PRINCIPLES AND PRACTICES OF MANAGEMENT

BASIC CONCEPTS OF MANAGEMENT

INTRODUCTION What is the need to have Management in organisations ? Members of one organisation or another

 A college  A Sports team  a business, etc. Basic element of any organisation-GOAL OR PURPOSE. Some programs or methods for achieving goals - a PLAN. Allocate and acquire the resources necessary to achieve goals. Need people responsible for helping in achieving the goals-

MANAGERS

WHAT IS MANAGEMENT?
DEFINITION I For the purpose of study Management is the process of planning, organizing, leading, and controlling the resources of an organisation in the efficient and effective pursuit of specified organisational goals. - Burton & Thakur


EFFICIENCY AND EFFECTIVENESS

EFFICIENCY- Ability to maximize the use of resources in achieving organisational objectives- doing things right Input- output concept. EFFECTIVENESS- Ability to determine appropriate objectives: doing the right things Involves choosing right goals.

PRODUCTIVITY
Surplus is created through productive operations. Definition: Productivity is the output-input ratio within a time period with due consideration for quality. Productivity = output inputs (within a time period and quality considered)


DEFINITION II
Management is the process of designing and maintaining an environment in which individuals , working together in groups, efficiently accomplish selected aims. - Harold Koontz & Heinz Weihrich

Management As A Science


Systematized body of knowledge covering general truths or the operation of general laws. Better work by using the organized knowledge about management. Organized knowledge underlying the practice.

MANAGEMENT AS AN ART
 

Managing as practice. Learning from mistakes and polishing managing art.

Science and art are not mutually exclusive; they are complementary.

MANAGEMENT AS A PROFESSION


Occupation for which specialized knowledge, skills, and training are required. Use of these skills for larger interests of the society not for self- satisfaction. Success is measured not in terms of money alone.

Certain Characteristics of Profession Missing in Management

1. 2. 3. 4. 5.

No formal education requirements for entry into management. No system of accreditation or licensing for managers. Managers do not have specific clients. No clear code of managerial ethics. No common body of knowledge required for understanding someone to be a manager. Thus, Management is moving closer to the state of professionalism.

Canakya Sutras

Rajyatantram (Management)

a-labdha-labhah na alasasya

Gaining that which not in possession is not for the lazy

Continued


alasasya labdham api raksitum na sakyate

The lazy cannot even protect that which is gained.

Continued


na ca alasasya raksitam vivaradhate

Neither does the lazy persons protected (gains) grow.

Continued


na bhrtyan presayati

(The lazy) does not deploy employees (servants).

Continued


a-labdha-labhadi catustayam rajya-trantram

These four, starting from gaining the nonpossessed, together constitute the technology of enterprise (management).

Management Functions at Different Organisational Levels

Management Levels
1.

First- Line Managers:

Responsible for the work of operating employees only and do not supervise other managers. First or lowest level managers in the organisational hierarchy.

2.

Middle Managers:
Managers in the midrange of the organisational levels. Responsible for other managers and sometimes for some operating employees. Report to more senior managers.

3. Top Managers:
Responsible for the overall management of the organisation. Establish operating policies. Guide the organization's interaction with its environment.

Management Functions
1.

PLANNING Process of establishing goals and a suitable course of action for achieving those goals.  Actions are based on some method, plan or logic.  Plans are the guides by which
 

The organisation obtains and commits the resources. Members of the organisation carry on activities consistent with the chosen objectives and procedures. Progress toward the objectives is monitored and measured to take corrective actions.

2. ORGANIZING

Process of engaging two or more people in working together in a structured way to achieve a specific goal or set of goals.  Different goals require different structures.  Bridge connecting the conceptual idea developed in creating and planning to the specific means for accomplishing ideas.

3. LEADING
Process of directing and influencing the taskrelated activities of group members or an entire organisation.  Management of human resources.  Interpersonal task of motivating the individual employee.  Motivate the work unit, work group or department as a complexity of individuals.  Management of organizational power, political forces and organizational culture.  Management of organizational communication processes.

4. CONTROLLING

Process of ensuring that actual activities conform to planned activities. Main Elements:
  

Establishing standards of performance. Measuring current performance. Comparing this performance to the established standards. Taking corrective actions if deviations are detected.

PLANNING Managers use logic & methods to think through goals and actions. CONTROLLING Managers make sure an organisation is moving towards organizational objectives. LEADING Managers direct, influence and motivate employees to perform essential tasks. ORGANIZNG Managers arrange & allocate work, authority, and resources to achieve organizational goals.

THE INTERACTIVE NATURE OF THE MANAGEMENT FUNCTIONS

90 80 70 60 50 40 30 20 10 0 Planning Organizing Leading Controlling

Top managers Middle managers First line Managers

IMPORTANCE OF MANAGEMENT FUNCTIONS AT DIFFERENT LEVELS

Management Levels and Skills

 1.

Henry Fayol Identified three basic skills:TECHNICAL SKILL

Ability to use procedures, techniques and knowledge of a specialized field. E.g. Surgeons, engineers, musicians,etc.  Pertain to knowledge and proficiency in processes, procedures, methods and techniques which are used in doing a work.  Also called as hard skills.


2. HUMAN SKILL
Ability to work with, understand, and motivate other people as individuals or in groups. Management is a process of getting things done with and through people. No manager can be effective without suitable human skills irrespective of being technically and conceptually competent.

3. CONCEPTUAL SKILL
Ability to co-ordinate and integrate all of an organization's interests and activities. Involves seeing the organization as a whole. Anticipating how a change in any of its parts will affect the whole.

MANAGERIAL ROLES


Henry Mintzberg discussed ten activities of managers in his book The Nature of Managerial Work. Role is defined as the pattern of behaviour which is defined for different positions. Mintzberg identified three major categories of roles of a manager each of which has different defined roles.

I.


INTERPERSONAL ROLES
Concerned with interaction with other persons, both the organizational members and outsiders. Three types of interpersonal roles:i. Figurehead: Perform activities which are of ceremonial and symbolic nature.  These include greeting the visitors, attending social functions involving employees, handing out merit certificates and other awards to outstanding employees.

ii.

Leader Role
 Involves leading the subordinates and motivating them for willing contributions.  Requires those leadership and motivational activities that are essential for the management of people.  These include staffing maintaining a productive work force,etc.

iii. Liaison Role

 Includes activities by which the executive develops and maintains a network of contacts outside the organization.  Manager serves as a connecting link between his organisation and outsiders or between his unit and other organisational units.  Major objective- to maintain a link between the organisation and its external environment.

II.
 

INFORMATIONAL ROLES

Mainly involve management of information. Include communication- giving and receiving information- both within and outside the organisation. Three types of informational roles: i. Monitor Role (or Recipient Role): Involves constantly collecting information about
those factors which affect a managers activities.  Factors may be within the organisation or outside it.  Manager uses interpersonal roles to seek information from many sources, both inside and outside the organisation.

ii.


Disseminator Role
Distributes the information to his subordinates who may otherwise not be in a position to collect it. Dissemination may be written or oral, formal or informal.

iii. Spokesperson Role

 As a spokesperson, the manager represents his organization or unit while interacting with outsiders.  Transmitting information to those outside the organisation.  Information is related to corporate plans, strategies, policies, actions, performances, etc.

III.


DECISIONAL ROLES
Involves choosing the most appropriate alternative out of the available ones. A manager performs four roles:

i.

Entrepreneur Role: Process by which manager seeks and identifies opportunities to promote improvement and needed change.  Manager assumes certain risk which is involved in terms of the outcomes of an action.  Since these actions can be affected by dynamic and constantly changing factors, manager is required to bring suitable changes.

ii.

Disturbance-Handler Role

 Equips the manager to take corrective actions needed to resolve important, unexpected disturbances.  Disturbances can be in the form of strike by employees, shortage of raw materials, employee complaints and grievances, natural disasters, etc.

iii. Resource Allocator Role

 Manager allocates resources human, physical and financial- to various organisational units according to their needs.  Specific activities might include developing and monitoring budgets, predicting future resource needs, forecasting future resource problems, etc.

iv. Negotiator Role

 Manager negotiates with various interest groups in the organisation.  Such interest groups are shareholders, employees and outside agencies.  For example- a manager might represent the corporation to negotiate a trade union contract, a joint venture, or a trade agreement.

Limitations of Mintzberg Approach



Sample of five executives used in his research is far too small. Type of roles identified by Mintzberg are not applicable to all types of managers. Managers have to do some work that is not purely managerial. Many of the activities Mintzberg found are evidences of planning, organizing, leading and controlling.

EVOLUTION OF MANAGEMENT THOUGHT

EVOLUTION OF MANAGEMENT THOUGHT

Study of how managers achieve results is predominantly a 20th century phenomenon. World War I compelled people to think of solution to the problem of how limited resources could be applied in better way. World War II added further problem. Growing competition and complexity of managing large business organisation forced to develop systematic management concepts and principles.

Increase in competition has come from factors as:

  

Technological innovations and their dissemination in business. Growing technological obsolescence. Increase in capital investment. Freedom at national and international markets. Increasing buyers sovereignty in the markets.

Complexity of managing business has increased because : 

Increasing size of business organisations. High degree of division of labour and specialisation. Increased government regulations and controls to make business more socially-oriented. Organized union activities to put pressures on management. Pressure of various conflicting interest groups to meet their demands from the organizations.

Management Contributions by Earlier Civilisations

CIVILIZATION Egyptians (4500 BC) Sumerians (3000) BC Babylonians (2000 BC) Hebrews Romans (AD 284) Roman Catholic Church (AD 200) Military organisation al structures CONTRIBUTION Planning, mobilisation, organizing and coordination of natural and especially human resources in the building of the pyramids. Written records in respect of control of herds, income, taxes and property. Code of Hammurabi stipulating guidelines and procedures in respect of trade, property, families and labour. Application of the span of management and creation of line organisation structure by Moses. Creation of chain of command by delegating authority to 100 provinces. Simple hierarchy of authority with a ranking order of pope, cardinal and local priest.

Centralisation of command and decentralisation of military operations.

THE SCIENTIFIC MANAGEMENT SCHOOL



Formulated by Frederick W. Taylor & others between 1890 & 1930,that sought to determine scientifically the best methods for performing any task, and for selecting, training and motivating workers. Generally acknowledged as the Father of Scientific Management. Concerned essentially with improving the operational efficiency at the shop-floor level. Published many papers and books and compiled all his contributions in his book Scientific Management.

PRINCIPLES OF SCIENTIFIC MANAGEMENT

1. Replacing rule of thumb with science a) Application of organized knowledge. b) Emphasis on scientific method which denotes precision in determining any aspect of work. c) Should not be based on mere estimates (rule of thumb).

2. Harmony in Group Action

a) Attempts should be made to obtain harmony in group action rather than discord. b) Mutual give and take situation and proper understanding should exist so that group as a whole contributes to the maximum.

3. Maximum Output
Involves continuous increase in production and productivity instead of restricted production either by management or by workers.

4. Cooperation
a) Involves achieving cooperation rather than chaotic individualism. b) Cooperation between management and workers can be developed through mutual understanding and a change in thinking. c) Based on mutual confidence, cooperation and goodwill.

5. Development of Workers
a) All workers should be developed to the fullest extent possible for their own and for the companys highest prosperity. b) Training should be provided to workers to keep them fully fit according to the new methods of working.

OPPOSITION OF SCIENTIFIC MANAGEMENT

Many followers took aggressive mechanical view of production and sidelined human aspect at the workplace. Work used to be performed under close and strict supervision based on authoritarian approach. Lack of scientific standardization of work and whatever standards used to be set by the management, workers had to follow strictly. Most crucial element under contention was Differential rate system- Taylors compensation system involving the payment of higher wages to more efficient workers which was interpreted by trade unions as a new method of exploiting workers by the industrialists.

THE GILBRETHS


A construction contractor by trade, Frank Gilbreth gave up his contracting career in1912 to study scientific management after hearing Taylor speak at a professional meeting. Frank and his wife Lillian, a psychologist, studied work to eliminate wasteful hand-and-body motions. Focused on ways of promoting the individual workers welfare. Ultimate aim of scientific management was to help workers reach their full potential as human beings.

First researchers to use motion pictures to study hand-and-body motions. Invented a device called microchronometer that recorded a workers motions and amount of time spent doing each motion. Wasted motions missed by the naked eye could be identified and eliminated. Devised a classification scheme to label 17 basic hand motions (search,grasp,hold,etc.) which they called therbligs.

HENRY L. GANTT


 

Worked with Taylor on several projects and began to reconsider Taylors incentive system when he went out on his own as a consulting industrial engineer. Abandon the differential rate system. Came up with new idea Every worker who finished a days assigned work load would win a 50-cent bonus.  Second motivation- the supervisor would earn a bonus for each worker who reached the daily standard, plus an extra bonus if all the workers reached it.  This would spur supervisors to train their workers to do a better job.

