Definition of Management [June 2014]

The organization and coordination of the activities of a business in order to achieve

defined objectives. Management is often included as a factor of production along
with? machines, materials, and money. According to the management guru Peter
Drucker (1909-2005), the basic task of management includes both marketing and
innovation. Practice of modern management originates from the 16th century study
of low-efficiency and failures of certain enterprises, conducted by the English
statesman Sir Thomas More (1478-1535). Management consists of the interlocking
functions of creating corporate policy and organizing, planning, controlling, and
directing an organization's resources in order to achieve the objectives of that
policy.
The Functions of Management [June 2014]

Management has been described as a social process involving responsibility for

economical and effective planning & regulation of operation of an enterprise
in the fulfillment of given purposes. It is a dynamic process consisting of various
elements and activities. These activities are different from operative functions like
marketing, finance, purchase etc. Rather these activities are common to each and
every manger irrespective of his level or status.

Different experts have classified functions of management. According to George &

Jerry, There are four fundamental functions of management i.e. planning,
organizing, actuating and controlling.

According to Henry Fayol, To manage is to forecast and plan, to organize, to

command, & to control. Whereas Luther Gullick has given a keyword POSDCORB
where P stands for Planning, O for Organizing, S for Staffing, D for Directing, Co for
Co-ordination, R for reporting & B for Budgeting. But the most widely accepted are
functions of management given by KOONTZ and ODONNEL i.e. Planning,
Organizing, Staffing, Directing and Controlling.

For theoretical purposes, it may be convenient to separate the function of

management but practically these functions are overlapping in nature i.e. they
are highly inseparable. Each function blends into the other & each affects the
performance of others.
Planning
It is the basic function of management. It deals with chalking out a future course of
action & deciding in advance the most appropriate course of actions for
achievement of pre-determined goals. According to KOONTZ, Planning is deciding
in advance - what to do, when to do & how to do. It bridges the gap from where we
are & where we want to be. A plan is a future course of actions. It is an exercise in
problem solving & decision making. Planning is determination of courses of action to
achieve desired goals. Thus, planning is a systematic thinking about ways & means
for accomplishment of pre-determined goals. Planning is necessary to ensure proper
utilization of human & non-human resources. It is all pervasive, it is an intellectual
activity and it also helps in avoiding confusion, uncertainties, risks, wastages etc.

Organizing
It is the process of bringing together physical, financial and human resources
and developing productive relationship amongst them for achievement of
organizational goals. According to Henry Fayol, To organize a business is to provide
it with everything useful or its functioning i.e. raw material, tools, capital and
personnels. To organize a business involves determining & providing human and
non-human resources to the organizational structure. Organizing as a process
involves:
Identification of activities.
Classification of grouping of activities.
Assignment of duties.
Delegation of authority and creation of responsibility.
Coordinating authority and responsibility relationships.

Staffing
It is the function of manning the organization structure and keeping it manned.
Staffing has assumed greater importance in the recent years due to advancement
of technology, increase in size of business, complexity of human behavior etc. The
main purpose of staffing is to put right man on right job i.e. square pegs in square
holes and round pegs in round holes. According to Kootz & ODonell, Managerial
function of staffing involves manning the organization structure through proper and
effective selection, appraisal & development of personnel to fill the roles designed
un the structure. Staffing involves:
Manpower Planning (estimating man power in terms of searching, choose the
person and giving the right place).
Recruitment, Selection & Placement.
Training & Development.
Remuneration.
Performance Appraisal.
Promotions & Transfer.

Directing
It is that part of managerial function which actuates the organizational methods to
work efficiently for achievement of organizational purposes. It is considered life-
spark of the enterprise which sets it in motion the action of people because
planning, organizing and staffing are the mere preparations for doing the work.
Direction is that inert-personnel aspect of management which deals directly with
influencing, guiding, supervising, motivating sub-ordinate for the achievement of
organizational goals. Direction has following elements:
Supervision
Motivation
Leadership
Communication

Supervision- implies overseeing the work of subordinates by their superiors. It is the

act of watching & directing work & workers.

Motivation- means inspiring, stimulating or encouraging the sub-ordinates with zeal

to work. Positive, negative, monetary, non-monetary incentives may be used for this
purpose.

Leadership- may be defined as a process by which manager guides and influences

the work of subordinates in desired direction.

Communications- is the process of passing information, experience, opinion etc

from one person to another. It is a bridge of understanding.

Controlling
It implies measurement of accomplishment against the standards and correction of
deviation if any to ensure achievement of organizational goals. The purpose of
controlling is to ensure that everything occurs in conformities with the standards. An
efficient system of control helps to predict deviations before they actually occur.
According to Theo Haimann, Controlling is the process of checking whether or not
proper progress is being made towards the objectives and goals and acting if
necessary, to correct any deviation. According to Koontz & ODonell Controlling is
the measurement & correction of performance activities of subordinates in order to
make sure that the enterprise objectives and plans desired to obtain them as being
accomplished. Therefore controlling has following steps:
Establishment of standard performance.
Measurement of actual performance.
 Comparison of actual performance with the standards and finding out
deviation if any.
Corrective action.

1. Briefly explain the levels of management and discuss

with illustrations the tasks at different level. [December
2015]
The term Levels of Management refers to a line of demarcation between various
managerial positions in an organization. The number of levels in management
increases when the size of the business and work force increases and vice versa.
The level of management determines a chain of command, the amount of
authority & status enjoyed by any managerial position. The levels of management
can be classified in three broad categories:

Top level / Administrative level

Middle level / Executory
Low level / Supervisory / Operative / First-line managers

Managers at all these levels perform different functions. The role of managers at all
the three levels is discussed below:

Top Level of Management

It consists of board of directors, chief executive or managing director. The
top management is the ultimate source of authority and it manages goals and
policies for an enterprise. It devotes more time on planning and coordinating
functions.

The role of the top management can be summarized as follows -

1. Top management lays down the objectives and broad policies of the
enterprise.
 2. It issues necessary instructions for preparation of department budgets,
procedures, schedules etc.
3. It prepares strategic plans & policies for the enterprise.
4. It appoints the executive for middle level i.e. departmental managers.
5. It controls & coordinates the activities of all the departments.
6. It is also responsible for maintaining a contact with the outside world.
7. It provides guidance and direction.
8. The top management is also responsible towards the shareholders for the
performance of the enterprise.
Middle Level of Management
The branch managers and departmental managers constitute middle level. They are
responsible to the top management for the functioning of their department. They
devote more time to organizational and directional functions. In small
organization, there is only one layer of middle level of management but in big
enterprises, there may be senior and junior middle level management. Their role
can be emphasized as -

1. They execute the plans of the organization in accordance with the policies
and directives of the top management.
2. They make plans for the sub-units of the organization.
3. They participate in employment & training of lower level management.
4. They interpret and explain policies from top level management to lower level.
5. They are responsible for coordinating the activities within the division or
department.
6. It also sends important reports and other important data to top level
management.
7. They evaluate performance of junior managers.
8. They are also responsible for inspiring lower level managers towards better
performance.

Lower Level of Management

Lower level is also known as supervisory / operative level of management. It
consists of supervisors, foreman, section officers, superintendent etc. According to
R.C. Davis, Supervisory management refers to those executives whose work has to
be largely with personal oversight and direction of operative employees. In other
words, they are concerned with direction and controlling function of management.
Their activities include -

1. Assigning of jobs and tasks to various workers.

2. They guide and instruct workers for day to day activities.
3. They are responsible for the quality as well as quantity of production.
4. They are also entrusted with the responsibility of maintaining good relation in
the organization.
5. They communicate workers problems, suggestions, and recommendatory
appeals etc to the higher level and higher level goals and objectives to the
workers.
6. They help to solve the grievances of the workers.
7. They supervise & guide the sub-ordinates.
 8. They are responsible for providing training to the workers.
9. They arrange necessary materials, machines, tools etc for getting the things
done.
10.They prepare periodical reports about the performance of the workers.
11.They ensure discipline in the enterprise.
12.They motivate workers.
13.They are the image builders of the enterprise because they are in direct
contact with the workers.

Universality of Management [December 2015]

Since management is needed in all types and sizes of organization, at all

organizational levels either bottom or top, in all organizational areas-
marketing, manufacturing, the people have started showing their genuine interest
in improving the way organizations are managed. Organizations that are well
managed develops a loyal customer base and increase in revenue whereas the
organization that are poorly and carelessly managed finds themselves with a
declining customer base and reduced revenue.

With the study of management and achieving broader management knowledge one
can easily be able to recognize poor management and work harder to get it
corrected. Poor management is most often due to both inefficiency and
ineffectiveness. On the other hand, one can also be able to recognize good
management and encourage it. In successful organization , high efficiency and
effectiveness typically go hand in hand. It does not matter whether we are working
as a manager or employee, the things that matter is our presence and interest ,hard
work as well interest in achieving organizational goals with full efficiency and
effectiveness. All the activities involved in managing an enterprise are common to
all organization whether economic, social or political. The managers however, does
all the plannings , organizing in the same way but the way of doing the job may
differ, the difference may be due to difference in culture,tradition and history.

Management principle are universal; that is why, the apply to all types of
organizations including but not limited to FOR PROFIT AND NOT FOR PROFIT ones
like businesses, churches,sororities, athletic teams, hospitals and so on.

Managers jobs vary somewhat from one type of organization to another because
each organizational type requires the use of specialized knowledge, exists in a
unique working and political environment, and uses different technology. However,
there are job similarities across organizations because the basic management
activities planning, organizing, influencing, and controlling are common to all
organizations.
Management can be applied to all organised human efforts whether they are in
business, government, educational, social, religious or other fields. Universality of
management suggests that the manager uses the same managerial skills and
principles in each managerial position held in various organisations. Accordingly an
industrial manager could manage a philanthropic organisation, a retired army
general could manage a university, a civil servant could manage an industrial
organisation, and so on.

Universality implies transferability of managerial skills across industries, countries.

It means that management is generic in content and is applicable to all types of
organisations. Lawrence A. Appley declared that He who can manage, can manage
anything. Let us examine the factors that have contibuted to the universal
application of management in every level of organisation and at every level of
organisation.

Arguments for Universality

1. Same functions. Quite often it is erroneously thought that management
exists only in a business and not in other enterprises. The fact is, however, that
when acting in their respective managerial capacities not only the company
president but also the office supervisor perform the fundamental functions of
management. The difference lies in such things as the breadth of the objectives, the
magnitude of the decisions taken, the organisation relationships affected, and so on.
Managers perform essentially the same functions irrespective of their level in the
organisation, industry or country.
2. Universal principles. Classical writers (Fayol, Urwick and others) believed
that there are certain principles in management which are universally applicablee.
These are the principles of departmentation, principles of division of labour,
principle of span of control, the scalar principle, principle of unity of
command, etc. Such principles as one man one boss, division of work to improve
speed and efficiency, limiting the number of persons to be supervised so that
managers can concentrate on exceptional problems, the principles governing
motivation theory have certainly proved their worth up to a point, and these
principles have been translated into practice for a long time. These principles have
found universal expression of the nature and level of management in organisations.
3. Fundamentals are same, the techniques employed and practices followed
are different. Managing occurs in parks, ranches, hospitals, farms, universities,
cities, police, agencies, churches, airports and community organisations, industries,
and so on. The fundamentals governing the management of a business, a church or
a university are same: the difference lies in the techniques employed and practices
followed. All managers arc accountable for performance of other people: they plan,
make decisions, organise work, motivate people and implement controls and so
forth. In order to accomplish things, the techniques employed might differ
depending on situational factors like : culture, tradition, attitude, etc. Same is the
case with management practices. An automobile designed for use in deserts or
jungles will be markedly different from the one that is designed for city traffic. The
design principles governing both models are the same. The generic content of
management fundamentals is such that they can be applied universally : practices
and techniques employed may differ depending on the nature of industry, the
organisational level where these are applied, etc.
4. Practical evidence. Managing is found in all types, functions, levels and
sizes of organisations. The fact that managers regularly move from public to private
sector organisations bears ample testimony to the fact that management concepts
are universal across organisational types. For example, D. D. Ensenhower went from
a general in the U.S. Army to President of Columbia University and to President of
the United States. Again Sri P.L. Tandon. the former Chairman of Hindustan Lever
Ltd, has managed the PNB, STC and the NCAER successfully during his tenure as the
Chairman in these organisations. The basic concepts of management propagated by
American writers have found expression even in communist countries. According to
Drucker. the rapid development of Brazil, the rapid development of non-communist
countries, that is, of Hong Kong, Singapore, and Taiwan, the rapid development of so
poor and backward a peasant country as Iran are all traceable to the impact of
management.

