good orientation program will leave the employee
firmly established in the new job, comfortable and relaxed in his relations with other members of
the department and content with his position in the firm.Though orientation takes a small amount
of time from productive activity, it repays the firm many times over in better personnel relations.
There are two phases of induction training program. The first phase is generally conducted by the
personnel department. It is concerned with giving the new employee a friendly welcome briefing
him in the matters concerned with the company's background, products, health and welfare plans.

Page | 86
He may be taken around the factory and introduced to the security officer, time keeper and
cashier.
The second phase of the induction program is conducted by the head of the department in which
he is to work. The employee is given information regarding production process, work rules,
working conditions etc. The employee is then informed about the customs prevalent in the
organization such as dress, lunch, refreshments, etc. Good induction is a good business for the
firm and a basic desire of most, if not all the new employees. If the new employee is allowed to
sink or swim, the adjustment period either is considerably lengthened with consequent losses in
productivity, or it is eliminated altogether by resignation, with consequent losses in turnover
costs.
Objects of Systematic Induction
a. To promote a feeling of belongingness and loyalty among theemployees.
b. To provide information to the employee regarding policies of theorganization.
c. To give information to the new employee as to leave rules, locationof canteen etc.
d. To build confidence in the new employee so that he can become anefficient worker.
A comprehensive induction program usuallycovers the following:
a. The company and its products.
b. The geography of the plant.
c. The structure of the organization and the functions of the variousdepartments.
d. Terms and conditions of employment, amenities and welfarefacilities available.
e. Standing orders including grievance and disciplinary procedures.
f. Accident prevention
g. Personnel policy and source of information.
h. Working routines and production
i. Employees own department and job and how it fits into the generalorganization.
j. Organizational culture and ethos
Placement:The candidates selected for appointment are to be offered specific jobs. There should
be a perfect matching of the requirements of the job and the abilities/skills of the employee
concerned. Only then effective placement will take place. In practice, right placement is not an
easy task. It may take a long time before a candidate is placed on the right job. Generally, the
candidate is appointed on probation of one year or so. During this period, he is tried on different

Page | 87
jobs. If his performance is satisfactory, he will be offered a permanent post and placed on the job
for which he is most suitable. He may need some training to do the job better. Therefore, his
training needs must also be identified during the probationperiod. If during the probation period,
an employee is not found suitable, the management may transfer him to some other job to which
he may be expected to do justice. But if the management cannot offer him a job which he can do
well, it may sack him or give him time and training to improve himself to do the job better.
5.3. Training and Development Function
After the selection of people for various jobs, the next function of staffing is to arrange for their
training and development. This is because a person, however carefully selected is not molded to
specifications and rarely meets the demands of his job adequately. Earlier, it was thought that the
training of personnel was unnecessary on the ground that the new employees would gradually
pick up all the particulars of the job. But as theprocesses and techniques of production are
becoming more and more complicated, it is being increasingly realized that the formal training is
important not only for new recruits but also for existing employees. Training function, in fact,
has become the corner stone of sound management.
Training is the act of increasing the knowledge and skills of an employee for doing a particular
job. Training involves the specific job. Its purpose is to achieve a change in the behavior of those
trained and to enable them to do their jobs better. Training makes newly appointed workers fully
productive in the minimum of time. Training is equally necessary for the old employees
whenever new machines and equipment are introduced and/or there is change in the techniques
of doing the things. In fact, training is a continuous process. It does not stop anywhere. The
managers are continuously engaged in training their subordinates. Training is different from
education. Training is the act of increasing the knowledge and skill of an employee for doing a
particular job. It is concerned with imparting specific skills for particular purposes. On theother
hand, education is a broader term concerned with increasing the general knowledge and
understanding of the employee's total environment. Thus, when we teach a person how to
assemble two objects and tighten a nut, we are training him to do a specific job but when we are
giving him a course in engineering, it is education. The distinction between the two is like the
distinction between applied and pure sciences.
Purpose of Training

Page | 88
Training is the act of enhancing the knowledge and skills of an employee for performing a
particular job. The main objective of training is to achieve a change in the behavior of the
trainees. In order to achieve this objective, any training program should try to bring positive
changes in:
 Knowledge  Skills. and  Attitudes.
An attempt to increase the knowledge of a trainee would help him knowfacts, policies,
procedures and rules and regulations pertaining to his job.An attempt to increase his skills would
help him learn technical and manualskills necessary to do his job efficiently. The training
program shouldalso mound the attitude of a worker towards other co-workers, supervisorand the
organization. It should also create in him a sense of responsibility,interest in his job and
appreciation of enterprise's goals and policies.
Benefits of Training
a. Benefits of Training to the Organization
The major benefits oftraining to the organization are discussed below:
1. Quick learning: Training helps to reduce the learning time to reachthe acceptable level of
performance. The employees need not learnby observing others and waste a long time if the
formal training program exists in the organization. The qualified instructors willhelp the new
employees to acquire the skills and knowledge to doparticular jobs within a short interval of
time.
2. Higher production: Training increases the skills of the employeein the performance of a
particular job. An increase in skills usuallyhelps increase in both quality and quality of
output. Training is alsoof great help to the existing employees. It helps them to increasetheir
level of performance on their present job assignments.
3. Standardization of procedures: With the help of training, the bestavailable methods of
performing the work can be standardized andtaught to all employees. Standardization will
make high levels ofperformance rule rather than the exception. Employees will
workintelligently and make fewer mistakes when they possess therequired know-how and
have an understanding of their jobs.
4. Less supervision: If the employees are given adequate training, theneed of supervision is
lessened. Training does not eliminate the needfor supervision, but it reduces the need for
detailed and constantsupervision. A well-trained employee is self-reliant in his workbecause

Page | 89
 he knows what to do and how to do. Under such situations,close supervision is ordinarily not
mandatory.
5. Economical operations:Trained personnel will be able to makebetter and economical use of
materials and equipment. Wastage willalso be low. In addition, the rate of accidents and
damage tomachinery and equipment will be kept to the minimum by the welltrained
employees.
6. Higher morale: The morale of employees is increased if they aregiven proper training. A
common objective of training program will mold employees' attitudes to achieve support for
organizational activities and to obtain better cooperation and greater loyalty. Withthe help of
training, dissatisfaction, complaints, absenteeism andturnover can also be reduced among the
employees.
7. Preparation of future mangers:Training can be used in spotting out promisingmen and in
removing defects in the selection process. It is better toselect and train from within the
organization rather than seek theskilled employees from the outside sources.
8. Better management: A manager can make use of training tomanage in a better way. To him
training the employees can assist inimproving his planning, organizing, directing and
controlling. Forinstance, maintaining higher standards of quality, building asatisfactory
organization structure, delegating authority andstimulating employees are all assisted by
effective training.
b. Benefits of Training to Employees: Training helps the employeesor workers in the following
ways :
1. Confidence: Training creates a feeling of confidence in the mindsof workers. It gives safety
and security to them at the workplace.
2. New skills: Training develops skills which serve as a valuablepersonal asset of the worker. It
remains permanently with the workerhimself.
3. Promotion: Training paves the way for promotion and self-development.
4. Higher earnings: By imparting skills, training facilitates higherremuneration and other
monetary benefits to the workers.
5. Adaptability: Training develops adaptability among workers. Theydon't worry when work
procedures and methods are changed.

Page | 90
6. Increased safety: Trained workers handle the machine safely.They also know the use of
various safety devices in the factory.Thus, they are less prone to industrial accidents.
Methods of Training
There are many methods of training. The method selected should be best suited to a specific
organization’s needs. The various factors generally considered for selecting a method include -
skills required, qualifications of candidates, cost, time available, depth of knowledge required
etc. Thefollowing methods are usually employed for training:
1. On the Job Training
Under this method an employee is instructed by some experienced employee, a special instructor
or supervisor. The success of this type of training depends on the qualified trainers. Usually
training in crafts, trades, and technical areas is given by keeping the unskilled or semi-
skilledworker under the guidance of some skilled workers. The increasing labor costs in industry
have made it essential that even the simplest job should be carried out in a most economical
manner. Therefore, training in improved methods can be given to the new employees. This
method of training proved to be a great success. However, its success largely depends on the
trained instructor otherwise the quality of his trainees will be very poor.
Advantages
a. The workers learn the job in actual conditions rather than theartificial conditions. It motivates
employees to learn.
b. It is less expensive and consumes less time.
c. The training is under the supervision of supervisors who take keeninterest in the training
program.
d. The production does not suffer under this method.
e. The trainee learns rules and regulations while learning the job.
f. It takes less time as skill can be acquired in a short period.
Limitations
a. The training is highly disorganized and haphazard.
b. The supervisor may not be in a position to devote time and hencefaulty training may take
place.
c. The experienced trainers may not be available
d. There is a lack of motivation on the part of the trainee to receivedtraining.

Page | 91
2. Apprentice Training
In many industries such as metal, printing and building construction, this system of training is
widely in use. The apprentice training may last for four to five years. The worker is usually
absorbed by the concerned industry after training period is over. They get practical knowledge
on the job and theoretical knowledge in the classroom lecture. The workers get some stipend
during their training period. It is the oldest and most common method of training in creates,
trades and technical areas. The standards fixed in apprentice training are slightly rigid. The
mechanical apprentice program in an organization, for example, may take four years. Progress
reports are periodically submitted. Like other employees, an apprentice is also entitled to bonus,
vacation and other facilities.
Advantages
a. Trainees receive some stipend during training
b. The trainees get valuable skill which carries good demand in themarket.
c. From employer's point of view, it is cheap source of labor and inaddition a skilled work
force is maintained.
d. It reduces labor cost and production cost as labor turnover is verylow.
e. The loyalty of the employees is increased.
Limitations
a. The training period is very long and the trainee requires regularsupervision which may not be
given.
b. Rigid standards make this method unsatisfactory.
c. If a worker fails to learn after long period of training he may not beabsorbed. This may create
labor problem in the firm.
d. It is an expensive method.
3. Vestibule Training (Training Centre Training)
Vestibule means a passage or room between the outer door and the interior of a building. In order
to reach the inner of a house, one must pass from vestibule. Under vestibule training, workers are
trained on special machines in a separate location i.e. classrooms. The vestibule school is run by
the personnel department. Training is given in artificial conditions which are just like the real life
situations. The supervisor is relieved of training the new employees. He can concentrate on his

Page | 92
other important assignments such as quality and quantity of output. This method is followed
when the number of persons to be trained is very large.
Advantages
a. The trainer is a specialist and possesses specialization in teaching.
b. Since the training is given off the job, trainees can concentrate onlearning.
c. The Instructor can give individual attention as he has no other workassigned to him.
d. The employee learns the job in a short time.
Disadvantages
a. Training is given under artificial conditions; hence the worker maynot adjust when he is put
on actual job.
b. It is expensive method as duplicate equipment is required.
c. If demand for workers is uneven, vestibule school may remainunused for a considerable
time.
d. Splitting of responsibilities may lead to organizational problems.
4. Internship Training
In this method of training students get practical training while they study. A proper liaison is
established between the technical institutions and business houses where students are sent during
their vacations. Thus, there is a balance between theory and practice and students get practical
knowledge while studying. The chief drawbacks of this method are :
a. It can be used for training only of skilled and technical workers.
b. The time taken is usually long.
Concept of Development
Executive or management development is a continuous process of learning and growth designed
to bring behavioralchange among the executives. It implies that there will be a change in
knowledge and behavior of the individuals undergoing development program. The individual
will be able to perform his present assignment better and also increase his potential for future
assignments through the acquisition, understanding and use of new knowledge, insights and
skills. The learning process involves the implication that there will be changed behavior on the
part of the individuals given the adequate training and education. Managers develop not only by
participating in formal courses of instruction drawn by the organization, but also through actual
job experience in the organization. It should be recognized that it is for the organization to

Page | 93
establish the developmental opportunities for its managers and potential managers. But an equal,
perhaps more important, counterpart to the efforts of the organization are those of the
individuals. Self-development is an important concept in the whole program of management
development.
Need and Importance of Development
There is a shortage of trained managers. This shortage is felt particularly during the large scale
expansion of the volume of activities of the organization. It is very difficult to appoint the
persons to man various managerial jobs from the labor markets. The organization has to develop
the talented employees and maintain an inventory of executive skills tomeet the future demands.
Obsolescence of managerial skills is another factor which calls for continuous executive
development. Executive development is not a 'one-shot' affair; it must continue throughout an
executive's career. Otherwise, an executive of yesterday will not be acceptable today and an
executive of today will not be good enough for the future. Therefore, in order to be dynamic and
to change himself according to the needs, a manager must continuously update himself to
successfully meet new challenges as they occur. The performance of a company depends upon
the quality of its managers. Companies with similar raw materials, equipment and technical
know-how show different results because of the quality of their executives. Quality of
management explains the difference in price policy, inventory policy, production policy,
marketing policy and labor policy of the organization. Thus, better the management, better are
the results of the organization. Executive development, therefore, is of paramount importance to
haveeffective and desired managerial talents to meet the organization’s demands.
Objectives of Management Development
The objectives of management development are as follows:
a. To prevent managerial obsolescence by exposing the managers tonew concepts and
techniques in their respective fields ofspecialization.
b. To ensure adequate managerial talent for the long-term survival andgrowth of the company.
c. To develop a second line of competent managers for futurereplacements.
d. To provide opportunities to the managers to reach their maximumcapabilities and to fulfill
their career expectations.
e. To ensure that managerial resources of the organization are properly and fully utilized.
Methods of Management Development

Page | 94
A large variety of methods of management development have come into prominence these days.
These methods can be classified into two broad categories, namely, (a) on-the job methods; and
(b) off-the job methods as follows:
a. On-the Job Methods: In internal facilities or ion-the-job facilitiesbe included the practices
and facilities given by the enterprise withinthe organization. Every good concern tries to
provide internaldevelopment and training facilities to its managers or executives.On-the-job
methods include (i) Experience, coaching andunderstudy, (ii) Position rotation, (iii) Special
projects and taskforces, and (iv) Committee assignments.
b. Off-the-Job Methods: Off-the-job methods include the externalfacilities which are also of
two types; firstly for those new entrantswho want to tap management as their carrier, and
secondly, juniorand middle level managers to equip them with higher skills, andtechniques in
management. The former type of training is providedby various universities and institutions
running M.B.A. programs.For junior executives various external facilities are provided by
thebusiness houses. Off-the-job methods include (i) Special courses orclasses (ii) Role
playing. (iii) Sensitivity training. (iv) Structured insight.(v) Stimulation. (vi) Conference
training (vii) Multiple management.(viii) Special meetings.
A. On-the-Job Methods
1. Experience, Coaching and Understudy:Learning by experience cannot and should not be
eliminated as a method of development.The executives may have any title while learning. An
understudymay be assistant to someone; or special assistant to someone or anyof the regular
supervisory or executive positions developing upon hisspecial assignment. He may be
assigned as an understudy solely fortraining, or he may be assigned as a staff man or line
assistant to abusy executive who really needs his help. The understudy may haveregular
duties for which he is solely responsible. Thus, he learns byexperience, observation, guidance
and coaching. This is a goodmethod for new entrants, promoters and management trainees.
2. Position Rotation: The objective of position rotation method is thebroadening of the
background of trainee in the organizations. If anexecutive is rotated periodically from one job
to another job, heacquires a general background. The main advantages of positionrotating
are: provision of general background in all functional areasof the business, training in actual
situation and competition amongthe rotating trainees. Due to rapid specialization, this
technique hasbecome less effective and less useful.