Every workers progress was rated publicly and recorded on individual bar chartsBlack Days the worker made the standard. Red - When he or she fell below it. Beyond this, he originated a charting system production scheduling the Gantt Chart which is still in use today. Formed the basis for two charting devices which were developed to assist in planning, managing and controlling complex organisations
 CPM ( Critical Path Method- originated by Du Pont).  PERT (Program Evaluation & Review Technique developed by Navy).

How Do Todays Managers Use Scientific Management?

Principles of Scientific management which are used today : Analysing the basic work tasks that must be performed.  Use time and motion study to eliminate wasted motions.  Hire the best qualified workers for a job.  Design incentive systems based on output.

MODERN OPERATIONAL MANAGEMENT THEORY/ CLASSICAL ORGANISATION THEORY SCHOOL



Attempt pioneered by Henri Fayol, to identify the principles and skills that underlie effective management. HENRI FAYOL Real father of modern operational management theory French industrialist Henri Fayol. Contributions are termed as operational management or administrative management. Contributions were first published in book form titled Administration Industrielle at Generale in French language in 1916. Its English version was published in 1949 in the United States of America.

FAYOLS GENERAL PRINCIPLES OF MANAGEMENT

 

Gave fourteen principles of management. Gave emphasis on two things: The list of management principles is not exhaustive but suggestive and has discussed only those principles which he followed on most occasions.  Principles of management are not rigid but flexible.

Fayols Fourteen Principles of Management

1. Division of Work: Specialisation allows the individual to build up experience, and to continuously improve his skills . Thereby he can be more productive. 2. Authority and Responsibility: The right to issue commands, along with which must go the balanced responsibility for its function. 3. Discipline: Employee must obey, but this is twosided: employees will only obey orders if management play their part by providing good leadership.

4. Unity of Command: Each worker should have only one boss with no other conflicting lines of command. 5. Unity of Direction: People engaged in the same kind of activities must have the same objectives in a single plan. This is essential to ensure unity and coordination in the enterprise. 6. Subordination of Individual Interest to General Interest: Common interest is above the individual interest. Individual interest must be subordinate to general interest when there is a conflict between the two.

7. Remuneration of Personnel: Payment is an important motivator although by analyzing a number of possibilities. 8. Centralisation: He refers the extent to which authority is centralised or decentralised. 9. Scalar Chain: A hierarchy is necessary for unity of direction. It refers to the number of levels in the hierarchy from the ultimate authority to the lowest level in the organisation.

10. Order: Principle relating to the arrangement of people and things. Material Order- Place for everything and everything should be in its place. Social order- There should be the right man in the right place. 11. Equity: It is the combination of justice and kindness. Equity in treatment and behavior is liked by everyone and it brings loyalty in the organisation.

12. Stability of Tenure: No employee should be removed within short time. There should be reasonable security of jobs. 13. Initiative: Within the limits of authority and discipline, managers should encourage their employees for taking initiative. It increases zeal and energy on the part of human beings. 14. Esprit de Corps: This is the principle of union is strength and extension of unity of command for establishing team work. The manager should encourage esprit de corps among his employees.

Dissimilarity between contributions of Taylor and Fayol

Basis of Difference Perspective Focus Taylor Shop-floor level Fayol Higher management level Overall efficiency by observing certain principles. Managerial functions. Personal experiences translated into universal truths. Systematic theory of management

Efficiency through work simplification and standardisation Production and engineering Scientific observation & measurement Basis for accomplishment on production line.

Orientation Results

Overall Contribution

Administrative Theory
MAX WEBER (1864-1920)  A German sociologist who studied organizational activity.  Developed a theory of authority structures and relations in the early 1900s.  Any goal oriented organisation consisting of thousands of individuals would require carefully controlled regulation of its activities.

Developed a theory of bureaucratic management that stressed the need for a strictly defined hierarchy governed by clearly defined regulations and lines of authority. Bureaucracy- A form of organisation characterized by division of labor, a clearly defined hierarchy, detailed rules and regulations, and impersonal relationships. Believed that technical competence should be emphasized and that performance evaluations should be made entirely on the basis of merit.

Features of Webers Ideal Bureaucratic Structure

Recognized that this ideal bureaucracy did not exist in reality.  A basis for theorizing about work and how work could be done in large groups. 1. Administrative Class:  Responsible for maintaining co-ordinative activities of the members.  People are paid and are whole time employees.  Receive salary and other perquisites normally based on their positions.  Their tenure in the organisation is determined by the rules and regulations of the organisation.  Selected for the purpose of employment based on their competence.


2. Authority Hierarchy:
 There is a hierarchy of positions in the organization.  Hierarchy is a system of ranking various positions in descending scale from top to bottom of the organization.  Each lower office is subject to control and supervision by a higher office.

3. Division of Labor:
 Work is divided on the basis of specialization to take the advantages of division of labor.  Tries to ensure that each office has a clearly defined area of competence within the organization.  No work should be left uncovered.

4. Official Rules:
 Administrative process is continuous and governed by official rules.  Rules provide the benefits of stability, continuity, and predictability.  Each official knows precisely the outcome of his behavior in a particular manner.

5. Impersonal Relationships:
 Relationships among individuals are governed through the system of official authority and rules.  Official positions are free from personal involvement, emotions and sentiments.  Concept used in dealing with organizational relations as well as relations between the organisation and outsiders.

6. Official Records:
 Maintenance of proper official records.  Decisions and activities of the organization are formally recorded and preserved for future reference.  An official record is almost regarded as encyclopedia of various activities performed by the people in the organization.

Demerits of Webers Bureaucratic Model

1. Invalidity of Bureaucratic Assumptions:
i. Rules often become source of inefficiency. ii. Rigid organisational hierarchy works against hierarchy. iii. Total impersonal approach cannot be adopted while dealing with people.

2.

Goal Displacement:
i. Resources are used for a purpose other than for the organisational goals. ii. Following of rules may become the objective of the organisation and organisational objectives may become secondary. iii. People may be judged on the basis of observance of rules not results.

3. Unintended Consequences:
i. Excessive specialisation may lead to trained incapacity in the organisation which refers to a phenomenon where a person does not see beyond his training and tries to correlate the matter with total situation on the basis of his training. ii. Conflicts between professionals and bureaucrats. Professionals try to work according to their discipline for efficiency. Bureaucrats try to emphasize rules and regulations. iii. Conflict between organisation and individuals.

4. Inhuman Organisation:
i. Behavioural scientists criticized the most, emphasizing on human behaviour in the organisation. ii. It is incompatible with the development of a mature personality. iii. It promotes conformity. iv. It does not consider the informal organisation and interpersonal difficulties. v. The hierarchy interferes with communication. vi. Innovation and new knowledge are stifled.

5. Closed-System Perspective:
i. Closed System is :      Self contained. Self maintaining. Rigid. Static. Ignores external conditions. Does not allow for adapting to changes in the environment.

ii. Bureaucratic organisation can work well when environment is highly static and predictable. iii. An open-system perspective is more suitable for the management of modern day organisations where more interaction between organisation and environment is required.

BEHAVIORAL APPROACH
HAWTHORNE STUDIES
 Hawthorne plant of Western Electric Company, Chicago, was manufacturing telephone system bell.  Employed about 30,000 employees at the time of experiments.  Most progressive company with pension and sickness benefits and other recreational facilities.  Great deal of dissatisfaction among the workers and productivity was not up to the mark.  A team was constituted to investigate the real causes behind this phenomenon.

i. ii. iii.

First set of experiment was to investigate the relationship between the level of lighting in the workplace and worker productivity. Control and experimental groups were set up. Experimental group being exposed to various lighting intensities. Control group working under a constant intensity. Findings: As the level of light was increased in the experimental group, output for both groups increased. As the light level was decreased in the experimental group, productivity continued to increase in both groups. A productivity decrease was observed in the experimental group only when the level of light was reduced to that of a moonlight.

The engineers couldnt explain what they had witnessed but concluded that illumination intensity was not directly related to group productivity and something else mustve contributed to the results.  In 1927, the Western Electric engineers asked Harvard professor Elton Mayo and some associates to join the study as consultants. New Set of Experiment :  A small group of workers was placed in a separate room and a number of variables were altered:

   

Wages were increased. Rest periods of varying length were introduced. The work day and work week were shortened. Researchers also allowed the groups to choose their own rest periods and to have a say in other suggested changes.

Findings:


Because of special attention, both the groups have developed a group pride that motivated them to improve their work performance. Sympathetic supervision had further reinforced their motivation. Employees would work harder if they believed management was concerned about their welfare and supervisors paid special attention to them. This phenomenon was labeled as the Hawthorne Effect. Informal work groups- the social environment of employees- have a positive influence on productivity.

Criticisms of Hawthorne Experiments



The Hawthorne plant was not a typical plant because it was a thoroughly unpleasant place to work. Therefore, the results could not be valid for others. It assumed acceptance of managements goals and look on the worker as someone to be manipulated by management. Insufficient attention was given to the attitudes that people bring with them to the workplace. There was bias and preconception on the part of the Harvard researchers.

CHESTER IRVING BARNARD



Chester Barnard (1886-1961) was an American Executive and an early organisational theorists. He was author of Functions of the Executive, an influential 20th century management book, which presents a theory of organisation and the functions of executives in the organisation. His analysis of management is truly a social systems approach,i.e., an organisation is essentially a cultural system composed of people who work in cooperation.

Contributions of Barnard
1. Concept of Organisation:
i. Defined formal organisation as a system of consciously coordinated activities of two or more persons. ii. An organisation exists when the following three conditions are fulfilled: There are persons able to communicate with each other.  They are willing to contribute to the action.  They attempt to complete the common purpose.

2. Formal and Informal Organisations:

i. An organisation can be divided into two parts:Formal: Consciously coordinated interactions which have a deliberate and common purpose. Informal: Refers to those social interactions which do not have consciously coordinated joint purpose. ii. A manager should take into account both types of organisations. iii. Executives should encourage the development of Informal organisation.

3. Elements of Organisation:
i. There are four elements of a formal organisation: A system of fictionalization so that people can specialise,that is, departmentation.  A system of effective and efficient incentives so as to induce people to contribute to group action.  A system of power which will lead group members to accept the decisions of the executives  A system of logical decision making.

4. Authority:
i. Gave a new concept of authority which is termed as acceptance theory of authority or bottom-up authority. ii. A person will accept a communication as being authoritative only when four conditions are met simultaneously: He can understand the communication.  He believes that it is not inconsistent with the organisational purpose.  He believes it to be compatible with his personal interest as a whole.  He is mentally and physically able to comply with it.

5. Functions of the Executive:

i. Maintenance of organisational communication through a system of organisation, that is, through formal interactions. ii. Securing of essential services from individuals so as to achieve organisational purpose. iii. Formulation and definition of organisational purpose.

6. Motivation:
i. Apart from financial incentives, he suggested a number of non-financial techniques for motivating people. ii. Some of them are: opportunity of power and distinction, pride of workmanship, pleasant organisation, participation and feeling of belonging-ness.

7. Executive Effectiveness:
i. It requires a high level of responsible leadership. ii. Leadership is the most strategic factor in securing cooperation from the people. iii. It requires high calibre, technological competence, and technical and social skills.

8. Organisational Equilibrium:
i. Matching of individual efforts and organisational efforts to satisfy individuals. ii. Demands and aspirations of individuals change and the organisation has to cope with the dynamic situation. iii. Equilibrium of the organisation depends on the individuals working in it, other organisations, and the society as a whole.

Douglas McGregor


Distinguished two alternative basic assumptions about people and their approach to work.

THEORY X:  Presents an essentially negative view of people.  Assumes that workers have little ambition, dislike work, want to avoid responsibility, and need to be closely controlled to work effectively.  Presented a traditional view of motivation that holds that work is distasteful to employees, who must be motivated by force, money or praise.

 

THEORY Y: Offers a positive view of people. Assumes that workers can exercise selfdirection, accept and actually seek out responsibility, and consider work to be a natural activity. People are inherently motivated to work and do a good job.

SYSTEMS APPROACH


Rather than dealing separately with the various segments of an organisation, the systems approach to management views the organisation as a unified, purposeful system composed of interrelated parts. Approach give managers a way of looking at the organisation as a whole and as a part of the larger, external environment. Activity of any segment of an organisation affects, in varying degrees, the activity of every other segment. Mangers cannot function wholly within the confines of the traditional organisation chart.

Features of a System
 

A system is basically a combination of partssubsystems. Parts and sub-parts of a system are mutually related to each other. A system is not merely the totality of parts and subparts but their arrangement is more important. Synergy:- The situation in which the whole is greater than its parts. In organisational terms, synergy means that departments that interact co-operatively are more productive than they would be if they operated in isolation. 2+2=5

 

A system can be identified because it has a boundary that separates it from its environment. Boundary classifies it into two parts:Closed System: A system that does not interact with its environment. Open System: A system that interacts with its environment. System transforms inputs into outputs. Three aspects are involved in this transformation process:- inputs, mediator, outputs. System works as a mediator.