2. 14 Principles of Management. [December 2015]

Management Principles developed by Henri Fayol:

1. DIVISION OF WORK: Work should be divided among individuals and groups to

ensure that effort and attention are focused on special portions of the task.
Fayol presented work specialization as the best way to use the human
resources of the organization.

2. AUTHORITY: The concepts of Authority and responsibility are closely related.

Authority was defined by Fayol as the right to give orders and the power to
exact obedience. Responsibility involves being accountable, and is therefore
naturally associated with authority. Whoever assumes authority also assumes
responsibility.

3. DISCIPLINE: A successful organization requires the common effort of workers.

Penalties should be applied judiciously to encourage this common effort.

4. UNITY OF COMMAND: Workers should receive orders from only one manager.

5. UNITY OF DIRECTION: The entire organization should be moving towards a

common objective in a common direction.

6. SUBORDINATION OF INDIVIDUAL INTERESTS TO THE GENERAL INTERESTS: The

interests of one person should not take priority over the interests of the
organization as a whole.

7. REMUNERATION: Many variables, such as cost of living, supply of qualified

personnel, general business conditions, and success of the business, should be
considered in determining a workers rate of pay.

8. CENTRALIZATION: Fayol defined centralization as lowering the importance of

the subordinate role. Decentralization is increasing the importance. The degree
 to which centralization or decentralization should be adopted depends on the
specific organization in which the manager is working.

9. SCALAR CHAIN: Managers in hierarchies are part of a chain like authority scale.
Each manager, from the first line supervisor to the president, possess certain
amounts of authority. The President possesses the most authority; the first line
supervisor the least. Lower level managers should always keep upper level
managers informed of their work activities. The existence of a scalar chain and
adherence to it are necessary if the organization is to be successful.

10.ORDER: For the sake of efficiency and coordination, all materials and people
related to a specific kind of work should be treated as equally as possible.

11.EQUITY: All employees should be treated as equally as possible.

12.STABILITY OF TENURE OF PERSONNEL: Retaining productive employees should

always be a high priority of management. Recruitment and Selection Costs, as
well as increased product-reject rates are usually associated with hiring new
workers.

13.INITIATIVE: Management should take steps to encourage worker initiative,

which is defined as new or additional work activity undertaken through self
direction.

14.ESPIRIT DE CORPS: Management should encourage harmony and general good

feelings among employees.

The father of Modern Management [December 2015]

Today's managers have access to an amazing array of resources which they can use to
improve their skills. But what about those managers who were leading the way forward 100
years ago?

Managers in the early 1900s had very few external resources to draw upon to guide and develop
their management practice. But thanks to early theorists like Henri Fayol (1841-1925),
managers began to get the tools they needed to lead and manage more effectively. Fayol, and
others like him, are responsible for building the foundations of modern management theory.

Henri Fayol was born in Istanbul in 1841. When he was 19, he began working as an
engineer at a large mining company in France. He eventually became the director,
at a time when the mining company employed more than 1,000 people.

Through the years, Fayol began to develop what he considered to be the 14 most
important principles of management. Essentially, these explained how managers
should organize and interact with staff.

In 1916, two years before he stepped down as director, he published his "14
Principles of Management" in the book "Administration Industrielle et Gnrale."
Fayol also created a list of the six primary functions of management, which go hand
in hand with the Principles.

Fayol's "14 Principles" was one of the earliest theories of management to be

created, and remains one of the most comprehensive. He's considered to be among
the most influential contributors to the modern concept of management, even
though people don't refer to "The 14 Principles" often today.

The theory falls under the Administrative Management school of thought (as
opposed to the Scientific Management school, led by Fredrick Taylor [Add to My
Personal Learning Plan].

Perhaps the real father of modern management theory is the French industrialist
Henri Fayol. He recognized a widespread need for principles and management
teaching. Consequently, he identified 14 such principles, noting that they are
flexible, not absolute, and must be usable.

The advantages of Principles of Management [December 2015]

a) Better coordination and control: - This structure is very much suitable to

coordinate and control the functional activities and project activities. Project
manager has got responsibility to establish better coordination and control system
in organization. Functional authority flows downwards and project authority flows
horizontally which enables to establish better control and coordination.

b) Adaptable to dynamic environment: - It is hybrid type of organizational

structure which can easily adjust with changing environment at business world. The
project managers have functional independently and they can get quickly feedback
with information related with project. Along with project mange, employees from
different functional area are specialists and adjustment does not become
problematic.

c) Effective utilization of resources: - Project structure makes very much

effective utilization of resources available. The whole staff along with project
manager is specialists in various areas. And has to make maximum utilization of
resources. They know better hoe to utilize project capacity and time, how to utilize
human and financial resources they know better.

d) Particular management: - In this type of organizational structure people work

in project as a team. They participate in decision making and problem solving
activity. They make joint team effort. They have authority to carry out day to day
activity. Frequent sharing of ideas and opinion with project manager is common.

e) Sufficient time for top management: - It encourages delegation of authority to

project managers. Project managers are responsible for operation of the project.
They have authority to take decision about day to day activity of project. Employee
working in project will also have sufficient authority. Hence, top management will
have sufficient time to think about policy and strategies.
f) Excellence in inter disciplinary specialization: - In matrix organizational
structure experts and specialists from various functional areas are combined
together and quality performance becomes possible. All experts from various
disciplinary or functional areas interact with each other and they make excellent
specialization.

g) Development of team work: - Team work is facilitating project organization or

matrix organization itself is team work. Employees from various functional areas
work under the spirit of team and make the project successful. Team effort is made.

The advantages of Principles of Management [December 2015]

a) Violation of unity of command: - They get command from two superior

functional or departmental manager and project manager. He or she has to report
superior at a time i.e; project manager and functional manager. He/she will be in
confusion. Unity of command hence is violated.

b) Costly structure: - Matrix organizational structure involves huge overhead

cost. There will be much paper work and information collection that involves heavy
cost. Most of the worker or employees are specialist and they are given high
remuneration and facilities and amount is given to project workers in many cases as
incentives.

c) Problem of overspecialization: - Matrix organizational structure create

problem of over specialization in some situations. Specialist from both functional
project works gather to show many complex problems of the organization. As many
experts gather to solve problems they waste valuable time in supporting their own
ideas and sometimes problems remains unsolved. It becomes like the famous
saying Too many cooks spoils the food.

d) Difficult to balance: - There will be two types of specialists functional and

project specialist. And, to make a balance between these two specialist is a difficult
task. Therefore, high level of interpersonal skill or specialists is required to balance
these two types of experts and to maintain balance between project authority and
functional authority is also difficult task.

e) Feeling of insecurity: - Those employees who are specially appointed for the
projects they feel a sense of insecurity after the completion of the project. This may
cause project completion delay. Loyalty and commitment towards project may
decrease.

f) Lack of white coordination: - In a matrix organization there will be a problem

of maintaining effective coordination among project workers, functional workers and
among the workers from various functional areas. Project manager have to make a
high level of exercise to maintain effective coordination in the organization.

Lack of commitment: - In a matrix organization, there wil be lack of commitment

among employees towards project. No one will be responsible and loyal to the
completion of the project. Due to the lack of commitment project completion delays,
project cost increases. Unless and until the project is completed. They will get good
amount with salary and benefit, this also decreases their commitment.

3. The functions and objectives of Management.

Objectives of Management

The main objectives of management are:

1. Getting Maximum Results with Minimum Efforts - The main objective of

management is to secure maximum outputs with minimum efforts & resources.
Management is basically concerned with thinking & utilizing human, material
& financial resources in such a manner that would result in best
combination. This combination results in reduction of various costs.

2. Increasing the Efficiency of factors of Production - Through proper

utilization of various factors of production, their efficiency can be increased to
a great extent which can be obtained by reducing spoilage, wastages and
breakage of all kinds, this in turn leads to saving of time, effort and money
which is essential for the growth & prosperity of the enterprise.

3. Maximum Prosperity for Employer & Employees - Management ensures

smooth and coordinated functioning of the enterprise. This in turn helps in
providing maximum benefits to the employee in the shape of good working
condition, suitable wage system, incentive plans on the one hand and
higher profits to the employer on the other hand.

4. Human betterment & Social Justice - Management serves as a tool for the
upliftment as well as betterment of the society. Through increased
productivity & employment, management ensures better standards of living
for the society. It provides justice through its uniform policies.

Importance of Management

1. It helps in Achieving Group Goals - It arranges the factors of production,

assembles and organizes the resources, integrates the resources in effective
manner to achieve goals. It directs group efforts towards achievement of pre-
determined goals. By defining objective of organization clearly there would be
no wastage of time, money and effort. Management converts disorganized
resources of men, machines, money etc. into useful enterprise. These
resources are coordinated, directed and controlled in such a manner that
enterprise work towards attainment of goals.

2. Optimum Utilization of Resources - Management utilizes all the physical &

human resources productively. This leads to efficacy in management.
Management provides maximum utilization of scarce resources by selecting
its best possible alternate use in industry from out of various uses. It makes
use of experts, professional and these services leads to use of their skills,
knowledge, and proper utilization and avoids wastage. If employees and
 machines are producing its maximum there is no under employment of any
resources.

3. Reduces Costs - It gets maximum results through minimum input by proper

planning and by using minimum input & getting maximum output.
Management uses physical, human and financial resources in such a manner
which results in best combination. This helps in cost reduction.

4. Establishes Sound Organization - No overlapping of efforts (smooth and

coordinated functions). To establish sound organizational structure is one of
the objective of management which is in tune with objective of organization
and for fulfillment of this, it establishes effective authority & responsibility
relationship i.e. who is accountable to whom, who can give instructions to
whom, who are superiors & who are subordinates. Management fills up
various positions with right persons, having right skills, training and
qualification. All jobs should be cleared to everyone.

5. Establishes Equilibrium - It enables the organization to survive in

changing environment. It keeps in touch with the changing environment.
With the change is external environment, the initial co-ordination of
organization must be changed. So it adapts organization to changing demand
of market / changing needs of societies. It is responsible for growth and
survival of organization.

6. Essentials for Prosperity of Society - Efficient management leads to

better economical production which helps in turn to increase the welfare of
people. Good management makes a difficult task easier by avoiding wastage
of scarce resource. It improves standard of living. It increases the profit which
is beneficial to business and society will get maximum output at minimum
cost by creating employment opportunities which generate income in hands.
Organization comes with new products and researches beneficial for society.

The difference between formal and informal organization. [December

2014]

An organisation is said to be formal organisation when the two or more than two
persons come together to accomplish a common objective, and they follow a
formal relationship, rules, and policies are established for compliance, and
there exist a system of authority.

On the other end, there is an informal organisation which is formed under the
formal organisation as a system of social relationship, which comes into
existence when people in an organisation, meet, interact and associate with each
other.