Page | 95
3. Special Project: Under special project method, an executive isassigned a project that is
closely related to the objectives of hisdepartment. For example, a trainee may be asked to
develop asystem of cost control in the execution of an order. He will study the problem and
make recommendations upon it. This project wouldalso help in educating the trainee about
the importance of cost andthe organizational relationships with the accounting and
otherdepartments. Thus, he acquires knowledge of allied subjects also.
4. Committee Assignment or Multiple Management: Under thismethod an adhoc committee is
constituted. It is to discuss a subjectand make recommendations. It is assigned objectives
andresponsibilities related to work of the organization. It makes a studyof the problem and
presents its suggestions to the departmentalmanager. Committee assignment may provide the
necessary generalbackground to the trainees because every member of the committeegets a
chance to learn from others. It is an important device ofeducating the executives to acquire
general background and tochange their behavior towards the selected problem.
B. Off-the-Job Training Methods
1. Special Courses: The executives are required to attend specialcourses formally organized by
the enterprise with the help of expertsfrom educational institutions. The executives may also
be sponsoredto attend the courses to be conducted by management institutions.This method
is popular these days. However, due to high fee onlythe big enterprises may send their
executives to the managementdevelopment courses run by management institutions.
2. Role Playing: Under role playing method, a conflict situation isartificially created and two or
more trainees are assigned differentparts to play. The role players are provided with either a
written ororal description of a situation and the role they are to play. They areallowed
sufficient time to plan their actions. They must act out their parts spontaneously before the
class. For instance, a role playingsituation may be a supervisor discussing a grievance with
anemployee or a salesman making a presentation to a purchasing agent.Role playing is used
for human relations and leadership training. Itaims to give trainees an opportunity to learn
human relation skillsthrough practice and to develop insight into one's own behavior andits
effect upon others. Thus, its objective is very narrow. It may beused in human relations
training and sales training as both theseinvolve dealing with other people. There are various
advantages of Role Playing. Firstly, it provides anopportunity for developing human
relations, understanding and skillsand to put into practice the knowledge they have acquired

Page | 96
 from textbooks, lectures, discussions, etc. Secondly, the interview may betaped to provide the
trainees a chance to listen to their performanceand note their strengths and weakness. Lastly,
knowledge of resultsis immediate, because the trainees as well as the listeners analyze
thebehavior of the role players.
3. Case Study: It is a means of simulating experience in theclassroom. The trainees may be
given a problem to discuss which ismore or less related to the principles already taught. He is
given anopportunity to apply his knowledge to the solution of realisticproblems. Cases may
use in following ways:
a. They can be used subsequent to the exposition of formaltheory under which the trainees
apply their knowledge oftheory to specific situations.
b. The trainees may be assigned to cases for written analysis andoral class discussion without
any prior explanation of pertinent concepts and theory. The case study places heavydemands
upon the trainees. It requires that they should have agood deal of maturity and background in
the subject matterconcerned.
Case studies are extensively used in teaching law, personnelmanagement, human relations,
marketing management and businesspolicy in various educational institutions. Students learn
that there isno single answer to a particular problem. The answer of each traineemay differ.
Case discussions will help them to appreciate eachother's thinking. That is why; case studies
are frequently used insupervisory and executive training in business.
4. Conference Training: A conference is a group meeting conductedaccording to an organized
plan. The members seek to developknowledge and understanding by obtaining a considerable
amount oforal participation. It is an effective training of both conferencemembers and
conference leader. As a member, a person can learnfrom others by comparing his opinions
with those of the others. Helearns the effect of closely controlling and dominating the
discussionas compared to adopting a more then participants understand howgroups actually
work and give them a change to discover how theyare interpreted by others. Sensitivity
training aims at increasingtolerance power of the individual and his ability to
understandothers. The sensitivity training programs are generally conductedunder controlled
laboratory conditions.
5.4. Maintenance and Utilization
A. Remuneration/Salaries and Wages Administration

Page | 97
Adequate salaries and wages should be given as part of remuneration
package to the employees. Due to sentiments and emotions commonly
attached to salaries and wages. Consequently, trade union members are
involved in working out what should be a living wage for the employees.
Remuneration can be worked out through hourly rate, piece rate or a
combination of the two or any other acceptance basis. Whichever method
that is employed, the outcome should be fair and the amount similar to what
is paid to other employees in similar organizations.Compensation systems in
organizations must be linked to organizational objectivesand strategies, as the opening discussion
of Bayer Corporation indicates. But compensation also requires balancing the interests and costs
of the employer with the expectations of employees.A compensation program in an organization
should have four objectives:
a. Legal compliance with all appropriate laws and regulations
b. Cost effectiveness for the organization
c. Internal, external, and individual equity for employee
d. Performance enhancement for the organization
For employers, compensation costs must be at a level that both ensures
organizationalcompetitiveness and provides sufficient rewards to employees for theirknowledge,
skills, abilities, and performance accomplishments. Balancing thesefacets so that the employer
can attract, retain, and reward the performance ofemployees requires considering several types of
compensation.Rewards can be both intrinsicand extrinsic. Intrinsicrewards often include
praisefor completing meeting some performance objectives. Other psychological and social
effects of compensation reflect the intrinsic type of rewards. Extrinsicrewards are tangible,
having the form of both monetary and nonmonetary rewards. Tangible components of a
compensation program are of two general types with the direct type of compensation, monetary
rewards are provided by the employer. Base pay and variable payare the most common formsof
direct compensation.
Base Pay:The basic compensation that an employee receives, usually as a wage or salary, is
called base pay. Many organizations use two base pay categories, hourlyand salaried, which are
identified according to the way pay is distributed and the nature of the jobs. Hourly pay is the
most common means of payment based on time; employees who are paid hourly are said to

Page | 98
receive wages, which are payments directly calculated on the amount of time worked. In
contrast, people who are paid salariesreceive payments that are consistent from period to period
despite the number of hours worked. Being salaried typically has carried higher status for
employees than being paid wages. Some organizations haveswitched to an all-salaried approach
with their manufacturing and clericalemployees in order to create a greater sense of loyalty and
organizational commitment.
Variable Pay:Another type of direct pay is variable pay, which is compensation linked directly
to performance accomplishments. The most common types of variable pay for most employees
are bonuses and incentive program payments. For executives, it is common to have longer-term
rewards such as stock options.
Benefits:Many organizations provide numerous extrinsic rewards in an indirect manner. With
indirect compensation, employees receive the tangible value of the rewards without receiving the
actual cash. A benefitis an indirect reward, such as health insurance, vacation pay, or retirement
pensions, given to an employee or group of employees as a part of organizational membership.
Health-Care Benefits: Employers provide a variety of health-care and medical benefits, usually
throughinsurance coverage. The most common plans cover medical, dental, prescription
drug,and vision-care expenses for employees and their dependents. Basic healthcareinsurance to
cover both normal and major medical expenses is highlydesired by employees. Dental insurance
is also important to many employees.Many dental plans include orthodontic coverage, which is
usually very costly.

B. Staff Welfare
This is ensured by maintaining all safety regulations and factory rules aswell as office rules.
Safety is also ensured by retaining the services of amedical doctor for quick reference of and
attention to the sick. There isalso the need for social welfare which involves providing
recreationalfacilities, meal subsidy among others.
Severance pay:is a security benefit voluntarily offered by employers to employees who lose their
jobs. Severed employees may receive lump-sum severance payments if their employment is
terminated by the employer. For example, if a facility closes because it is outmoded and no
longer economically profitable to operate, the employees who lose their jobs may receive lump-
sum payments based on their years of service. Severance pay provisions often appear in

Page | 99
union/management agreements and usually provide larger payments for employees with longer
service.
Retirement Benefits and Age Discrimination: As a result of a 1986 amendment to the Age
Discrimination in Employment Act(ADEA), most employees cannot be forced to retire at any
age. As a result, employershave had to develop different policies to comply with these
regulations.Inmany employer pension plans “normal retirement” is the age at
whichemployeescan retire and collect full pension benefits. Employers must
decidewhetherindividuals who continue to work past age 65 should receive the
fullbenefitspackage, especially pension credits. As possible changes in Social
Securityincreasethe age for full benefits past 65, these policies likely will be modified.
Social Security:The Social Security Act of 1935, with its later amendments, established a
systemproviding old age, survivor’s, disability, and retirement benefits. Administered by
thefederal government through the Social Security Administration, this programprovides benefits
to previously employed individuals. Employees and employersshare in the cost of Social
Security through a tax on employees’ wages or salaries.
Financial Benefits: Financial benefits include a wide variety of items. A credit unionprovides
savingand lending services for employees. Purchase discountsallow employees to buygoods or
services from their employers at reduced rates. For example, a furnituremanufacturer may allow
employees to buy furniture at wholesale cost plus 10%,or a bank may allow use of a safe deposit
box and free checking to itsemployees.
Employee thrift, saving, or stock-investment plans may be made available. Some employers
match a portion of the employee’s contribution. These plans are especially attractive to executive
and managerial personnel. To illustrate, in a stock purchaseplan, the corporation provides
matching funds equal to the amount invested by the employee to purchase stock in the company.
In this way,employees can benefit from the future growth of the corporation. Also, it ishoped that
employees will develop a greater loyalty and interest in the organization and its success.
Financial planning and counselingare especially valuable to executives, who may need
information on investments, tax shelters, and comprehensive financial counseling because of
their higher levels of compensation. These financial planning benefits likely will grow as a
greater percentage of workers approach retirement age.Numerous other financial-related benefits

Page | 100
may be offered as well. These include the use of a company car and company expense accounts
and assistance in buying or selling a house when an employee is transferred.
Other Insurance Benefits: In addition to health-related insurance, some employers provide other
types ofinsurance. These benefits offer major advantages for employees because manyemployers
pay some or all of the costs. Even when employers do not pay any ofthe costs, employees still
benefit because of the lower rates available throughgroup programs.
a. Life Insurance:It is common for employers to provide life insurance foremployees. Life
insurance is bought as a group policy, and the employer pays allor some of the premiums, but
the level of coverage is usually low and is tied tothe employee’s base pay. A typical level of
coverage is one-and-a-half or two timesan employee’s annual salary. Some executives may
get higher coverage as part ofexecutive compensation packages.
b. Disability InsuranceOther insurance benefits frequently tied to employee paylevels are
short-term and long-term disability insurance. This type of insurance providescontinuing
income protection for employees who become disabled and unableto work. Long-term
disability insurance is much more common becausemanyemployers cover short-term
disability situations by allowing employees toaccruethe sick leave granted annually.
c. Legal Insurance:Legal insurance is offered as a benefit through some employers,often as
part of cafeteria benefit plans, which let workers choose from manydifferentbenefits. Legal
insurance plans operate in much the same way healthmaintenanceorganizations do.
Employees (or employers) pay a flat fee or a setamounteach month. In return, they have the
right to use the serviceof a networkof lawyers to handle their legal problems.
Educational Benefits: Another benefit used by employees comes in the form of educational
assistance topay for some or all costs associated with formal education courses and degree
programs,including the costs of books and laboratorymaterials. Some employerspayfor schooling
on a proportional schedule, depending on the grades received;otherssimply require a passing
grade of C or above.
Social and Recreational Benefits: Some benefits and services are social and recreational in
nature, such as bowlingleagues, picnics, parties, employer-sponsored athletic teams,
organizationallyowned recreational lodges, and other sponsored activities and interest groups.
Asinterest in employee wellness has increased, more firms have begun to providerecreational
facilities and activities. But employers should retain control of allevents associated with their

Page | 101
organizations because of possible legal responsibility.The idea behind social and recreational
programs is to promote employee happinessand team spirit. Employees mayappreciate this type
of benefit, butmanagers should not necessarily expect increased job productivity or job
satisfactionas a result. Other such benefits too numerous to detail are made available by various
employers as well.
Family-Care Benefits: The growing emphasis on family issues is important in many
organizations formany workers. But as the HR Perspective indicates, those employees
withoutfamilies are feeling some resentment against those who seem to get special
privilegesbecause they have families.
a. Adoption Benefits: Many employers have had maternity and paternity benefits for
employees who give birth to children. In the interest of fairness, a growing number of
organizations provide benefits for employees who adopt children. In comparison to those
giving birth, a relatively small number of employees adopt children, but there is a fairness
issue that employers have addressed by providing adoption benefits.
b. Child Care:Balancing work and family responsibilities is a major challenge foroften
experience difficulty in obtaining high-quality, affordable child care.Employers are
addressing the child-care issue in several ways. Some organizationsprovide on-site day-care
facilities. Relatively few such facilities have beenestablished,primarily because of costs and
concerns about liability and attractingsufficient employee use. However for a number of
firms, providing on-site childcarehas had a positive impact on employees who use the
service.Having on-sitechild care also has been an advantage in recruiting workers in tight
labor markets.Other options for child-care assistance include:are having to change some
benefitsto allow childless workers to usemore flexible schedules and allowsalaried
employees to take additionaltime off. Of course, if thatdoesnot work, one childless
workersuggestsputting a picture of a smallchildon his desk and pretending totakeoff when he
wants to in order tocarefor his “child.” Obviously,thisparticularexample raises
ethicalconcerns,but the broader ethicalandmoral issues of benefits “discrimination”against
childless workerswill grow in the future, at leastuntilchildless workers face
eldercareproblems.
 Providing referral services to aid parents in locating child-care providers
 Establishing discounts at day-care centers, which may be subsidized by theemployer

Page | 102
  Arranging with hospitals to offer sick-child programs partially paid for by theemployer
 Developing after-school programs for older school-age children, often in conjunctionwith
local public and private school systems
c. Elder Care: Another family-related issue of growing importance is caring forelderly
relatives. Various organizations have surveyed their employees and foundthat as many as
30% of them have had to miss work to care for an aging relative.The responsibilities
associated with caring for elderly family members have resultedin reduced work
performance, increased absenteeism, and more personalstressfor the affected employees.One
study estimated that lost productivity and absenteeism by workers caringfor elders costs
employers at least $29 billion per year.Some responses by employershave included
conducting needs surveys,providing resources,and givingreferralsto elder-care providers.
Some employers provide eldercareassistancethroughcontracts with firms that arrange for
elder care for employee’srelativeslocatedin other geographic locales.
Time-Off Benefits: Employers give employees paid time off in a variety of circumstances. Paid
lunchbreaks and rest periods, holidays, and vacations are the most well-known. Butleaves are
given for a number of other purposes as well. Time-off benefits are estimatedto represent from
about 5% to 13% of total compensation. Some of the morecommontime-off benefits include
holiday pay,vacation pay,and leaves of absence.
a. Holiday Pay: Most, if not all, employers provide pay for a variety of holidays. Other
holidays are offered to some employees through laws or union con-tracts. As an abuse-
control measure, employers commonly require employees towork the last scheduled day
before a holiday and the first scheduled workday aftera holiday to be eligible for holiday
pay.Some employers pay time-and-a-halftohourly employees who must work holidays.
b. Vacation Pay:Paid vacations are a common benefit. Employers often use graduated vacation
timescales based on employees’ length of service.Some organizations allowemployeesto
accumulate unused vacation. A growing number of companies areallowingemployees to
“buy” additional vacation or let them sell unused vacationbackto employers. About 25% of
all surveyedfirms permit such options.Aswith holidays, employees often are required to work
the day before and the dayafter a vacation.
c. Leaves of Absence: Leaves of absence,taken as time off with or without pay, are given for a
variety ofreasons. All of the leaves discussed here add to employer costs even when they

Page | 103
 areunpaid, because usually the missing employee’s work must be covered, either byother
employees working overtime or by temporary employees working undercontract.
C. Performance Appraisal
Performance appraisal is the process ofevaluating the performance and competencies of the
employees in termof the requirements of the job for which he is employed, for the purposeof
administration including placement, selection for promotions,providing financial rewards and
other actions which require differentialtreatment among the members of a group as distinguished
from actionaffecting all members equally. Performance appraisal may also be defined as any
procedure thatinvolves (i) setting work standard (ii) assessing the employees actualperformance
relative to these standards (iii) providing feedback toemployee with the aim of motivating that
person to eliminateperformance deficiencies or to continue to perform above par.
Uses of Performance Appraisals
a. Performance improvement: Performance feedback allows theemployee, the manager and
personnel specialists to intervene withappropriate actions to improve performance.
b. Compensation adjustments:Performance evaluations helpdecision makers determine who
should receive pay raises. Manyfirms grant part or all of their pay increases and bonuses on
thebasis of merit, which is determined mostly through performanceappraisals.
c. Placement decisions: Promotions, transfers, and demotions areusually based on past or
anticipated performance. Oftenpromotions are a reward for past performance.
d. Training and development needs:Poor performance mayindicate a need for retraining.
Likewise, good performance mayindicate untapped potential that should be developed.
e. Career planning and development: Performance feedbackguides career decisions about
specific career paths one shouldinvestigate.
f. Staffing process deficiencies: Good or bad performance impliesstrengths or weaknesses in
the personnel department’s staffingprocedures.
g. Informational inaccuracies: Poor performance may indicateerrors in job analysis
information, human resource plans, or otherparts of the personnel management information
system. Relianceon inaccurate information may lead to inappropriate hiring,training, or
counseling decisions.
h. Job-design errors: Poor performance may be a symptom of ill-conceivedjob designs.
Appraisalshelp diagnose these errors.

