Project and Finance Management– 1MEHS409

Unit II: Functions of Management

Dr. L. Y. Waghmode

Professor, Department of Mechanical Engineering

Annasaheb Dange College of Engineering and Technology,

Ashta
Management
Introduction
• Organizations, regardless of business model or industry, depend on capable managers to
achieve goals, earn profits and maintain consistent operations.
• Professionals in leadership positions who have a firm grasp on the functions of management
can better fulfill their responsibilities and deliver great results for their employers.
• Management is an activity consisting of process which is mainly concerned with important task
of goal achievement.
• No business enterprise can achieve its objective until all the members of the organization work
in planned and integrated way.
• Therefore the process of management involves the determination of objectives and putting
them in action.

According to G.R. Terry ‘Management is a distinct process consisting of planning, organizing,

actuating and controlling, performed to determine and accomplish stated objectives by the
use of human beings and other resources.’’
Management
Introduction
 Management is defined as the procedure of organizing, directing, planning and controlling the
efforts of organizational members and of managing organizational sources to accomplish
particular goals.

Management is considered a continuing activity

made up of basic management functions:
• Planning
• Organizing
• Staffing
• Directing and Controlling.
The managers have to perform all these functions in
order to achieve the desired organizational goals.
Planning
Introduction
• Planning is the most basic function of management.
• All the organizations have to make a concrete plan before they start business or execute any
project.
• Planning involves setting objectives in advance, a goal which is to be achieved within a
stipulated time.
• Various alternatives are formulated in order to achieve the goals.
• The best alternative courses of action is then selected which will help the organization to
achieve its objectives.
• It is deciding in advance what to do and how to do when to do and by whom it is to be done. It
bridges the gap between where we are and where we want to go.
• Planning is related to future and is a continuous process.
• All the other functions of management like organizing, staffing, directing, controlling are
dependent on planning.
Planning
Definition of Planning

“Planning is deciding in advance what is to be done .When a

manager plans, he projects a course of action for the future,
attempting to achieving a consistent, coordinated structure of
operation aimed at desired result ”.
Importance of Planning

1. Planning increase efficiency

Planning makes optimum utilization of all available
resources. It helps to reduce wastage and avoids duplication
of work.
2. Planning reduces business related risks
Planning helps to forecast the business related risk and also
helps to take necessary precautions to avoid these risks and
prepare for future uncertainties .
Planning
Importance of Planning
3. Planning provides direction
Direction means to give proper information, accurate instructions and guidance to the
subordinates. Planning tells us what to do, how to do and when to do . It help the organization
to achieve the goals through systematic coordination of the employees.
4. Planning encourages creativity and innovation
Planning helps the managers to express their creativity and innovation. It brings satisfaction to
the managers and eventually success to the organization.
5. Planning helps in motivation
A good plan provides various financial and non-financial incentives to both managers and
employees. These incentives motivate them to work hard and achieve the objectives of the
organization.
6. Planning helps in decision making
A manager makes many different plans. Then they evaluate every course of action and choose
the best strategy. So decision making is facilitated by planning.
Planning
Importance of Planning

7. Planning helps to achieve objectives

Without Planning each and every activity will be based on trial and error which will give rise to
confusion. Every organization has certain targets. Planning helps an organization to achieve
their aims by avoiding overlapping, confusion and misunderstanding.
8. Planning provides basis of control
Planning is the first function of management. The other functions like organizing, staffing,
directing and controlling etc. are organized for implementing plans. Planning and controlling
both are dependent on each other. Planning establishes standards for controlling.