Key Differences Between Formal and Informal Organization

The difference between formal and informal organisation can be drawn clearly on
the following grounds:

1. Formal Organization is an organisation in which job of each member is clearly

defined, whose authority, responsibility and accountability are fixed.
Informal Organization is formed within the formal organisation as a network
of interpersonal relationship when people interact with each other.
2. Formal organisation is created deliberately by top management.
Conversely, informal organisation is formed spontaneously by members.
3. Formal organisation is aimed at fulfilling organisations objectives. As
opposed to an informal organisation is created to satisfy their social and
psychological needs.
4. Formal organisation is permanent in nature; it continues for a long time. On
the other hand, informal organisation is temporary in nature.
5. The formal organisation follows official communication, i.e. the channels of
communication are pre-defined. Unlike informal organisation, the
communication flows in any direction.
6. In the formal organisation, the rules and regulations are supposed to be
followed by every member. In contrast to informal communication, there are
norms, values, and beliefs, that work as a control mechanism.
7. In the formal organisation, the focus is on the performance of work while in
the case of an informal organisation, interpersonal communication is given
more emphasis.
8. The size of a formal organisation keeps on increasing, whereas the size of the
informal organisation is small.
9. In a formal organisation, all the members are bound by the hierarchical
structure, but all the members of an informal organisation are equal.

An informal organisation is just opposite of a formal organisation. The principal

difference between these two is that all the members of a formal organisation follow
a chain of command, which is not in the case of an informal organisation. Moreover,
there exist a superior-subordinate relationship (status relationship) in the former,
whereas such relationship is absent in the latter because all the members are equal
(role relationship).

4. What is meant by management by exception? Briefly

discuss the phases of management by exception. What
are the advantages and disadvantages of management
by exception?

What is management by exception? [December 2015] [December 2014]

Management by exception is the practice of examining the financial and

operational results of a business, and only bringing issues to the attention of
management if results represent substantial differences from the budgeted or
expected amount. For example, the company controller may be required to notify
management of those expenses that are the greater of $10,000 or 20% higher than
expected.

The purpose of the management by exception concept is to only bother

management with the most important variances from the planned direction or
results of the business. Managers will presumably spend more time attending to and
correcting these larger variances.

The concept can be fine-tuned, so that smaller variances are brought to the
attention of lower-level managers, while a massive variance is reported straight to
senior management.

The phases of management by exception [December 2015] [December

2014]

5 main process of management by exception are:

The process of MBE may be briefly outlined as follows:

1. Set norms or standard

2. Let subordinates measure performance and compare it to standard.

3. If performance does not deviate from standard, or deviates within tolerable limits
from standard, no action is necessary.

4. If performance deviates appreciably from standard the matter has to be brought

to the attention of the superior officer.

5. Necessary action will be taken by him.

(a) If performance is less than standard, he has to take corrective measures and
even punish those responsible for the shortfall.

(b) If performance is more than standard, he should reward those who are behind it
and use it as an example for others to follow.

Advantages of Management by Exception [December 2014]

There are several valid reasons for using this technique. They are:

It reduces the amount of financial and operational results that management

must review, which is a more efficient use of their time.
The report writer linked to the accounting system can be set to automatically
print reports at stated intervals that contain the predetermined exception
levels, which is a minimally-invasive reporting approach.
This method allows employees to follow their own approaches to achieving
the results mandated in the company's budget. Management will only step in
if exception conditions exist.
 The company's auditors will make inquiries about large exceptions as part of
their annual audit activities, so management should investigate these issues
in advance of the audit.

Disadvantages of Management by Exception [December 2014]

There are several issues with the management by exception concept, which are:

This concept is based on the existence of a budget against which actual

results are compared. If the budget was not well formulated, there may be
a large number of variances, many of which are irrelevant, and which will
waste the time of anyone investigating them.
The concept requires the use of financial analysts who prepare variance
summaries and present this information to management. Thus, an extra
layer of corporate overhead is required to make the concept function
properly. Also, an incompetent analyst might not recognize a potentially
serious issue, and will not bring it to the attention of management.
This concept is based on the command-and-control system, where conditions
are monitored and decisions made by a central group of senior managers.
You could instead have a decentralized organizational structure, where local
managers could monitor conditions on a daily basis, and so would not need
an exception reporting system.
The concept assumes that only managers can correct variances. If a business
were instead structured so that front line employees could deal with most
variances as soon as they arise, there would be little need for management
by exception.

5. What is meant by planning? State the nature and

importance of planning. Distinguish between single use
plan and standing plan.
Definition of Planning [December 2015] [June 2014]

Planning means looking ahead and chalking out future courses of action to be
followed. It is a preparatory step. It is a systematic activity which determines when,
how and who is going to perform a specific job. Planning is a detailed programme
regarding future courses of action.

It is rightly said Well plan is half done. Therefore planning takes into
consideration available & prospective human and physical resources of the
organization so as to get effective co-ordination, contribution & perfect adjustment.
It is the basic management function which includes formulation of one or more
detailed plans to achieve optimum balance of needs or demands with the available
resources.

According to Urwick, Planning is a mental predisposition to do things in orderly

way, to think before acting and to act in the light of facts rather than guesses.
Planning is deciding best alternative among others to perform different managerial
functions in order to achieve predetermined goals.

According to Koontz & ODonell, Planning is deciding in advance what to do, how
to do and who is to do it. Planning bridges the gap between where we are to, where
we want to go. It makes possible things to occur which would not otherwise occur.

The nature of Planning [December 2015]

The following are the essential characteristics of planning which describe the nature
of planning:

1. Planning is primary function of management:

The functions of management are broadly classified as planning, organisation,

direction and control. It is thus the first function of management at all levels. Since
planning is involved at all managerial functions, it is rightly called as an essence of
management.

2. Planning focuses on objectives:

Planning is a process to determine the objectives or goals of an enterprise. It lays

down the means to achieve these objectives. The purpose of every plan is to
contribute in the achievement of objectives of an enterprise.

3. Planning is a function of all managers:

Every manager must plan. A manager at a higher level has to devote more time to
planning as compared to persons at the lower level. So the President or Managing
director in a company devotes more time to planning than the supervisor.

4. Planning as an intellectual process:

Planning is a mental work basically concerned with thinking before doing. It is an

intellectual process and involves creative thinking and imagination. Wherever
planning is done, all activities are orderly undertaken as per plans rather than on
the basis of guess work. Planning lays down a course of action to be followed on the
basis of facts and considered estimates, keeping in view the objectives, goals and
purpose of an enterprise.

5. Planning as a continuous process:

Planning is a continuous and permanent process and has no end. A manager makes
new plans and also modifies the old plans in the light of information received from
the persons who are concerned with the execution of plans. It is a never ending
process.

6. Planning is dynamic (flexible):

Planning is a dynamic function in the sense that the changes and modifications are
continuously done in the planned course of action on account of changes in
business environment. As factors affecting the business are not within the control of
management, necessary changes are made as and when they take place. If
modifications cannot be included in plans it is said to be bad planning.

7. Planning secures efficiency, economy and accuracy:

A pre- requisite of planning is that it should lead to the attainment of objectives at

the least cost. It should also help in the optimum utilisation of available human and
physical resources by securing efficiency, economy and accuracy in the business
enterprises. Planning is also economical because it brings down the cost to the
minimum.

8. Planning involves forecasting:

Planning largely depends upon accurate business forecasting. The scientific

techniques of forecasting help in projecting the present trends into future. It is a
kind of future picture wherein proximate events are outlined with some distinctness
while remote events appear progressively less distinct.

9. Planning and linking factors:

A plan should be formulated in the light of limiting factors which may be any one of
five Ms viz., men, money, machines, materials and management.

10. Planning is realistic:

A plan always outlines the results to be attained and as such it is realistic in nature.

Importance of planning in management [December 2015]

Planning is the first and most important function of management. It is needed at

every level of management. In the absence of planning all the business activities of
the organisation will become meaningless. The importance of planning has
increased all the more in view of the increasing size of organisations and their
complexities. Planning has again gained importance because of uncertain and
constantly changing business environment. In the absence of planning, it may not
be impossible but certainly difficult to guess the uncertain events of future.

The following facts show the advantages of planning and its importance for a
business organisation:

(1) Planning Provides Direction:

Under the process of planning the objectives of the organisation are defined in
simple and clear words. The obvious outcome of this is that all the employees get a
direction and all their efforts are focused towards a particular end. In this way,
planning has an important role in the attainment of the objectives of the
organisation.

For example, suppose a company fixes a sales target under the process of planning.
Now all the departments, e.g., purchase, personnel, finance, etc., will decide their
objectives in view of the sales target.

In this way, the attention of all the managers will get focused on the attainment of
their objectives. This will make the achievement of sales target a certainty. Thus, in
the absence of objectives an organisation gets disabled and the objectives are laid
down under planning.

(2) Planning Reduces Risks of Uncertainty:

Planning is always done for future and future is uncertain. With the help of planning
possible changes in future are anticipated and various activities are planned in the
best possible way. In this way, the risk of future uncertainties can be minimised.

For example, in order to fix a sales target a survey can be undertaken to find out the
number of new companies likely to enter the market. By keeping these facts in mind
and planning the future activities, the possible difficulties can be avoided.

(3) Planning Reduces Overlapping and Wasteful Activities:

Under planning, future activities are planned in order to achieve objectives.

Consequently, the problems of when, where, what and why are almost decided. This
puts an end to disorder and suspicion. In such a situation coordination is established
among different activities and departments. It puts an end to overlapping and
wasteful activities.

Consequently, wastages moves towards nil, efficiency increases and costs get to the
lowest level. For example, if it is decided that a particular amount of money will be
required in a particular month, the finance manager will arrange for it in time.
In the absence of this information, the amount of money can be more or less than
the requirement in that particular month. Both these situations are undesirable. In
case, the money is less than the requirement, the work will not be completed and in
case it is more than the requirement, the amount will remain unused and thus
cause a loss of interest.

(4) Planning Promotes Innovative Ideas:

It is clear that planning selects the best alternative out of the many available. All
these alternatives do not come to the manager on their own, but they have to be
discovered. While making such an effort of discovery, many new ideas emerge and
they are studied intensively in order to determine the best out of them.

In this way, planning imparts a real power of thinking in the managers. It leads to
the birth of innovative and creative ideas. For example, a company wants to expand
its business. This idea leads to the beginning of the planning activity in the mind of
the manager. He will think like this:

Should some other varieties of the existing products be manufactured?

Should retail sales be undertaken along with the wholesales?

Should some branch be opened somewhere else for the existing or old product?

Should some new product be launched?

In this way, many new ideas will emerge one after the other. By doing so, he will
become habituated to them. He will always be thinking about doing something new
and creative. Thus, it is a happy situation for a company which is born through the
medium of planning.

(5) Planning Facilitates Decision Making:

Decision making means the process of taking decisions. Under it, a variety of
alternatives are discovered and the best alternative is chosen. The planning sets the
target for decision making. It also lays down the criteria for evaluating courses of
action. In this way, planning facilitates decision making.

(6) Planning Establishes Standards for Controlling:

By determining the objectives of the organisation through planning all the people
working in the organisation and all the departments are informed about when,
what and how to do things.

Standards are laid down about their work, time and cost, etc. Under controlling, at
the time of completing the work, the actual work done is compared with the
standard work and deviations are found out and if the work has not been done as
desired the person concerned are held responsible.
For example, a labourer is to do 10 units of work in a day (it is a matter of planning),
but actually he completes 8 units. Thus there is a negative deviation of 2 units. For
this, he is held responsible. (Measurement of actual work, knowledge of deviation
and holding the labourer responsible falls under controlling.) Thus, in the absence of
planning controlling is not possible.

Efficient Use of Resources

All organizations, large and small, have limited resources. The planning process
provides the information top management needs to make effective decisions about
how to allocate the resources in a way that will enable the organization to reach its
objectives. Productivity is maximized and resources are not wasted on projects with
little chance of success.

Creating Competitive Advantages

Planning helps organizations get a realistic view of their current strengths and
weaknesses relative to major competitors. The management team sees areas where
competitors may be vulnerable and then crafts marketing strategies to take
advantage of these weaknesses. Observing competitors actions can also help
organizations identify opportunities they may have overlooked, such as emerging
international markets or opportunities to market products to completely different
customer groups.