Page | 104
i. Equal employment opportunity: Accurate performanceappraisals that actually measure job-
related performance ensurethat internal placement decisions are not discriminatory.
j. External challenges: Sometimes performance is influenced byfactors outside the work
environment, such as family, financial,health, or other personal matters. If these factors are
uncoveredthrough appraisals, the human resource department may be able toprovide
assistance.
k. Feedback to human resources:Good or bad performancethroughout the organization
indicates how well the humanresource function is performing.
Methods of Performance Appraisal
The previous section described the appraisal process in general terms.We now want to move
from the general to the specific. In this section,we will look at how management can actually
establish performancestandard and devise instruments that can be used to measure andappraise
an employee’s performance. There are a lot of methods toappraise the employees. No one
approach is always best. Each has its strengths and weaknesses. Following are the some of the
standardmethods used by the organizations to measure the performance.
1. Graphic Rating Scale
The graphic rating scale is the simplest and most popular technique forappraising the
performance. It consists of typical rating scale. It liststraits (such as quality and reliability) and
arrange of performance values(from unsatisfactory to outstanding) for each trait. The
supervisor’srates each subordinate by circling or checking the score that bestdescribes his or her
performance for each trait. The assigned value forthe traits is then totaled.
The rating method is easy to understand and easy to use. It permits thestatistical tabulations of
scores in terms of measures of centraltendency, skewness and dispersion. It permits a ready
comparison of scores among employees. The scorespresumably reveal the merit or value of
every individual. However, thismethod has certain drawbacks also. There is a disadvantage that a
highscore on one factor can compensate for a low score on another. If a manscores low for
quantity of work, this may be counter-balanced by highscores for attendance, attitude,
cooperativeness etc. In practice, ratingtends to cluster on the high side with this system.
2. Ranking Method
One of the simplest methods of performance appraisal is ranking method.The supervisor
evaluates all the subordinates under him on an overallbasis and then rank orders them from

Page | 105
exceptional to poor. Each rank indicates the position of an employee in relation to others under
thesame supervisor. In case these employees have worked under severalsupervisors each one of
these supervisors ranks them according to hisown assessment. Finally, all the ranks are grouped
to see which one of the employees is rated low.
3. Paired Comparison Method
Pair comparison force raters to compare each employee with all theemployees in the same group
who are being rated. For every trait(quantity of work, quality of work and so on) every
subordinate ispaired with and compared to every other subordinate. Suppose there are five
employees to be rated. In the paired comparisonmethod one can make chart, as in following
Figure, of all possible pairsof employees for each trait. Then for each trait indicate. (With a + or
who is the better employee of the pair. Next the number of items anemployee is rated better is
added up.
4. Forced Distribution Method
Some appraisers suffer from the constant error, i.e. they either rate allworkers as excellent,
average or poor. They fail to evaluate the poor,average or excellent employees clearly and cluster
them closely arounda particular point in the rating scale. The forced distribution system isdevised
to force the appraiser to fit the employees being appraised intopredetermined ranges of scale.
The forced distributor system is applicable to a large group ofemployees. This system is based on
the presumption that all employeescan be divided into five point scale of excellent, very good,
average,acceptable and poor.
5. Checklist Method
In the checklist, the evaluators use a list of behavioral descriptions andcheck-off those behaviors
that apply to the employees. The evaluator merely goes down the list and gives‘yes’ or ‘no’
responses. Once a checklist is complete, it is usually evaluated by the staff ofpersonnel
department, not the manager doing the checklist. Therefore,the rater does not actually evaluate
the employee’s performance. Hemerely records it. An analyst in the personnel department then
scoresthe checklist, often weighting the factors in relationship to theirimportance. The final
evaluation can then be returned to the ratingmanager for discussion with the subordinate, or
someone from thepersonnel department can provide feedback to the subordinates.
6. Critical Incident Appraisal

Page | 106
With the critical incident method, the supervisor keeps a log ofdesirable or undesirable examples
or incidents of each subordinateswork related behavior. Then every six months or so, the
supervisor andsubordinates meet and discuss the latters’ performance using thespecific incidents
as examples. This method can always be used to supplements other appraisal techniques and in
that role it has several advantages. It provides youwith specific and hard facts for explaining the
appraisal. It ensures youto think about the subordinates’ appraisal all during the year becausethe
incidents must be accumulated. Keeping a running list of criticalincidents should also provide
concrete examples of what especially yoursubordinate can do to eliminate any performance
deficiencies.
7. Behaviorally Anchored Rating Scales (BARS)
This method assists upon accurate measurement and improvement of jobperformance through
feedback to appraisees. It provides statements ofstandards against which the performance of an
appraisee is evaluated.These standards are put on the scales in BARS. There is one scale foreach
significant broad performance area or job dimension. Whiledeveloping BARS, small group
discussions are conducted with would-beappraisers and appraisees with a view to identifying the
significantdimensions of a job which need to be evaluated. Different jobdimensions identified in
this way tend to form varied behaviorallyanchored scales. For example, for a managerial
position, the significantjob dimensions may include: planning, organizing, controlling,leadership,
motivation, communication and coordination. Frequently, the scale is presented vertically with
“excellent”performance at the top and “very poor” performance at the bottom.There are a
number of scale points ranging between five and nine inbetween these two extremes. Suppose,
five job dimensions have been identified in a particular job. There will be five scales in the
appraisalformat, each having several anchors illustrating varied amounts ofperformance along
the scales. These scales may also embody statementsto facilitate the clarity of the job dimension
being evaluated. To cite an example of BARS for the position of an equipment operator-one
jobdimension in this position is verbal communication. The excellentperformance on this scale
may contain the following statements: checksverbal instructions against written procedures,
checks to ensure he/sheheard others correctly, brief replacements quickly and accurately, giving
only relevant information. On the other hand, a very poorperformance on this scale may contain
the following statements: notanswers when called, refuses to brief replacements, gives a
personrelieving him/her inaccurate information deliberately. The appraiser isrequired to indicate

Page | 107
on each scale the level of performance he/shevisualizes is revealed by the appraisee’s typical job
behavior. Whiledoing so, he/she makes use of the behavioral anchors and dimensions,
clarification statements as guidelines and cues to recall the appraisee’sjob behavior. Explicitly, it
is not possible for the appraisers to placebehavioral statements embracing all dimensions of job
performance onthe scales. Therefore, they merely indicate specific behavioralexamples which
can be recalled for each appraisee at appropriate levelson the scale. In this way, these added
anchors represent their ownexamples and rationale for an appraisal at a particular level.
BARS are useful for varied reasons. Their major characteristic relates tobehavioral orientation.
They are based on job behavior, whatindividuals really do on their jobs, which is within their
control.Attachment of behavioral anchors to different scales enables theappraisees to understand
what they must do to organizing the dimension of a managerial job may include the following:
assigns/delegates tasks,identifies alternative approaches to resource applications,
coordinateshuman, financial and material resource applications and divides unitobjective into
identifiable tasks and sets due dates. This feature ofspecificity of these scales also enables the
appraisers to provide relevantfeedback to appraisees why they received a particular level of
appraisal,and what they can do to improve their performance. This quality of thescale minimizes
subjectivity in appraisal as well as also enables theappraisees to overcome their anxiety related to
such appraisals.
BARS also provide participation to both appraisee and appraiser in theirdevelopment. They
become familiar with different aspects of the job asa result of discussions of job dimensions and
anchors in small groupmeetings. This understanding provides guidelines to the appraiser
whileobserving performance and enables the appraisee to judge theexpectations of his/her
superior. Any conflict between he appraiser andappraisee over the desired performance can be
clarified in subsequentdiscussions. The participation of their ultimate users in the design
ofBARS also ensures their commitment to this method of appraisal. As BARS are based on
quantity measures, an attempt may be made torelate appraisal scores to current wage and salary
structure with a viewto ascertaining varying extents of rewards to different behaviors. Thus,the
management may link different levels of merit raises to differentranges of scores on BARS. In
addition, certain job dimensions can besingled out for bonus administration and allied purposes.
Last but notthe least, the scales can also be used to identify behavioral criteria tofacilitate
selection decisions, construct selection tests and specifybehavioral training objectives. Explicitly,

Page | 108
the job dimensions in BARScan help in formulating training courses, and the behavior anchors
can indicate the specific behaviors to be learned in different content areas.The poor performance
areas can be pinpointed to improve performance.Notwithstanding these advantages, BARS form
a time-consumingmethod. Although it is promising, much more research is required
todemonstrate its ability to eliminate certain types of rater errors.
8. Management by objectives (MBO) Method
This method of appraisal was introduced and made popular by PeterDrucker (1961).
Management by objectives requires the manager to getspecific measurable goals with each
employee and then periodicallydiscuss his or her progress towards these goals. You could engage
in amodest MBO program with subordinates by jointly setting goals andperiodically providing
feedback. However, the term MBO almost alwaysrefers to a comprehensive, organization wide
goal setting and appraisalprogram that consist of following steps :
a. Set the organization’s goal:Establish on organization wide planfor next year and set goals.
b. Set departmental goals:Here department/heads and theirsuperiors jointly set goals for their
departments.
c. Discuss departmental goals:Department heads discuss thedepartment’s goals with all
subordinates in the department andask them to develop their own individual goals; In other
words,how can each employee contribute to the department’s attainingits goals.
d. Define expected results:Here department heads and theirsubordinates set short-term
performance targets.
e. Performance reviews:Department heads compare the actualperformance of each employee
with expected results.
f. Provide feedback:Department heads hold periodic performancereview meetings with
subordinates to discuss and evaluate thelatters’ progress in achieving expected results. MBO,
thus, is a performance-oriented system. A well thought out MBOsystem provides the
following benefits to the organization. (i) The setting up of objectives provides a basis for
coordinatingbetween and among various units of the organization. (ii) It establishes a linkage
between the performance of the individualand organizations. Hence, both move in the
achievement of sameobjectives. (iii) It becomes easy to implement because those who carry
out theplans also participate in setting up these plans. (iv) Each employee becomes aware of
the exact task that he issupposed to perform leading to better utilization of capacity andtalent.

Page | 109
 (v) The communication chain between and among employees andunits are clearly established
facilitating information sharing. (vi) The performance appraisal is built in the system itself. It
providesthe guidelines for self as well as evaluation by the supervisoragainst the set tasks and
goals. (vii) It facilitates the task of employee guidance and counseling.
Limitations
Notwithstanding the above merits, the result oriented procedure hasseveral limitations. The
procedure is impracticable in situations wherethe superior is decisive and seldom bothers to
involve the subordinatesin goal-setting goals. Moreover, the procedure stresses tangible goals(i.e.
production) and ignores intangible goals (i.e. morale). This mayalso cause concealment of poor
performance, distortion of data and thefixation of low goals. MBO is a time-consuming. Taking
the time to set objectives, to measureprogress and to provide feedback can take several hours per
employeeper year, over and above the time you spent doing each person’sappraisal. Setting
objectives with the subordinate sometimes turns into a tug ofwar with you pushing for higher
quotas and the subordinate pushing forlower ones.
Limitations of Performance Appraisal
The ideal approach to performance evaluation is that in which evaluatoris free from personal
biases, prejudices and idiosyncrasies. This isbecause when evaluation is objective, it minimizes
the potentialcapricious and dysfunctional behavior of the evaluator which may bedetrimental to
the achievement of the organizational goals. However asingle fool proof evaluation method is
not available. Inequities inevaluation often destroy the usefulness of the performance system,
resulting in inaccurate, invalid appraisals, which are unfair too. Thereare many significant
factors which deter or impede objective evaluation.These factors are:
a. Halo Error
It occurs when the rates allows one aspect of a man’s character orperformance to influence his
entire evaluation. It is the tendency ofmany raters to set their rating be excessively influenced by
onecharacteristic rather than on all subsequent characteristics. This problem often occurs with
employees who are especially friendlyor unfriendly toward the supervisor. For example, an
unfriendlyemployee will often be rated unsatisfactory for all traits rather than justfor trait “gets
along well with others”. Being aware of this problem is amajor step toward avoiding it.
Supervisory training can also alleviatethe problem.
b. Central Tendency

Page | 110
Many supervisors have a central tendency when filling in rating scales.For example, if the rating
scale ranges from 1 to 7, they tend to avoidthe highs (6 and 7) and lows (1 and 2) and rate most
of their peoplebetween 3 and 5. If you use a graphic scale, this central tendency couldmean that
all employees are simply rated “average”. Such a restrictioncan distort the evaluations, making
than less useful for promotion,salary or counseling purposes. Ranking employees instead of
using agraphic rating scale can avoid this central tendency problem because allemployees must
be ranked and this cannot all be rated averages.
c. Leniency or Strictness
The leniency bias results when raters tend to be easy in evaluating theperformance of employees.
Such raters see all employee performance asgood and rate it favorably. The strictness bias is the
opposite; it resultsfrom raters being too harsh in their evaluation. Sometimes, thestrictness bias
results because the rater wants others to think he or she is a ‘tough judge’ of people’s
performance. Both leniency and strictnesserrors more commonly occur when performance
standards are vague.
d. Cross Cultural Biases
Every rater holds expectations about human behavior that are based onhis or her culture. When
people are expected to evaluate others fromdifferent cultures, they may apply their cultural
expectations to someonewho has a different set of beliefs or behaviors. In many Asian
culturesthe elderly are treated with greater respect and are held in higher esteemthan they are in
many western cultures. If a young worker is asked torate an older subordinate, this culture value
of “respect and esteem”may bias the rating. Similarly, in some Arabic cultures, women
areexpected to play a very subservient role, especially in public. Assertivewomen may receive
biased rating because of these cross culturaldifferences. With greater cultural diversity and the
movement ofemployees across international borders, this potential source of biasbecomes more
likely.
Suggestions for Improved Performance Appraisals
The fact that managers frequently encounter problems with performanceappraisal should not lead
you to throw up your hands and give up on theconcept. There are things that can be done to make
performanceappraisal more effective. The following are the suggestions in thisregard.
a. BehaviorallyBased Measures

Page | 111
Many traits often considered to be related to good performance may infact, have little or no
performance relatively. Traits like loyalty,initiative, courage, reliability and self-expression are
intuitively appealing as desirable characteristics in employees. But the relevantquestion is, are
individual who are evaluated as high on those traitshigher performances than those who rate
low? We cannot answer thisquestion. We know that there are employees who rate high on
thesecharacteristics and are poor performers. We can find others who areexcellent performers but
do not score well on traits such as these. Ourconclusion is that traits like loyalty and initiative
may be prized bymanagers, but there is no evidence to support that certain traits will beadequate
synonyms for performance in a large cross-section of jobs. A second weakness in traits is the
judgment self. What is loyalty?
When is an employee reliable? What you consider ‘loyalty’, I may not. So traits suffer from
weak interpreter agreement. Behaviorally derived measures can deal with both of these
objectives.Because they deal with specific examples of performance - both goodand bad - we
avoid the problem of using inappropriate substitute.
b. Trained Appraisers
If you cannot find good raters, the alternative is to make good raters.The training of appraisers
can make these more accurate raters. Errors can be minimized through training workers. Training
workshopsare usually intended to explain to raters the purpose of the procedure,the mechanics of
‘how to do it’, pitfalls or biases they may encounterand answer to their questions. The training
may include trail runsevaluating other classmates to gain some supervised experience.
Companies even use videotapes and role playing evaluation sessions togive raters both
experience with and insight into the evaluation process. During the training, the timing and
scheduling of evaluations arediscussed.
c. Multiple Raters
As the number of raters increases, the probability of attaining moreaccurate information
increases. If person has had ten supervisors, ninehaving rated him or her excellent and one poor,
we can discount thevalue of the one poor evaluation. Therefore, by moving employees
aboutwithin the organizations so as to gain a number of evaluations, weincrease the probability
of achieving move valid and reliableevaluations.
d. Peer Evaluations

Page | 112
Periodically, managers may find it difficult to evaluate theirsubordinates’ performance because
they are not working with themevery days. Unfortunately, unless they have this information, they
maynot be making an accurate assessment. And of their goal of theperformance evaluation is to
identify deficient areas and provideconstructive feedback to their subordinates, they may be
providing adisservice to these subordinates by not having all the information. Yet, how do they
get this information? One of the easiest means isthrough peer evaluations. Peer evaluations are
conducted by employees’co-worker, people explicitly familiar with the jobs involved
mainlybecause they too are doing the same thing. They are the ones most aware of co-workers’
day - to day work behavior and should be giventhe opportunity to provide the management with
some feedback.
The main advantages to peer evaluation are that (i) there is a tendencyfor co-workers to offer
more constructive insight to each other so that, as a unit, each will improve and (ii) their
recommendations tend to bemore specific regarding job behavior-unless specificity
exists,constructive measures are hard to gain. But necessary condition for thismethod is that the
environment in the organization must be such thatpolitics and competition for promotion are
minimized. This environmentcan only be found in the most “mature” organizations.
e. Evaluation Interviews
Evaluation interviews are performance review sessions that giveemployees essential feedback
about their past performance or futurepotential. Their importance demands preparation.
Normally this includea review of previous appraisals, identification of specific behaviors tobe
reinforced during the evaluation interview and a plan or approach tobe used in providing the
feedback.
The evaluator may provide this feedback through several appraisals :tell and sell, tell and listen
and problem solving. The tell and sellapproach reviews the employee’s performance and tries to
persuade theemployee to perform better. It works best with new employees. The tell and listen
allows the employee to explain reasons, give excusesand describe defensive feelings about
performance. It attempts toovercome these reactions by counseling the employee on how
toperform better. The problem solving approach identifies problem that are interferingwith
employee performance. Then, through training, coaching orcounseling goals for future
performance are set to remove thesedeficiencies.
5.5. Separation

Page | 113
It is the final human resource management function. Like other functions this requires
preparation and planning. It can be initiated by:

1. Employer like
- Mandatory retirement, Dismissal, Lay-off
2. Employee like
- Resignation, voluntary retirement, quit
3. Agreement
- When the contract ended
4. Unforeseen; outside the will of both employee and employer i.e. accident, death, permanent
disabilities.