Therefore, Planning is necessary for effective and efficient functioning of every organization
irrespective of its size, type and objectives.
Steps in Planning Process

1. Establishing verifiable goals

 The first step in planning is to determine the enterprise objectives.
 These are more often set by upper level managers.
 The objective may vary from a desired sales volume or growth rate to development of a
new product.
2. Establishing Planning Premises
 Plans are made to operate in the future.
 The second step in planning is to establish planning premises i.e. assumption on the basis
of which plans will be ultimately formulated.
 Planning premises are vital to the success of planning as they supply important facts and
information related to future like population trends, economic condition, production cost,
government control etc.
Steps in Planning Process

3. Deciding the Planning Period

 The next task is to decide the period of the plan whether it’s a yearly plan or a plan which
is spread over for longer span of time.
 Choice of planning period is decided based on time required in development of new
product, time required to recover capital investment and length of commitments already
made.
4. Finding alternative course of action
 The next in planning is to search for and examine alternative course of action. For Ex-
Products may be sold directly to the consumers by the company’s salesman or through
exclusive agencies.
5. Evaluating and selecting a course of action
 Having searched the alternative courses, the next step is to evaluate and analyze them in
the light of premises and goals and select the best alternative. This is done with the help
of quantitative techniques and operations research.
Steps in Planning Process

6. Implementing the Plan

 The best possible course of action has now to be implemented i.e. putting the plan into
action .
 For this the managers have to develop derivative plans for each department.
 A draft version of the action plan should be communicated to inform those directly affected
and gain their cooperation.
7. Measuring and Controlling the Programme
 The process of controlling is a critical part of any plan.
 Managers need to check the progress of their plans i.e. follow up, so that they can take
remedial action if the plan is not working as per schedule or change the original plan if it is
unrealistic.
Types of Plans

1. Objectives :
 Objectives may be defined as the goals which an organization tries to achieve.
 Objectives are the ends towards which the activities of the enterprise are aimed.
 Objectives provide direction to various activities and serve as benchmark of measuring
the efficiency and effectiveness of the organization.
2. Strategies :
 A strategy is a special kind of plan formulated to meet the challenge of the policies of
the competitors.
 Strategy can be shaped by the general forces operating in an industry and the
economy.
 The strategy must be consistent with external environment
3. Policies :
 Policies may be described as plans which are meant to serve as broad guidelines to
decision making in a firm.
 Policies exist at various levels of the enterprise.
Types of Plans

3. Policies :
 A policy should be definite, positive and clear.
 A policy is a standing plan which assist decision making and should be referred as a
general statement of the established rule.
 For example – A firm has a policy of promotion from within the organization. If a
vacancy arises; the first preference is given to existing employees.
4. Procedure :
 Procedure lays down the manner or method by which work is to be performed in a
standard and uniform way.
 Procedure is a standing plan acting as a means of implementing a policy.
 For Example –Sales department lays down a policy to execute all orders within 48 hours.
So a procedure has to be followed in a chronological and systematic order to fulfill the
orders.
Types of Plans

5. Programmes :
 Programmes are precise plans which need to be made to discharge a non –repetitive task.
 The essential ingredient of every programme are time phasing and budgeting.
 Specific dates should be laid down for the completion of each successive stage of a
programme.

For Example :
An enterprise has a programme of opening 5 branches in different parts of a country so they
have to allocate funds and time period for :
a)Securing the necessary accommodation
b) Recruiting personnel to manage business
c) Arrange the supply of goods that are to be sold through the branches.
Often a single step in a programme is set up as a project.
Types of Plans

6. Rules :
 Rules are an explicit statement that tells the members of the organization what they can or
cannot do.
 Rules do not allow any room for interpretation because it clearly specifies the action
needed to be done in a particular situation.
 Rules enforce discipline. For e.g. - Use of Mobile Phone at workplace during office hours is
restricted.
7. Budgets :
 Budgets are plans for future period of time containing statements of expected results in
numerical terms. Budgets are very useful for an enterprise.
 Being expressed in numerical terms, they facilitate comparison of actual results with
planned ones and serve as a control devise.
 The important budgets are sales budget, production budget, cash budget, Revenue –
Expense Budget.
Organizing
Introduction
 After planning the next function of management is organizing.
 Organizing involves division of work among people whose efforts must be coordinated to
achieve specific objectives and to implement pre-determined strategies.
 It is the backbone of management.
 After the objectives of an enterprise are determined and the plan is prepared, the next step in
the management process is to organize the activities of the enterprise.