The difference between standing use plans and single use plans
[December 2015]

Basis Standing Use plans Single Use Plans

Meaning Standing use plans may Whereas single use plans may be
be defined as a long defined as a short term
term approachable plan approachable this is prepared by
which is prepared by the the lower level managers of
top level managers of organization.
organization.
Objectives The objective of Standing Whereas the objective of Single
Use Plans is to attain the Use Plans is to attain to the
primary goals of specific goals or to remove
organization. the specific problems of
organization.
Nature Standing Use Plans are On the other hand Single Use
stable in nature. It Plans are flexible in nature & it
cannot be changed at any can be changed as per the
cost. conditions of organization.
Basis Standing Use Plans are On the other hand Single Use
based upon the primary Plans are based upon the
objectives of standing use plans of
organization organization.
Types Standing Use Plans has On the other hand Single Use
five types (1) Plans has only two types (1)
Objectives, (2) Polices, (3) Budgets (2) Programs.
 Rules, (4) Procedures, (5)
Strategies.
To Prepare Standing Use Plans are
mainly prepared by the
Top level managers of
organization.
Period Standing Use Plans are
made for a long duration
of time. For example of
Objectives of
organization, Policy of
organization etc.
On the other hand Single Use
Plans are mainly prepared by
the Lower level managers of
organization.
Whereas Single Use Plans are
made for a very short duration
time. For example
Programs of organization,
Budgets of organization.

Types of Plans [June 2014]

Management Principles - Types Of Plans

Plans commit the various resources in an organization to specific outcomes for the
fulfillment of future goals. Many different types of plans are adopted by
management to monitor and control organizational activities. Three such most
commonly used plans are hierarchical, frequency-of-use (repetitiveness) and
contingency plans.

Strategic Plans
Strategic plans define the framework of the organizations vision and how the
organization intends to make its vision a reality.

It is the determination of the long-term objectives of an enterprise, the action

plan to be adopted and the resources to be mobilized to achieve these goals.

Since it is planning the direction of the companys progress, it is done by the

top management of an organization.

It essentially focuses on planning for the coming years to take the

organization from where it stands today to where it intends to be.

The strategic plan must be forward looking, effective and flexible, with a
focus on accommodating future growth.

These plans provide the framework and direction for lower level planning.

Tactical Plans
Tactical plans describe the tactics that the managers plan to adopt to achieve the
objectives set in the strategic plan.

Tactical plans span a short time frame (usually less than 3 years) and are
usually developed by middle level managers.
 It details specific means or action plans to implement the strategic plan by
units within each division.

Tactical plans entail detailing resource and work allocation among the
subunits within each division.

Operational Plans
Operational plans are short-term (less than a year) plans developed to create
specific action steps that support the strategic and tactical plans.

They are usually developed by the manager to fulfill his or her job
responsibilities.

They are developed by supervisors, team leaders, and facilitators to support

tactical plans.

They govern the day-to-day operations of an organization.

Operational plans can be

Standing plans Drawn to cover issues that managers face repeatedly, e.g.
policies, procedures, rules.

Ongoing plans Prepared for single or exceptional situations or problems and are
normally discarded or replaced after one use, e.g. programs, projects, and budgets.

Steps in Planning Process

6. Why is controlling essential in an organization? Discuss

the important requirements of an effective control
system. Define budgetary control and discuss its
effectiveness as a tool of management control.

Definition of Controlling

Controlling is an important function of management which all the managers are

required to perform. In order to contribute towards achievement of organisational
objectives, a manager is required to exercise effective control over the activities of
his subordinates.
Thus, controlling can be defined as a managerial function to ensure that activities in
an organisation are performed according to the plans. Controlling also ensures
efficient and effective use of organisational resources for achieving the goals.
Hence, it is a goal oriented function.

Managerial control implies the measurement of accomplishment against the

standard and the correction of deviations to assure attainment of objectives
according to plans. Koontz And ODonnell

Control is the process of bringing about conformity of performance with planned

action. Dale Henning

Controlling function is performed in all types of organizations whether commercial

or non commercial and at all levels i.e. top, middle and supervisory levels of
management. Thus, it is a pervasive function. Controlling should not be considered
as the last function of the management.

The controlling function compares the actual performance with predetermined

standards, finds out deviation and attempts to take corrective measures. Eventually,
this process helps in formulation of future plans too. Thus, controlling function helps
in bringing the management cycle back to planning.

Importance of Controlling [December 2015]

The significance of the controlling function in an organisation is as follows:

1. Accomplishing Organisational Goals:

Controlling helps in comparing the actual performance with the predetermined

standards, finding out deviation and taking corrective measures to ensure that the
activities are performed according to plans. Thus, it helps in achieving
organisational goals.

2. Judging Accuracy of Standards:

An efficient control system helps in judging the accuracy of standards. It further

helps in reviewing & revising the standards according to the changes in the
organisation and the environment.

3. Making Efficient Use of Resources:

Controlling checks the working of employees at each and every stage of operations.
Hence, it ensures effective and efficient use of all resources in an organisation with
minimum wastage or spoilage.
4. Improving Employee Motivation:

Employees know the standards against which their performance will be judged.

Systematic evaluation of performance and consequent rewards in the form of

increment, bonus, promotion etc. motivate the employees to put in their best
efforts.

5. Ensuring Order and Discipline:

Controlling ensures a close check on the activities of the employees. Hence, it helps
in reducing the dishonest behaviour of the employees and in creating order and
discipline in an organization.

6. Facilitating Coordination in Action:

Controlling helps in providing a common direction to the all the activities of different
departments and efforts of individuals for attaining the organizational objectives.

Limitations of Controlling:

The defects or limitations of controlling are as following:

1. Difficulty in Setting Quantitative Standards:

It becomes very difficult to compare the actual performance with the predetermined
standards, if these standards are not expressed in quantitative terms. This is
especially so in areas of job satisfaction, human behaviour and employee
morale.

2. No Control on External Factors:

An organization fails to have control on external factors like technological

changes, competition, government policies, changes in taste of consumers
etc.

3. Resistance from Employees:

Often employees resist the control systems since they consider them as curbs on
their freedom. For example, surveillance through closed circuit television (CCTV).

4. Costly Affair:

Controlling involves a lot of expenditure, time and effort, thus it is a costly affair.
Managers are required to ensure that the cost involved in installing and operating a
control system should not be more than the benefits expected from it.
The important requirements of an effective control system [December
2015]

Controls at every level focus on inputs, processes and outputs. It is very

important to have effective controls at each of these three stages.

Effective control systems tend to have certain common characteristics. The

importance of these characteristics varies with the situation, but in general effective
control systems have following characteristics.

1. Accuracy:

Effective controls generate accurate data and information. Accurate information is

essential for effective managerial decisions. Inaccurate controls would divert
management efforts and energies on problems that do not exist or have a low
priority and would fail to alert managers to serious problems that do require
attention.

2. Timeliness:

There are many problems that require immediate attention. If information about
such problems does not reach management in a timely manner, then such
information may become useless and damage may occur. Accordingly controls must
ensure that information reaches the decision makers when they need it so that a
meaningful response can follow.

3. Flexibility:

The business and economic environment is highly dynamic in nature. Technological

changes occur very fast. A rigid control system would not be suitable for a changing
environment. These changes highlight the need for flexibility in planning as well as
in control.

Strategic planning must allow for adjustments for unanticipated threats and
opportunities. Similarly, managers must make modifications in controlling methods,
techniques and systems as they become necessary. An effective control system is
one that can be updated quickly as the need arises.

4. Acceptability:

Controls should be such that all people who are affected by it are able to
understand them fully and accept them. A control system that is difficult to
understand can cause unnecessary mistakes and frustration and may be resented
by workers.

Accordingly, employees must agree that such controls are necessary and
appropriate and will not have any negative effects on their efforts to achieve their
personal as well as organizational goals.

5. Integration:
When the controls are consistent with corporate values and culture, they work in
harmony with organizational policies and hence are easier to enforce. These
controls become an integrated part of the organizational environment and thus
become effective.

6. Economic feasibility:

The cost of a control system must be balanced against its benefits. The system
must be economically feasible and reasonable to operate. For example, a high
security system to safeguard nuclear secrets may be justified but the same system
to safeguard office supplies in a store would not be economically justified.
Accordingly the benefits received must outweigh the cost of implementing a control
system.

7. Strategic placement:

Effective controls should be placed and emphasized at such critical and strategic
control points where failures cannot be tolerated and where time and money costs
of failures are greatest.

The objective is to apply controls to the essential aspect of a business where a

deviation from the expected standards will do the greatest harm. These control
areas include production, sales, finance and customer service.

8. Corrective action:

An effective control system not only checks for and identifies deviation but also is
programmed to suggest solutions to correct such a deviation. For example, a
computer keeping a record of inventories can be programmed to establish if-then
guidelines. For example, if inventory of a particular item drops below five percent of
maximum inventory at hand, then the computer will signal for replenishment for
such items.

9. Emphasis on exception:

A good system of control should work on the exception principle, so that only
important deviations are brought to the attention of management, In other words,
management does not have to bother with activities that are running smoothly. This
will ensure that managerial attention is directed towards error and not towards
conformity. This would eliminate unnecessary and uneconomic supervision,
marginally beneficial reporting and a waste of managerial time.

12 important needs of an effective control system in management are:

(1) Objectives:
A system of control can work more effectively when it is based on the main
objectives or goals of the organisation. It should be related to the persons. It
becomes essential that the standards, which are set by the management, should
not be too high or too low. These should be told to the workers in time so that the
standards can be judged with the actual performance.

(2) Suitability:

A business organisation should adopt such a system of control which suits its
requirement. There is no hard and fast rule and readymade system of control which
give the correct and most favourbale, results in all type of organisations and in all
circumstances.

Suitability of a system of control differs from organisation to organisation and to

make it favourable, it is necessary to know the nature of the business, needs of the
workers a circumstances prevailing inside the organisation.

(3) Forward looking:

The system of control should be forward looking which enables the managers to
keep a control on operations in advance. Each and every deviation from the
standards should be noted in time to take corrective action before the task is
completed. This will avoid or minimise the deviation in future.

(4) Feedback:

The success of a business depends on a system of control and for a systematic

control advance planning is needed. This advance planning should be based on
actual accurate post information collected through investigation.

The control system should be such that it is based on past information and. which
would also adjust if necessary to future actions.

(5) Quick action:

Management gets the information from various line managers or supervisors about
the deviation in standards and these should be suggested to the planner to take a
correct and quick action to avoid future wastage. Actually speaking, the success of
control depends entirely on quick action and its implementation.

(6) Directness:

In order to make the system of control more effective, it is necessary that the
relation between the workers and management should be direct. It is quite obvious
that if the number of line supervisors is less in the organisation then workers would
work effectively and objectives may be achieved in time because they will not take
much time in getting the correct information.

(7) Flexibility:
The system of control should be such that it accommodates all changes or failures
in plans. If plans are to be revised due to change in its objectives, the system of
control should also be adjusted to suit the changed circumstances.

(8) Economy:

The system of control must be economical. In simple words, cost of the control
system should not exceed its benefits. A system of control to be adopted by the
organisation should be cheaper in terms of expenses.

(9) Regular revision:

The system of control should be based art objective results, after proper technical
and analytical studies. They must be revised regularly and kept to meet the
objectives of the organisation.

(10) Active Participation:

All members in the organisation should participate in the effective implementation

of the control system. This is only possible when each and every worker in the
organisation is asked to take active part in the discussions and exchange views
while selecting the system of control.

(11) Suggestive:

The control system should also be suggestive. A system which detects deviations
only should not be held good, but should also tell the accurate and correct
alternative.

(12) Competent and talented staff:

Controlling A system of control can work more effectively if it has talented and
competent people to work in the organisation.

Budgetary Control [December 2015]

Budgetary control is the process of determining various actual results with budgeted
figures for the enterprise for the future period and standards set then comparing
the budgeted figures with the actual performance for calculating variances, if any.
First of all, budgets are prepared and then actual results are recorded.