CHAPTER-FIVE: DIRECTING FUNCTION(LEADING)

6.1. Meaning of Directing

Directing is the process of integrating people with the organization so as to obtain their
willingness and enthusiastic cooperation for the achievement of its goals. To actual direct the
behavior of individuals, managers requires three basic skills. These basic skills are;

 Leadership skills

 Motivation skills and

 Communication skills

6.2. Meaning and The Need for Leadership

There is a profound difference between manager and leader, and both areessential in a sound
management system. To ‘manage’ means “to bring about, to accomplish, to have charge of or
responsibility for, to conduct”. On the other hand the ‘Leading’ is “influencing, guiding in

Page | 114
direction, course, action, opinion”. Managers are people who do things right and leaders are
people who do the right thing. In thislesson, you’ll learn that leadership is a very complex art that
is essential for the success in mission. In fact, your knowledge of effective leadership principles
and concepts coupled with their application at your work place may prove to be rewarding both
professionally and personally. Let’s start with a simple definition of leadership. Leadership is the
process of influencing an organized group towards a common goal. This definition sounds easy,
but the application can provide a real challenge.
Your goal as a leader in the organization is to do the best job you can at influencing your people
towards a common goal. Since you are dealing with a very diverse group of people, it is
important to understand the different approaches to motivate them to meet their goals.
Leadership style is the pattern of behaviors you use when you are trying to influence the
behaviors of those you are trying to lead. Each leadership style can be identified with a different
approach to problem solving and decision-making. Possessing a better understanding of the
various leadership styles and their respective developmental levels will help you match a given
style for a specific situation. The challenge is to master the ability to change your leadership
style for a given situation as the person’s development level changes. How can you help your
followers increase their development level? You should:
a. Explain to them what you want to get done.
b. Provide the guidance they might need before they start.
c. Give them the opportunity to complete the task on their own.
d. Give them a lot of positive encouragement.
Your goal should be to help your followers increase their competence andcommitment to
independently accomplish the tasks assigned to them, sothat gradually you can begin to use less
time-consuming styles and still gethigh quality results. Your organization depends on positive,
effectiveleaders at all levels to perform the mission. There is no single leadershipstyle that is
appropriate in every situation; therefore, for you to be effectiveleaders you need to learn to
understand your environment, your situationand the circumstances to help you act accordingly.
Remember, your successas a leader will depend on your assessment of the situation and your
abilityto communicate what you want in such a way that others will do as youwish - that is the
art of leadership.
What is Leadership?

Page | 115
It is difficult to define the term “leadership”. However, as a starting point, we may proceed with
the workable definition that a leader is one who leadsothers and is able to carry an individual or a
group towards theaccomplishment of a common goal. He is able to carry them with him,because
he influences their behavior. He is able to influence theirbehavior, because he enjoys some
power over them. They are willing tobe influenced, because they have certain needs to satisfy in
collaborationwith him. French andRaven have proposed the following bases of powerfor a
person exerting influence:
a. Legitimate: That the targets of influence, followers or sub-ordinates understand that the
power the leader enjoys is legitimate and theyshould comply with his orders in order to meet
their own goals.
b. Reward:That the followers know that the leader has the power togrant promotions, monetary
inducements or other rewards if hisorders are complied with.
c. Coercive: That the followers know that if the leader’s orders are notcomplied with, he has the
power to hire, fire, perspire and dischargethe followers.
d. Expert: That the followers know that the leader possessesspecialist’s knowledge in the field
they lack it.
e. Referent: That the followers feel attracted towards him because of his amiable manners,
pleasing personality or they feel that he iswell connected with high-ups. It is apparent then
that the first three power bases indicate positional power,which one derives from one’s
position. The other two indicate personalpower, which is based on the individual’s own
characteristics. In any case,the leader exercises his influence because of one or more of these
types ofpower and obtains compliance from the followers. How far he succeeds inhis
attempts will depend upon several other factors that we will discussduring the course of this
lesson.
Leadership is, therefore, regarded as the process of influencing the activities of an individual or a
group in efforts towards goal achievement in a given situation. This process, as Heresy and
Blanchard suggest, can be explained in the form of the following equation:
L = f (L, F, S,)
That is, the leadership is a function of the leader (L), the follower (F) and other situational
variables(S). One who exercises this influence is a leader whether he is a manager in a formal
organization, an informal leader in an informal group or the head of a family. It is undoubtedly

Page | 116
true that a manager may be a weak leader or a leader may a weak manager, but it is also equally
probable that a manager may be a true leader or a leader may be true manager. Amanager who is
a true leader as well is always desirable. Situational variables include the whole environment like
the task, the group, organizational policies, etc.
6.3. Meanings of Leadership Theories
Leadership is a systematic study of personal, psychological, and physical characteristics and
traits of leaders. It was begun as a consequence of the need for military officials during WWI.
There are broadly three major approaches to the study of the leadershipphenomenon. These are:

1. Trait Approach

There have always been very few persons in society or organizationswho are leaders. The vast
majority of people constitute thefollowers. But what is it that distinguishes leaders from non-
leader? Or what make a person the successful leader? It is, perhaps,something that is in-born in
him and which the followers lack. Thisapproach stresses the in-born qualities or characteristics
of anindividual. One way to identify the traits is to ask the leader himself how heconsiders
himself different from his followers or what distinguishingcharacteristics he possesses. Another
way is to analyze the past andthe present of the leader in terms of his family
background,education, career events, etc. and build up a list of traits or attributesthat the leader
possesses. In both cases, a leader’s life becomeshighly interesting only when he has emerged as
a leader. Thiscompilation of a list of traits or attributes does not give anypredictive power and
therefore, investigators have tended to relateleadership even with handwriting (graphology),
skull shape (phrenology) and occult influence of stars (astrology).A number of studies have been
conducted to identify traits orcharacteristics that can be used to distinguish successful from
unsuccessfulleaders or followers. The most researched traits include the following:

 Physical characteristics; Age, appearance and height

 Social background; Education, social status and mobility
 Intelligence; Judgment, knowledge, decisiveness and fluency of speech
 Personality; Alertness, dominance, extroversion, independence, creativity and
self-confidence
 Task-related Characteristics; Achievement drive, initiative,persistence, enterprise and task
orientation.

Page | 117
 Social characteristics; Attractiveness, popularity, sociability and interpersonal skills.

Different studies have identified different numbers of traits. With each study, the list of traits
studied has become longer and longer. Some traits are, however, common to all the studies. In
general, there appears to be a consensus that effective leaders possessedintelligence, social
maturity and breadth, inner motivation and achievement drive, and a human relations attitude.
However, inability to value the followers’ ideas, poor human relations, display of emotional
immaturity, and poor communication skills have been regarded as dysfunctional to effective
leadership.
Criticism
The trait approach is weak in several respects.
1. There is no finite set of traits to distinguish successful from unsuccessful leaders. Rarely, if
ever, do two lists agree on theessential characteristics of the effective leader. A survey by
Birdand Stogdill shows: (i) Less than 5 per cent of the traits are commonin four or more of
the studies surveyed, and (ii) leaders are notmarkedly different from their followers. The
same traits are widelydistributed among the non-leaders as well.
2. It is difficult to indicate what mix of traits is necessary to make aneffective leader. Its
measurement is problematic.
3. No consistent relationship is discernible between attributes andleader behavior.
4. This approach stresses the inborn qualities or characteristics ofindividuals and therefore, in
turn, questions the value of trainingindividuals to assume leadership positions. Training may
helpimprove a person if he possesses the basic traits. Therefore, it wasessential first to
identify those who possess these traits and thenimpart training only to such persons. This
view seems tobe inappropriate in the light of the aforesaid criticisms andinconsistent with the
results of training programs.
5. Different traits appear necessary for different roles even in the sameorganization. At lower
managerial levels where there is a directcontact between the worker and the supervisor,
technical knowledgeis of paramount importance. At middle management levels wherethey
interpret and elaborate policies, human relations skills are moreimportant than technical
knowledge. At higher managerial levelswhere ideas are generated, policies are framed,
strategic and long-termplanning is undertaken,ideationalresource possessingconceptualskills

Page | 118
 gains pre-eminentposition. Organizationscompete,not with products,with people.So
uniformity of traitsacrossall levels is questioned.
6. Leadership in a large organization demands a specialized limitedrole, but a multiplicity of
roles has to be played in a smallorganization. Therefore, a different combination of traits for
the tworoles would be required.
7. The approach does not consider what the leader does, ignoresfollowers and their effect on the
leader. The effectiveness ofleadership is dependent to a large extent on the situation
orenvironment surrounding the leadership or influence process.
8. It requires an initial separation of people into “leaders” and “non-leaders”or “ good leaders”
and “ notso good leaders”.But thereappearsto be no particular correlationbetweena
man’sethics andmoralsand his power to attract followers.
9. When an individual is faced with a problem, then only the presenceor absence of the trait
required in that situation becomes known. That is, a trait in order to get expressed needs a
situation, withoutwhich, the presence or absence of that trait in a particular individualmay not
be known.
There is, therefore, an increasing recognition of wide variations in thecharacteristics of
individuals who become leaders in similar situations andof even greater divergence in the traits
of leaders working in differentsituations. Despite its shortcomings, no approach is entirely
worthless. It ison the basis of its weaknesses that the foundations of new approaches arelaid.
Thus, the trait approach paved the way for later approaches like thebehavioral and the situational.
2. Behavioral Approach
When it was apparent that the trait basis was not adequate to explain the leadership phenomenon,
the theorists directed their attention to the study of leader behavior. This approach was
advocated during the 1950s-1960s. The roots of this approach lie in how the management
viewed the workers. It was the function of management to coerce, direct and motivate them
through the offer of economic rewards. Management attempted to reduce wastes of time and
material to increase efficiency.
In other words, the philosophy was that people were, by nature, lazy uncreative and
irresponsible, and so leadership has to be directive. However, during the 1930s, the Hawthorne
experiments exploded the myth of management thinking. Elton Mayo and his associates
discovered the existence of informal groups and informal leaders and laid stress on interpersonal

Page | 119
relationships as a significant influence on productivity. Therefore, the scientific management
advocates ignored human behavior and expressed some concern for output, whereas the human
relations movement showed an overriding concern for people.
Criticism
These studies have met with the following criticisms:
1. A serious point of criticism is that these studies fail to point outwhether leader behavior is the
cause or effect. A productive groupmay suggest it to the leader to adopt an employee
centered approach. Whether the employee-centered leadership style makes the
groupproductive or whether the productive group induces the leader to beemployee-centered
is not clear.
2. It suggests leader behavior to be of one particular type and staticwhereas, in practice, it
changes from situation to situation. Particular leadership style is appropriate in a normal
circumstanceand an altogether different one when there is pressure is an
extraordinarysituation.
3. The use of a questionnaire completed by subordinates introduces anelement of employee bias
in it and may not present the true view ofthe leadership style. The individuals and groups
that are satisfiedand attracted towards the leader are more likely to describe theleader as
considerate than those who are conflict-ridden and dislikethe leader.
4. As in the trait approach, these studies also did not take intoconsideration the nature of the
subordinate’s task or the personalcharacteristics, group characteristics or other situational
variables.
3. Situational Approach
Behavioral approach advanced our knowledge in understanding theleadership phenomenon by
explaining various combinations of leadershipstyles. What characteristics an individual possesses
did not explain hisemergence as a leader nor did it explain what mix of traits one should haveto
prove effective if one happens to be placed in a leadership position. Thetrait approach, in effect,
explained some of the desirable characteristics thatleaders had or a leader should have. But it
could not suggest with certaintythat one who possesses particular characteristics shall be a
leader. Thebehavior approach, learning from the weaknesses of the trait approach,went a step
further to explain the practices available to a leader in order todischarge his leadership

Page | 120
dimensions are available. But this again failed toindicate a “best” style of leadership, which was
universally appropriate.
As a result, it was recognized that it is not style that matters; in fact, no style is good or bad, it is
the situation that makes it so. What makes a style to be effective or ineffective is the situational
difference. The behavioral approach failed to consider this situation as an important element. It
merely thought of various leadership practices that prove productive or not so productive. It is,
therefore, clear that it is not a matter of the best style, but of what style is likely to be effective in
a particular situation. What is relevant for an industrial setting may not be relevant for an
educational institution. What is relevant for an administrative office in an educational institution
may not be relevant for the teaching staff. A number of leader behavior styles may be effective
or ineffective depending on the important elements of the situation. Leader behavior is affected
by several situational factors like managerialcharacteristics, subordinate characteristics, group
factors, organizational factors, etc., which, in fact, constitute the environment of the leader. It is
difficult to list all these factors, but it suggests that leadership is a verycomplex process and
based on situational factors.
a. Fiedler’s Contingency Theory
Fiedler’s Contingency Theory specifies that the performance of a group is contingent upon both
the motivational system of the leader and the degree to which the leader has control and
influence in a particular situation. That is, a leader’s effectiveness is contingent upon the
favorableness or unfavorableness of the situation. The favorableness of the situation is
dependent upon leader-member relations, the task structure and leader position power. If leader
member relations are good, task is structured and leader position power is weak, the situation is
regarded as highly favorable.
A leader operates in a particular situation and its favorableness or unfavorableness determines
the effectiveness of his orientation. It is obviously a question of the kind of leadership style is
effective only in a particular situation. Let us now understand these variables. Leadership style
is measured by using an instrument called “esteem for least preferred co-worker” (LPC).
Accordingly to this, the respondent has to think of all co-workers he or she has ever had and to
describe the one person with whom he or she has been least able to work well, that is, the person
he/she least prefers as a coworker. This need not be someone with whom, he works at the time.
The description is made by rating that person on a simple bipolar scale scored from 1 to 8, with

Page | 121
8 representing the most favorable perception of one’s least preferred co-worker. The lower the
LPC score (an average item value of about 2), the greater is the task orientation of the least
preferred co-worker. Such a person is described in a very negative, rejecting manner with the
basic goal of task accomplishment.
The higher the LPC score [in the neighborhood of 5 to 8, the greater is the willingness to
perceive even the worst co-worker as having some reasonable positive attributes. Such a person
has as his basic goal the desire to be related with others. The person seeks to have strong
emotional ties with the co-workers. Over twenty items were used in LPC scales and the score is
obtained by summing the item values.
b. Path - Goal Theory
House was baffled by the contradictory findings in the leadership area and so, advanced his own
situational theory of leadership. It was, first of all, Evans who talked of the effects of
supervisory behavior on the path-goal relationship and later, Housedeveloped it into the theory
based on Vroom’s Expectancy Theory of motivation. In Vroom’s Expectancy Theory of
motivation, there are, among others, two key variables: expectancies and valences. Expectancy
is the perceived belief concerning the likelihood that a particular behavioral act will be followed
by a particular outcome. This degree of belief varies between 0 and 1. Valence is the strength of
an employee’s preference for a particular outcome. Obviously, for certain things, employee’s
valences will be positive and for certain others, negative. Expectancy and valence combine
multiplicatively to determine one’s motivation.
The Path-Goal theory states that an individual’s attitude or behaviorcan be predicted from (i) the
degree to which the job or behavior is seen as leading to various outcomes (called “expectancy”)
and (ii) the evaluation of these outcomes (called “valence”). One is satisfied with the job if one
thinks that it leads to things that are highly valued and works hard if one believes that efforts will
lead to things that are highly valued. It is the function of the leader to influence the valence (i.e.,
goal attractiveness) and expectancy (i.e., goal paths)perceptions of subordinates, by increasing
personal pay-offs, making the path to these pay-offs easier by clarifying it, reducing road blocks
and pitfalls and increasing the opportunities for personal satisfaction in route. This will increase
the motivation of the subordinates. In order to enable the leader to help the subordinates reach
their highly valued job-related goals, the specific style of leader behavior is determined by two