According to Louis Allen "Organizing is the process of identifying and grouping the work to be
performed defining and delegating responsibility and authority, and establishing relationships for
the purpose of enabling people to work most effectively together in accomplishing objectives."

According to the Haiimann "Organizing is the process of defining and growing the activities of the
enterprise and establishing authority relationships among them.
Organizing
Importance

1. It facilitates efficient management

Organizing is necessary for the performance of other functions of management. Poor
organization may result in duplication of work and efforts.
2. It facilitates coordination and communication
Organization creates a clear cut relationships between the departments and helps in laying
down balanced emphasis on various activities. It also provides channels of communication
and coordination of activities of different departments.
3. It facilitates growth and diversification
Sound organization helps in the growth and expansion of the enterprise by facilitating its
efficient management . It also increases the capacity of the enterprise to undertake more
activities.
Importance of Organizing

4. It ensures optimum use of resources

Organizing leads to the optimum use of all material, financial and human resources. It
matches the jobs with the individuals and vice versa and ensures that job position is clearly
defined. It minimizes confusion and wastage of resources.
5. It provides for optimum use of technological innovations
Sound organization structure is not rigid. It is flexible and provides adequate scope for
adoption of new technology.
6. It facilitates specialization
Organizing provides a great scope for bringing specialization in every department of an
enterprise through proper allocation of jobs among the employees.

Organizing thus can be understood in two ways

• Organizing as a process
• Organizing as a structure
Organization as a Process
Steps in the process of organizing
1. Determination of objectives
The purpose of the organization must be identified. Objectives determine resources and various
activities which should be done to achieve the organizational goals.
2. Identification and grouping of activities
If group members are to pool their efforts successfully, there must be proper division of the major
activities. Each job should be accurately classified and grouped. This will avoid duplication of work.
3. Assignment of duties
After grouping the activities into various jobs, as per the nature of work, Similar activities should be
placed under one department . Each individual should be given a particular task according to his
ability and skills.
4. Establishing relationship among individuals and group
The activities which are performed by person holding different positions must be related. Every
person in the organization should know about his responsibility, authority and accountability so
that there is coordination, among individuals and departments.
Organization Structure

• An organization structure shows the authority - responsibility relationship between the

various positions in the organization by showing who reports whom.

• It lays down the pattern of communication and coordination in the enterprise.

• It facilitates growth of the enterprise by increasing capacity to handle diversified situations.

• Organisation structure is usually shown on an organization chart.

There are basically 2 types of organization structure:

• Functional structure
• Divisional Structure
 Organization Structure

Functional structure
 Organization Structure
Functional structure

 This type of organization structure is formed by grouping together all activities into
functional department and putting each department under one head.
 Functional structure leads to specialization.
 It promotes efficiency and results in increased profits.
 Its suitable to organization where operations require high degree of specialization .

Example:
A steel manufacturing Company has divided its structure into Manufacturing, Finance,
Marketing Personnel, Research and Development, as it has diversified activities and its
operation require a high degree of specialization.
 Organization Structure

Divisional structure
 Organization Structure
Divisional structure
 Large Companies often find it to operate as one large unit under a functional organizational
structure.
 The size of the company makes it difficult for managers to oversee operations and screen
customers.
 To overcome this problem, most large companies are now structured as divisional
organizations.
 Each division functions relatively autonomously because it contains most of the functional
expertise under each unit.
 Division can be formed according to product, customers, processes or geographical division.

Example: Samsung has multiproduct based division Each Product division has its own
Manufacturing, Research and Development, Marketing, Finance departments.
Types of Organization
1. Formal organization
• Formal organization refers to a structure which is consciously designed to enable people of the
organization to the work together in accomplishing the common objectives.
• It is predetermined by top management to facilitate smooth functioning of the organization.
• The authority responsibility relationship created by the organization structure are to be
followed by all the employees in the organization.
• It is created as result of Company’s rules and policies.