The comparison of budgeted and actual figures will enable the management to find
out discrepancies and take remedial measures at a proper time. The budgetary
control is a continuous process which helps in planning and co-ordination. It
provides a method of control too. A budget is a means and budgetary control is the
end-result.
According to Brown and Howard, Budgetary control is a system of controlling costs
which includes the preparation of budgets, coordinating the departments and
establishing responsibilities, comparing actual performance with the budgeted and
acting upon results to achieve maximum profitability. Weldon characterizes
budgetary control as planning in advance of the various functions of a business so
that the business as a whole is controlled.

J. Batty defines it as, A system which uses budgets as a means of planning and
controlling all aspects of producing and/or selling commodities and services. Welsch
relates budgetary control with day-to-day control process. According to him,
Budgetary control involves the use of budget and budgetary reports, throughout
the period to co-ordinate, evaluate and control day-to-day operations in accordance
with the goals specified by the budget.

From the above given definitions it is clear that budgetary control involves the
follows:

(a) The objects are set by preparing budgets.

(b) The business is divided into various responsibility centres for preparing various
budgets.

(c) The actual figures are recorded.

(d) The budgeted and actual figures are compared for studying the performance of
different cost centers.

(e) If actual performance is less than the budgeted norms, a remedial action is
taken immediately.

Objectives of Budgetary Control:

Budgetary control is essential for policy planning and control. It also acts an
instrument of co-ordination.

The main objectives of budgetary control are the follows: [December 2015]

1. To ensure planning for future by setting up various budgets, the requirements and
expected performance of the enterprise are anticipated.

3. To operate various cost centres and departments with efficiency and economy.

4. Elimination of wastes and increase in profitability.

5. To anticipate capital expenditure for future.

6. To centralise the control system.

7. Correction of deviations from the established standards.

8. Fixation of responsibility of various individuals in the organization.

Essentials of Budgetary Control:

There are certain steps which are necessary for the successful implementation
budgetary control system.

These are as follows:

1. Organisation for Budgetary Control

2. Budget Centres

3. Budget Mammal

4. Budget Officer

5. Budget Committee

6. Budget Period

7. Determination of Key Factor.

1. Organization for Budgetary Control:

The proper organization is essential for the successful preparation, maintenance

and administration of budgets. A Budgetary Committee is formed, which comprises
the departmental heads of various departments. All the functional heads are
entrusted with the responsibility of ensuring proper implementation of their
respective departmental budgets.

The Chief Executive is the overall in-charge of budgetary system. He constitutes a

budget committee for preparing realistic budgets A budget officer is the convener of
the budget committee who co-ordinates the budgets of different departments. The
managers of different departments are made responsible for their departmental
budgets.

2. Budget Centres:

A budget centre is that part of the organization for which the budget is prepared. A
budget centre may be a department, section of a department or any other part of
the department. The establishment of budget centres is essential for covering all
parts of the organization. The budget centres are also necessary for cost control
purposes. The appraisal performance of different parts of the organization becomes
easy when different centres are established.

3. Budget Manual:
A budget manual is a document which spells out the duties and also the
responsibilities of various executives concerned with the budgets. It specifies the
relations amongst various functionaries.

4. Budget Officer:

The Chief Executive, who is at the top of the organization, appoints some person as
Budget Officer. The budget officer is empowered to scrutinize the budgets prepared
by different functional heads and to make changes in them, if the situations so
demand. The actual performance of different departments is communicated to the
Budget Officer. He determines the deviations in the budgets and the actual
performance and takes necessary steps to rectify the deficiencies, if any.

He works as a coordinator among different departments and monitors the relevant

information. He also informs the top management about the performance of
different departments. The budget officer will be able to carry out his work fully well
only if he is conversant with the working of all the departments.

5. Budget Committee:

In small-scale concerns the accountant is made responsible for preparation and

implementation of budgets. In large-scale concerns a committee known as Budget
Committee is formed. The heads of all the important departments are made
members of this committee. The Committee is responsible for preparation and
execution of budgets. The members of this committee put up the case of their
respective departments and help the committee to take collective decisions if
necessary. The Budget Officer acts as convener of this committee.
6. Budget Period:

A budget period is the length of time for which a budget is prepared and employed.
The budget period depends upon a number of factors. It may be different for
different industries or even it may be different in the same industry or business.

The budget period depends upon the following considerations:

(a) The type of budget i.e., sales budget, production budget, raw materials purchase
budget, capital expenditure budget. A capital expenditure budget may be for a
longer period i.e. 3 to 5 years purchase, sale budgets may be for one year.

(b) The nature of demand for the products.

(c) The timings for the availability of the finances.

(d) The economic situation of the country.

(e) The length of trade cycles.

All the above-mentioned factors are taken into account while fixing period of
budgets

7. Determination of Key Factor:

The budgets are prepared for all functional areas. These budgets are inter-
dependent and inter-related. A proper co-ordination among different budgets is
necessary for making the budgetary control a success. The constraints on some
budgets may have an effect on other budgets too. A factor which influences all
other budgets is known as Key Factor or Principal Factor.

There may be a limitation on the quantity of goods a concern may sell. In this case,
sales will be a key factor and all other budgets will be prepared by keeping in view
the amount of goods the concern will be able to sell. The raw material supply may
be limited, so production, sales and cash budgets will be decided according to raw
materials budget. Similarly, plant capacity may be a key factor if the supply of other
factors is easily available.

The key factor may not necessarily remain the same. The raw materials supply may
be limited at one time but it may be easily available at another time. The sales may
be increased by adding more sales staff, etc. Similarly, other factors may also
improve at different times. The key factor also highlights the limitations of the
enterprise. This will enable the management to improve the working of those
departments where scope for improvement exists.

Advantages of Budgetary Control: [December 2015]

The budgetary control system help in fixing the goals for the organization as whole
and concerted efforts are made for its achievements. It enables economies in the
enterprise.

Some of the advantages of budgetary control are:

1. Maximization of Profits:

The budgetary control aims at the maximization of profits of the enterprise. To

achieve this aim, a proper planning and co ordination of different functions is
undertaken. There is a proper control over various capital and revenue
expenditures. The resources are put to the best possible use.

2. Co-ordination:

The working of different departments and sectors is properly coordinated. The

budgets of different departments have a bearing on one another. The co-ordination
of various executives and subordinates is necessary for achieving budgeted targets.

3. Specific Aims:

The plans, policies and goals are decided by the top management. All efforts are put
together to reach the common goal, of the organization. Every department is given
a target to be achieved. The efforts are directed towards achieving some specific
aims. If there is no definite aim then the efforts will be wasted in pursuing different
aims.

4. Tool for Measuring Performance:

By providing targets to various departments, budgetary control provides a tool for

measuring managerial performance. The budgeted targets are compared to actual
results and deviations are determined. The performance of each department is
reported to the top management. This system enables the introduction of
management by exception.

5. Economy:

The planning of expenditure will be systematic and there will be economy in

spending. The finances will be put to optimum use. The benefits derived for the
concern will ultimately extend to industry and then to national economy. The
national resources will be used economically and wastage will be eliminated.

6. Determining Weaknesses:

The deviations in budgeted and actual performance will enable the determination of
weak spots. Efforts are concentrated on those aspects where performance is less
than the stipulated.

7. Corrective Action:
The management will be able to take corrective measures whenever there is a
discrepancy in performance. The deviations will be regularly reported so that
necessary action is taken at the earliest. In the absence of a budgetary control
system the deviations can be determined only at the end of the financial period.

8. Consciousness:

It creates budget consciousness among the employees. By fixing targets for the
employees, they are made conscious of their responsibility. Everybody knows what
he is expected to do and he continues with his work uninterrupted.

9. Reduces Costs:

In the present day competitive world budgetary control has a significant role to play.
Every businessman tries to reduce the cost of production for increasing sales. He
tries to have those combinations of products where profitability is more.

10. Introduction of Incentive Schemes:

Budgetary control system also enables the introduction of incentive schemes of

remuneration. The comparison of budgeted and actual performance will enable the
use of such schemes.

Limitations of Budgetary Control:

Despite of many good points of budgetary control there are some limitations of this
system.

Some of the limitations are discussed as follows:

1. Uncertain Future:

The budgets are prepared for the future period. Despite best estimates made for the
future, the predictions may not always come true. The future is always uncertain
and the situation which is presumed to prevail in future may change. The change in
future conditions upsets the budgets which have to be prepared on the basis of
certain assumptions. The future uncertainties reduce the utility of budgetary control
system.

2. Budgetary Revision Required:

Budgets arc prepared on the assumptions that certain conditions will prevail.
Because of future uncertainties, assumed conditions may not prevail necessitating
the revision of budgetary targets. The frequent revision of targets will reduce the
value of budgets and revisions involve huge expenditures too.

3. Discourage Efficient Persons:

Under budgetary control system the targets are given to every person in the
organization. The common tendency of people is to achieve the targets only. There
may be some efficient persons who can exceed the targets but they will also feel
contented by reaching the targets. So budgets may serve as constraints on
managerial initiatives.

4. Problem of Co-ordination:

The success of budgetary control depends upon the co-ordination among different
departments. The performance of one department affects the results of other
departments. To overcome the problem of coordination a Budgetary Officer is
needed. Every concern cannot afford to appoint a Budgetary Officer. The lack of co-
ordination among different departments results in poor performance.

5. Conflict Among Different Departments:

Budgetary control may lead to conflicts among functional departments. Every

departmental head worries for his department goals without thinking of business
goal. Every department tries to get maximum allocation of funds and this raises a
conflict among different departments.

6. Depends Upon Support of Top Management:

Budgetary control system depends upon the support of top management. The
management should be enthusiastic for the success of this system and should give
full support for it. If at any time there is a lack of support from top management
then this system will collapse.
7. Define job stress. Briefly note down the major sources
of stress in your organization. What is counseling? How
does counseling escape a variety of employee problems?

Definition of Job Stress [December 2015]

Stress can hit anyone at any level of the business and recent research shows that
work related stress is widespread and is not confined to particular sectors, jobs or
industries. The adverse reaction people have to excessive pressures or other types
of demand placed on them at work. Work related stress develops because a person
is unable to cope with the demands being placed on them. Stress, including work
related stress, can be a significant cause of illness and is known to be linked with
high levels of sickness absence, staff turnover and other issues such as more errors.

It's important to recognise the common causes of stress at work so that you can
take steps to reduce stress levels where possible.

Some common causes/sources of stress include: [December 2015]

Excessively high workloads, with unrealistic deadlines making people feel

rushed, under pressure and overwhelmed.
Insufficient workloads, making people feel that their skills are being
underused.
A lack of control over work activities.
A lack of interpersonal support or poor working relationships leading to a
sense of isolation.
People being asked to do a job for which they have insufficient experience or
training.
Difficulty settling into a new promotion, both in terms of meeting the new
role's requirements and adapting to possible changes in relationships with
colleagues.
Concerns about job security, lack of career opportunities, or level of pay.
Bullying or harassment.
A blame culture within your business where people are afraid to get things
wrong or to admit to making mistakes.
Weak or ineffective management which leaves employees feeling they don't
have a sense of direction. Or over-management, which can leave employees
feeling undervalued and affect their self-esteem.
Multiple reporting lines for employees, with each manager asking for their
work to be prioritised.
Failure to keep employees informed about significant changes to the
business, causing them uncertainty about their future.
 A poor physical working environment, eg excessive heat, cold or noise,
inadequate lighting, uncomfortable seating, malfunctioning equipment, etc.

In this competition world there are de-stressed employees in each and every
organization. Its difficult to find a tension free employee in an organization.

Organizations has started Counselling at Workplace to retain the current

employees, the talented employees, to increase the productivity and this is one of
the way to motivate their employee.

Counselling is conducted by the employer and at the cost of employer, its free for
employees. Many organizations have now started employee counselling at their
workplace and making it as a part of their organization.

Organization hires a professional as a counsellor or keeps a part time counsellor or

selects a senior person from company for counselling.
Meaning of Employee Counselling [December 2015]

Employees face lots of problems in day to day life, they may have problem with
their subordinates, colleagues, system of the work or may have problem in personal
life.