Feedback is the key to system controls. It is the part of system control in which the results of actions are returned to the individual, allowing work procedures to be analyzed and corrected.

Limitations of Systems Approach

1. Abstract Approach: It is not of much use of a practicing manager.  Its contribution to managing is limited.  E.g., An organisation is a social system and therefore, is related with other organisation in the society. This approach fails to spell out the relationship among these.

2.

Lack of Universality: It cannot be applied to all organisation as it is suitable for large and complex organisation, but not suitable for small organisation.

3. 4.

This approach does not offer anything new. Managers have been doing their jobs seeing the problems as a network of interrelated element with interaction between environment inside and outside of their organisation.

CONTINGENCY APPROACH
 

Extension of systems approach. A managers task is to identify which technique will, in a particular situation, under particular circumstances, and at a particular time, best contribute to the attainment of management goals. It represents an important turn in modern management theory , because it portrays each set of organizational relationships in its unique circumstances. Also known as situational approach.

Features of Contingency Approach



Management action is contingent on certain action outside the system or subsystem as the case may be. Organisational action should be based on the behavior of action outside the system so that organisation should be integrated with the environment. Because of the specific organisationenvironment relationship, no action can be universal. It varies from situation to situation.

Management is entirely situational and there is nothing like universal principles of management, or one best way of doing a particular thing. The approach suggests suitable alternatives for those managerial actions which are generally contingent upon external and internal environment. It suggests that since organisation interacts with it environment, neither the organisation nor any of its subsystems are free to take absolute action.

Limitations of Contingency Approach

1. Inadequate Literature: It has not adequately spelled out various types of actions which can be taken under different situations.  It is not sufficient to say that managerial action depends on the situation.

2. Complex: When put into practice, this approach becomes very complex.  Determination of situation in which managerial action is to be taken involves analysis of a large number of variables with multi-dimensions.

3. Difficult Empirical Testing: Methodology available for testing consists of too many factors which makes testing difficult.  It cannot be adopted to managerial actions.

4. Reactive not Proactive: It does not suggest what managers can do in a given situation.  Managers are supposed to take actions based on the situation.

Mckinsey 7-S Framework

Developed in the early 1980s by Tom Peters and Robert Waterman, two consultants working at the McKinsey & Company consulting firm, the basic premise of the model is that there are seven internal aspects of an organization that need to be aligned if it is to be successful. Following are the uses: 

Improve the performance of a company; Examine the likely effects of future changes within a company; Align departments and processes during a merger or acquisition; or Determine how best to implement a proposed strategy.

Seven Elements


Strategy: the plan devised to maintain and build competitive advantage over the competition. Structure: the way the organization is structured and who reports to whom. Systems: the daily activities and procedures that staff members engage in to get the job done.

Continued


Shared Values: called "superordinate goals" when the model was first developed, these are the core values of the company that are evidenced in the corporate culture and the general work ethic. Style: the style of leadership adopted. Staff: the employees and their general capabilities. Skills: the actual skills and competencies of the employees working for the company

Japanese Management System



Also known as Theory Z, describes the major postulates of Japanese management practices and how these practices can be adopted to the environment of United States and other countries. William G. Ouchi is among those who have studied Japanese business in the hope that it might provide solutions to some American problems.

Features of Theory Z


1.

2.

Based on the Japanese management practices and motivational pattern, Ouchi has suggested five broad features:Trust: Trust between employees, supervisors, work groups, unions, management, and government.  When trust and openness exist, the chances of conflict are automatically reduced to the minimum. Strong Bond between Organisation and Employees: Encouraging life-time employment.  Slowing down of evaluation and promotion, and giving more emphasis to horizontal movement which reduces stagnation.

3. Employee Involvement: Involvement comes through meaningful participation.  There can be some decisions which are taken without consulting employees but they are informed later.  Idea is not to slow down decision-making process but to involve employees for their commitment and giving due recognition to them.

4. No formal Structure: There should be a perfect team-work with cooperation along with sharing of information, resources and plans.  It places emphasis on rotational aspect of employee placement which provides opportunities to him to understand how his work affects others or is affected by others.

5. Coordination of Human Beings: Leaders role is to coordinate people and not technology to achieve productivity.  Purpose is to achieve commitment of employees to the development of a less-selfish-more-cooperative approach to work.  Leader must develop trust which requires a complete openness in the relationship.  This develops a common culture and no class feeling in the organisation.

Limitations of Theory Z
1. Provision of life-time employment to develop strong bond between the organisation and the employees seems to be difficult because of two reasons: Employer cannot retain an employee who is unproductive because of easy availability of substitutes.  An employee will not hesitate to switch over, if there is a relative rise in the income or other nonmonetary benefits. Common culture and no class feeling within an organisation is very difficult as people come from a wide variety of environments.

2.

3. Proposition that shareholders will accept less profit or accept losses to avoid lay-off, does not seem feasible where most of the organisations believe in low level of social responsibility. 4. Following operational problems may come while implementing Theory Z: Organisation without structure has been emphasised but how actually it works is yet unanswered.  Degree of horizontal movement is limited to the extent to which skills needed for one job can be transferred to other jobs.

Pertinent Features of Japanese Management System

 

Company wide union or House union. General preference to inexperienced fresh graduates from schools and colleges.
Temporary Staffing University Recruiting Mid-Career Hiring

 

Preference for promotions from within. Life-time employment.

Continued
    

Quality Control Circles (QCCs). Training Practices. Decision making and consultation practices. Settlement of conflict through negotiations. Compensation.

CORPORATE SOCIAL RESPONSIBILITY

DEFINITION

Social responsibilities refer to the businessmans decisions and actions taken to reasons at least partially beyond the firms direct economic or technical interest.

Social Responsibility of Managers

       

Responsibility towards shareholders. Responsibility towards consumers. Responsibility towards employees. Responsibility towards creditors. Responsibility towards the government. Responsibility towards suppliers. Responsibility towards competitors. Responsibility towards general public.

Arguments For Social Involvement of Business

  

 

Business: A part of the society. Avoidance of Government regulations. Internal activities impact on the external environment. Social involvement may be in the interest of stakeholders. Long-run self-interest of business. Profitably re-utilisation of wasteful items.

Arguments Against Social Involvement of Business

 

 

Contrary to basic function of Business. Incomplete support for involvement in social actions. It would create excessive cost for business. Lack of social skills needed to deal with the problems of society. Lack of accountability of business to society.

PLANNING

WHAT IS PLANNING?


A process that involves defining the organisations goals, establishing an overall strategy for achieving those goals, and developing a comprehensive set of plans to integrate and co-ordinate organizational work. Ongoing process that reflects and adapts to changes in the environment surrounding each organization. Planning is an activity consisting of a process, hence various sub-activities. Plans are the documents that outline how goals are going to be met including resource allocations, schedules, and other necessary actions to accomplish the goals. Goals are desired outcomes for individuals, groups or entire organizations.

WHY DO MANAGERS PLAN?



Planning gives direction to managers by establishing coordinated effort. Planning reduces uncertainty by forcing managers to look ahead, anticipate change, consider the impact of change, and develop appropriate responses. Planning reduces overlapping and wasteful activities by coordinating activities around established plans. Planning establishes goals or standards that are used in controlling.

TYPES OF PLANS


A plan is a commitment of resources to a particular course of action believed necessary to achieve specific purpose. A plan can be effective only if properly understood which managers, generally, fail to do. Plans can be classified as:1. Purpose or Mission:  Basic function or task of an organization.  Basic objective of an organization is accomplished by undertaking activities, going in clearly defined directions, achieving goals and accomplishing a mission.  purpose of existence, gives an indication about the type of business/industry you are in.

2.

Objectives:

    3. 

  

specific components that turn the missions into reality. Objectives or goals are the ends toward which activity is aimed. Represents not only the end point of planning but the end toward which other functions of management are aimed. A department may also have its own objective. Strategies: Strategy is the long term direction and scope of an organization which achieves advantage for the organization through its configuration of resources within a challenging environment. General programs of action and deployment of resources to attain comprehensive objective. They furnish a framework of guiding, thinking and action. They do not attempt to outline exactly how the enterprise is to accomplish its objectives.

4. Policies:   

 

General statements or understandings that guide thinking in decision making. Not all policies are statements; they are often merely implied from the actions of the managers. It defines an area within which a decision is to be made and ensure that the decision will be consistent with, and contribute to, an objective. They are the means of encouraging discretion and initiative, but within the limits. E.g. Hiring only university affiliated management graduates.

5.      6.  

Procedures: step by step sequence of required actions. Guide the actions to be taken to implement policies. Plans that establish a required method of handling future activities. Guides to action. Chronological sequences of required actions. Often cut across department lines. Rules: Specific required actions or non-actions, allowing no discretions. Essence of a rule is that it reflects a managerial decision that a certain action must-or must not be taken.

7. Programs:  Set of clear instructions in a clear and logical   8.  

sequence to perform a particular task. Explain how to carry out a given course of action. Supported by budgets. Budgets: Statement of expected results expressed in numbers. It may beExpense Budget that deals with operations. Capital Expenditure budget that reflect capital outlays. Cash Budget that shows cash inflows and outflows.

STEPS IN PLANNING
The sequences of various steps in planning are in such a way that they lead to the translation of an idea into action by reaching to the state of establishing of sequences of activities.  Each stage contributes to plan formulation in following ways: 1. Perception of Opportunities:


 Not strictly a planning process.  It leads to formulation of plans by providing clue whether opportunities exist for taking up particular plans.  A preliminary look at possible opportunities.  It takes the advantages of opportunities and avoids threats.

2. Establishing Objectives:
 Major organisational and unit objectives are set.  Objectives specify the results expected and indicate the end points.  Establishing objectives for the entire enterprise and then for each subordinate work unit.

3. Developing Premises:
 Conditions under which planning activities will be undertaken.  Planning premises are planning assumptions- the expected environmental and internal conditions.  Forecasting plays a major role in planning premises.  The nature of planning premises differs at different levels of planning.

4. Determining Alternative Courses:

 This concept suggests that a particular objective can be achieved through various actions.  The most common problem is to reduce the number of alternatives so that most promising ones may be taken for detailed analysis.

5. Evaluation of Alternatives:
 An attempt is made to evaluate how each alternative contributes to the organisational objectives in the light of its resources and constraints.  There is no certainty about the outcome of any alternative.  It is affected by a large number of factors making the evaluation work quite complex.

6. Choice of Alternative:
 This is the point at which the plan is adopted.  It is the real point of decision-making.  Evaluation may show more than one alternative good.  Alternative course of action is to be undertaken in future which is not constant.

7. Formulation of Supporting Plan:

 After formulating the basic plan, various plans are derived so as to support the main plan.  Derivative plans in no way reflect the main focus of the business, but they are formulated out of the main plan.

8. Establishing Sequence of Activities:

 Sequence of activities are determined so that plans are put into action.  Budgets for various periods can be prepared to give plans more concrete meaning of implementation.  The overall budgets of an enterprise represent the sum total of income and expenses, with resultant profit or surplus.  Each department of a business can have its own budgets, usually of expenses and capital expenditures, which tie into the overall budget.

OBJECTIVES

OBJECTIVES


Definition:

Intended end result that an organisation desires to achieve over varying periods of time. FEATURES:  Organisations or groups are created for certain objectives.  Objectives may be broad or specific, short-term or long-term.  Objectives are clearly defined and provide clear direction for managerial action.  Objectives have hierarchy.  An organisation may have multiple objectives.

HIERARCHY OF OBJECTIVES


Organisational objectives form a hierarchy ranging from the broad aim to specific individual objectives. Process of assigning a part of a mission to a particular department and then further sub dividing the assignment among sections and individuals creates a hierarchy of objectives. Objective of each subunit contribute to the objectives of the larger unit of which it is a part.

Hierarchy of Organizational Objectives

1. Socio- economic purpose 2. Mission 3. Overall objectives of the organization 4. More specific overall objectives 5. Division Objectives 6. Department and unit objectives 7. Individual objectives

GUIDELINES FOR OBJECTIVE SETTING

 

Objectives must be clearly specified. Objectives must be set taking into account the various factors affecting their achievements. Objectives should be consistent with organisational mission. Objectives should be rational and realistic rather than idealistic. Objectives should be achievable but must provide challenge to those responsible for achievement.

Objectives should yield specific results when achieved. Objectives should be desirable for those who are responsible for the achievement. Objective should start with the word to and be followed by an action verb. Objectives should be consistent over the period of time. Objectives should be periodically reviewed.

EXAMPLE OF GOOD OBJECTIVE SETTING  We want to make our product number one selling brand in its field in terms of units sold.  We strive to become leader in product innovation in our field by investing five per cent of our sales revenue on research and development. EXAMPLE OF POOR OBJECTIVE SETTING  Our objective is to maximize our profit.  Our objective is to offer best and cheapest product.

MANAGEMENT BY OBJECTIVES


Approach was first proposed by Peter Drucker in his 1954 book The Practice of Management. Definition: A comprehensive managerial system that integrates many key managerial activities in a systematic manner, consciously directed towards the effective and efficient achievement of organisational objectives.