2. Informal Organisation
• Informal Organisation refers to the relationship between the people in the organization based
on personal likes, dislikes, emotions, attitude etc.
• These relationship are not in terms of procedure and regulation laid down in the formal
organization.
• These groups are not preplanned, they develop automatically within the organization.
• The membership in informal organization is voluntary. It originates as a result of social
interaction.
Delegation
Introduction
• A manager alone cannot perform all the tasks assigned to him. In order to meet the targets, the
manager should delegate authority.
• Delegation of Authority means division of authority and powers downwards to the subordinate.
• Delegation is about entrusting someone else to do parts of your job.
• Delegation of authority can be defined as subdivision and sub-allocation of powers to the
subordinates in order to achieve effective results.
• In management, delegation is the act of assigning tasks to team members in a department or
project team.
• Often, these are tasks that the manager might have performed when the team was smaller or had
fewer obligations.
• As teams grow and assume greater responsibilities, effective managers assign some of their tasks
to members of their team, which allows them to focus on management responsibilities, like
training and performance reviews.
Delegation
Importance
 Through delegation, a manager is able to divide the work and allocate it to the subordinates.
This helps in reducing his work load so that he can work on important areas such as -
planning, business analysis etc.
 With the reduction of load on superior, he can concentrate his energy on important and
critical issues of concern. This way he is able to bring effectiveness in his work as well in the
work unit. This effectively helps a manager to prove his ability and skills in the best manner.
 Delegation of authority in a way gives enough room and space to the subordinates to flourish
their abilities and skill. 
 Delegation of authority is not only helpful to the subordinates but it also helps the managers
to develop their talents and skills. Since the manager get enough time through delegation to
concentrate on important issues, their decision-making gets strong and in a way they can
flourish the talents which are required in a manager.
Delegation
Elements of Delegation
Authority - in context of a business organization, authority can be defined as the power and right
of a person to use and allocate the resources efficiently, to take decisions and to give orders so as
to achieve the organizational objectives.
Authority must be well-defined. All people who have the authority should know what is the scope
of their authority is and they shouldn’t misutilize it. Authority is the right to give commands,
orders and get the things done. The top level management has greatest authority.
 Authority always flows from top to bottom.
 It explains how a superior gets work done from his subordinate by clearly explaining what is
expected of him and how he should go about it.
 Authority should be accompanied with an equal amount of responsibility.
 Delegating the authority to someone else doesn’t imply escaping from accountability.
 Accountability still rest with the person having the utmost authority.
Delegation
Elements of Delegation

Responsibility - is the duty of the person to complete the task assigned to him. A person who is
given the responsibility should ensure that he accomplishes the tasks assigned to him. If the tasks
for which he was held responsible are not completed, then he should not give explanations or
excuses. Responsibility without adequate authority leads to discontent and dissatisfaction among
the person.
 Responsibility flows from bottom to top.
 The middle level and lower level management holds more responsibility.
 The person held responsible for a job is answerable for it.
 If he performs the tasks assigned as expected, he is bound for praises.
 While if he doesn’t accomplish tasks assigned as expected, then also he is answerable for
that.
Delegation of Authority
Elements of Delegation

• Accountability - means giving explanations for any variance in the actual performance from
the expectations set.
• Accountability can not be delegated. For example, if ’A’ is given a task with sufficient
authority, and ’A’ delegates this task to B and asks him to ensure that task is done well,
responsibility rest with ’B’, but accountability still rest with ’A’.
• The top level management is most accountable. Being accountable means being innovative as
the person will think beyond his scope of job. Accountability, in short, means being
answerable for the end result. Accountability can’t be escaped. It arises from responsibility.

For achieving delegation, a manager has to work in a system and has to perform following
steps : -
 Assignment of tasks and duties
 Granting of authority
 Creating responsibility and accountability
Delegation
Differences between Authority and Responsibility
 Staffing
Introduction

• The staffing function deals with the human elements of management.

• It is important to have a good organization structure, but it is even more important to fill the
jobs with the right people.
• Staffing phase of the management function deals with filling and keeping the position
provided for by the organization structure with right people at the right place.
• All the managers have a responsibility for staffing.
• The staffing function has assumed great importance these days because of rapid
advancement of technology, increasing size of organizations and complex behavior of human
beings.