This problem starts affecting their work, their career and their performance in job.
Counselling is like giving advice, sorting out the problems of employees, guiding
and helping them for the problem they face in office or in personal life.

Employee counselling is done to bring out a positive result from the de-stressed
employee. In simple terms employee counselling is like a stressed person discuss
about the problem or about the poor performance and other person consoles and
try to sort the problem.

Why counselling at workplace?

Employees face through the stress of completing the targets, work-load, meeting
deadlines, relations with subordinates or colleagues, work-life balance, lack of time
and higher responsibility.

Counselling helps the employees to come out from the problems, gives a new way
to deal with the problems. Counselling shows how much the employer care for the
employee.

Counselling may help to identify the employee the work related problems and the
poor performance.

Benefits of effective counselling [December 2015]

Helps employees to tackle with the problems effectively

Employees are able to sort their problems
Helps in decision making
A new way to look at the perspective.
May reduce the number of absenteeism of employee
It may prevent termination from employer or resignation from employee.
It reduces the cost of hiring new employee and training new staff.
Possibility of smooth coordination between employer and employee.

Qualities of counsellor

The counsellor should be either a professional counsellor or any senior,

experienced, mature employee.
The counsellor should be a good patient listener.
Counsellor should be able to understand the problem of employee and should
be able to give a proper advice.
Counsellor should be able boost the employee for his/her career path and
show a positive way.
Counsellor should be able to sort out the official problems of the employee.
 Counsellor should not compare the employee with other employees.
Counsellor should be able to understand the situation of the employee.
Counsellor should have warm manners and social etiquettes.
Excellent communication skills
Counsellor should have sufficient time to understand and listen about the
employee problems. It does not mean that counselling should go on for
hours.

Discuss the steps of organizational development process. [December

2015]

(OD) Organization development process is a complex and long process. Sometimes

it takes a year or more than a year to design, executes and gets end fruits. In some
cases it can continue indefinitely. Organization development process eaters to move
the organization from present position to better future position. The process
consists of five steps.

The model has been excerpted from Newstrom and Daviss book Organization
Behavior. The model is shown in the following figure and elements are discussed
briefly in the points beneath the figure.

Organization development process

Data collection: Surveys may be made to determine organizational climate and

behavioral problems. The consultant usually meets with groups away for work to
develop information from questions such as these:
What kinds of conditions contribute most to your job effectiveness?
What kinds of conditions interfere with your job effectiveness?
What would you most like to change in the way this organization operates?
The by-products of data collection include the identification of performance
gaps deficiencies in the way the organization operates and abseiling in the
way the organization operates and baseline information a portrait of the
organizations current level of operations for later comparison with the effects
of OD (Organization Development) efforts?

Data feedback and confrontation: Work groups are assigned to review the data
collected, to medicate areas of disagreement, and to establish priorities for change.

Action planning and problem solving: Groups use the data to develop specific
recommendations for change. Discussion focuses on actual problems in the
organization. Plans are specific, including who is responsible and when the action
should be completed.

Use of intentions: Once the action planning is completed, the consultant helps the
participants select and use appropriate OD interventions, Depending on the nature
of the key problems; the intervention may focus on individuals, teams.
Interdepartmental relating or the total organization.
Evaluation and follow-up: The consultant helps the organization evaluate the
results of tits OD efforts and develop additional programs in areas where additional
results are needed.

9. What is leadership? Describe the importance of

leadership. Describe the various style of leadership. All
leaders are managers but all managers are not leaders-
do you agree? Distinguish between management and
leadership. Explain the idea of charismatic leadership.

What is Leadership [December 2015] [December 2014]

Leadership is a process by which an executive can direct, guide and influence the
behavior and work of others towards accomplishment of specific goals in a given
situation. Leadership is the ability of a manager to induce the subordinates to work
with confidence and zeal.

Leadership is the potential to influence behaviour of others. It is also defined as the

capacity to influence a group towards the realization of a goal. Leaders are required
to develop future visions, and to motivate the organizational members to want to
achieve the visions.

According to Keith Davis, Leadership is the ability to persuade others to seek

defined objectives enthusiastically. It is the human factor which binds a group
together and motivates it towards goals.

Characteristics of Leadership

It is a inter-personal process in which a manager is into influencing and

guiding workers towards attainment of goals.
It denotes a few qualities to be present in a person which includes
intelligence, maturity and personality.
It is a group process. It involves two or more people interacting with each
other.
A leader is involved in shaping and moulding the behaviour of the group
towards accomplishment of organizational goals.
Leadership is situation bound. There is no best style of leadership. It all
depends upon tackling with the situations.

Importance of Leadership [December 2014]

Leadership is an important function of management which helps to maximize
efficiency and to achieve organizational goals. The following points justify the
importance of leadership in a concern.

Initiates action- Leader is a person who starts the work by communicating the
policies and plans to the subordinates from where the work actually starts.

Motivation- A leader proves to be playing an incentive role in the concerns working.

He motivates the employees with economic and non-economic rewards and thereby
gets the work from the subordinates.

Providing guidance- A leader has to not only supervise but also play a guiding role
for the subordinates. Guidance here means instructing the subordinates the way
they have to perform their work effectively and efficiently.

Creating confidence- Confidence is an important factor which can be achieved

through expressing the work efforts to the subordinates, explaining them clearly
their role and giving them guidelines to achieve the goals effectively. It is also
important to hear the employees with regards to their complaints and problems.

Building morale- Morale denotes willing co-operation of the employees towards their
work and getting them into confidence and winning their trust. A leader can be a
morale booster by achieving full co-operation so that they perform with best of their
abilities as they work to achieve goals.

Builds work environment- Management is getting things done from people. An

efficient work environment helps in sound and stable growth. Therefore, human
relations should be kept into mind by a leader. He should have personal contacts
with employees and should listen to their problems and solve them. He should treat
employees on humanitarian terms.

Co-ordination- Co-ordination can be achieved through reconciling personal interests

with organizational goals. This synchronization can be achieved through proper and
effective co-ordination which should be primary motive of a leader.

Leaders communicate the policies and plans to the people of the

organization. They are to imbibe the values and the culture of the
organization since these play an important role in ensuring the achievement
of the organizational goals.
Leaders provide a structured approach. The structured approach is able to
generate a plan of action that most effectively meets the organizational
goals. An inclusive planning process also provides the opportunity for people
to identify, contribute to, understand and achieve well defined objectives.
The commitment and enthusiasm of leaders shape the common goals of the
organization and provides inspiration and motivation for people to perform at
a high level.
Leaders provide encouragement to people for openly contributing and
discussing new ideas in a positive environment and make use of their diverse
experience and ideas to improve the organization.
 Leaders have an open and engaging relationship with the people. This
relationship demonstrates that the people are valued as an integral part of
the organization, creates a sense of ownership among people, and develops a
closer alignment between individual and organizational objectives.
Good leadership can help the organization remain focused during a time of
crisis, reminding the people of their achievements and encourage them to set
short term, achievable goals.

Effective leadership of the line managers requires leadership qualities in them.

These qualities are to be visible by their actions in the context and circumstances of
different situations. Line managers with effective leadership qualities exhibit (Fig 1)
a combination of some of the following qualities.

These qualities are described below.

Future vision- Successful leadership involves creating a well founded vision of what
can be achieved in the future and the best way to approach it.

Integrity Effective leaders often place great importance on ethical values. They
always do the right things even if these things are difficult. In general, leaders with
integrity are honest, truthful, fair, reliable and do not let their emotions affect their
ability to do their job.

Self confidence Good and strong leaders have a firm belief in their abilities. They
generally remain confident at all the times and demonstrate the ability to handle
challenges and pressures.

Commitment Successful leadership is impossible without firm commitment. Good

leaders remain focused and dedicated towards their objectives and goals.

Creativity Effective line managers with the leadership qualities are creative in their
approach. They develop new ideas to resolve current issues and implement them
effectively to prevent future recurrences.

Communication skill Communication skill is vital for effective leadership. Lines

managers with leadership qualities are usually very clear, effective and influential in
communication and knows its importance for achieving success. They continuously
improve their communication skills and learn new ways to remain effective in a
constantly changing organizational environment.

Enthusiasm Effective leadership normally requires a proactive approach towards

people, problems and possibilities. It is able to stimulate and evoke excitement
amongst people so that the organizational goals can be achieved in an energetic
manner.

Self awareness and adaptability Line managers who are skilful leaders exhibit an
understanding of their own values, skills, strengths and weaknesses. They are often
flexible and willing to continually improve their knowledge and skills to meet new
challenges.
Decision making capabilities This is the capability to exploit opportunities and to
make sound decisions which benefits the organization. Line managers with
leadership qualities have the capabilities for making sound decisions.

Openness Line managers with effective leadership qualities listen openly to the
ideas, suggestions and opinions of their people. They are willing to adopt new ways
of doing things if they believe it will be beneficial for the organisation. They focus on
creating a positive environment of mutual respect and trust that enables the
organization to be well prepared for new challenges.

Ability to understand people Good leadership amongst line managers requires a

clear understanding of human behaviour and the ability to develop open and honest
relationships with the people to understand their abilities, concerns, interests and
motivations.

Ability to inspire and motivate Leadership requires line managers to be

charismatic, highly organized, and very motivational in their interaction with the
people. They develop a culture of hard work and commitment, inspiring and
motivating the people to give their best to the organization.

Business understanding Line managers with leadership qualities strive to have a

clear understanding of their business, the environment in which they operate and
their competitors. They develop an awareness of the strengths, weaknesses,
opportunities and threats for their business and focus on maximizing resources to
their full potential.
Managing organizational change The role of a leader is crucial for managing
organizational change, The process of organizational change is very complex and
challenging and a competent and effective leadership is required to manage the
situation.

Leadership determines excellent organizational performance. Leadership success in

the implementation of the strategy is manifested in a conducive organizational
climate, a reward strategy that is linked to strategic objectives, flexible structures
that support business demands, and an effective organizational culture that
influence behaviour in the right direction. The ultimate desired end results manifest
itself in aligned individual and organizational performance.

Leadership Styles

Different types of leadership styles exist in work environments. Advantages and

disadvantages exist within each leadership style. The culture and goals of an
organization determine which leadership style fits the firm best. Some companies
offer several leadership styles within the organization, dependent upon the
necessary tasks to complete and departmental needs.

Laissez-Faire
A laissez-faire leader lacks direct supervision of employees and fails to provide
regular feedback to those under his supervision. Highly experienced and trained
employees requiring little supervision fall under the laissez-faire leadership style.
However, not all employees possess those characteristics. This leadership style
hinders the production of employees needing supervision. The laissez-faire style
produces no leadership or supervision efforts from managers, which can lead to
poor production, lack of control and increasing costs.

Autocratic
The autocratic leadership style allows managers to make decisions alone without
the input of others. Managers possess total authority and impose their will on
employees. No one challenges the decisions of autocratic leaders. Countries such as
Cuba and North Korea operate under the autocratic leadership style. This leadership
style benefits employees who require close supervision. Creative employees who
thrive in group functions detest this leadership style.

Participative
Often called the democratic leadership style, participative leadership values the
input of team members and peers, but the responsibility of making the final
decision rests with the participative leader. Participative leadership boosts employee
morale because employees make contributions to the decision-making process. It
causes them to feel as if their opinions matter. When a company needs to make
changes within the organization, the participative leadership style helps employees
accept changes easily because they play a role in the process. This style meets
challenges when companies need to make a decision in a short period.

Transactional
Managers using the transactional leadership style receive certain tasks to perform
and provide rewards or punishments to team members based on performance
results. Managers and team members set predetermined goals together, and
employees agree to follow the direction and leadership of the manager to
accomplish those goals. The manager possesses power to review results and train
or correct employees when team members fail to meet goals. Employees receive
rewards, such as bonuses, when they accomplish goals.