FEATURES OF MBO
 

It is an approach and philosophy to management and not merely a technique. Refers to a formal set of procedures that begins with goal setting and continues through performance review. Heart of MBO is the objectives, which spell out the individual actions needed to fulfill the units functional strategy and annual objectives. It is characterized by the participation of concerned in objective setting and performance reviews.

Periodic review of performance is an important feature as it emphasises initiative and active role by the manager who is responsible for achieving objectives. Once the objectives have been agreed upon, the individual enjoys wide discretion in choosing the means for achieving them. Effective MBO programs usually start with the top managers, who determines the organization's strategy and set preliminary goals.

PROCESS OF MBO
1. Setting of Organisational Purpose and Objectives:
 Questions which provide guidelines for the statement of purpose are:Why does the organisation exist? What business are we in? What should be our business?  Top managers has to determine what he or she perceives to be the purpose or mission and the more important goals of the enterprise for a given period ahead.  Companies strengths and weaknesses should be taken into account in the light of available opportunities and threats while setting the goals.  Goals are tentative and entire chain of verifiable objectives is worked out by the subordinates.

2. Identification of Key Result Areas (KRAs):

 These are those aspects of a unit or organisation that must function effectively if the entire unit or organisation is to succeed.  KRAs indicate the present state of an organisations health and the top management perspective for the future.  Organisations objectives and planning premises together provide the basis for identification of KRAs.  E.g., KRAs of marketing can be sales volume, sales expense, advertising expenditure, individual sales-persons performance.

3. Setting Subordinates Objectives:

 Organisational objectives are achieved through individuals.  Each individual manager must know in advance what he is expected to achieve.  Process begins with superiors proposed recommendations for his subordinates objectives.  Subordinate states his own objectives as perceived by him.  Final objectives are set by the mutual negotiation between superior and subordinate.

4.

Matching Resources with Objectives:

 Objectives should indicate the resource requirement.  Proper application of resources ensures objective achievement.  There should be matching between objectives and resources.  Allocation and movement of resources should be done in consultation with the subordinate manager.

5.

Appraisal:
 Tries to measure whether the subordinate is achieving his objective or not.  Helps in identifying the problems and the ways to overcome them.  On-going process so as to find out deficiency in the working and also to remove it promptly.  It is taken to ensure that everything is going as planned and the organization is able to achieve its objectives.

6. Recycling:
 Appraisal, being the last aspect of MBO, is used as an input for recycling objectives and other actions.  What happens at each level may affect other levels also.  Outcome of appraisal at one level is recycled to see if the objectives have been set properly at the level concerned and also at the next higher level.

Benefits of MBO
1. Better Managing:
 Resources and activities are put in such a way that they result in better performance.  MBO forces managers to think about planning for results, rather than merely planning activities or work.  Clarity of objectives.  Clarity of roles.  Periodic feedback of performance.  Participation by managers in the management process.  Realization that there is always scope for improvement.

2. Clarity in Organisational Action:

 Tends to provide the key result areas (KRAs) where organizational efforts are needed.  While implementing MBO, the deficiencies in the organization get discovered and appropriate remedial measures can be initiated.  Helps in defining the organisation properly in the environmental context as well as in the context of its various competitors.

3. Personal Satisfaction:
 Encourages people to commit themselves to their goals.  This is possible because of two closely related phenomena: participation in objective setting and rational performance appraisal.  People become enthusiastic when they work for the objectives set by themselves.

4. Basis for Oraganisational Change:

 It provides a framework and guidelines or planned change, enabling the top management to initiate, plan, direct and control the change.  It aids in developing effective controls.  Change process becomes easier because of application of MBO.

Limitations of MBO
1. Time and Cost:
 Requires large amount of time of the senior managers.  It generates paper work because large number of forms are to be designed and put into practice.

2. Failure to Teach Philosophy of MBO:

 Philosophy is built on concepts of self-control and self-direction, which are aimed at making managers professionals.  Managers have doubt MBO like what purpose it serves, how the performance is to be appraised and how organisation will benefit.

3. Problems in Objective Setting:

 MBO requires verifiable objectives against which performance can be measured.  It is difficult, sometimes, to quantify the objectives because of dynamic environment.

4. Failure to Give Guidelines to Goal Setters:

 Managers must know about their corporate goals and how their own activity fits in with these goals.  No guidelines are being given for managers regarding future assessment, understanding of the policies affecting their areas of operations, etc.

5. Emphasis on Short-run Goals:

 In order to be precise, there is a tendency to emphasize short term goals usually for a year or even less as it helps in performance appraisal.

6. Danger of Inflexibility:
 It is useless to follow old objectives in the context of revised corporate objectives, changed premises or modified policies.  Managers hesitate to change objectives during a period of time.

7. Managers may downgrade the important goals that are difficult to state in terms of end results.

STRATEGIES, POLICIES AND PLANNING PREMISES

STRATEGY


 

Strategy is the broad program for defining and achieving an organisations objectives; the organisations response to its environment over time. Term strategy has been derived from Greek word strategos which means general. It may be defined as a comprehensive plan guiding resource allocation to achieve long-term organisation goals. Strategic Intent is focusing and applying organisational energies on a unifying and compelling goal. Coca- Cola: To put a Coke within arms reach of every consumer in the world.

STRATEGY AND POLICY



 

Policies are general statements or understandings that guide managers thinking. Essence of policy is discretion. Strategy concerns the direction in which human and material resources will be applied in order to increase the chance of achieving selected objectives.

SRATEGY AND TACTICS



Strategy determines what major plans are to be undertaken and allocates resources to them. Tactics is means by which previously determined plans are executed.

Corporate Level Strategy

Business-Level Strategy

Business- Level Strategy

Marketing Strategy

Production Strategy

R&D Strategy

Finance Strategy

Advertising Strategy

LEVELS OF STRATEGY

CORPORATE-LEVEL STRATEGY


Strategy formulated by top management to oversee the interests and operations of multiline corporations. Major questions at this level are What kinds of businesses should the company be engaged in?  What are the goals and expectations for each business?  How should resources be allocated to reach these goals?

 It sets long term direction for the total enterprise.  Typical strategic decisions at corporate level relate t the allocation of resources for acquisitions, new business development, divestitures, etc.

BCG MATRIX(BOSTON CONSULTING GROUP) 1. QUESTION MARK

 They are low-market-share businesses in high growth markets.  They do not produce much profits but compete in rapidly growing markets.  They are the source of difficult strategic decisions.  Usually require cash investment so that they can become stars.

2. STARS
 They are the high-market-share businesses in high growth markets.  They produce large profits through substantial penetration of expanding markets.  If properly handled, they can turn out to be the firms cash cows of the future.  Preferred strategy for stars is growth, and further resource investments in them are recommended.

3. CASH COWS
 They are high-market-share businesses in lowgrowth markets.  They produce large profits and a strong cash flow.  Such businesses are in a position of making the products at low cost.  Preferred strategy is stability or modest growth, and harvest.  Cows should be milked to generate cash that can be used to support investments in stars and question marks.

4. DOGS
 They are the low-market-share businesses in low growth markets.  They do not produce much profits; and they show little potential for future improvement.  These businesses are usually not profitable and generally should be disposed off.  Preferred strategy is divest (retrenchment by divestiture).

BUSINESS-LEVEL STRATEGY


It is the strategy for single business unit or product line. Applicable in those organizations which have different businesses and each business is treated as Strategic Business Unit (SBU). SBU describes a single business firm or a component that operates with a major business line within a larger enterprise.

It could be termed as a sub strategy of corporate where for each line of business, a separate strategy is formulated. Selection of strategy at the business level involves answering the strategic question:How are we going to compete for customers in this industry and market? Typical business strategy decisions include choices about product/service mix, facilities location, new technologies, etc.

PORTERS GENERIC STRATEGIES

 According to Porter, business-level strategic decisions are driven by two basic factors:1. Market Scope ask: How broad or narrow is your market or target market? 2. Source of Competitive Advantage ask: Will you compete for competitive advantage by lower price or product uniqueness?

 These factors combine to create the following three generic strategies that organisations can pursue.

1. DIFFERENTIATION


Organisations resources and attention are directed toward making its products appear different from those of the competition. It aims at increasing the firms share of the market by bringing about some changes in the basic features of its products like the colour, shape, design or size of the product. This offers a customer appeal to the buyers and also a competitive advantage to the firm over its competitors.

2. OVERALL COST- LEADERSHIP



Organisations resources and attention are directed toward minimizing costs to operate more efficiently than the competition. It aims at increasing the firms share of the market by minimizing the per unit cost of its products and reducing the selling price, thereby increasing its sales volume. Sales volume is increased in the present market by cutting down the companys overall costs (production, R&D, advertising,etc.) below the costs of the competing firms.

3. FOCUSED STRATEGY


Organisations concentrate on a special market segment with the objective of serving its needs better than anyone else. Its focus may be on a specified group of customers, or a specified product, or a specified area. They seek competitive advantage in that market segment through product differentiation.

FUNCTIONAL-LEVEL STRATEGY
 

It guides activities within one specific area of operations. It guides the organisational resources to implement business strategy. The strategic question to be answered in selecting functional strategies is: How can we best utilize resources to implement our business strategy? Typical strategic decisions include the choice of management practices within each function that improves operating efficiency, product or service quality, customer service or innovativeness.

Environmental Analysis by TOWS Matrix

It aims at matching the organization's internal strengths and weaknesses (company profile) with its external threats and opportunities (environmental analysis).  Combination of these factors require distinct strategic choices, and thus give rise to four alternative strategies:1. WT Strategy:


 Company aims at minimising its internal weaknesses and the environmental threats.  It may require a complete restructuring of the firm,e.g., form a joint venture, retrench or even liquidate.

2.

3.

WO Strategy:  Company minimises its weaknesses by developing its internal strengths and maximises the environmental opportunities.  To take advantage of opportunities, a firm with certain weaknesses in some areas may either develop those areas within the enterprise or acquire needed competencies, e.g., technology, persons with needed skills,etc. ST Strategy:  Company maximises its strengths (technological, functional, managerial,etc.) to be able to minimise the environmental threats.  Company can make use of its technological developments to face the threat of stiff competition with its competitor.

4. SO Strategy:
 Company uses its strengths to take advantage of environmental opportunities.  Weaknesses, if any, are overcome and converted into strengths.  Environmental threats are overpowered by opportunities.  Most desirable strategy where the organisations use their strengths to exploit the opportunities offered by the environment and are also able to face the threats and convert them into opportunities.

Effective Implementation of Strategies

       

Communication of strategies. Communication of planning premises. Reflection of overall objectives. Review. Develop contingency strategies. Development of an organisation structure. Need to spread the importance of strategies. Climate.

PLANNING PREMISES

Planning premises are the anticipated environment in which plans are expected to operate. They include assumptions or forecasts of the future and known conditions that will affect the operation of plans.

Making Premising Effective

1. SELECTION OF PREMISES
 Managers have to identify the most critical and high priority factors which should be later analysed intensively.

2. PREMISES FOR CONTINGENCY PLANNING

 Planning premises are not constant but dynamic.  Managers should be ready with alternative premises and align their plans accordingly.

3. VERIFICATION OF THE CONSISTENCY OF PREMISES

 Managers should ensure that premises are consistent with the objective of the organisation.

4. COMMUNICATION OF THE PREMISES

 It should be communicated to those who are involved in planning process at different levels of the organisation.

DECISION - MAKING

DECISION - MAKING


 

The word decision has been derived from the Latin word decidere which means a cutting away or a cutting off, or in a practical sense. A decision represents a judgment. Decision-making is defined as selection of a course of action from among alternatives. Plans get translated into action only when a decision has been made.

DECISION MAKING PROCESS

1. Identification of the Problem:
 Problem may be defined as any deviation from a set of expectations.  This is done in three stages: Scanning:- Scanning of the current set up of an organisation to ascertain as to whether or not it is in accordance with the requirements of the internal and external environment.  Categorisation:- Areas of operation which can be responsible for the deviation are categorised.  Diagnosis:- Managers collect facts and information which have led to the occurrence of the problem.

2. Establishment of Objectives:
 Aim is to solve the problems identified.  This resolution of managers forms the objective of decision-making.

3. Generating Alternatives:
 Alternative solutions refer to two or more ways of dealing with a particular problem.

4. Evaluation of Alternatives:
 Three ways of evaluating alternatives:i. Quantitative and Qualitative Factors:
 Fixed and operating costs.  Quality of labor relations, the risk of technological changes and the domestic or international political climate.

ii. Marginal Analysis:  Refers to comparing additional revenues associated with the acceptance of an alternative with its additional costs.  If the additional benefits are more than the additional costs associated with an alternative, the proposed alternative should be accepted. iii. Cost-Effectiveness Analysis:  Also known as Cost Benefit Analysis.  Refers to comparing the future expected benefits with the potential costs of alternative solutions and selecting the one which gives the maximum benefit generated in terms of difference between the potential revenues and costs.