Page | 122
situational variables, characteristics of the subordinates and the characters of the work
environment. The theory envisages four types of leader behavior:
1. Instrumental behavior is the planning, organizing, controlling andcoordinating of subordinate
activities by the leader.
2. Supportive behavior shows consideration for employees’ needs andtheir welfare.
3. Participative behavior implies consultation with subordinates and sharingof information with
them.
4. Achievement-oriented behavior suggests setting challenging goalsfor subordinates and also
displaying confidence in their ability to doa good job.
The two situational variables mentioned earlier, i.e., characteristics of the subordinate and the
characteristics of the work environment moderate the relationship between the leader style and
the behavior of the subordinate.
The Path-Goal Theory proposes that leader behavior will be viewed acceptable to the
subordinate to the extent that the subordinate sees such behavior as either an immediate source of
satisfaction, or as needed for future satisfaction. But the subordinate’s own characteristics, such
as, ability, being internals or externals (whether they believe what happens to them is under their
control or because of fate) and needs and motives, influence their perceptions. Accordingly, they
view a particular leadershipstyle favorably or un-favorably. For example, a subordinate having
the ability to effectively accomplish a task is not likely to view favorably a directive or
instrumental behavior. A subordinate having high safety and security and security needs may
accept an instrumental leader style, but those with high social and esteem needs may react more
positively to a supportive leader.
The second major variable is the characteristics of the work environment which include three
broad aspects: (i) the subordinate’s tasks - structured or unstructured; (ii) the primary work
group- its characteristics and stage of development; and (iii) the formal authority system or
organizational factors such as (a) the degree to which rules, procedures, and policies govern a
subordinate’s work; (b) high pressures or stressful situations; and (c) situations of high
uncertainty. These characteristics of work environment will influence subordinate behavior in
relation to a particular leadership style. In such a situation, instrumental behavior would be
regarded as unnecessary and inappropriate. A leader who is supportive is likely to have more
satisfied subordinates than one who is directive. But a directive leadership style would be

Page | 123
welcome where the task is unstructured and there is need for providing clarifications as, for
example, if a manager of an industrial relations team gives guidance and direction on how to
process a grievance for arbitration. Thus, the leader behavior, modified by the characteristics of
the subordinates and the work environment, influences the perceptions of valences and
expectancies which can result in higher motivation, satisfaction, and performance.
c. An Integrative Model of Leadership
We have examined various approaches to study and understand the leadership phenomenon. The
Trait approach identified the traits only when a person had emerged, as a leader and therefore, it
had no predictive power. Learning from the weaknesses of the trait approach, the foundations of
the Behavioral approach were laid, but this approach wholly concentrated on leader behavior as
if it was occurring in a vacuum while other variables were ignored. Situational theories
attempted to fill in these gaps. But no single theory can ever accommodate all the variables and
as more and more elaborate theories are advanced, their complexity increases. This fact reduces
their applicability in practice. In fact, leadership is such a complex phenomenon that even after
integrating the knowledge generated by the formulation and testing of various approaches to the
study of leadership, weare not yet nearer the solution.
d. Two-dimensional theory

A theoretical orientation related to trait theory is the one that focuses on the activities or
behaviors of leaders. Rather than focusing on their characteristics of effective leaders, an
alternative is to focus on their behavior. This theory refers to whether the leader’s behaviors
reflect primary concern for the work or for the people who are doing the work.

 Task-oriented leadership: It had been said that the essence of leadership is getting work done
through other people. The leader; structures the job of subordinates, closely supervise to see
that designed tasks are performed, uses incentives to super production, and determine
standards.
 Person-oriented leadership: This idea is an outgrowth of the behavioral approach to
management particularly the human relations branch. The person-oriented leader focuses on
the human aspects of subordinate’s problems, and building effective work group with high
performance goals and such leaders; specify objectives, communicate them to subordinates,
and give subordinates considerable freedom to accomplish their jobs.

Page | 124
6.4. Concept of Leadership Styles
Leadership style is the way a managerial leader applies his influence in getting work done
through his subordinates in order toachieve the organizational objective. It depends upon the role
of the leader whether he likes to work more of a colleague,facilitator and decision maker and on
the other hand the response of the subordinates would determine the particular style to bein
application. Leadership style is a pattern of behaviors that leaders adapt in leading people. It is
the way or methods that leaders use in leading others. Broadly speaking, there are three basic
leadership styles:
1. Autocratic or Dictatorial Leadership: In this leadership style the leader assumes full
responsibility for all actions. Mainly he relies onimplicit obedience from the group in
following his orders. Hedetermines plans and policies and makes the decision-making a one
manshow. He maintains very critical and negative relations with hissubordinates. He freely
uses threats of punishment and penalty for anylack of obedience. This kind of leadership has
normally very short life.Autocratic leadership style is a leadership style in which leaders tend
to centralize control and decision making power with them. They need everything to be done
as they want. In every action they are not willing to consult their group members.
Features of autocratic leadership

 Give definite instructions  Emphasize task performance

 Demands compliance  Exercise close supervision

 Do not permit the participation of employees in decision making

 Uses coercion power
2. Democratic Leadership: In this case, the leader draws ideas and suggestions from his group
by discussion, consultation andparticipation. He secures consensus or unanimity in decision-
making.Subordinates are duly encouraged to make any suggestion as a matter oftheir
contribution in decision-making and to enhance their creativity.This kind of leadership style
is liked in most civilized organization andhas very long life.Democratic leadership style
allows their members to participate in decision making process. The leader suggests possible
action with his/her recommendations but awaits approval of the group before putting them in
to effect. They see their group members as important entities and strive to maintain good
relationship with them.

Page | 125
Features of democratic leadership

 Permit subordinates to participate in decision making

 Permit subordinates to take initiative and exercise judgment

 Emphasize group effort  Person centered leadership

 Exercise general or broad supervision  High moral and positive attitude
 Use two way communication

3. Laissez-faire Leadership: Quite contrary to autocratic leadership style, in this leadership

style the leader depends entirely onhis subordinates to establish their own goals and to make
their owndecisions. He let them plan, organize and proceed. He takes minimuminitiative in
administration or information. He is there to guide thesubordinates if they are in a problem.
This kind of leadership is desirable in mainly professional organization and where the
employeesare self-motivated. Leader works here just as a member of the team. We shall now
discuss the roots of such leadership styles i.e. we shall tryto understand as to how these
different leadership styles have beenevolved by the management scholars. Laissez-fair
leadership style is a leadership style in which leaders tend to the “I do not care” mentality.
4. Leadership style based on Theory-X, and Theory-Y assumptions:These are theories that
explain about two sets of assumption held by managers regarding human nature. According
to Douglas McGregor every manager has a philosophy or set of assumptions it uses in
handling its workers.
a. Theory-X: States that negative view point of human beings. Most people dislike working
and will avoid it if possible. Because of dislike of work, workers must be controlled,
forced, directed, coerced, and threatened with punishment in order to work. Most people
prefer to be directed because they do not like to take responsibility, and most people
show little ambition.
b. Theory-Y: It states that positive view point of human beings. Most people enjoy work
and view it as being natural play or rest, and most people can exercise self-control and
self-direction if they are motivated to achieve a goal. External control and threat of
punishment are not the only means for obtaining efforts of people. The average people
not only accept responsibility but actively seek responsibility. The ability to make good

Page | 126
 decision is not only qualities of those in managerial position, but it is widely distributed
throughout the population.
6.5. Motivation
The term motivation is derived from the word motive, meaning inner force or drive that makes a
person to be having or act in certain way. It is the act of stimulating some to take desired course
of action. It is the process of furnishing with an incentive or inducement to action. Managing
requires the creation and maintenance of an environment in which individuals work together in
group toward the accomplishment of common objectives. The process of motivation involves the
followings:

Unsatisfiedneeds➞Create tension➞Stimulate motive➞Leads to action➞Resulted to goal ➞Achievement

satisfaction ➞ Reduction of tension.

6.6. The Concept of Motivation

Motivated people are ill constant state of tension. This tension is relieved bydrives towards an
activity and outcome that is meant to reduce or relieve suchtension. The greater the tension, the
more activity will, be needed to bring aboutrelief and hence higher the motivation. Thus the
basic motivation process can bedepicted as follows:
a. Effort: The amount of effort put into the activity identifies the strength of the person's work
related behavior. Hard work usually reflects highmotivation. A student who works very hard
to get top grades can be referred to ashighly motivate. A professor who is engaged in
research and publishesmany high quality articles is exerting extensive effort relating to his
job.
b. Persistence: Motivation is a permanent and an integral part of a humanbeing. Its second
characteristic is persistence in the efforts. Motivation iscontinuously goal directed so that
once a goal is achieved, a higher goal isselected and efforts are exercised towards this higher
goal. For example, aprofessor who publishes simply to get a promotion and then stops
orreduces research efforts would not be considered as highly motivated.Accordingly, high
motivation requires persistent efforts.
 Direction:Persistent hard work determines the quantity of effort whiledirection determines
the quality of the anticipated output. All efforts are tobe directed towards the organizational
goal. This would ensure that thepersistent effort is actually resulting into accepted

Page | 127
 organizationaloutcomes. For example, a quality control inspector is consistentlyexpected to
direct his efforts in discovering defects in the produced itemsso that the organizational goal
of high quality output is met.
 Analysis of situation: The situation that needs motivational inducement must besized up so
as to ascertain the motivational needs. From organizational behavior point of view it must be
recognized that since the needs of different employeesdiffer both in nature as well as
intensity, a composite view of the collective needsof the group is established with appropriate
recognition of differences inindividual needs.
 Selecting and applying appropriate motivators: A list of all devices ofmotivation is drawn
and a selection made of such motivators that motivatedifferent types of people under
different circumstances. Proper timing and theextent of motivation are also to be considered.
The individual goals should begiven adequate attention within the framework of group goals
and theorganizational goals.
 Follow-up: It is important to know that the motivators selected are indeedproviding the
desired motivation. This can be accomplished by getting andevaluating the feedback. If these
motivators are not-showing the optimum effect,then alternative motivators should be selected
and applied.
6.7. Theories of Motivation
There are basically two types of theories developed that relate to and define themotivational
processes. These are the content theories and processtheories. These theories are described in
greater detail.
1. The Content Theories of Work Motivation
The content theories have been developed to explain the nature of motivation interms of types of
need that people experience. They attempt to focus on factorswithin a person that initiate and
direct a certain type of behavior or check certainother type of behavior. The basic idea
underlying such theories is that people have certain fundamental needs, both physiological and
psychological in nature and that they are motivated to engage in activities that would satisfy
these needs.Some of the more important content theories are discussed in detail under the
following sub-topics.
a. Maslow's Model

Page | 128
Maslow’s needs hierarchy theory is probably the most widely used theory ofmotivation in
organizations. Abraham Maslow suggested that people have acomplex set of exceptionally
strong needs and the behavior of individuals at aparticular moment is usually determined by their
strongest need. He developed his model of human motivation in 1943, based upon his own
clinical experience andformulated his theory of hierarchical needs by asking the same question,
what is itthat makes people behave the way they do and made a list of answers from whichhe
developed a pattern. His theory is based upon two assumptions. First thosehuman beings have
many needs those are different in nature ranging from thebiological needs to psychologicalneeds.
Second that needsoccur in an order of hierarchy so that lower level needs must be satisfied
beforehigher level needs arise or become motivators. This means thatif the people's basic
needsare unsatisfied, then theirtotal attention will be focused upon these needs and it will not be
possible to communicate with them about other matter. Maslow postulates five basic needs
arranged in successive levers. The first three level needs at the bottom are known as“deficiency”
needs, because they must be satisfied in order to ensure theindividual's very existence and
security and make him fundamentallycomfortable. The top two sets of needs are termed
"growth" needs because theyare concerned with personal growth, development and realization of
one’spotential.
 Physiological Needs: The physiological needs form the foundation of the hierarchy and tend
to have the highest strength in terms of motivation.These are primarily the needs arising out
of physiological or biologicaltension and they are there to sustain life itself and include the
basic needs for food, water, shelter and sex. Sexual need and desire is not to beconfused with
love, which is at the third level. Once these basic needs aresatisfied to the degree needed for
the sufficient and comfortable operationof the body, then the other levels of needs become
important and startacting as motivators.
 Security and Safety Needs:Once the physiological needs are gratified, the safety and security
need become predominant. These are the needsfor self-preservation as against physiological
needs, which are forsurvival. These needs include those of security, stability freedom
fromanxiety and a structured and ordered environment. These safety andsecurity needs are
really provisions against deprivation of satisfaction ofphysiological needs in the future. It
also involves a sense of protectionagainst threats and danger of losing the job in the future. In
a civilized, a person is usually protected from threats of violenceor extremes in climate or

Page | 129
 fear of material safety, so that the safety andsecurity needs dwell upon economic and job
security, life and medicalinsurance and other protective measures to safeguard the
satisfaction ofphysiological needs.
 Love and Social Needs:After the needs of the body and security aresatisfied, then a sense of
belonging and acceptance becomes prominent mmotivating behavior. These needs include
the needs for love, friendship,affection, and social interaction. We look for an environment
where weare understood, respected arid wanted. That is one reason for"polarization" where
people of similar background arid beliefs tend togroup together. "Love thy neighbor" has
perhaps a profound meaning.
 Esteem Needs: This need for esteem is to attain recognition from others,which would induce
a feeling of self-worth and self-confidence in theIndividual. It is an urge for achievement,
prestige, status and power. Self-respectis the internal recognition.The respect fromothersis
the externalrecognitionand an appreciation ofone'sindividuality as well as
hiscontribution.This would result in self-confidence,independence, status, reputation and
prestige. People then would begin to feel that they areuseful and have some positive effect on
their surrounding environment.
 Self-Actualization Needs:This last need is the need to develop fully andto realize one's
capacities and potentialities to the fullest extent possible,whatever these capacities and
potentialities maybe. This is the highestlevel of need in Maslow’s hierarchy and is activated
as a motivator whenall other needs have been reasonably fulfilled. At this level, the
personchallenging work assignments that allow for creativity andopportunities for personal
growth and advancement. This need is for soulsearching and is inner-oriented. A self-
actualized person is creative,independent, content, and spontaneous and has a good
perception ofreality and he is constantly striving to realize his fun potential. Thus,"what a
man ‘can’ be ‘must’ be.”
Maslow's model is a general model in which an individual needs interactwith each other to some
degree. Needs are not necessarily linear, nor is theorder of needs so rigid. The relative
dominance of many needs is variableand is continuously shifting. For example, a self-actualized
person mayshift his priority to social needs and love needs instead of prestige andstatus, if
suddenly there occurs a vacuum due to loss of a loved one. Similarly, a person may not go to the
higher need, even when his lowerneeds are satisfied. It is also likely that a well-prepared elite

Page | 130
person maydecide to enter a commune where there is overwhelming emphasis on loveand
affection rather than climb the corporate ladder.
Maslow's theory made management aware that people are motivated by awide variety of needs
and that management must provide an opportunityfor the employees to satisfy these needs
through creating a physical andconceptual work environment, so that people will be motivated to
do theirbest to achieve organizational goals.The first level needs in the hierarchy, the
physiological needs can besatisfied through such organizational efforts and incentives as
adequatewages and salary, acceptable working conditions in order to improve comfort and avoid
fatigue, more leisure time and acceptable workenvironment in terms of lighting, ventilation, rest
rooms, working space,heat and noise level. Some bonuses and other fringe benefits will behighly
motivational.
The second level needs of safety and security can be satisfied throughmanagement's initiative to
provide life insurance, medical insurance, jobsecurity, cost of living increments, pension plans,
freedom to unionize,and employee protection against automation. Law in the form of
minimumwages, unemployment benefits, and welfare benefits provides theeconomic security to
some degree. Similarly, unions protect employeesagainst discrimination and indiscriminate
firing.Since first level physiological needs and second level security needs areprimarily met by
business, industrial, societal and legal environment,management must take steps to satisfy higher
level needs and mustestablish as to which of these needs are the stronger sources of motivation.
When the third level needs of love and affiliation become motivators, thenpeople find an
opportunity in their work environment for establishingfriendly interpersonal relation-ships. The
management can satisfy theseneeds by: Providing opportunities for employees to interact society
with each otherthrough coffee breaks, lunch facilities and recreational activities such asorganized
sports programs, company picnics and other social get together. Creating team spirit by keeping
work groups informal wherever possiblewith friendly and supportive supervision, conducting
periodic meetings with all subordinates to discuss matters, pertaining to personal achievements
and contributions as well asorganizational developments.
The fourth level needs of self-esteem involve a feeling of satisfaction andachievement and
recognition for such achievement. The management can takethe following steps to satisfy these
needs: Design more challenging tasks and provide positive feedback onperformance of
employees, give recognition and encouragement for performance and contributionand delegate