Transformational
The transformational leadership style depends on high levels of communication
from management to meet goals. Leaders motivate employees and enhance
productivity and efficiency through communication and high visibility. This style of
leadership requires the involvement of management to meet goals. Leaders focus
on the big picture within an organization and delegate smaller tasks to the team to
accomplish goals.

Charismatic Leadership

Charismatic leadership involves a sense of style, flair, and confidence. These

charismatic leaders have a quality which is hard to pin down, but which attracts
followers and inspires people to action. Transformational leaders are often highly
charismatic because they are capable of initiating and maintaining a significant
level of change in the organization.

The following are some of the most prominent characteristics of charismatic

leadership. [December 2014]

1. Communication
Charismatic leaders have extraordinary skills in communication. This helps to
motivate employees through tough times and also help them stay grounded when
things are good. The leaders are equally comfortable communicating one-to-one or
in a group setting.

2. Maturity
Though they have a very powerful personality, a charismatic leader also has
maturity and character. They dont believe in empty showmanship, but they draw
on their wisdom and knowledge which they have accumulated over the years of life
and business experiences. They behave in a mature and responsible manner on all
occasions.

3. Humility
Charismatic leaders also have a sense of humility. They place a lot of value on each
employee, and have the ability to truly listen to their concerns. The charismatic
leader is able to convince the employee of the value that they bring to the
organization, and show them how their contributions impact the strategic interests
of the company. They inspire great loyalty from their employees.

4. Compassion
Successful charismatic leaders are also compassionate. Charisma alone may not be
enough, because theres a very real possibility that it can disintegrate into mere
hero worship. Compassion, integrity, honesty, and fortitude are also qualities that
successful charismatic leaders exhibit.

5. Substance
Charisma can exist without substance, but only for a very short time. Flashy and
glitzy behavior may capture the attention of people, but eventually they will want
something substantial beneath the facade. A charismatic leader must not only talk
the talk, but also walk the walk. Charm gets him the face time, and substance
closes the deal.

6. Confidence
It goes without saying that charismatic leaders are truly confident. They are the
glass half full kind of people, and are comfortable with who they are. They
understand themselves well and do not try to be anyone else. Charismatic leaders
are secure and confident enough to be comfortable in their own skin.

7. Positive body language

One of the first things that youd notice about a charismatic leader is their warm,
open, and positive body language. They make eye contact with were that they are
talking to, smile, and introduce themselves to strangers with the genuine joy of
making a new contact. They have an endearing swagger, and they are authentic.

8. Listening skills
Charismatic leaders are extremely good listeners. When they listen to you, they
dont fidget or look distracted. A charismatic leader pays attention to what is being
said, and listens with interest. They are engaged in the conversation and act with
empathy.

9. Self-monitoring
One of the attributes of charismatic leaders is that they often tend to watch
themselves. They are aware of their powerful personality, and the fact that their
followers are watching them constantly. For this reason, they consider it important
to portray a good image of themselves to their followers. This can be achieved only
with self-monitoring.

10. Self-improvement
A charismatic leader understands that he has certain qualities that make him
different from others, and that these are the qualities that get him attention and
make him charismatic. So he also knows how important it is to continually improve
himself.

11. Convincing
The charismatic leader is often an effective salesman. These leaders entice
followers with grandiose visions, stories and plans that make the follower feel as if
he is participating in an extremely important task. Charismatic leaders also posses
the skill of helping a follower see his own potential and possibility.

12. Creativity
Creativity is a characteristic of many leaders, especially the charismatic leader.
These leaders take creative approaches to everything including solving problems,
completing tasks or starting new projects. Charismatic leaders thrive on innovation
and often encourage followers to think outside of the box. The creativity and
innovation demonstrated by charismatic leaders allows followers to trust in the
capability of the leader.

13. Taking Risks

Taking risks and convincing others to take risks is a characteristic of the charismatic
leader. These leaders view risk-taking in romantic ways, such as taking on a noble
cause or going on an adventure. The leaders high level of self-belief often results in
successful risk-taking endeavors.

14. Establishes Importance

The charismatic leader often attaches his identity to the identity of the group. This
attachment joins the group with the leader and makes the leader essential to the
success of the group. In doing this, the charismatic leader ensures his place in the
group and establishes his importance to the groups overall success.

No one is perfect, and that goes for our leaders too even though we may wish
differently for them.
We want them to be near perfect in their ability to inspire us to do great work,
accomplish important things for the organization, and lead us with humanity and
unquestionable character.

Great leaders spend a lot of time thinking about how to improve their organizations
and the people within them. Deb Cheslow, author of Remarkable Courage, has spent
a lot of time thinking about what makes a great leader, and the characteristics
below are adapted from her writings.

Do the right things, even when no one is watching. Have integrity and character
to complement your ability to get things done. Its easy to do the right thing when
you have an audience, but it takes courage and strength of character to do the right
thing when youre alone. Stay true to your values even when everyone around you
is floundering, or when popular opinion goes against what you know in your heart to
be right.
Take personal responsibility. Follow rules, report facts accurately, treat people
fairly, and dont lie, cheat, or steal to advance your agenda. Hold yourself
accountable for your actions and decisions and for the actions of the people under
your authority. Dont make excuses; take the blame when things go wrong and
make sure those who do the work get the credit when things go right. Attack root
causes of problems and never blame others.
Do whatever it takes, but minimize collateral damage. Achieve outcomes without
leaving your followers exhausted, damaged, or demoralized. Achieve your goals
within moral and ethical boundaries. Dont be a leader who falls prey to poor
decision making or compromises their character and integrity for what might feel
good in the moment.
Develop followers. Build the skills and talents of others and make employees
partners in the process of accomplishing goals. Empower your staff to continually
improve, share your knowledge and experience generously, and press your team to
achieve more, realizing that everyone will be better off the more frequently
employees do great work and achieve great success.
Never go it alone. Absorb the input and counsel of numerous advisors, both from
similar and opposing perspectives, then devise solutions based upon a well-rounded
view of the problem. Understand that it is nave to believe youve considered every
possible angle of an issue without seeking outside counsel from a varied and
extended network.
Leave people and things better than you found them. Always make a positive
difference that benefits everyone. Even when you inherit a situation thats less than
ideal, provide inspiration for rebuilding bigger and better than before.
Be courageous. Defy logic and conventional wisdom and blaze new trails. Dont
dwell on why something cant be done, but only consider how it might be
accomplished. Make a decision, announce it, and then you and your team should set
about making it a reality.

Differences between leadership and management [December 2014]

When you are promoted into a role where you are managing people, you dont
automatically become a leader. There are important distinctions between managing
and leading people. Here are nine of the most important differences that set leaders
apart:

1. Leaders create a vision, managers create goals.

Leaders paint a picture of what they see as possible and inspire and engage their
people in turning that vision into reality. They think beyond what individuals do.
They activate people to be part of something bigger. They know that high-
functioning teams can accomplish a lot more working together than individuals
working autonomously. Managers focus on setting, measuring and achieving goals.
They control situations to reach or exceed their objectives.

When you are promoted into a role where you are managing people, you dont
automatically become a leader. There are important distinctions between managing
and leading people. Here are nine of the most important differences that set leaders
apart:

1. Leaders create a vision, managers create goals.

Leaders paint a picture of what they see as possible and inspire and engage their
people in turning that vision into reality. They think beyond what individuals do.
They activate people to be part of something bigger. They know that high-
functioning teams can accomplish a lot more working together than individuals
working autonomously. Managers focus on setting, measuring and achieving goals.
They control situations to reach or exceed their objectives.

2. Leaders are change agents, managers maintain the status quo.

Leaders are proud disrupters. Innovation is their mantra. They embrace change and
know that even if things are working, there could be a better way forward. And they
understand and accept the fact that changes to the system often create waves.
Managers stick with what works, refining systems, structures and processes to make
them better.

3. Leaders are unique, managers copy.

Leaders are willing to be themselves. They are self-aware and work actively to build
their unique and differentiated personal brand. They are comfortable in their own
shoes and willing to stand out. Theyre authentic and transparent. Managers mimic
the competencies and behaviors they learn from others and adopt their leadership
style rather than defining it.

4. Leaders take risks, managers control risk .

Leaders are willing to try new things even if they may fail miserably. They know that
failure is often a step on the path to success. Managers work to minimize risk. They
seek to avoid or control problems rather than embracing them.

5. Leaders are in it for the long haul, managers think short-term.

Leaders have intentionality. They do what they say they are going to do and stay
motivated toward a big, often very distant goal. They remain motivated without
receiving regular rewards. Managers work on shorter-term goals, seeking more
regular acknowledgment or accolades.
6. Leaders grow personally, managers rely on existing, proven skills.
Leaders know if they arent learning something new every day, they arent standing
still, theyre falling behind. They remain curious and seek to remain relevant in an
ever-changing world of work. They seek out people and information that will expand
their thinking. Managers often double down on what made them successful,
perfecting existing skills and adopting proven behaviors.

7. Leaders build relationships, managers build systems and processes.

Leaders focus on people all the stakeholders they need to influence in order to
realize their vision. They know who their stakeholders are and spend most of their
time with them. They build loyalty and trust by consistently delivering on their
promise. Managers focus on the structures necessary to set and achieve goals. They
focus on the analytical and ensure systems are in place to attain desired outcomes.
They work with individuals and their goals and objectives.

8. Leaders coach, managers direct.

Leaders know that people who work for them have the answers or are able to find
them. They see their people as competent and are optimistic about their potential.
They resist the temptation to tell their people what to do and how to do it. Managers
assign tasks and provide guidance on how to accomplish them.

9. Leaders create fans, managers have employees.

Leaders have people who go beyond following them; their followers become their
raving fans and fervent promoters helping them build their brand and achieve
their goals. Their fans help them increase their visibility and credibility. Managers
have staff who follow directions and seek to please the boss.

Leader VS Manager

12. Discuss different principles of conflict management. Is conflict in organization

good or bad? Explain your answer. How would you manage conflict in your
organization applying conflict resolution technique?

Conflict is a dispute in a situation defined by the parties' underlying goals and

beliefs, mutual perception and communication, and the facts involved. The conflict
itself is a process of communication--an engagement of fields of expression.
Passions and beliefs become evident; the nature and intensity of hidden interests
surface. In the process of achieving a new structure of expectations, conflict
integrates underlying goals and mutual perceptions into a balance among the
central interests at stake, the resolution, and the ability of the parties to support
them. The balancing process can be shortened, intensity reduced, antagonism
lessened, and the resulting expectations made more realistic by clarifying the
conflict situation. In this four rules should help the parties.

Principles of Conflict Resolution [December 2015] [June 2014]

1. Think Before Reacting

The tendency in a conflict situation is to react immediately. After all, if we do not
react we may lose our opportunity. In order to resolve conflict successfully it is
important to think before we react--consider the options, weigh the possibilities. The
same reaction is not appropriate for every conflict.

2. Listen Actively
Listening is the most important part of communication. If we do not hear what the
other parties are communicating we can not resolve a conflict. Active listening
means not only listening to what another person is saying with words, but also to
what is said by intonation and body language. The active listening process also
involves letting the speaker know that he or she has been heard. For example,
"What I heard you say is......"

3. Assure a Fair Process

The process for resolving a conflict is often as critical as the conflict itself. It is
important to assure that the resolution method chosen as well as the process for
affect- ing that method is fair to all parties to the conflict. Even the perception of
unfairness can destroy the resolution.

4. Attack the Problem

Conflict is very emotional. When emotions are high it is much easier to begin
attacking the person on the other side than it is to solve the problem. The only way
conflicts get resolved is when we attack the problem and not each other. What is
the problem that lies behind the emotion? What are the causes instead of the
symptoms?

5. Accept Responsibility
Every conflict has may sides and there is enough responsi- bility for everyone.
Attempting to place blame only creates resentment and anger that heightens any
existing conflict. In order to resolve a conflict we must accept our share of the
responsibility and eliminate the concept of blame.