5. Selection of an Alternative:
 Most suitable alternative is selected by adopting any of the following three approaches:i. Experience:- Post experience serves as a guide for future. ii. Experimentation:- Each available alternative is put to practice and the one which is most suitable is selected. iii. Research and Analysis:- Most effective technique when major decisions are involved.
 Solving a problem by first comprehending it.  Problem is broken into its component parts and various quantitative and qualitative factors are studied.  A model simulating the problem is developed.

6. Implementation of the Alternative:

 Planning for the application of the selected alternative is required.  Other major area of concern is the acceptance of the alternative by those who are actually affected by it.

7. Monitoring the Implementation:

 Implementation process, once initiated, should be regularly monitored to know the degree of acceptance by the organisational members.

TYPES OF DECISIONS
PROGRAMMED DECISIONS


Decisions related to structured situations, where the problem is more or less of routine and repetitive in nature. Managers take recourse to the pre-established criteria for taking decisions. Various policies, schedules and procedures laid down by the management provide a guideline for taking these decisions. E.g., Ordering of fresh inventory when the existing level of inventory reaches the re-order point.

NON-PROGRAMMED DECISIONS


Decisions are taken in unstructured situations which are reflective of novel, ill-defined and complex problems. They are non-recurring or exceptional in nature and require brainstorming by managers. E.g., Increase in advertising expenditure.

SITUATIONS OF DECISION MAKING

While making decisions, the managers face three types of situations or conditions:1. CERTAINTY
 It exists when managers can obtain complete and reliable information about future.  Future is predictable.  Such decisions normally relate to very near future and are taken by lower-level or middle level managers.

2.

UNCERTAINTY
 It exists where almost no information is available about future .  Normally such situations do not occur and very few decisions are made under such conditions.  E.g., Change in the economic, legal or political scenario in future.

3. RISK
 It occurs when information is available about future but it may be incomplete.  Impact of present decisions on future outcomes can be predicted with a fair degree of certainty, the exact degree not always known.  Past experience and current economic scenario help in predicting the future.  E.g., Potential of new entrants in the market.

Modern Approaches to Decision-Making Under Certainty

1. RISK ANALYSIS
 It is important to know the size and nature of the risk involved in choosing a course of action.  New techniques have been developed to give a more precise view of risk.  It is important to analyse the interaction of important variables, many of which have an element of uncertainty.

2. DECISION TREES
 Some decisions involve a series of steps, the second step depending on the outcome of the first, and so on.  It is a graphical method for identifying alternative actions, estimating probabilities, and indicating the resulted expected payoff.  Decision trees depict the decision points, chance events and probabilities involved in various courses that might be undertaken.  Graphical form visually helps the decision makers view his alternatives and outcomes.

3. PREFERENCE THEORY
 Also known as Utility Theory, explains the individual attitude toward risk, i.e., risk averters and gamblers.  Assumed that the decision makers follow the statistical probabilities, as applied to decision making.  Attitudes toward risk vary not only with the individual, but also with the level of the manager in an organization and the source of the funds involved.

DECISION SUPPORT SYSTEM  They use computers to facilitate the decision-making process of semi-structured tasks.  Designed not to replace managerial judgement but to support it to make the decision process more effective. LIMITING FACTOR  Factors that stand in the way of accomplishing a desired objective.  Help in choosing the best alternative.  It is possible to narrow the search for alternative that are required in overcoming the limiting factors.  By recognizing and overcoming those factors that stand critically in the way of a goal, the best alternative course of action can be selected.

ORGANISING

ORGANISING


Organising is the process of arranging people and other resources to work together to accomplish a goal. Once plans are created, the managers task is to see to it that they are carried out. Organising begins the process of implementation by clarifying jobs and working relationships.

ORGANISATION STRUCTURE

Organisation structure is the system of tasks, workflows, reporting relationships and communication channels that link together the work of diverse individuals and groups.

FORMAL ORGANISATION


A formal organisation is a well-defined structure of authority and responsibility that defines delegation of authority and inter-relationships amongst various organisational members. It works on the basis of pre-defined set of policies, plans, procedures, schedules and programs. Some degree of formalisation is a must for any organisation to function effectively. Excessive reliance can lead to loss of initiative and innovative capacities of employees.

Features of Formal Organisation



It is a job-oriented concept which allocates jobs amongst people for the attainment of a common objective. It is based on the principles of division of labor and efficiency in operations. The structure of relationships is depicted through lines and boxes on the organisation chart. People enjoy the authority and power by virtue of their position in the organisational hierarchy. Coordination among members and their control are well specified through processes, procedures, rules, etc.

INFORMAL ORGANISATION


It refers to the natural grouping of people on the basis of some similarity in an organisation. Chester Barnard, author of The Functions of the Executive described informal organisation as any joint personal activity without conscious joint purpose, even though contributing to joint results. Such relationships may be more complex the the officially prescribed ones.

Features of Informal Organisation

 

It is a natural outcome at the work place. They are created on the basis of some similarity among its members. A person may become member of several informal organisations at the same time. They can be very helpful in getting work accomplished. It enables informal learning that takes place while working and interacting together throughout the work day.

S.No. Nature 1. Structure

Formal Organisation
Formally structured.

Informal Organisation
Spontaneous reaction to formally structured organisations People and their relationships. It is attached to a person and given by group. Social interaction.

2. 3.

Emphasis Positions Power It is attached to position and is institutional in nature. Well set goals.

4.

Purpose

S.No. Nature
5. Chain of Command

Formal Organisation
Chain is respected and the authority is delegated by the top management.

Informal Organisation
Authority comes from personal knowledge & skill and given by group. Change in members can lead to instability.

6.

7. 8.

Stable;not affected by incomings and outgoings of organisational members. Guidelines Rules & for behavior procedures. Flexibility Not flexible.

Stability

Group norms. Highly flexible.

SPAN OF MANAGEMENT
 

Also known as Span of Control. It is the number of subordinates directly reporting to the manager. Magic number for an effective span was never found but this span of control principle evolved: There is a limit to the number of people one manager can effectively supervise; care should be exercised to keep the span of control within manageable limits.

NARROW SPAN


 

When only few people are under a managers immediate supervision, then the span of control is said to be narrow. It gives rise to a Tall Structure. Manager is in a position to exercise tight control over their activities. It results in creation of a large number of levels in an organisation.

Narrow Span / Tall Structure

Advantages of Narrow Span

1. Managers can maintain a close supervision on their employees. 2. There can be better communication between superiors and subordinates. 3. It results into personalised relationship between managers and subordinates. 4. Control can also be tightened.

Disadvantages of Narrow Span

1. Too many hierarchial levels are created which makes coordination complicated. 2. There is need for more number of managers to supervise the given number of workers resulting in an increase in the overhead expenditure. 3. Increasing gap between the top-level managers and workers can result in slow communication process. 4. Decision making becomes difficult. 5. Supervisors are engaged in the routine jobs of supervising their subordinates and have less time to look after other important matters.

WIDE SPAN

 

When many people are under a managers immediate supervision, then the span of control is said to be wide. It gives rise to a Flat Structure. It is created with lesser number of hierarchial levels.

Wide Span / Flat Structure

Advantages of Wide Span

1. There is reduction in cost. 2. Decision-making process is made more effective as superiors delegate the authority to their subordinates and are relieved of dealing with the routine matters. 3. It results in a better system of communication as the number of levels is less. 4. Clear policies can be made.

Disadvantages of Wide Span

1. There is the risk of superiors losing track of the activities being actually performed by the employees. 2. It can give rise to a situation of decisive bottlenecks because of overloaded superiors. 3. It requires exceptional quality of managers to perform in this structure.

Factors Affecting Span of Management

1. Level of Competence of Managers
If the managers are competent in their jobs, they can afford to have a wider span of management.

2. Nature of Work
If all the employees are doing work of similar and repetitive nature, the managers can supervise a large number of subordinates and thus have a wider span of control.

3. Subordinate Training
 If subordinates have a strong educational background and can manage their jobs without much assistance from their superiors, a wider span of control can be thought of.

4. Clarity of Delegation of Authority

 If the authority responsibility structure of an organisation is well-defined and understood by everyone clearly, the superiors can afford to supervise a large number of subordinate.

5. Clarity of Plans and Policies

 A manager can control more subordinates If the plans are well-defined.

 If they are workable.  If the authority to undertake them has been delegated.  If the subordinate understands what is expected of him.

6. Variation by Organisation Level

 Top executives have to look after many important and specialised activities, and therefore, the span has to be narrow.  At lower levels, since the supervisors are mainly concerned with routine jobs, the span can be wide.

7. System of Control
Prevalence of effective techniques of control in an organisation shall enable a manager to supervise a larger number of subordinates. Effectiveness with which communication technique are used also influence the span of management. An ability to communicate plans and instructions clearly and concisely also tends to increase a managers span.

8. Use of Objective Standards

Good objective standards enable managers to avoid many time-consuming activities. A manager must find out whether subordinates are following plans.

DEPARTMENTATION


Departmentation refers to division of work into smaller units and their re-grouping into bigger units on the basis of similarity of certain features. The word department designates a distinct area division, or branch of an organization over which a manager has authority for the performance of specified activities. It is the basis of providing structure to an organizational unit.

Functional Departmentation


It is the grouping of jobs and resources within the company in such a way that employees who perform the same or similar activities are in the same department. Departments are created along the various activities or functions of an organization. It is grouping of activities on the basis of similarities of functions.

Organization Chart showing Functional Departmentation

Board of Directors

GM Production Production Control Manufacturing

GM Finance Capital Budgeting Current Assets Budgets

GM Personnel Recruitment

GM Marketing Advertisement Sales Promotion R&D

Placement Training & Promotion

Purchasing

ADVANTAGES


    

Simple and logical basis of creating departments. Specialisation. Co-ordination. Training and Control. Supervision. Suitable for small organisations.

DISAVANTAGES
     

Neglected overall organisational goals. Delayed decisions. Holding of accountability. Unsuitable for dynamic organisation. Reduces coordination between functions. Responsibility for profits is at the top only.

PRODUCT DEPARTMENTATION


It is the grouping of jobs and resources around the products or product lines that a company sells. Focus of attention is the product line and all functional activities associated with that product line. Each department is headed by a product manager who is given necessary authority by the top manager to carry out the functional activities associated with the department.

Organisation Chart showing Product Departmentation

Board of Directors GM Production Manager Product A Production Finance Accounting R&D GM Finance GM Personnel Manager Product B Production Finance Accounting R&D GM Marketing Manager Product C Production Finance Accounting R&D

ADVANTAGES
     

Better performance. Flexibility. Faster decisions. Easy to coordinate. East to exercise control. Facilitates use of specialized capital, skills and knowledge. Places responsibility for profits at the division level.

DISADVANTAGES


Different departments focus excessive attention on the activities of their departments only without actually linking their performance with those of other departments. Expensive as it requires more persons with general manager abilities. Presents increased problem of top management control.

PROCESS DEPARTMENTATION
  

Also known as Equipment Departmentation. Particularly in manufacturing organisations. Each stage of production is designated as a different process and departments are created on the basis of respective processes. People and materials are brought together in order to carry out a particular operation.

Organisation chart showing Process Departmentation

Board of Directors

GM Production

GM Finance

GM Personnel

GM Marketing

Manager Crushing

Manager Making Pulp

Manager Purifying Pulp

Manager Paper Rolls

Manager Cutting

ADVANTAGES
 

 

Encourages and uses specialization. Achieves economic advantage due to specialisation in terms of time, money and managerial skills. Uses specialized skills. Facilitates training for employees to efficiently carry out the processes.

DISADVANTAGS


 

Output of one process department is the input for the other which creates coordination problems. Responsibility for profits is at the top only. Repeated handling of the same job leads to boredom.

CUSTOMER DEPARTMENTATION


It is defined as the organizing of jobs and resources in such a way that each department can carefully understand and respond to the different needs of specific customer groups. Clear identification of the customers and their needs is the basis of this type of departmentalization.

Organisation Chart Showing Customer Departmentation

Board of Directors

Managing Director

Manager Car Loans

Manager Housing Loans

Manager Electronics Loans

Manager Commercial Loans

ADVANTAGES


 

Companies stand an edge over their competitors and have better chance of survival and growth. Customer orientation. Gives customers feeling that they have an understanding supplier.

DISADVANTAGES


 

Difficult to coordinate operations between competing customer demands. It is not an easy task to identify consumer groups. Change in consumer behavior. Requires managers and staff expert in customers problems.

TERRITORY OR GEOGRAPHIC DEPARTMENTATION



Territorial departmentation is followed in cases where An organisation creates departments close to its customers.  Organisation sets up its units or departments at places near the source of deposits.

Each geographical unit has resources assigned to it so that it can effectively cater to the needs of consumers of that area.

ADVANTAGES


Places emphasis on local markets and needs of the customers. Takes advantage of economies of local operations. Better face-face communication with local interests. Improves coordination in a region.