According to Koontz and O’Donnell, “Staffing involves manning the organization structure
through proper and effective selection appraisal and development of personal to fill the roles
designed into the structure.”
 Staffing
Importance of Staffing
There are various benefits of proper and efficient staffing.
1. Helps in finding efficient worker:
 Staffing helps in discovering talented and competent workers and develops them to work more
efficiently for achievement of organizational goals.
2. Helps in increased Productivity:
 Staffing ensures greater production by putting right man at the right job.
 It helps in improved organizational productivity through proper selection according to
requirement.
3. Maintains Harmony:
 Staffing maintains harmony in the organization.
 Through proper staffing, individuals are not just recruited and selected but their performance
is regularly appraised and promotions are done.
 This gives everyone an equal opportunity for getting better compensation which finally results
in peace and harmony.
 Staffing
Importance of Staffing
There are various benefits of proper and efficient staffing.

4. Helps in morale boosting:

 Job satisfaction keeps the morale high of the employees.
 Through training and development programmers their efficiency improves and they feel
assured of their career advancement.
5. Helps in Optimum utilization of human resources:
 Staffing helps in proper utilization of the available personnel.
 Manpower forecasting provides a basis for recruitment, transfer and training of employees.
 Shortage or surplus of manpower will be revealed by proper manpower planning.
 Staffing
Staffing Process
 Staffing function is performed by all managers at all levels.
 However, its scope is different in small and large organization.
 In large organization there is a separate department called Human Resources Department
(HRD), with specialists to manage the people.
Steps involved in Staffing Process:
1. Manpower Planning:
 Estimation of manpower requirements in the future is the first stage in the staffing process.
 It is known as manpower or human resources planning.
 Its purpose is to make right kind of personnel available so that there is no surplus or
shortage of people in any department.
 To determine the qualifications needed to meet the requirements of jobs, the organization
first of all has to analyze the jobs, write the jobs description and prepare job specifications.
Staffing
Steps involved in Staffing Process:

2. Recruitment:
 Once the requirement of manpower is known, the process of recruitment starts.
 It is the process of identifying the sources for prospective candidates and to stimulate
them to apply for the jobs.
 It is a positive process as it attracts suitable candidates to apply for available jobs.
 The process of recruitment and the cost involved in it depends on the size of the
undertaking and the type of persons to be recruited.
 The sources of recruitment can be
a) Internal sources (recruitment from within the enterprise)
b) External Sources(recruitment from outside)
Staffing
Steps involved in Staffing Process:
3. Selection:
 The process of selection leads to employment of persons who possess the ability and
qualifications to perform the jobs which have fallen vacant in the organization.
 Selection is frequently described as a negative process as it eliminates all the candidates
those who do not match up to the requirements of the job offered.
 As the employees are placed in the jobs for which they are best suited, they derive
maximum job satisfaction reducing the labor turnover and increasing the overall efficiency
of the organization.
 The candidates have to go through the whole selection process of an organization i.e.
interviews, tests, medical examination etc.
Staffing
Steps involved in Staffing Process:
4. Placement:
 The candidate selected for appointment are to be offered specific jobs.
 A personnel should be placed on a position where there is full use of his strength and
capabilities.
 Proper placement reduces absenteeism and turnover.
5. Induction and Orientation:
 Induction is the process of familiarizing a new employee to the new workplace,
surroundings, company’s rule and regulations.
 Induction programme is generally informal in case of small organization.
 But in large organization the orientation or induction is carried on formally so that the
new employee develops a favorable attitude towards the company
Staffing
Steps involved in Staffing Process:
6. Training and Development:
 Training is an organized activity for increasing the knowledge and skills of people for a
definite purpose.
 Its purpose is to achieve a change in the behavior of the employees and to enable them to
do their jobs better.
 The initiative for training usually comes from the management. Development emphasizes
on growth of an individual.
 It’s a continuous process Development helps in overall growth of the employee.
7. Performance Appraisal:
 It refers to all the formal procedures used in an organization to evaluate the employees
and their contributions.
 It also reveals as to how efficiently the subordinate is performing his job and to know his
aptitudes and other qualities necessary for performing the job assigned to him.
Staffing
Steps involved in Staffing Process:
8. Promotion and Transfers:
 Promotion refers to being placed at a higher job position with more salary, job satisfaction and
responsibility.
 On the basis of feedback report of employees performance they are given promotion and
other opportunities.
 Transfer means shifting of an employees from one job to another or one department to other.
 Transfer may take place due to change in organization structure or changes in the volume of
work.
9. Compensation:
 Compensation of employees for their services is an important responsibility of any
organization.
 Every organization must offer good wages, pay, salary and other rewards to attract and retain
talented employees.
 Compensation to workers will vary depending upon the nature of jobs, skills required, risk
involved, nature of work etc.
 Controlling
Introduction
 Controlling is seeing that actual performance is guided towards expected performance.
 All other functions of management cannot be completed effectively without performance of the
control function.
 It implies measurement of accomplishment against the standards and correction of deviation, if
any, to ensure achievement of organizational goals.
 The efficient system of control helps to predict deviation before they actually occur.
 Controlling ensures that there is effective and efficient utilization of organizational resources so as
to achieve the organizational goals.
According to Theo Haiimann "Controlling is the process of checking whether or not proper progress is
being made towards the objectives and goals and acting if necessary, to correct any deviation.”