Page | 131
additional authority to subordinates, involve subordinates in goal setting and decision-making
processes, provide adequate training and executive development programs to help employees
successfully accomplish their goals and increase theircompetency on their jobs, provide some of
the symbols for status and respect.
The fifth and top-level needs of self-actualization long for growth arid creativityand the
management can take the following steps to satisfy these needs: The employees should be given
an opportunity to shape their own jobs, Give employees the freedom of expression. This will
open the channels of communications further and give the employees an opportunity to get
involved, Encourage and develop creativity among employees. Creativity is tied inwith freedom
of expression and freedom of movement.
Maslow believed that from the point of organizational behavior the managementshould strive to
create an organizational climate, which motivates employees atall levels of organizational
hierarchy. Research has established that top managersgenerally are more able to satisfy their
higher level needs than lower levelmanagers who have more routine jobs. Based on Maslow’
theory other theory was developed.
b. ERG Theory
The ERG need theory, developed by Clayton Alerter is a refinement of Maslow'sneeds hierarchy.
Instead of Maslow's five needs, ERG theory condenses these fiveneeds into three needs. These
three needs are those of Existence, Relatedness andGrowth.
 Existence Needs:These needs are roughly comparable to thephysiological and safety needs
of Maslow's model and are satisfiedprimarily by material incentives. They include all
physiological needs ofMaslow's model and such safety needs which financial and
physicalconditions rather than interpersonal relations satisfy. These include theneeds for
sustenance, shelter and physical and psychological safety fromthreats to people's existence
and wellbeing.
 Relatedness Needs:Relatedness needs roughly correspond to social andesteem needs in
Maslow's hierarchy. These needs are satisfied by personalrelationships and social interaction
with others. It involves opencommunication and honest exchange-of thoughts and feelings
with otherorganizational members.
 Growth Needs:These are the needs to develop and grow and reach thefull potential that a
person is capable of reaching. They are similar toMaslow's self-actualization needs. These

Page | 132
 needs are fulfilled by strongpersonal involvement in the organizational environment and by
acceptingnew opportunities and challenges.
ERG theory differs from Maslow's theory in proposing that people may bemotivated by more
than one-kind of need at tile same time. While Maslowproposes that in hierarchy of needs, a
person will satisfy the lower level needsbefore he moves up to the next level of needs and will
stay at that need until it issatisfied, ERG theory suggests that if a person is frustrated in satisfying
his needsat a given level, he will move back to lower level needs. For example; assume thata
manager’s existence needs are fully satisfied and he looks for more challengingtasks to satisfy
his self-esteem needs. If his efforts are frustrated in meeting thesechallenges, he will move back
to existence needs and may ask for more materialbenefits.
c. McClelland's Theory of Needs
Harvard psychologist David McClelland concluded that from the organizationalbehavior point of
view the most prominent need is the need forachievement, power and affiliation. The primary
motive is the achievementmotive and is defined as a desire to succeed in competitive situations
based uponan established or perceived standard of excellence.
 Individuals with a strong need for achievement known as nAch, ask for accept and perform,
well in challenging tasks which require creativity, ingenuityand hard work. They are
constantly preoccupied with a desire for improvementand look for situations in which
successful outcomes are directly correlated withtheir efforts so that they can claim credit for
success. They take- moderate andcalculated risks and prefer to get quick and precise
feedback on theirperformance. They set more difficult but achievable goals for themselves
because success with easily achievable goals hardly provides a sense ofachievement. They
desire greater pleasure and excitement from solving a complexproblem than from financial
incentives or simple praise.
 The need for power known as nPaw is the desire is the desire to affect and control the
behavior of other people and to manipulate the surroundings. Power motivationwhen applied
positively results in successful managers and leaders who preferdemocratic style of
leadership. Power motivation, applied-negatively tends tocreate arrogant autocratic
leadership.
 The need for affiliation known as nAff is relatedto social needs and reflects a desire for
friendly and warm relationships withothers. Individuals tend to seek affiliation with others

Page | 133
 who have similar beliefs,backgrounds and outlook on life. This results in information of
informal groupsand informal organizations. It is evident in social circles also that people mix
withpeople of their own kind. Individuals with high "nAff” tend to get involved injobs that
require a high amount of interpersonal contact; and relations such as jobsin teaching and
public relations. From organizational behavior point of view,these individuals are highly
motivated to perform better in situations wherepersonal support and approval are tied to
performance. They tend to avoid conflictand exhibit strong conformity to the wishes of their
friends.
d. Herzberg's Two-Factor Theory
Fredrick Herzberg and his associates developed the two-factor theory in the late1950s and early
1960s. As part of a study of job satisfaction, Herzberg and hiscolleagues conducted in-depth
interviews with over 200 engineers andaccountants in the Pittsburgh area. The researchers felt
that a person's relation tohis work is a basic one and that his attitude towards work would
determine hisorganization related behavior. The respondents were required to describe indetail
the type of environment in which they felt exceptionally good about theirjobs and the type of
environment in which they felt bad about their jobs. It seemsnatural to believe that people who
are generally satisfied with their job will bemore dedicated to their work and perform it well as
compared to those peoplewho are dissatisfied with their jobs. If the logic seems justified then it
would beuseful to isolate those factors and conditions that produce satisfaction with the joband
those factors, which produce dissatisfaction.The basic questions that were asked in the survey
were the following two:
 What is it about your job that you like? and
 What is it about your job that you dislike?
Based upon these answers it was concluded that there are certain characteristics orfactors that
tend to be consistently related to job satisfaction and there are otherfactors that are consistently
related to job dissatisfaction. Herzberg named thefactors that are related to job satisfaction as
motivational factors, which areintrinsic in nature and factors related to job dissatisfaction as
maintenance orhygiene 'factors which are extrinsic in nature. These factors are described in
detailas follows:
 Hygiene Factors:Hygiene factors do not motivate people. They simply prevent
dissatisfaction and Maintain Status Quo. They produce nogrowth but prevent loss. The

Page | 134
 absence of these factors leads to jobdissatisfaction. The elimination of dissatisfaction does
not meansatisfaction and these factors simply maintain a “zero level of motivation.”For
example: if a person indicated "low pay" as a cause of dissatisfaction,it would not necessarily
identify '”high pay” as a cause of satisfaction.Some of the hygiene factors are: Wages, salary
and other types of employee benefits, company policies and administration rules that govern
the working environment, interpersonal relations with peers, supervisors and subordinates,
cordial relations with all will prevent frustration and dissatisfaction, working conditions and
job security. The job security may be inthe form of tenure or a strong union could support it,
Supervisor's technical competence as well as the quality of hissupervision. If the supervisor
is knowledgeable about the work and ispatient with his subordinates and explains and guides
them well, thesubordinates would not be dissatisfied in this respect. All the hygiene factors
are designed to avoid damage to efficiency or morale andthese are not expected to stimulate
positive growth. Hawthorne experiments werehighly conclusive in suggesting that
improvements in working conditions orincrements in financial benefits do not contribute to
motivated performance.
 Motivational Factors: These factors are related to the nature of work (job content) and are
intrinsic tothe job itself. These factors have a positive influence on morale,
satisfaction,efficiency and higher productivity. Some of these factors are:
 The job itself: To be motivated, people must like and enjoy their jobs. They become
highly committed to goal achievement and do not mindworking late hours in order to do
what is to be done. Their morale is highas evidenced by lack of absenteeism and
tardiness.
 Recognition: Proper recognition of an employee's contribution by themanagement is
highly morale boosting. It gives the workers a. feeling ofworth and self-esteem. It is
human nature to be happy when appreciated.Thus, such recognition is highly
motivational.
 Achievement: A goal achievement gives a great feeling ofaccomplishment. The goal
must be challenging, requiring initiative andcreativity. An assembly line worker finishing
his routine work hardly getsthe feeling of achievement. The opportunities must exist for
themeaningful achievement; otherwise workers become sensitized to theenvironment and
begin to find faults with it.

Page | 135
  Responsibility: It is an obligation on the part of the employee to carry outthe assigned
duties satisfactorily. The higher the level of these duties, themore responsible the work
would feel and more motivated he would be. Itis a good feeling to know that you are
considered a person of integrity andbe given a higher responsibility. It is a motivational
factor that helpsgrowth.
 Growth and advancement: These factors are all interrelated and arepositively related to
motivation. Job promotions, higher responsibility,participation in decision-making and
executive benefits are allsigns of growth and advancement and add to dedication and
commitment of employees. The Herzberg's two-factor model is tied in with
Maslow'sbasic model in that Maslow is helpful in identifying needs and
Herzbergprovides us with directions and incentives that tend to satisfy these needs.
Also the hygiene factors in Herzberg’s model satisfy the first three levelsof Maslow's model of
physiological needs, security and safety needs andsocial needs, and the motivational factors
satisfy the lasttwo higher level needs of esteem and self-actualization. Some researchers do not
agree with Herzberg's model as being conclusive, sincethe results were based primarily on the
responses of white collar workers(accountants and engineers) and do not necessarily reflect the
'blue collar workers'(operational employees) opinion who may consider hygiene factors as
motivational factors.
Some studieshave found that the effect of hygiene factors and motivational factors are
totallyreversed on some people. They are highly motivated by financial rewards,organized
supervision, well-defined work rules, pleasant working environmentand positive employee
'interaction and do not give much importance toachievement and self-actualization.Another
criticism about Herzberg's two-factor theory dwells upon the method ofresearch and data
collection. The theory was developed on the basis of "criticalincident" method. According to this
method, the respondents were asked toindicate particular incidents, which they felt, were
associated with theirsatisfaction or dissatisfaction with their jobs.
Furthermore, the theory does not take into consideration individual differences invalues and
outlook as well as the individual's age and organizational level.However, this theory has
contributed to one management program that has lentitself to the enhancement of motivators. It
provides valuable guidelines forstructuring the jobs in order to include within the job content
such factors, whichbring about satisfaction.

Page | 136
2. Process Theory of Work Motivation
While "need theories" of motivation concentrate upon "what" motivates persons, “process
theories" concentrate upon "how" motivation occurs. These theoriesidentify the variables that go
into motivation and their relationship with eachother. Some of these theories are explained in
more detail as follows:
a. Vroom's Expectancy Model: The expectancy model is based upon the belief that motivation
is determined bythe nature of the reward people expect to get as a result of their job
performance.The underlying assumption is that a man is a rational being and will try
tomaximize his perceived value of such rewards. He will choose an alternative thatwould
give him the most benefit. People are highly motivated if they believe thata certain type of
behavior will lead to a certain type of outcome and their extentof personal preference for that
type of outcome. There are three importantelements in the model. These are:
 Expectancy:This is a person's perception of the likelihood that a particular outcome will
result from a particular behavior or action. Thislikelihood is probabilistic in nature and
describes the relationship betweenan act and its outcome. For example, if a student works
hard during thesemester, he will expect to do well in the final examination. It is not
100%definite that he will indeed do well in the examination. There is someprobability
attached to this outcome. Similarly, if a person works hard, hemay expect to perform better
and increase productivity. For example, aworker works hard and is absolutely certain
(expectancy = 1.0) that he canproduce an average 15 units a day and 60% certain (expectancy
= 0.6) thathe can produce a high of 20 units per day. This expectation of outcome isknown as
"first level" outcome.
 Instrumentality: This factor relates to a person's belief and expectationthat his performance
will lead to a particular desired reward. It is thedegree of association of first level outcome of
a particular effort to thesecond level outcome-which is the ultimate reward. For example,
workinghard may lead to better performance-which is the first level outcome, and it may
result in a reward such as salary increase or promotion or both whichis the second level
outcome.If a person believes that his highperformancewill not be recognized orlead" to
expectedand desiredrewards,hewill notbemotivatedtoworkhardforbetteroutput.
Similarly,aprofessor maywork had to improveupon his
techniquesofteachingandcommunication(first level outcome)in order to get promotionand

Page | 137
 tenure(secondlevel outcome).Accordingly, instrumentalityis the performance
rewardrelationship.
 Valence: Valence is the value a person assigns to his desired reward. Hemay not be willing
to work hard to improve performance if the reward forsuch improved performance is not
what he desires. It is not the actualvalue of the reward but the perceptual value of the reward
in the mind ofthe worker that is important. A person may be motivated to work hard notto get
pay raise but to get recognition and status. Another person may bemore interested in job
security than status. Accordingly, according to this model of motivation, the person's level
ofeffort (motivation) depends upon: Expectancy: A worker must beconfident that his efforts
will result in better productivity and that he hasthe ability to perform the task well.
Instrumentality: The worker must beconfident that such high performance will be
instrumental in gettingdesired rewards. Valence: The worker must value these rewards as
desiredand satisfactory. Hence motivation is related to these three factors as:Motivational
Force (M) =Expectancy (E) x instrumentality (I) x Valence(V).Or M = (E x I x V). As the
relationship suggests, the motivational force will be the highestwhen expectancy,
instrumentality and valence are all high and themotivational value is greatly reduced when
anyone or more of expectancy,instrumentality or valence approaches the value of zero. The
management must recognize and determine the situation as it exists and takesteps to improve
upon these three factors of expectancy, instrumentality and valence for the purpose of
behavioral modification so that these three elementsachieve the highest value individually.
For example, if a worker exhibits a poorlymotivated behavior, it could be due to: Low effort-
performance expectancy. The worker may lack the necessary skills and training in order to
believe that his extra efforts will lead tobetter performance. The management could provide
opportunities fortraining to improve skills in order to improve the relationship betweeneffort
and performance.
Low performance-reward instrumentality relationship: The worker maybelieve that similar
performance does not lead to similar' rewards. Thereward policy may be inconsistent and
may depend upon factors otherthan simply the performance, which the worker may not be
aware of or may not consider fair. Low reward-valence. Since the managers may lookat the
value of a reward differently than the worker, the management mustinvestigate the
desirability of the rewards, which are given on the basis ofperformance. While monetary

Page | 138
 benefits may be more desirable for someworkers, the need to be formally appreciated may be
more valuablerewards for others for similar task oriented activities. The Vroom's modeltries
to explain as to what factors affect a person's choice of a particularcourse of action among all
available alternatives and why a person wouldbe better motivated towards achievement of
certain goals as compared tosome other goals. Accordingly, managers must understand and
analyze thepreferences of particular subordinates in order to design
"individualizedmotivational packages" to meet their needs, keeping in mind that all
suchpackages should be perceived as generally fair by all concerned parties.
b. Equity Theory: Equity theory is based on the assumption of some researchers that one of the
mostwidely assumed source of job dissatisfaction is the feeling of the employees thatthey are
not being treated fairly by the management or the organizational system.The “Equity theory"
has two elements. First, the workers want to get a fair reward for their efforts. This
"exchange," meaning reward for efforts, is similar to anyother exchange. If you put in more
efforts into-your work, you expect to get out of it morerewards. Second, you would compare
your rewards with the rewards of otherswho put in similar efforts. Imagine that you got your
MBA from an Ivy Leagueuniversity and are offered a job for $30,000 per year. However,
you believe thatthis offer is not fair and based upon your qualifications and potential
contributionto the company; you believe that $35,000 per year would be more
equitable.Suppose you do get $35,000 as you hoped for. This would eliminate the
inequityand you are happy. A few days into the job you find out that another person withthe
same degree and background from the same university was hired at the sametime at $40,000
per year. You feel that this is unfair by comparison and thus inyour mind a state of inequity
exists. This inequity can be a source ofdissatisfaction.
Equity theory is based upon the recognition that employees are not only concernedwith the
rewards that they receive for their efforts but also with the relationship oftheir rewards with the
rewards received by others. They make judgments of equity orinequity between their input and
outcomes and the inputs and outcomes of others. Forcomparison purposes, the inputs can be
considered as efforts, skills, education,experience, competence; and outputs can be considered as
salary levels, recognition,raises, status and other privileges. When such inequity exists, whether
it is perceivedor real, employees will feel uneasy about it and will tend to take steps that will
reduceor eliminate this inequity. These steps may result in lower or higher productivity,improved

Page | 139
or reduced quality of output, increased dedication and loyalty or uncaringattitudes, protests
against inequity and voluntary resignation. Equity theory proposesthat under-rewarded
employees tend to produce less or produce products of inferiorequality than equitably rewarded
employees, and over-rewarded employees tend toproduce more or product of higher quality than
equitably rewarded employees. Thismust be realized that inequity exists when people are either
"underpaid" or "overpaid"for similar efforts. However, they are more willing to accept
overpayment by justifying such overpayment than by taking steps to reduce this inequity.
Asformulated by Adams, the equity theory comprises of the following postulates: Perceived
inequity creates a feeling of resentment and tension withinindividuals.
The extent of this tension reflects the magnitude and type of inequity.Individuals will be
motivated to take steps to reduce this tension. The greater the extent of perceived inequity the
greater is the strength of such motivation.There are a number of steps that a person can take in
order to reduce the tensioncaused by perceived inequity. It must be understood that inequity
exists only inthe perception of the individual. It may or may not be real. If people are satisfiedin
spite of any inequity that might exist or if they can justify inequity by one wayor another then in
their own perceptions, such inequity does not exist. Thefollowing are some of the steps people
may take to reduce the extent of suchinequity.They may change their inputs either upwards or
downwards to a more equitable level. Overpaid workers may justify overpayment by
increasedefforts and underpaid workers may reduce their level of efforts and be lessinterested in
work by excessive absenteeism and tardiness. They may alter their outcome to restore equity.
The workers .may demandbetter pay and better working conditions for the same input either
bystaging walkouts and strikes or through organized union negotiations.
They can change input-outcome ratio to more favorable and equitablelevels by distorting the
values of the inputs or outcomes. They mayartificially increase the importance of the jobs they
are doing in their ownminds or decrease the value of their own input by believing that they
arenot really working very hard. For example if a professor does not getpromotion he may justify
it by either thinking that "it is not the promotionthat counts but helping the students achieves
academic excellence" or bybelieving that "he really did not work very hard in the area of
research andpublications." Employees may resign from their jobs. 1Smployees who feel that
theyhave been inequitably treated at a particular job may find another jobwhere they feel that the
input-outcome balance is more favorable andequitable for them.