DISADVANTAGES


Since different departments are widely dispersed, coordination problems may arise. Method proves to be costly as each department sets up its auxiliary departments. Requires more persons with general manager abilities.

Departmentation by Time


This is the traditional method of departmentation still in use. Generally used at lower levels of organisations where activities are grouped on the basis of time. Following are some of the situations where work has to be done round the clock:    The machine cannot be stopped. The demand is high and machine has to work overtime. Services provided are essential in nature. The nature of the work entrusted to the organisation is such.

ADVANTAGES


Optimum utilization of machines which can work on a continuous basis. Advantageous for those who prefer evening or night shifts. Service can be rendered extending to 24 hours a day.

DISADVANTAGES

Coordination and supervision of employees who are working in different shifts. Payment of overtime rates can increase the cost of the product or service.

MATRIX ORGANISATION STRUCTURE

 

Also known as Grid or Lattice Pattern. It is the combination of functional and product patterns of departmentation in the same organization structure. Functional managers (e.g. engineering, manufacturing, sales, etc.) and product managers( individual product lines) report to a matrix manager. Instead of reporting to separate higher level managers, they report to one general matrix manager who consolidates and integrates their activities.

FEATURES


Functional departments are a permanent fixture of the matrix organization; they retain authority for the overall operation of their respective units. Members of a project team are assembled from the functional departments and are placed under the direction of a project manager. Manager for each project is responsible and accountable for its success and he has authority over the other team members for the duration of the project. Functional and product managers need to work closely with each other to make a matrix design work well.

A Typical Matrix Orgnisation

Board of Directors

R&D

Engineering Manufacturing Administration Group Group Group

Project Manager A Project Manager B Project Manager C

Benefits of Matrix Structure



Permits the flexible sharing of employees across product lines. It helps in achieving coordination to meet the dual demands of efficiency and changing customer expectations. Change of projects promotes the intellectual growth and development of employees. It is oriented towards end result.

Drawbacks of Matrix Structure



Maintenance of two management hierarchies (functional and product) is expensive. Members generally show greater loyalty to their parent departments than to the project organization in which they are working. Employees may fall in confusion and ambiguity as they have two bosses- a functional and a product boss. Conflict exists between functional and project managers.

FORMS OF ORGANISATIONAL STRUCTURE

 

 

MECHANISTIC STRUCTURES Also known as Classical Organization Structure. Mechanistic organization is one in which management breaks activities into separate, highly specialized tasks, relies extensively on standardized rules, and centralizes decision making at the top. It is usually pyramid shaped. Most appropriate when an organization's environment is stable and predictable. Generally give rise to a tall structure with narrow span of control.

ORGANIC STRUCTURE


 

 

It encourages managers and subordinates to work together in teams and to communicate openly with each other. Decision-making tends to be decentralized. Authority, responsibility and accountability flow to employees having the expertise required to solve problems as they arise. Well suited for changing environment. Generally give rise to flat form with wider span of control.

AUTHORITY AND POWER

POWER


Authority is different from power, which is the ability to influence or to cause a person to perform an act. There are five types of Power:i. Reward Power: Power of A over B as B feels that A can deliver reward to him. ii. Coercive Power: Power of A over B as B feels that A can deliver punishment if B fails to respond to As influence attempt.

Continued
iii. Referent Power: Power of A over B as B desires more and more to identify with or imitate A. iv. Expert Power: It exists when B sees that A has some expertise in a given subject. v. Legitimate Power: It exists when B perceives that A has the legal right to determine Bs behavior.

Legitimate power is same as Authority.

AUTHORITY
     

Henri Fayol defines authority as the right to give orders and power to exact obedience. It is the right to make a decision and act. Authority implies both responsibility and accountability. Responsibility is an employees obligation to perform assigned tasks. Accountability is the expectation that employees will accept credit or blame for their performance. When delegating tasks to others, managers should take care to match the responsibility they confer with authority and then insists on accountability for results.

Difference Between Authority and Power

AUTHORITY
It is the formal right of an individual to issue orders and instructions to his subordinates. It is related to the position that a person holds in a organizational hierarchy.

POWER
It is not a formal right but only the ability of a person to issue orders and instructions to his subordinates. It is related to the person; his qualities, experience and expertise that enables him to influence the behavior of others.

It can be depicted on the organisation chart.

It cannot be depicted on the organisation chart.

Continued
AUTHORITY It can be delegated to people at lower levels. Parity between authority and responsibility is maintained. It is formal in nature as it is derived by virtue of the position. POWER It cannot be delegated as it is the personal abilities of a person. There is no such parity maintained between power and responsibility. Power being attached to the person can be both formal and informal.

LINE AND STAFF AUTHORITY

LINE AUTHORITY


Line authority belongs to managers who have the right to direct and control the activities of employees who perform tasks essential to achieve organizational goals. Line authority flows down the organisation through the primary chain of command, according to the scalar principleThe clearer the line of authority from the ultimate management position in an enterprise to every subordinate position, the clearer will be the responsibility for decision making and more effective will be the organisation communication.

STAFF AUTHORITY


Staff authority belongs to those who support line functions through advice, recommendations, research, technical expertise and specialized services. Information which a staff officer furnishes or the plans he recommends flow upward to his line superior who decides whether they are to be transformed into action. E.g., a marketing department (line unit) might have to adhere to the mandates of human resources (staff unit) on how annual performance reviews are to be conducted.

Benefits of Staff


Advice of well-qualified specialists in various areas of an organisations operations can be utilized. These specialists get time to think, gather data and analyze, whereas their superiors, busy managing operations, cannot do so. They help line managers to carry out the managerial functions.

Limitations of Staff


Lack of staff responsibility for the failure of their proposed plan. Staff people do not implement what they recommend which may result in friction, loss of morale and even sabotage. Too much staff activity may complicate a line executives job of leadership and control. Managers may find problems in maintaining unity of command. It may give rise to problems when staff advisors forget that they are there to counsel not to order.

FUNCTIONAL AUTHORITY


Each departmental head exercises control over subordinates of his department. Each departmental head is assisted by various staff specialists. Staff specialists exercise some authority which is formalized on account of their expertise and competence. Each of the functional heads exercises direct authority (line authority) over the people of his department and also exercises authority over people of other departments.

Continued


E.g., a finance manager holds direct authority over the people of finance department (line authority) and can also control the financial activities of other departments (functional authority). Staff specialists, the accounting manager, also has the formal authority over the line managers of different departments.

Features of Functional Authority



 

It may be exercised by line, service or staff department heads, more often by service and staff departments. It is delegated by the line superior. Line superiors may delegate the authority to the staff executive over the line organizations with respect to procedures in the fields of accounting, personnel, purchasing, public relations, etc. Restricting the area of authority is must to avoid role conflict and role ambiguity.

SPLINTERED AUTHORITY


It exists when a problem cannot be solved or decision cannot be made without pooling the authority delegations of two or more managers. Generally it exists in departments that have a common superior only in the office of the presidents.

DELEGATION OF AUTHORITY

Delegation of Authority


Delegation is the process of giving authority to a person (or group) to make decisions and act in certain situations. It is the downward pushing of authority to make decisions. Delegation of authority by managers does not mean that he/she is surrendering authority. Authority and responsibility are delegated by the superiors to the subordinates but not the accountability of the work assigned.

Advantages of Effective Delegation



   

It relieves the manager of his heavy workload. It leads to better decisions. It speeds up decision-making. It helps train subordinates and builds morale. It serves as compensation to those employees who face the prospect of limited advancement. It helps create a formal organization structure.

Barriers to Effective Delegation

Fear of loss of power.  The I Can Do it Better Myself Fallacy.  Lack of confidence in subordinates.  Fear of being exposed.  Difficulty in briefing. On the subordinates side  Lack of confidence.  Fear of making mistakes.  Lack of incentives.  Lack of adequate information and resources.


Guidelines for Effective Delegation



 

Before delegating authority, make the nature and scope of the task clear. Assign authority proportionate to the task. Make subordinate clearly understand the limits of his authority. Give the subordinate some positive incentive for accepting responsibility. Train the subordinate properly.

Continued
 

Create a climate of mutual trust. Do not make the subordinate accountable to more than one superior. Overlapping of delegation and responsibility should be avoided.

CENTRALISATION & DECENTRALISATION

CENTRALISATION OF AUTHORITY


Centralization is the concentration of authority at the top of an organization or department. Managers may delegate the work to people at lower levels but the necessary authority to carry out those tasks is vested with the top managers only. Absolute centralization is not possible, except in a one-man enterprise.

KINDS OF CENTRALISATION
i. Centralization of Performance:
 All the operations of the company are carried out in a single geographical location.

ii. Centralization of Departments:

 This is the way a functional organization is structured.  All activities related to one particular area are centralized in one department.

Continued
iii. Centralization as an Aspect of Management:
 Certain decisions are always reserved at the top levels and others are delegated down the organizational levels.

DECENTRALISATION OF AUTHORITY


Decentralization is disposal of a high degree of authority to lower levels of an organization or department. It is essential but how much should the managers decentralize depends on various factors. Absolute decentralization of authority is not possible because the manager cannot delegate all his authority without surrendering his position as a manager.

Difference between Delegation & Decentralization

DELEGATION
Delegation is a process which refers to the granting of authority and creation of responsibility as between one individual and another. Superior continues to be responsible for the work delegated to his subordinates.

DECENTRALISATION
It is the end result of delegation and dispersal of authority which exists as a result of the systematic delegation of authority throughout the organization. Superior is relieved from his responsibility for the work decentralized and the subordinate becomes liable for that.

Continued
DELEGATION
Delegation is possible without decentralization.

DECENTRALISATION
Decentralization is not possible without delegation.

Lower levels managers carry Managers of each unit frame out the plans framed by their their own plans. superiors. Power to control the delegated tasks vests with the delegator. The process to control is also delegated to lower level managers.

ADVANTAGES OF DECENTRALISATION
    

Reduction in the burden of top management. It permits quicker and better decision-making. It reduces problem of communication and red tape. It ensures development of employees. It leads to a competitive climate within the organization. It facilitates diversification of products, activities and markets. Flexibility.

DISADVANTAGES OF DECENTRALISATION


 

High degree of decentralization makes it difficult for top managers to coordinate the overall organizational activities. Difficulty for top managers to exercise control over different organizational activities. It might prove to be expensive since each department handles its activities in its own way. Makes it more difficult to have a uniform policy. Can be limited by the availability of qualified managers.

HOW MUCH DECENTRALISATION?

    

Size of the organization. History and age of the organization. Philosophy of top management. Abilities of lower level managers. Cost and significance of decisions.

GUIDELINES FOR EFFECTIVE ORGANISATION



Establishment of objectives and orderly planning of organization structure. Avoid organizational inflexibility so as to adapt to a changing environment and meet new contingencies. Line-staff problem should be dealt with care for the effective working of the organization. Avoiding conflict by clear understanding of the assignment.

Continued


All the members should understand the structure of their organization so that structure can work well (Grapevine). Value-driven corporate leaders are needed to create an effective climate. Organization culture should be appropriate so that managerial functions are carried out ina proper way.

Feasibility Studies & Feedback

1.Enterprise Objectives

2. Supporting Objectives, policies & plans

3.Identification & classifica-tion of required activities

4.Grouping of activities in light of resour-ces & situations

5.Delegation of authority

6.Horizontal & vertical coordi-nation of autho-rity & informa-tion relationships

7. Staffing

8. Leading

9. Controlling Part 2 (Planning) Part 3 (Organizing) Parts 4,5,6 (Other Functions)

ORGANIZING PROCESS

STAFFING

STAFFING


Staffing is defined as filling, and keeping filled, positions in the organisation structure. It is related to performing a set of activities which aim at inviting, selecting, placing and retaining individuals at the various jobs to achieve organisational goals.

IMPORTANCE OF STAFFING
      

Emphasis on human element. Facilitates leadership. Facilitates control. Motivation to work. Increase in overall efficiency. Development of potential managers. Enables the organisation to face competition.

MANAGEMENT INVENTORY
 

Assess available human resource. Finds out required number of competent managers. It is done by Inventory Chart Organisation chart of a unit with managerial positions indicated and keyed as to the promotability of each incumbent.

General Manager

Manager General Accounting 45 M.Y. Singh 6

Manager Cost Accounting 52 2

Manager Contract Pricing 42 G.N. Madhav 1

Manager Budget analysis 43 C. N. Suresh 7

J.K. Sinha

Promotable now Promotable in 1 yr Potential for further promotion Satisfactory but not promotable Dismiss

45 = age 6 = Yrs in position

MANAGER INVENTORY CHART

ADVANTAGES OF INVENTORY CHART

 

 

Give overview of staffing situation. Managers ready for promotion can be easily identified. Prompt action may avoid such managers to look for better opportunity. Shows future internal supply of managers. Identification of those who are not performing well and satisfactory. Shows when recruitment/replacement and training plans can be initiated.

Continued


Preparation can be made for retirement cases. Transfer of managers wherever required.
 Strengthen weak departments.  Broaden managers experience.