Controlling has two basic purposes

a) If facilitates coordination
b) It helps in planning
 Controlling
Importance of Controlling

• A good control system provides timely information to the manager which is very much useful
for taking various decisions.
• The road signals at a road crossing illustrates the significance of control.
• Road signals are necessary to ensure accident free and smooth traffic management.
• Controls are essential in any organization for its smooth functioning.

Significance of good control system are as follows:

1) Basis of future action:

Control provides the basis for future actions. It will reduce the chances of mistakes being
repeated in future by suggesting preventive steps.
 Controlling
Importance of Controlling

2. Facilitates decision making:

 The process of control is complete only when corrective measures have been taken.
 This requires taking a right decision as to what type of follow up action is to be taken.
3. Facilitates discipline and order:
 The existence of control system has a positive impact on the behavior of the employees.
 They are cautious while performing their duties as they know they are being observed
by their superiors.
4. Facilitates Coordination:
 Control helps in Coordination of the activities of various departments of the enterprise.
 It provides them unity of direction.
 Controlling
Importance of Controlling

5. Facilitates motivation:
 A control system is most effective when it motivates people to high performance.
 Since most people respond to a challenge, successfully meeting a tough standard may
provide a greater sense of accomplishment.

6. Effective plan Implementation

 Controlling and planning are interdependent.
 Control is the only means to ensure that the plans are being implemented control points
out short comings of not only planning but also other functions of management.
 Comparison can be done through various Performance report, Personal Observation.
 Controlling
Controlling Process
Controlling as a management function involves following steps:
1) Establishment of standards
• Standards are the plans or the targets which have to be achieved in the course of business function.
• It acts as a basis of evaluations of actual performance. Standards can be set in quantitative or
qualitative terms. Quantitative or measurable standards can be in the form of cost, output, time,
profit etc.
• Qualitative or non-measurable standards can be in form of performance of a manager, attitude of
worker improving motivational level of employees.
• Standards should be flexible i.e. capable of being changed according to the circumstances.

2) Measurement of Performance
• This step involves measuring of actual performance of various individuals, group or units.
• Measurement of tangible standards is easy as it can be expressed in quantitative terms.
• Frequency of measurement depends on the nature of task being controlled Qualitative.
 Controlling
Controlling Process
3) Comparison of Actual and Standard Performance
• Comparison of actual performance with the planned targets is very important.
• Deviations can be defined as the gap between actual performance and the standards laid
down.
• The manager has to find out extent of deviation and cause of deviation.
• The manager has to exercise control by exception.
• He has to target those deviation which are critical and important for business.
4) Taking remedial action
• Once the causes and extent of deviation are known, the manager has to detect those
errors and take remedial measures so that these deviations don’t occur again.
• Remedial or corrective actions can be replanning of standards, classification of duties,
training of workers etc.