Page | 140
People may change the level of comparison with other employees. In theface of equity, the
employees may believe either that other people getbetter outcomes because they do work harder
at it or because they belongto different category with which the comparison is not valid or
justified.For example, a professor from Business Administration division who didnot get
promotion may compare it equitably with another professor fromSocial Sciences division who
did get promotion by believing that therequirements for promotion for both divisions are not the
same or that theprofessor from Social Science division did work harder to get hispromotion.
c. Goal-Setting Theory: Goal setting theory is a relatively applied approach to motivation and
is basedupon -the assumption that the type as well as the cha1lenge of the goal
inducesmotivation in the individual to achieve such goal. The theory as proposed byEdwin
Locke, studies the processes by which people set goals for themselves andthen put in efforts
in order to achieve them. The quality of performance isgenerally shaped by how difficult and
how specifically defined the goal is:'General goals such as "do your best," do not lend to
accurate performanceappraisal and proportionate rewards. Specific goals are clear and tend to
give aclear direction to the worker, resulting in improved performance. Similarly,difficult
goals, once accepted, lead to higher performance.
 Goal specificity: A specific goal identifies the target in quantitative terms. This would enable
the worker to evaluate his performance and judge as tohow he is doing relative to the goal.
For example, if a worker is producing50 units a day, which is the average output, he may set
his goal of 60 unitsa day to be achieved within seven days. The worker can evaluate
thisoutput each day and decide whether he is adequately moving towards that goal. Meeting a
goal provides the worker with a sense of achievement,pride and personal satisfaction.
General goals, such as “we will produce asmuch as possible,” have little effect on
motivation. Specific goals reduceambiguity and the worker has very clear idea as to what is
expected ofhim.
 Goal difficulty: Difficult but feasible goals provide more challenge thaneasy goals. Reaching
an easy target is not competitive and hence hardlyexciting. This is particularly true for high
need achievers. Goalcommitment is independent of whether the goal is set by the
workerhimself or is assigned by superiors, but depends upon expectations ofsuccess and
degree of success. Commitment would also depend uponprevious rewards for goal
achievement.

Page | 141
The most important element of goal setting theory is the acceptance of goal by theworkers. Of
course, the best way to have the goal accepted by workers is to letthem set their own goals within
the general organizational guidelines. A goal thatone establishes for him becomes an integral part
of him. An example is a person'scareer objective. A person with self-set goals is most likely to
strive harder toachieve them. Assigned goals are equally acceptable if these goals are
consistentwith personal aspirations of workers. Acceptance becomes easier if the workersare
encouraged to participate in the goal setting process. Goal acceptance can alsobe facilitated if the
management demonstrates a supportive attitude towardssubordinates regarding goal
achievement. There is evidence that goal setting, asoutlined, improves performance about 90%
of the time, and that comparativelyhigh achievers set comparatively more difficult goals and are
much more satisfiedwith intrinsic rewards rather than extrinsic rewards.
 The “Carrot and Stick” approach: It is related to the use of reward and penalties in order to
induce desired behavior. Carrot represents rewards while stick implies penalty, punishment,
fear of loss of job, demotion etc.
 Money as motivators: One of the alternative models of motivation known as rational
economic model asserts that people are primarily motivated by financial reward they get as
an exchange for their job inputs. Economists and most managers have tended to place money
high on the scale of motivation. Behavioral scientists tend to place it low. Money satisfies
almost all types of needs. It principal use may be to provide the physical necessities of life as
well as security. Social status depends largely on the size of one’s earning. It cannot be
assumed that money motivates anyone in the same way and the same extents.

Communication

The word communication has been derived from the Latin word “Communist” which means
common. This stands for sharing ideas in common, beside community. Communication
incorporates the concept of transfer information and exchange of messages, ideas, and
understanding between people for the purpose of achieving common objectives.

 Definitions: It is two way process of exchanging ideas or information between human

beings. (Murphy and Peck). It is an intercourse by words, letters, symbols, or messages and is
a way that one organization member shares meanings and understand with others. (Koontz
and O’Donnell). Communication is the sum of all things one person does involves systematic

Page | 142
 and continuous process of telling, listening and understanding. (Louisa Allen).
Administrative communication is a process which involves a transition and accurate
replication of ideas insured by feedback court the purpose of eliciting which will accomplish
organizational goals.
 The communication process: Communication is a two way process in which there is an
exchange and progression of ideas towards a mutually accepted direction or goals. It is
essential that the basic elements of communication be identified. These elements are;
a. Sender/encoder/speaker: Is the person who initiates the communication process. From his/her
personal data he/she selects ideas, encodes, and finally transmits them to receivers.
b. Message: Is the encoded idea transmitted by the sender. It consists of verbal and non-verbal
symbols.
c. Media or channel: Is important element of communication through which messages pass. It
includes; face-to-face discussion, memorandum, magazines, radios, television, news paper,
telephone.
d. Decoder:Is a person who receives and tries to make sense out of message. It is the decoder
who assigns meanings to the ideas or messages transmitted by sender or encoder.
e. Feedback:Is the most important component of communication. It begins when the receiver
responds to the message and ends when his/her response has been decoded by the original
sender. It is the reaction that the receiver has to a message. It helps to evaluate the
effectiveness of the communication. It helps to improve future communication process. The
communication process will also be affected by other factors that include;
a. The code of the transmission of the message i.e. the symbols that carry the message can be;
verbal, non-verbal, paralanguage.
b. The frame of reference i.e. peoples’ attitude, culture, race, sex so on
c. Noise: Refers to anything that interferes with the communication process and destroys and
blocks the message. It can be external such as telephone call, talk of people, heat and other
sounds, and internal such as receiver’s mental and physical condition, daydreaming,
preoccupation, health problems etc.
 Sender ➞Ideas➞Encoding➞ Message ➞ Media➞ Receiver ➞Decoding ➞Feedback.
 Communication in an organization

Page | 143
1. Vertical communication: It is a communication that moves up and downward for the
chain of command in the organization.
a. Downward communication: it is the message passed from the top management to the
lower level of management. The purpose of downward communication is to inform, to
advice, to instruct, to direct, and to evaluate employees.
b. Upward communication: it is the message passed from the lower level management to the
upper level management. The purpose of upward communication is to supply information
to upper level management, to report performed tasks, to give suggestions, to request for
aid or decision, and resources.
2. Lateral or Horizontal communication: It is the communication process that transferred
between the department of an organization that generally follows the work flow rather
than chain of command. The purpose of lateral communication is to provide a direct
channel for organization coordination and problem solving, to enable organizational
members to form relationship with their peers, to slower of avoid the much slower
procedure of communication.
3. Informal communication:It is a type of communication in an organization that is not
effectively sanctioned. The most type of this communication is grapevine. It is formed
and maintained by social relationship rather than the formal reporting relationship.

Characteristics of informal communication

a. It is fast and can penetrate the tightest security

b. It transmit information very rapidly in all direction through the organization
c. It is easily assess bile

Pattern of grapevine

There are four possible types of grapevine chains

1. Single strand chain. It is a least accurate at passing on information.

A ➞ B➞ C ➞D ➞ E
2. Gossip chain. One person seeks out and tells everyone the information he/she obtained.

B C

Page | 144
 A D

3. Random chain. Individuals are in different bout that they inform to. Tell people at
random, and those people return tell at random. Used when information is mildly
interesting but insignificance.
H C

F D B

A E

4. Cluster. One person conveys the information to a few selected individuals, some of
whom then inform a few selected others. The grapevine typically transmits information
through this chain which is dominated in the organization.

B C D

E F I J K

 Barriers to communication

It is a common breakdown in communication which occurs when sender fail to transmit the
message intended to those who should to receive. There are;

1. Difference in perception

Page | 145
2. Difference in semantic
3. Difference in status
4. Difference in mental leaning/biases
5. Difference in organizational climate
6. Business jargon
7. Poor communication skill
8. Others; like; time pressure, noise, distance between sender and receiver of information, bad
smell, inadequate listening etc.

CHAPTER-SIX: THE CONTROLLING FUNCTION

7.1. Meaning and Need for Control
A. Meaning of Control
Control is any process that guides activity towards some predetermined goals. Thuscontrol can
be applied in any field such as price control, distribution control, pollutioncontrol, etc. However,
control as an element of management process can be definedas the process of analyzing whether
actions are being taken as planned and takingcorrective actions to make these to conform to
planning. Thus control process tries tofind out deviations between planned performance and
actual performance and tosuggest corrective actions wherever these are needed. “Controlling is
determining what is being accomplished, that is evaluating theperformance and, if necessary,
applying corrected measures so that theperformance takes place according to plan.”Based on the
definition of control, its following features can be identified:
1. Control is forward looking because one can control future happenings and not the past.
However, on control process always the past performance ismeasured because no one can
measure the outcome of a happening whichhas not occurred. In the light of these
measurements, managers suggestcorrective actions for future period.

Page | 146
2. Control is both an executive process and from the point of view of theorganizations of the
system. As an executive process, eachmanager has to perform control function in the
organization. It is true thataccording to the level of a manager in the organization, the nature,
scope,and limit of his control function may be different as compared to amanager at other
level. The word control is also preceded by an adjectiveto designate a control problem, such
as, quality control, inventory control,production control, or even administrative control. In
fact, it isadministrative control, which constitutes the most comprehensive controlconcept.
All other types of control may be included under it.
3. Control is a continuous process. Though managerial control enables themanager to exercise
control at the point of action, it follows a definitepattern and timetable, month after month
and year after year on a continuous basis.
4. A control system is a coordinated or integrated system. This emphasizes that, although data
collected for one purpose may differ from those withanother purpose, these data should be
reconciled with one another. In asense, control system is a single system, but it is more
accurate to think ofit as a set of interlocking sub-systems.
B. Importance of Control
Organizations try to achieve their objectives through various actions. From thispoint of view, all
the objectives lead to the achievement of organizationalobjectives. However, the organizations
must also monitor whether they areachieving their objectives or not. Thus control is an integrated
action of anorganization or manager. It offers help in the following directions:
a. Adjustments in Operations: A control system acts as an adjustment in organizational
operations. Every organization has certain objectives toachieve which becomes the basis for
control. It is not only sufficient tohave objectives but also to ensure that these objectives are
being achievedby various functions. Control provides this clue by finding out whetherplans
are being observed and suitable progress towards the objectives isbeing made, and acting, if
necessary, to correct any deviation. This mayresult into taking actions more suitable for the
achievement oforganizational objectives.
b. Policy Verification:Various policies on the organization generate theneed for control. For
organizational functioning, managers set certainpolicies and other planning elements, which
later become the basis andreason for control. They become basis in the sense that
organizationalperformance is reviewed in these lights. They also become the reason for

Page | 147
 control because through these, an organization tries that its variousindividuals adhere to such
framework. In this process, the organizationand its management can verify the quality of
various policies.
c. Managerial Responsibility: In every organization, managerialresponsibility is created
through assignment of activities to variousindividuals. This process starts at the top level and
goes to the lowerlevels. However, when a manager assigns some activities to
hissubordinates, he remains responsible for that portion of activities for theirultimate
performance. It is quite natural that when a person is responsiblefor the performance of his
subordinates, he must exercise some controlover them. Thus, the control is required because
of the very basic natureof the organization itself. In large organizations, many
individualscontribute to the organizational objectives. For efficient performance,they are
arranged in hierarchy, forming superior-subordinate relationshipthroughout the organization.
Since each superior is responsible for theactivities of his subordinates also, the control flows
throughout the organization beginning at the top level,
d. Psychological Pressure:Control process puts a psychological pressureon the individuals for
better performance. The performance of theindividuals is evaluated in the light of targets set
for them. A person islikely to put better performance if he is aware that his performance will
beevaluated. He may feel pressure to achieve the results according to thestandards fixed for
him. This is further complemented by the reward andpunishment based on the performance.
Since the performancemeasurement is one of the basic elements of the control process,
itensures that every person in the organization contributes to his maximumability for goal
achievement.
e. Coordination inaction:Though coordination is the essence ofmanagement and is achieved
through the proper performance of allmanagerial functions, control affects this aspect
significantly. Control systems are designed in such a way that they focus not only on
theoperating responsibility of a manager but also on his ultimateresponsibility. This forces a
manager to coordinate the activities of hissubordinates in such a way that each of them
contributes positivelytowards the objectives of the superior. Since this follows throughout
theorganization, coordination is achieved in the organization as whole levels of the
management.

Page | 148
f. Organizational Efficiency and Effectiveness:Proper control ensuresorganizational efficiency
and effectiveness. Various factors of control,namely, making managers responsible,
motivating them for higherperformance, and achieving coordination in their performance,
controlensures that the organization works efficiently. The organization alsomoves towards
effectiveness because of control system. The organizationis effective if it is able to achieve
its objectives. Since control focuses onthe achievement of organizational objectives, it
necessarily leads toorganizational effectiveness. Looking into the various roles that
controlsystem plays in the organization, the management should devise a controlsystem
which effectively meets the demands of the organization: Themanager can do this if he is
aware of the essential features of effectivecontrol system.Effective and efficient management
leads to success, the success where it attains the objectives and goals of the organizations. Of
course for achieving the ultimate goal and aim management need to work creatively in
problem solving in all the four functions. Management not only has to see the needs of
accomplishing the goals but also has to look in to the process that their way is feasible for the
company.
7.2. Control Process
The various steps in controlling may broadly be classified into four parts such as:
1. Establishment of Control Standards: Every function in the organizations begins with plans,
goals, objectives, or targets tobe achieved. In the light of these, standards are established
which arecriteria against which actual results are measured. For setting standardsfor control
purposes, it is important to identify clearly and precisely theresults which are desired. In
many areas, great precision is possible. However, in some areas, standards are less precise.
Standards may be precise if they are set in quantities, physical, such as volume of products,
man-hour ormonetary, such as costs, revenues, and investment. They may also be inother
qualitative terms, which measure performance. After setting thestandards, it is also important
to decide about the level of achievement orperformance, which will be regarded as good or
satisfactory. There areseveral characteristics of a particular work that determine
goodperformance. Important characteristics, which should be considered whiledetermining
any level of performance as good for some operations are: (i)output, (ii) expense, arid (iii)
resources. Expense refers to services orfunctions, which may be expressed in quantity, for
achieving a particularlevel of output Resources refer to capital expenditure, human

Page | 149
 resources,etc. After identifying these characteristics the desired level of eachcharacteristic is
determined. The desired level of performance should bereasonable and feasible. The level
should have some amount of flexibilityalso, and should be stated in terms of range;
maximum and minimum.Control standards are most effective when they are related to
theperformance of a specific individual, because a particular individual canbe made
responsible for specific results. However, sometimesaccountability for a desired result is not
so simply assigned; for example,the decision regarding investment in inventory is affected by
purchase,rate of production and sales. In such a situation, where no one person isaccountable
for the levels of inventories, standards may be set for eachstep that is being performed by a
man.
2. Measurement of Performance: The second major step in control processis the measurement
of performance. The step involves measuring theperformance in respect of a work in terms of
control standards. Thepresence of standards implies a corresponding ability to observe
andcomprehend the nature of existing conditions and to ascertain the degreeof control being
achieved. The measurement of performance againststandards should be on a future basis, so
that deviations may be detected in advance of their actual occurrence and avoided by
appropriate actions:Appraisal of actual or expected performance becomes an easy task,
ifstandards are properly determined and methods of measuring performancewhich can be
expressed in physical and monetary terms, such asproduction units, sales volume, profits, etc.
can be easily and preciselymeasurable. The performance, which is qualitative and intangible,
such ashuman relations, employee morale, etc., cannot be measured precisely.For such
purposes, techniques like psychological tests and opinionsurveys may be applied. Such
techniques draw heavily upon intuitive judgment and experience, and these tools are far from
exact. Accordingto PetorDrucker, it is very much desirable to have clear and
common'measurements in all key areas of business. It is not necessary thatmeasurements are
rigidly quantitative. In his opinion, for measuringtangible and intangible performance,
measurement must be (i) clear,simple, and rational, (ii) relevant, (iii) direct attention and
efforts, and (iv)reliable, self-announcing, and understandable without
complicatedinterpretation or philosophical discussions.
3. Comparing Actual and Standard Performance:The third major step incontrol process is the
comparison of actual and standard performance. Itinvolves two steps: (i) finding out the