Managers can counsel subordinates about their career paths.

LIMITATIONS OF INVENTORY CHART

  

 

Does not show to what position manager may be promotable. Information not sufficient for a fair assessment. Not suitable to share this information with all employees. Takes time and effort to keep the chart up-to-date. Upper level managers may be afraid to loose competent subordinates to other organisation units.

External Environment
Enterprise Plans

Organization plans

Number, kinds of managers required

External sources Analysis of Present & future needs for manager Internal sources Recruitment Selection Placement Promotion Separation

Appraisal Career strategy Leading and controlling Training and development

Manager Inventory

Internal environment Personnel policies Reward system

SYSTEMS APPROACH TO STAFFING

SYSTEMS APPROACH TO HRM: STAFFING

  

Staffing requires open system approach. It is carried out within the enterprise and linked to the external environment. Internal factors: Personnel Policies. Organisational climate. Reward System External factors: High technology demands well-trained, well educated and highly skilled managers.

JOB DESIGN


Before selection, clear understanding of the nature and purpose of the position is to be filled. Job design is to meet organisational and individual needs. What has to be done? How is it done? Is there any better way? What background, knowledge and skills are required?

FOCUS OF JOB DESIGN



  

Individual Job Enrichment: assigning an individual to carry out a group of similar tasks. Vertical job loading. Prompt and specific feedback. Establish direct relationship with customer or client.

Factors Affecting Job Design

   

Individual differences. Technology involved. Costs associated with restructuring the jobs. Organisation structure (centralised / decentralised). Internal climate (not in autocratic top-down approach).

SELECTION

SELECTION / RECRUITMENT


Recruitment is the process of searching, both inside and outside the organisation, for people to fill vacant positions. Selection involves deciding which of the recruits should be hired and for which positions.

Job Analysis


It consists of:
 Present methods and procedures of doing a job.  Physical conditions in which it is done.  Relation of the job to other jobs.  Other conditions of employment.

 Reveals What is Actually Required?  Purpose is to show how at the moment constituent parts are being carried out.

Continued


Sources of information: Observation by workers. Interviews Questionnaires responses. Published manuals. Bulletin, etc.

Job Description & Specification

Job Description  Result of job analysis are set down.  Defines complete role. Job Specification  Statement of the minimum acceptable human qualities necessary to perform a job satisfactorily.  Abilities and qualities that a should possess.

Selection Process- Techniques & Instruments

       

Establishment of selection criteria Filling up of application form Screening interview Testing the candidates skills Formal interviews Verification of information is checked Physical examination Either selected or rejected

Weaknesses of Interviews


Different interpretation by different interviewers Interviewers do not often ask the right questions Interviewer may be influenced by interviewees general appearance Interviewers make up their minds early in the interview

How to improve interviewing & overcome weaknesses Train interviewers Ask the right questions  Structured interview- pre-determined set of questions which are specific  Semi-structured- mix of structured & loose questions asked  Unstructured open-ended vague question Conduct multiple interviews & compare evaluations Supplement by data from application form, result of tests, references & recommendations

Tests


Tests aim to obtain data about the applicants to have the best person for the job Type of tests Intelligence tests: mental capacity, test memory, agility, reasoning Aptitude & Proficiency tests: skills & potential to acquire new skills Vocational tests: interests of the person- out-door activities, mathematical, scientific, artistic, literary Personality tests: interpersonal competence, naturedominant, introvert, self-confidence, patience, leadership ability & ambitions

ASSESSMENT CENTERS


 

An approach to measure how a potential manager will act in typical managerial situation. Technique used for selecting and promoting managers which may be used in combination with training. Inappropriate for top-executives. Used by the German and British military in World War II and the American Office of Strategic Services. First corporate use in United States was in American Telephone and Telegraph Company in the 1950s.

Continued
Exercises in a typical assessment center:  Psychological tests.  Management games in small groups.  In-basket exercises- handle a variety of matters that they might face in a managerial job.  Oral presentation on a particular topic or theme.  Preparing a written report.

Advantages of Assessment Centers:  Encouraging and reliable. Limitations of Assessment Centers:  Costly in terms of time.  Training assessors is a problem- line managers / trained psychologists.  Exercises used may not be the best criteria for evaluation.

ORIENTATION


Introduction of new employees to the enterprise, its functions, tasks & people Formal orientation programs are conducted :
 Company

history  Businesses  Policies & Practices  Organization Structure  Benefits

PERFORMANCE APPRAISAL

Performance Appraisal


Importance
Basis of determining who is promotable to a higher position To determine whether development efforts are going in the right direction Appraisal is an integral part of a system of managing

Purpose/Aim
Assess the employees current level of performance Identify the strength & weakness of employees Provide feedback to the employee so that he can improve his performance To have a basis for rewarding the employees To motivate To identify gaps & assess training & development needs. Employees potential To provide for database for succession strategies Take decisions related to rewards, punishments

Different Approaches to Appraising

 

TRAIT Appraisal: the oldest method of appraisal It is based on personal traits and behavioral patterns of an employee towards work It appraises the ability to get along with people, leadership, analytical competence, judgment, initiative Also includes work-related characteristics as job knowledge, assignments finished, implementation of plans & instructions carried out

Weaknesses
Managers cannot & wont evaluate Leaves some employees dissatisfied Many look at it as another work or paperwork

Appraisal by Objectives


Appraisals are done on the basis of the verifiable objectives set. Supervisors determine how well managers set objectives and how well they have performed against them. Evaluator checks
Whether goals were reasonably achievable. Reasons that may have helped or hindered in accomplishing goals. Whether any change in the goals was made or not.

Kinds of appraisals in ABO

Comprehensive review: once a year or as required. To be supplemented by progress & periodic review. Progress or Periodic review: short & informal. Help pinpoint problems that hinder performance. open communication. Review and change in objectives. Continuous monitoring : immediate corrective actions to be taken to prevent a major problem.

Strengths :
Improves managing Advantage of being operational Appraisals are done in cooperative and conducive manner

Weaknesses :
- Persons may miss or meet the goals through no fault of their own - Managerial abilities are not appraised

Appraisal of Manager as Manager

It focuses attention on what should be expected of a manager as a manager. It uses the fundamentals of management as the standards to evaluate a manager. The programs involve designing a series of questions related to each function of management.

Advantages  Supplement & a check on appraisal of managers effectiveness in setting & achieving goals. Weaknesses  Applies only to managerial aspects not to technical qualifications.  Rating the checkpoints take time.  Subjectivity involved.

Stress in Managing


Physical sources
Workload Irregular work hours Loss of sleep Loud noises Bright & insufficient light

Psychological sources
Boring job  Inability to socialize  Lack of autonomy  Responsibility without authority  Unrealistic objectives  Role ambiguity  Dual-career marriages Effects -losing interest -inordinate food consumption -absenteeism -drug or alcohol abuse


Formulating Career Strategy

1. Preparation of a Personal Profile- identify the strengths & weaknesses. Attitude towards work & other things. 2. Development of long-term personal & professional goals. 3. Analyzing the environment threats & opportunities.

4. Analysis of personal strengths & weaknesses. 5. Develop strategic career alternatives. 6. Consistency testing & strategic choices. 7. Development of short-term career objectives and action plans. 8. Development of contingency plans. 9. Implementation of career plan. 10. Monitoring.

DIRECTING

NATURE & ELEMENTS

Definitions


Process of instructing, guiding, counseling, motivating & leading the human resources to achieve organisational objectives A managerial function that involves the responsibility of managers for communicating to others what their roles are in achieving the company plans

Features
     

On-going process Not supported by rules Directing is situational Behavioral science Understanding of the group behavior Participative in nature

Importance of Direction
      

Creation of sound working environment Development of managers Behavioral satisfaction Increase in productivity Achieves coordination Facilitates control Facilitates growth

Components of Directing
  

Leadership Motivation Communication

MANAGER AS A LEADER

LEADING DEFINED
Leadership is the lifting of mans visions to higher sights, the raising of mans performance to a higher standard, the building of mans personality beyond its normal limitations. Peter Drucker Leadership is the ability to persuade others to seek defined objectives enthusiastically. Keith Davis

BEHAVIORAL MODELS
Model by Edgar H. Schein: Developed four
conceptions about people:-

1. Rational-economic assumptions: People are primarily motivated by economic incentives. (Theory X) 2. Social assumptions: People are motivated by social needs. (Elton Mayo)

Continued
3. Self-actualizing assumptions: Motives fall into five classes in a hierarchy (simple need of survival-highest need of selfactualization). People are self-motivated. 4. Complex assumptions: People are complex, variable and have many motives which combine into a complex motive pattern. (Scheins own view point)

 

Existence of followers. Involves a community of interest between the leader and his followers. Involves an unequal distribution of authority among leaders and group members. Develop a climate conducive to responding to and arousing motivations. Comprehend that human beings have different motivation forces at different times and in different situations. Leaders can influence followers in addition to being able to give legitimate directions.

CHARACTERISTICS OF LEADERSHIP

TRAIT APPROACH


  

Attempts to identify the traits that leaders possess. Great Man Theory- Leaders are born, not made. Not a fruitful approach to explain leadership. Do not reveal which traits are leadership traits. Implies that training cannot make a man a leader if he is devoid of certain inborn qualities.

BEHAVIORAL APPROACH


Tried to find answer to the question What determines leadership? Prominent belief Leaders are not born but can be trained. Studied leadership behavior from three points of view:  

Motivation Authority Supervision

MOTIVATION
 

Leadership behavior can be positive or negative. Positive behavior- leaders emphasis is on rewards to motivate the subordinates. Negative behavior- leaders emphasis is on penalties and punishments. Leader tries to frighten the subordinates into higher productivity. Time is lost in protecting themselves against management. Involves useless documentation, recording and filing of letters and papers.

LEADERSHIP STYLES BASED ON AUTHORITY

1. AUTOCRATIC LEADERSHIP
Leader commands and expects compliance. Demands strict obedience and relies on power. Formula used Do what I say or else Determines policies and makes plans. Tells others what to do and how to do it. Can be paternalistic or benevolent also. Formula Do what I say because I am good to you.

MERITS


If appropriate, can increase efficiency in a crisis or an emergency situation. Paternalistic form works well with employees who thrive under clear, detailed and achievable objectives. Chain of command and division of work are clearly and fully understood by all.

DEMERITS


One-way communication often becomes a false efficiency. Receives little information and ideas from his people as inputs into his decision-making. Most people resent authoritarian rule.

2. DEMOCRATIC LEADERSHIP


Also known as Participative or Personoriented leadership. Entire group is involved in and accepts responsibility for goal setting and achievement. Leader shows greater concern for his people than for high production. Leaders task is to encourage and reinforce constructive inter-relationships among members.

MERITS

 

Built-in-personal motivation working for him. Benefit of receiving best information, ideas, suggestions, talent, and operating experience of his people. Encourages people to develop, grow and rise in the organisation

DEMERITS

Can take enormous amount of time and may lead to a complete loss of leaders control. Some leaders may use this style as a way of avoiding responsibility.

3. FREE-REIN LEADERSHIP
 

Leader exercises absolutely no control. Provides only information, materials and facilities to his men to enable them to accomplish group objectives. Can be a disaster if the leader does not know well the competence and integrity of his people and their ability to handle freedom.

SUPERVISION


Leadership style can be

 Employee - oriented :- Leader cares for the welfare of his subordinates.  Production oriented :- Leader cares more for production than for the welfare of subordinates.

MANAGERIAL GRID


Developed by Robert Blake and Jane Mouton. Grid has two dimensions: Concern for People ( Vertical Axis)  Concern for Production ( Horizontal Axis)

Dimensions are plotted on a 9-point scale on two separate axis. Authors main emphasis is on the styles in the 4 corners and at the middle of the grid.

1. Impoverished Management (1.1): Management shows least concern both for production as well as people.  It is speak no evil, hear no evil, see no evil approach.

2. Team Management (9.9): Management shows maximum concern both for people as well as production.  Able to mesh the production needs of the enterprise with the needs of individuals.  Assumption is one plus one can add up to three.

3. Country-Club Management (1.9): Management shows maximum concern for people and least concern for production.  Assumption is that contented people will produce the most.  It is the love conquers all approach.

4. Task Management (9.1): Management shows maximum concern for production and least concern for people.  Autocratic in their style of leadership.  Also called authority-obedience approach.

5. Dampened Pendulum or the Middle-ofRoad style (5.5): Management shows a balanced concern for production and people.  Leaders do not set goals too high.  Likely to have a benevolently autocratic attitude toward people.  Manager follows the middle position- Get results but do not kill yourself

CONTINGENCY APPROACH
1. FIEDLERS MODEL:
Fred E. Fiedler and his associates and the university of Illinois suggested contingency theory of leadership. Effectiveness of leadership styles depend on situational favorableness, i.e., ease and difficulty with which the leader can influence the subordinate. Situational favorableness can be defined as the degree to which a given situation enables a leader to exert influence over a group.

Continued


Situational Favourableness depends on three critical factors:

i. Position - Power: Power arising from organisational hierarchy. ii. Task-structure: Extent to which tasks can be clearly spelled out and people held responsible for them. iii. Leader Member Relations: Most important since position power and task structure may be largely under the control of an enterprise. Extent to which group member accept, follow and like their leader.

Continued


Used a testing technique to determine leadership styles: Scores on the Least Preferred Coworker (LPC): Rating for those with whom they would least like to work.  Scores on the Assumed Similarity between Opposites (ASO): Rating based on the degree to which leader see group members to be like themselves. Assumption- people will work best with those who are similar to them.

Continued
FINDINGS: i. Leader can be effective in one situation and ineffective in the other. ii. Building an organisational environment in which leader can perform well is important to increase organisational and group effectiveness.

COMMUNICATION

COMMUNICATION


Communication is an exchange of facts, ideas, opinions or emotions by two or more persons. It is the transfer of information from a sender to a receiver with the information being understood by the receiver. A proper understanding of information is one very important aspect of communication.

PURPOSES OF COMMUNICATION


 

  

Recruitment process to persuade potential employees. Needed in Orientation programs. Enable employees to perform their functions effectively. Establish and disseminate goals. Develop plans for achievement of goals. Organize human and other resources in the most effective and efficient ways.

Continued


Select, develop and appraise members of the organization. Lead, direct, motivate and create a climate in which people want to contribute. Control performance.

COMMUNICATION PROCESS


Communication starts in the mind of sender who has a thought or an idea. Sender develops a message to convey the idea (Encoding). Language skills are important at the encoding phase. Once developed, message is then transmitted (Transmission). Information is transmitted over a channel oral or written.

Continued


It may be transmitted through a memorandum, a computer, telephone, telegram or television. Once transmitted, message is received and the receiver attaches meaning to it (Decoding). Sender and receiver should attach the same or at least similar meanings to the symbols that compose the message. Communication is affected by noise which can be with any one sender, transmission, or the receiver.

Continued


Final step is action taken by receiver which is known as Feedback. Without feedback, the sender cannot get the certainty of the message received. With feedback, any distortion in meaning can be corrected by another communication. Communication is not complete unless it is understood. Understanding is in the minds of both sender and receiver.

COMMUNICATION PROCESS MODEL

COMMUNICATION FLOW IN THE ORGANISATION



Communication flows in various directions:

 Downward Communication: Flow from superiors to the subordinates.  Upward Communication: Flow from the subordinates to superiors.  Crosswise Communication :Includes horizontal flow of information among people on the same or similar levels. Diagonal flow among persons at different levels who have no direct reporting relationships.

BARRIERS TO COMMUNICATION
 

 

 

Badly expressed message. Faulty organization Too long chain of command or too wide span of control. Distrust of communicator. Restricting communication- holding back a part of information due to some reasons. Poor retention. Different backgrounds.

Continued


In-group language terminology of occupational or social groups. Inattention selective listening block out information that conflicts with what we believe. Physical barriers environmental factors physical distance, distracting noises, etc. Poor understanding semantic distortion.

MOTIVATION

Definitions


Motive is an inner state that energises , activates or moves & that directs behavior towards goals Motivation refers to the way in which urges, drives, desires, aspirations, strivings or needs direct, control or explain the behavior of human beings

Features


Motivation involves a chain reaction- a needwant-satisfaction chain Complexity of motivation

Various approaches & theories

   

Maslows hierarchy of needs Motivation-Hygiene theory by Herzberg Mcclellands theory Alderfers ERG theory

Herzbergs two-factor theory



Dissatisfiers needs like company policy & administration, supervision, working conditions, salary, status, job security, interpersonal relations, personal life. Satisfiers achievement, recognition, challenging work, advancement and growth in job

McClellands need theory of motivation



Three types of basic motivating needs

Need for Power (n/PWR) Need for affiliation (n/AFE) Need for achievement (n/ACH)

Need for Power



 

People having a high need for power have a great concern for exercising influence & control People seek positions of leadership They are forceful, outspoken, hardheaded, demanding & argumentative conversationalists They enjoy teaching and public speaking

Need for Affiliation

People like to be loved and avoid being rejected by social group Concerned with maintaining pleasant social relationships, help people in trouble

Need for Achievement



People have a high desire for success & equally intense fear of failure They want challenges and set difficult goals for themselves Analyse & assess risk rationally, assume responsibility for getting a job done They like to run their own shows

ERG Theory by Alderfer

 

Extension of Maslows & herzbergs theory Categorized the needs into 3 categories
Existence needs Relatedness needs Growth needs

Existence needs


Include all needs related to physiological & safety aspects of an individual. Clubbed the physiological needs & safety needs of Maslow into one category as these have similar impact on the behavior of the individuals

Relatedness needs


Needs that induce people to make efforts to achieve full potential It covers Maslows social needs & that part of esteem needs which is derived from the relationship with other people

Growth needs


These include Maslows self actualization need as well as that part of the esteem need which is internal to the individual like feeling of being unique, feeling of personal growth etc

Features of ERG theory



Decreasing concreteness in the hierarchy of three need categories become abstract. Rise in the level of satisfaction of any lowerlevel need may result in decrease in its importance. Progression of need satisfaction most concrete to abstract needs. Satisfaction-progression may become frustration-regression.

Motivational Techniques


Money
As money Means of keeping organisation adequately staffed Motivator As a reward for good performance

 

Participation Quality of work life (QWL)

Job Enrichment


  

Attempts to make a job more varied by removing the dullness associated with performing repetitive operations. Giving workers more freedom in performing their jobs Encouraging participation & interaction between workers Feeling of personal responsibility for their tasks Feedback on their job performance Involving workers in laying down the physical aspects of work environment

Limitations of Job Enrichment

  

Technology. Cost. Difficulty in enriching those jobs which require low levels of skill. Dissatisfied attitude among workers. (Applies mainly to jobs of low skill levels.)

Effective Job Enrichment



 

Better understanding of what employees want. It should clearly convey the benefits of the employees. Participative. Workers should get feedback and recognition by managers . Workers should know what they are doing and why.

CONTROLLING

CONTROLLING


It is the measurement and correction of performance in order to make sure that enterprise objectives and the plans devised to attain them are accomplished. Planning and controlling may be viewed as the blades of a pair of scissors. Control is not possible without objectives and plans as performance has to be compared against some established criteria. It is a process through which managers assure that actual activities conform to planned activities.

CONTROL PROCESS
There are 3 basic steps :1. ESTABLISHING STANDARDS
 Entire operations cannot be observed, a list of key result areas for the purpose of control should be developed.  Managers should establish special standards which they desire to obtain in KRAs.  Standards criteria of performance.  Standards should be in quantitative terms and flexible in order to adapt to changing conditions.

Continued


Following are the types of standards :i. Physical Standards: Non-monetary, common at operating level, reflect quantity such as labor hours per unit of output, units of production per machine hour, etc. Reflect quality also hardness of bearings, durability of a fabric, etc. ii. Cost Standards: Monetary measurements, common at operating level. E.g. direct and indirect cost per unit produced, machine hour cost, etc.

Continued
iii. Revenue Standards: Monetary values to sales are attached. E.g. average sale per customer. iv. Capital Standards: Arise from application of monetary measurements to physical items. v. Intangible Standards: Not expressed in either physical or monetary measurements, most difficult to set. E.g. Competence of managers and employees, success of a public relation program, etc.

Continued
vi. Program Standards: E.g., a program for formally following the development of a new product, a program to improve the quality of sales force, etc. vii. Goals as Standards: Define goals that can be used as performance standards, can be quantitative and qualitative training sales people in accordance with a plan with specific characteristics.

Continued
viii.Strategic Plans as Control Point for Strategic Control: Systematic monitoring at strategic control points as well as modifying the organisations strategy on the basis of this evaluation.

2. MEASUREMENT OF PERFORMANCE


Performance is compared with predetermined standards. Can be done by personal observation, or by a study of various summaries of figures, reports, charts and statements. Reveal variations which can be desirable like output above the standard/expenses below the standard, undesirable variation in delivery schedule agreed upon with the customer.

3. CORRECTION OF DEVIATIONS
 

Correct the deviations reflected. Standards should reflect the various positions in an organisation structure. Correct causes for deviation should also be determined. Control is seen as a part of the whole system of management.

TYPES OF CONTROL METHODS

1. CONTROL AS A FEEDBACK SYSTEM
 Post action control and measures results after the process.  Examined what has happened in a particular period in the past.  Managers measures actual performance, compare this measurement against standards and identify and analyse deviations.  E.g., accounting records, inspection of goods and services, etc.

2. FEEDFORWARD CONTROL


Designed to measure results during the process so that action can be taken before the job is done or the period is over. Serve as warning posts to direct attention rather than to evaluate. Technique in use is network planning with the help of PERT. E.g. Cash flow and funds flow analysis.

BUDGETING AS A CONTROL TECHNIQUE



 

Budget is a statement of anticipated results during a designated time period expressed in financial and non-financial terms. A part of the step of establishing standards and involves use of cost standards. Cover a time period usually a year. Begins when top management sets the strategies and goals for the organisation.

Continued


Usually lower level managers will then devise budgets for their sub-units within the guidelines. Reviewed by the superior of these managers, integrate lower-level budgets into their own budget and send it up the chain of command for review.

TYPES OF BUDGETS
1. SALES BUDGET
 Comprehensive sales program and plan for developing sales.  Lays down sales potential in terms of quantity, value, period, product, etc.  Sales forecasting is the basis.

2. SELLING AND DISTRIBUTION COST BUDGET

 Lays down the cost of selling and distribution of product during budget period.  Includes advertising cost, research and development cost, etc.

Continued
3. PRODUCTION BUDGET
 Based on sales budget.  Lays down quantity of units to be produced during the budget period.  Purpose is to maintain an optimum balance between sales, production and inventory position of the firm.

Continued
4. PRODUCTION COST BUDGET
 Based on production budget.  Lays down the estimated cost of carrying out production plans.  Sub divided into various sub-budgets Raw materials budget, labor budget, production overhead budget.

Continued
5. CAPITAL EXPENDITURE BUDGET
 Outlines capital expenditure for plants, equipments, inventories, etc.  Plans concerning investment, expansion, growth, etc.

6. CASH BUDGET
 Anticipated receipt and disbursements for the budget period.  Shows the cash position arising from it.  Indicates the requirement of cash at various points of time.

Continued
7. MASTER BUDGET
 Summary of all the functional budgets and shows how they affect the business as a whole.  Provides detailed particulars regarding production, sales, cash, fixed assets, etc.

ADVANTAGES OF BUDGETARY CONTROL



Different functional budgets clearly indicate the limits for expenses and also the results to be achieved in a given period. Make it possible to coordinate the work of entire organisation. Prepared with the consultation of managers at different levels, provide the fruit of combined wisdom.

Continued
 

 

Promotes co-operation and team-spirit. Deviations from the pre-determined standards are found out. Helps people learn from past experience. Improves communication.

LIMITATIONS


Inflexible and rigid, do not respond to internal or external environmental changes. People want to spend their current budget to the maximum so that their budget for next financial year is not reduced. Performance in the budget-based organisation means the ability to maintain or increase ones budget. A good manager is discouraged from taking initiative and undertaking activities for which provision has not been made in the budget.

COORDINATION

INTRODUCTION


Coordination is defined as the process of integrating the objectives and activities of the separate units (departments or functional areas) of an organisation in order to achieve organisational goals efficiently. It is the orderly synchronisation or fitting together of the interdependent efforts of individuals, in order to attain a common goal. It is the process of linking the activities of the various departments of the organisation.

ELEMENTS OF COORDINATION


Integrates the individual efforts of units with each other so that all the units work as a group. Ensures that the activities of each department are directed towards the common goal. Strives to achieve a balance between the individual, departmental and the overall organisational goals.

Advantages of Coordination


Helps in effectively carrying out non-routine jobs which need a constant flow of information. Helps in integrating activities which constantly change according to changes in the environment. Managers attempt to coordinate the various activities to achieve high performance standards. Greater the interdependence, either for resources or for information, greater is the need for coordination between departments. Directs specialised activities, which are carried out by different work groups, towards a common goal.

Limitations of Coordination


Most difficult to coordinate the various activities where there is higher degree of specialisation. Higher interdependence among various units lead to more difficulty in coordination. Different approach towards the same problem will lead to problem of coordinating their functioning. Uncertainty about future will make coordination difficult. External uncertainties political or technological changes, Internal uncertainties strikes, lockouts, etc.

Continued


Coordination becomes a problem if managers do not possess the requisite knowledge, skill and competence to do so. Existence of informal groups which are strongly bonded by the forces of culture, social values and ethics can hinder effective coordination.

Requisites for Excellent Coordination

     

 

Direct contact. Early start. Continuity. Clear cut objective. Simplified organisation. Clear definition of Authority and Responsibility. Effective communication. Effective leadership and supervision.