Page | 150
extent of deviations, and (ii)identifying the causes of such deviations. When adequate
standards aredeveloped and actual performance is measured accurately, any variationwill be
clearly revealed. Management may have information relating towork performance, data,
charts, graphs and written reports, besidespersonal observation to keep itself informed about
performance indifferent segments of the organization. Such performance is comparedwith the
standard one to find out whether the various segments andindividuals of the organization are
progressing in the right direction.When the standards are achieved, no further managerial
action isnecessary and control process is complete. However, standards may notbe achieved
in all cases and the extent of variations may differ from case to case. Naturally, management
is required to determine whether strictcompliance with standards is required or there should
be a permissiblelimit of variation. In fact, there cannot be any uniform practice
fordetermining such variations. Such variations depend upon the type ofactivity. For
example, a very minute variation in engineering productsmay be significant than a wide
variation in other activities. When thedeviation between standard and actual performance is
beyond theprescribed limit, an analysis is made of the causes of such deviations.
Forcontrolling and planning purposes, ascertaining the causes of variationsalong with
computation of variations is important because such analysishelps management in taking up
proper control action. The analysis willpinpoint the causes, which are controllable by the
person responsible. Insuch a case, person concerned will take necessary corrective
action.However, if the variation is caused by uncontrollable factors, the personconcerned
cannot be held responsible and he cannot take any action.Measurement of performance,
analysis of deviations and their causes maybe of no use unless these are communicated to the
person who can takecorrective action. Such communication is presented generally in the
formof a report showing performance standard, actual performance, deviationsbetween those
two tolerance limits, and causes for deviations. As soon aspossible, reports containing control
information should be sent to theperson whose performance is being measured and
controlled. Theunderlying philosophy is that the person who is responsible for a job canhave
a better influence on final results by his own action. A summary ofthe control report should
be given to the superior concerned because theperson on the job may either need help of his
superior in improving theperformance or may need warning for his failure. In addition,
otherpeople who may be interested in control reports are (i) executivesengaged in

Page | 151
 formulating new plans; and (ii) staff personnel who areexpected to be familiar with control
information for giving any adviceabout the activity under control when approached.
4. Correction of Deviations:This is the last step in the control process,which requires that
actions should be taken to maintain the desired degreeof control in the system or operation.
An organization is not a self-regulatingsystemsuch as thermostatwhich operates in a state
ofequilibriumput there by engineeringdesign. In a businessorganizationthistype
ofautomaticcontrolcannotbeestablished becausethestateofaffairsthat existsis the
resultofsomanyfactors in the total environment.Thus,someadditionalactions are requiredto
maintainthecontrol.Suchcontrolaction maybe (i) review of plansand goals
andchangethereinonthebasis ofsuch review;(ii) changein the assignmentoftasks; (iii)changein
existing techniques of direction;(iv) change in organizationstructure;provision fornew
facilities,etc.Infact,correction of deviationisthe step in managementcontrol process,which
mayinvolve either all orsomeof the managerialfunctions. Dueto this, manypersons hold
theviewthat correctingdeviationsis not a step in thecontrolprocess.It isthestage where other
managerialfunctionsare performed.Koontz andO’Donnellhave emphasized that the overlapof
control function with theothermerelydemonstratesthe unity ofthe manager’sjob.It shows
themanagingprocess to be an integrated system.
7.3. Types of Control
Control consists of ensuring whether everything happens in conformity with the plan adopted,
the issued instructions and the established principles. The aim objective of control is to identify
errors in order to correct them and to prevent recurrence. Control is to be applied to humans,
material and activities or services. Effective control is based on prompt action followed by
sanction if necessary. Control has been seen as impartial and for that reason advises separation of
the inspector from those being inspected to insure independence of the control element. That is,
by nature, control’s main objective is to note and correct mistakes and to prevent them from
occurring again and again.
Now that is where the problem lies. Some people do not like to be corrected, or to be identified
as having performed an error. But we all know the saying that says. “We learn by mistakes”. It is
through mistakes that we learn and perform better. Sometimes it is said, “Practice makes
perfect”. During practice then, mistakes will be made and they are supposed to be corrected. That
is where the control function has to play a role. We cannot make mistakes forever. One needs to

Page | 152
develop and grow and overcome making some mistakes. The followings are some important
types of control.
1. Pre-Action Control or Preliminary Control
This can also refer to controls made before the execution of a plan and known as feed forward or
preventive control. Preventive control monitors inputs to ensure that they meet the standards
necessary for successful transformation. In doing so, they regulate quality and quantity of
financial, physical, human and information resources before they are transformed into output.
Pre-action control is the most desirable type of control since the intention is to prevent problems.
Ensure that the required human, material and financial resources are set aside before the activity
is started or is done by these control strategies. The intention is to prevent problems before they
occur rather than solving them as they arise. For example, the financial budget is one example;
the agency budgets for expenses that are associated with a project and allocate the funds needed
to ensure its completion. In general, preventive control regulates inputs to ensure that they meet
the standards necessary for the transformation process. Even though, preventative control makes
a significant contribution to organizational effectiveness, they frequently cannot cover every
possible action. In such case, other types of controls may be needed.
2. Screening or Concurrent Control
Screening control is also known as yes/no or preventive control. It involves the regulation of
ongoing activities by monitoring the transformation of inputs into outputs to ensure that they
conform to organizational standards. Concurrent control is the only control that can cope with
contingencies (unexpected events) that cannot be anticipated. When unexpected events arise for
activities on the transformation process, a “yes or no” or “go or not go” decision is required i.e. a
decision must be made whether to continue as before, or follow an alternative courses, or take
corrective action, or stop work altogether. It gives aselection process during which a specific
aspect of the procedure must first beapproved or certain requirements must be fulfilled before
proceeding to thenext step in the process. It is a safety measure basically, because theoutcome
would be very serious if, for instance, there were deviation from thequality standards. For
instance, before someone can be appointed in theposition of a social worker, he/she must have
successfully completed a four-yeardegreeinsocialworkatarecognized
universityandmustberegisteredwiththe Council for Social Service Professions as a social worker.
If it thenhappens that he/she does not meet the minimum requirements, he/she cannotbe

Page | 153
appointed. On the other hand, this ensures that clients receive help frompersonnel who are well
qualified and who are subject to the control of a professional body. Concurrent control allows
adjustments to be made while work is to being done.
3. Post-action or Feedback Control
Post-action control is regulation exercised after a product or services have been completed in
order to ensure that the final output meets organizational standards and goals. Feedback control
comes in to play after transformations have had taken place. Thus, it focuses on end results, as
opposed to inputs and activities. Post-action control is very important because it provides
managers with a basis for evaluating the reasonableness of organizational goals and standards, as
well as significant in to past performance that can be used to avoid future mistakes. This type of
knowledge is essential for refining organizational planning capabilities. Post-action control
fulfills a number of important functions such as:
 It used when pre-action and concurrent controls are not feasible or are too costly.
 It is often used when the exact processes involved in producing output are difficult to specify.
 It provides information that facilitate planning processes.
 By documenting accomplishments, it also provides feedback for rewarding employee
performance.
7.4. Techniques of Control
There are a variety of controlling techniques. Their appropriateness for various points in the
input, transformation, and output cycle will vary with the conditions and requirements of a
particular undertaking organizations use various methods of control with varying degree of
appropriateness, depending on how frequently the controls are used. Accordingly, the followings
are the most common used control techniques in the organizations.
1. Constant Controls: These are control methods that are use more frequently or constantly.
There are three methods of control that put in this category such as:
a. Self-control: Under this method of control, employees exert the self-control required to
perform their assigned tasks in the organization. So, self-control should exist in organization
since their absence would require enormous investments to other control methods.
Accordingly, organization shifts control away from management to the self-control within
the individual employees. For employees self-control means reporting work on time,

Page | 154
 respecting properly, and observing the right of others. Personal pride and initiative are the
main source of self-control.
b. Group control: Work groups are also a source of control. By defining the kind of work
behavior that are acceptable or unacceptable, group defined norms exert a strong influence
on individual actions. Some organizations place great emphasis on work group control by
striving to develop a way of thinking that stress adherence to group established behavior
patterns.
c. Policies: The role of policies, procedures, and rules was discussed in connection with
elements of planning functions. Typically reflecting past managerial experiences, policies,
procedures, and rules may concern any number of things how to make certain decisions,
deal with resources, and handle difficult employees and so on.
2. Periodic Control: These methods of controls are used periodically rather than frequently.
These include the following methods:
a. Information system: An information system is a mechanism for controlling, analyzing, and
disseminating data in the form of suitable information. Each function within the
management process is served by various information systems. Besides facilitating effective
control of organizational resources, management information systems are important in
planning, organizing, staffing and human resource management, and leadership and
interpersonal influence.
b. External audits: This method of control requires the examination of an organizational
finance on a regular basis by an outside accounting (auditing) firm. In such firms there are
certified professionals who are tried to ensure that an organization’s financial statements are
prepared in conformity with generally accepted accounting principles. External audits verify
the existence of the assets, claimed on financial statements, such as inventory, equipment,
furniture and so on. In doing so, external audits help control the use of organizational assets
and resources.
c. Budgets: In addition to being a type of plan, budgets are also the method of control. They
exercised control by allocating resources across departments, specifying in advance how
allocated resources are to be utilized, and providing a standard against which planned
performance can be compared to actual performance.

Page | 155
3. Occasional Control: Unlike the constant control, occasional controls are conducted
frequently. It includes:
a. Special report: Such reports are prepared when controls indicate a discrepancy or deviation
between standards and performance. Depending on their purpose, special reports vary in
content and style some may be statistical, and others descriptive. For example; special reports
may be prepared for production down times showing an analysis of idle machine time, its
causes and costs.
b. Personal observation: There are essentially two ways manager can determine what is
happening in the organization. Rely on information provided by others or find out by them.
Effective managers recognize the importance of reliable, firsthand information. This might
require speaking directly to those performing various functions, or holding meetings with
lower level employees.
c. Project controls: Various methods have been developed from controlling specific projects.
The three most popular are Gantt Chart, Program Evaluation and Review Techniques (PERT)
and Break-even analysis. PERT does a control method that depicts the interrelationship
across time among those events and activities comprise a project. Break-even analysis is a
method of visualizing the relationship between costs and revenues.
4. Quality Control: It is a recent or current control issues. Quality is a totality of features and
characteristics of a product or services that bear on its ability to satisfy needs. There are
several dimensions of quality. Performance; involves the products primary operating
characteristics.
 Features: Are supplements to the basic functioning characteristics.
 Reliability: Addresses the probability of a product’s working properly or breaking down
altogether within specific period.
 Conformance: Refers to the degree to which a product’s design or operating characteristics
agree to pre-established standards.
 Durability: Is a measure of how much use a person gets from a product before it deteriorates
or break down.
 Serviceability: Refers to the promptness and easy of repair.
 Aesthetics: Refers to how a product looks feels, tastes or smells.
5. Statistical Aids to Quality Control\

Page | 156
a. Acceptance Sample: It is a statistical technique that evolved evaluating random samples
from a group of produced materials or lots to determine whether the lot meets acceptable
quality levels. Acceptable quality levels (AQL) is a pre-determined standard against which
random samples of a produced materials are compared in acceptance sampling.
b. Statistical Process Control: Is a statistical technique that uses periodic random samples taken
during actual production to determine whether acceptable quality levels are being meet or
schedule should be stopped for remedial action.
c. Inventory Control: Inventory is a stock of materials that are used to facilitate production or
to satisfy consumer demands. There are three major types of inventory such as:
 Raw Material Inventory: The stock of ingredients, and other inputs to a production process.
 Work-in-process Inventory: The stock of items that are currently being transformed in to a
final product.
 Finished Good Inventory: The stock of items that has been produced and is waiting sales or
transit to a customer. The major types of control system for inventories are:
a. Economic Order Quantity (EOQ): The EOQ is an inventory control method developed to
maintain ordering plus holding costs which avoiding stock out costs. Ordering costs are the
expenses involved in giving an order such as telephone, faxes, and postage. Holding costs are
expenses associated with keeping an item on hand such as storage. Stock out costs is
economic consequences of running out of stock.
b. Just-in-time Inventory Control (JIT): It is an approach to inventory control that emphasizes
having materials arrive just as they are needed in the production process. This approach
minimizes holding costs and save storage space by having materials arrive only as needed.
7.5. Effective Control System
Control is necessary in every organization to ensure that everything is goingproperly. Every
manager, therefore, should have an effective and adequate control system to assist him in making
sure that events conform to plans. However, control does not work automatically, but it requires
certain design. While the basic, principals involved in designing a control system in
organizations may be universal; the actual system in an organization requires some specific
design. In this tailoring of Control system, there are certain requirements, which should be kept
in mind.

Page | 157
1. Reflecting Organizational Needs:All control systems and techniques should reflect the jobs
they are to perform. There may be several controltechniques, which have general
applicability, such as, budgeting, costing, etc. However, it should not be assumed that these
might be utilized in allsituations. The managers should choose an appropriate tool for
control,which helps him in controlling actions according to plans.
2. Forward Looking: Control should be forward looking. Though many ofthe controls are
instantaneous, they must focus attention as to how futureactions can be confirmed with plans.
In fact the control system should besuch that it provides aid in planning process. This is done
in two ways: itdraws situations where new planning is needed, and it provides some ofthe
data upon which plans can be based.
3. Promptness in Reporting Deviation: The success of a thermostat lies inthe fact that it points
the deviation promptly and takes corrective actionsimmediately. Similarly, an ideal control
system detects deviationspromptly arid informs the manager concerned to take timely
actions. Thisis done through designing good appraisal and information systems.
4. Pointing out Exceptions at Critical Points:Control should pointexception at critical points
and suggest whether action is to be taken fordeviations or not Some deviations in the
organizations have any impactwhile others, though very little in quantity may have great
significance.Thus, control system should provide 'information for critical point controland
control on exception. The critical point control stresses that effectivecontrol requires
attention to those factors critical to appraisingperformance against an individual plan. The
control on exception requiresthat a manager should take corrective action when there is
exceptionaldeviation. The more a manager concentrates his control efforts onexceptions, the
more efficient will be the results of his control.
5. Objectives:The control should be objective, definite, and determinable ina clear and positive
way. The standards of measurement should bequantified as far as possible. If they are not
quantifiable, such as, trainingeffectiveness, etc. they must be determinable and verifiable. If
theperformance standard and measurement is not easily determinable, manysubjective
elements enter into the process, which catch the controller and controlled on wrong tooting.
6. Flexible: Control system should be flexible so that it remains workable in the case of
changed plans, unforeseen circumstances, or outright failures.As Geotz has remarked, a
control system should report such failures andshould contain sufficient elements of flexibility

Page | 158
 to maintain managerialcontrol of operations despite such failures. Having alternative plans
forvarious probable situations can provide much flexibility in control. Infact, flexible control
is normally achieved through flexible plans.
7. Economical:Control should be economical and must be worth its costs.Economy is relative,
since the benefits vary with the importance of theactivity the size of the operation, the
expense that might be incurred in theabsence of control and the contribution the control
system can make. Theeconomy of a control system will depend a great deal on the
manager’sselecting for control only critical factors in areas important to him. Iftailored to the
job and the size of the enterprise, control will beeconomical. A large-sized organization can
afford highly complicatedtechniques, sophisticated tools of control and more elaborate
system ofcontrol, but a small-sized organization cannot afford these because of thecost
factor.
8. Simple:Control system must be simple and understandable so that allmanagers can use it
effectively. Control techniques which are complicatedsuch as complex mathematical
formulae, charts, graphs, advancedstatistical methods and other techniques fail to
communicate the meaningof their control data to the managers who use them. Effective
controlrequires consistency with the position, operational responsibility, abilityto understand,
and needs of the individuals concerned.
9. Motivating: Control system should motivate both controller andcontrolled. While the
planning and control are necessary for economicaloperations, researches in human relations
show that planning and control are more often than not antagonistic to good human
relations.The design of control system should be such that aims atmotivating people by
fulfilling their needs.
10. Reflecting Organizational Pattern:The control should reflectorganizational pattern by
focusing attention on positions in organizationstructure through which deviations are
corrected. Organization structure, aprincipal vehicle for coordinating the work of people, is
also a majormeans of maintaining control. Thus, in every area of control, it is notenough to
know that things are going wrong unless it is known whereinthe organization structure the
deviations are occurring. This enablesmanagers to fix up the responsibility and to take
corrective actions.

Page | 159
Page | 160