6. Use Direct Communication

Say what we mean and mean what we say. Avoid hiding the ball by talking around a
problem. The best way to accomp- lish this is to use "I-Messages". With an "I-
Message" we express our own wants, needs or concerns to the listener. "I-
Messages" are clear and non-threatening way of telling others what we want and
how we feel. A "you-message" blames or criticizes the listener. It suggests that she
or he is at fault.

7. Look for Interests

Positions are usually easy to understand because we are taught to verbalize what
we want. However, if we are going to resolve conflict successfully we must uncover
why we want something and what is really important about the issue in conflict.
Remember to look for the true interests of the all the parties to the conflict.

8. Focus on the Future

In order to understand the conflict, it is important to under- stand the dynamics of
the relationship including the history of the relationship. However, in order to
resolve the conflict we must focus on the future. What do we want to do differently
tomorrow?

9. Options for Mutual Gain

Look for ways to assure that we are all better off tomorrow than we are today. Our
gain at the expense of someone else only prolongs conflict and prevents resolution.

Conflict Management Strategies/Techniques [June 2014] [June 2015]

[December 2015]

In any situation involving more than one person, conflict can arise. The causes of
conflict range from philosophical differences and divergent goals to power
imbalances. Unmanaged or poorly managed conflicts generate a breakdown in trust
and lost productivity. For small businesses, where success often hinges on the
cohesion of a few people, loss of trust and productivity can signal the death of the
business. With a basic understanding of the five conflict management strategies,
small business owners can better deal with conflicts before they escalate beyond
repair.

Accommodating
The accommodating strategy essentially entails giving the opposing side what it
wants. The use of accommodation often occurs when one of the parties wishes to
keep the peace or perceives the issue as minor. For example, a business that
requires formal dress may institute a "casual Friday" policy as a low-stakes means of
keeping the peace with the rank and file. Employees who use accommodation as a
primary conflict management strategy, however, may keep track and develop
resentment.

Avoiding
The avoidance strategy seeks to put off conflict indefinitely. By delaying or ignoring
the conflict, the avoider hopes the problem resolves itself without a confrontation.
Those who actively avoid conflict frequently have low esteem or hold a position of
low power. In some circumstances, avoiding can serve as a profitable conflict
management strategy, such as after the dismissal of a popular but unproductive
employee. The hiring of a more productive replacement for the position soothes
much of the conflict.

Collaborating
Collaboration works by integrating ideas set out by multiple people. The object is to
find a creative solution acceptable to everyone. Collaboration, though useful, calls
for a significant time commitment not appropriate to all conflicts. For example, a
business owner should work collaboratively with the manager to establish policies,
but collaborative decision-making regarding office supplies wastes time better spent
on other activities..
Compromising
The compromising strategy typically calls for both sides of a conflict to give up
elements of their position in order to establish an acceptable, if not agreeable,
solution. This strategy prevails most often in conflicts where the parties hold
approximately equivalent power. Business owners frequently employ compromise
during contract negotiations with other businesses when each party stands to lose
something valuable, such as a customer or necessary service.

Competing
Competition operates as a zero-sum game, in which one side wins and other loses.
Highly assertive personalities often fall back on competition as a conflict
management strategy. The competitive strategy works best in a limited number of
conflicts, such as emergency situations. In general, business owners benefit from
holding the competitive strategy in reserve for crisis situations and decisions that
generate ill-will, such as pay cuts or layoffs.

Is conflict good or bad in an organization? [December 2015]

Conflict, while often avoided, is not necessarily bad. In fact, conflict can be good for
organizations because it encourages open-mindedness and helps avoid the
tendency toward group think that many organizations fall prey to. The key is
learning how to manage conflict effectively so that it can serve as a catalyst, rather
than a hindrance, to organizational improvement.

Conflict Encourages New Thinking

Although it is often assumed that people avoid conflict, many people actually enjoy
conflict to a certain degree because it can be the stimulus for new thinking.
Considering a different point of view--which represents conflict--can open up new
possibilities and help to generate new ideas that might otherwise have not been
considered.

Conflict Raises Questions

Organizational conflict usually leads to a series of questions for those on both sides
of any issues. Those questions can lead to new ideas and breakthroughs in thinking
that can benefit individuals, departments and organizations. When there is no
conflict, nothing changes. There is no need to question or challenge the status quo.
Conflict represents an opportunity to reconsider, which can lead to breakthrough
thinking.

Conflict Builds Relationships

Being agreeable is nice, but encouraging conflict can actually strengthen
relationships. Organizational conflict between individuals, departments and even
competitors can help to build relationships through mutual understanding and
respect. Learning to listen and listening to learn leads to insights valued by both
sides in any conflict situation.

Conflict Opens Minds

Organizations that teach employees how to manage conflict effectively create a
climate of innovation that encourages creative thinking and opens minds to new,
previously unexplored, possibilities. Considering the possibility for new ways of
approaching challenges and meeting the demands of a competitive business world
can result in improvements that benefit staff as well as the organization.

Conflicts Beats Stagnation

Organizations that avoid conflict avoid change. Avoiding change is futile and can
lead to the demise of even successful organizations. Companies that encourage
staff to approach conflict in positive and productive ways, can beat the stagnation
that opens the doors to competitors and challenges the ability to continue to
provide customers with new and innovation solutions to meet their needs.

13. What is Organizational Behavior? Describe importance of Organizational

Behavior?

Organizational Behavior [June 2015]

Organizational behavior (OB) is the study of the way people interact within groups.
Normally this study is applied in an attempt to create more efficient business
organizations. The central idea of the study of organizational behavior is that a
scientific approach can be applied to the management of workers. Organizational
behavior theories are used for human resource purposes to maximize the output
from individual group members.

There are a variety of different models and philosophies of organizational behavior.

Areas of research include improving job performance, increasing job satisfaction,
promoting innovation and encouraging leadership. In order to achieve the desired
results, managers may adopt different tactics, including reorganizing groups,
modifying compensation structures and changing the way performance is
evaluated.

The main goal of behavioral and organizational management is to create a business

staffed by ethical employees who do not compromise the safety or well-being of
others. If a small business does not have an effective strategy for dealing with the
behavioral and organizational problems that arise in the office, it risks creating a
demotivating work environment full of unhappy employees.

Feedback
Managers cannot know their employee dynamic without encouraging
communication and feedback from their employees. The employee dynamic is the
way in which coworkers interact with one another and their managers. Managers
can assess the behavioral and organizational status of their workplace by asking
employees to approach them when there is a problem or by fielding surveys at
certain times during the year. Both methods obtain valuable information about
potential problems in the workplace while maintaining the anonymity of employees.

Investigation
Effective managers rely on thorough investigation, not word of mouth, when
addressing problems in the workplace. For instance, an employee may complain to
a manager that she faces daily harassment from another employee in the office. It
is the responsibility of a manager to monitor the situation and look for signs of
harassment. By investigating the allegations, you ensure your employees that you
are sensitive to their concerns. Additionally, if you must fire an employee, you have
proof of the worker's wrongdoing in the event of a lawsuit.

Prompt Action
Promptly responding to organizational and behavioral problems is critical to
maintaining the trust and motivation of your employees. If managers fail to respond
quickly to issues, employees might see this as disrespectful and evidence of an out-
of-touch management staff. For instance, if employees complain that working in
groups is inefficient and a waste of their time, managers should quickly analyze this
organizational problem and provide a solution. If more independence is the answer,
managers must say this directly and promptly to employees.

Recognition
Recognizing good deeds or exemplary behavior is another key element of effective
organizational and behavioral management. For example, if an employee comes
forward and tells a manager that he made a large mistake, the manager should
commend the employee for his honesty and give him recognition. This may seem
counterintuitive, but it is essential to promote an honest and responsible
organization. If an employee knows that he will be punished for a mistake, he is
more likely to hide the problem, possibly causing more problems for the business in
the future.

Elements of Organizational Behavior [June 2015]

The organization's base rests on management's philosophy, values, vision and

goals. This in turn drives the organizational culture which is composed of the formal
organization, informal organization and the social environment. The culture
determines the type of leadership, communication and group dynamics within the
organization. The workers perceive this as the quality of work life which directs their
degree of motivation. The final outcome are performance, individual satisfaction
and personal growth and development. All these elements combine to build the
model or framework that the organization operates from.

Organizational behavior is the study and application of knowledge about how

people, individuals and groups act within organizations. It does this by taking a
system approach. That is, it interprets people-organization relationships in terms of
the whole person, whole group, whole organization and whole social system. Its
purpose is to build better relationships by achieving human objectives,
organizational objectives and social objectives.

As you can see from the definition above, organizational behavior encompasses a
wide range of topics, such as human behavior, change, leadership, teams, etc.

The organization's base rests on management's philosophy, values, vision and

goals. This in turn drives the organizational culture which is composed of the formal
organization, informal organization and the social environment. The culture
determines the type of leadership, communication and group dynamics within the
organization. The workers perceive this as the quality of work life which directs their
degree of motivation. The final outcome are performance, individual satisfaction
and personal growth and development. All these elements combine to build the
model or framework that the organization operates from.

24. What is delegation of authority? Describe its elements, principles, and

importance. Distinguish between delegation and decentralization. State the
problems of delegation of authority. One can delegate authority but not
responsibility.

Delegation of Authority [December 2014]

Delegation of Authority means division of authority and powers downwards to the
subordinate. Delegation is about entrusting someone else to do parts of your job.
Delegation of authority can be defined as subdivision and sub-allocation of powers
to the subordinates in order to achieve effective results.

A manager alone cannot perform all the tasks assigned to him. In order to meet the
targets, the manager should delegate authority. Delegation of Authority means
division of authority and powers downwards to the subordinate. Delegation is about
entrusting someone else to do parts of your job. Delegation of authority can be
defined as subdivision and sub-allocation of powers to the subordinates in order to
achieve effective results.

Elements of Delegation

Authority - in context of a business organization, authority can be defined as the

power and right of a person to use and allocate the resources efficiently, to take
decisions and to give orders so as to achieve the organizational objectives.
Authority must be well- defined. All people who have the authority should know
what is the scope of their authority is and they shouldnt misutilize it. Authority is
the right to give commands, orders and get the things done. The top level
management has greatest authority.

Authority always flows from top to bottom. It explains how a superior gets work
done from his subordinate by clearly explaining what is expected of him and how he
should go about it. Authority should be accompanied with an equal amount of
responsibility. Delegating the authority to someone else doesnt imply escaping
from accountability. Accountability still rest with the person having the utmost
authority.

Responsibility - is the duty of the person to complete the task assigned to him. A
person who is given the responsibility should ensure that he accomplishes the tasks
assigned to him. If the tasks for which he was held responsible are not completed,
then he should not give explanations or excuses. Responsibility without adequate
authority leads to discontent and dissatisfaction among the person. Responsibility
flows from bottom to top. The middle level and lower level management holds more
responsibility. The person held responsible for a job is answerable for it. If he
performs the tasks assigned as expected, he is bound for praises. While if he
doesnt accomplish tasks assigned as expected, then also he is answerable for that.
Accountability - means giving explanations for any variance in the actual
performance from the expectations set. Accountability can not be delegated. For
example, if A is given a task with sufficient authority, and A delegates this task to
B and asks him to ensure that task is done well, responsibility rest with B, but
accountability still rest with A. The top level management is most accountable.
Being accountable means being innovative as the person will think beyond his
scope of job. Accountability, in short, means being answerable for the end result.
Accountability cant be escaped. It arises from responsibility.

For achieving delegation, a manager has to work in a system and has to perform
following steps : -

Assignment of tasks and duties

Granting of authority
Creating responsibility and accountability

Delegation of authority is the base of superior-subordinate relationship, it involves

following steps:-

Assignment of Duties - The delegator first tries to define the task and duties to
the subordinate. He also has to define the result expected from the subordinates.
Clarity of duty as well as result expected has to be the first step in delegation.

Granting of authority - Subdivision of authority takes place when a superior

divides and shares his authority with the subordinate. It is for this reason, every
subordinate should be given enough independence to carry the task given to him by
his superiors. The managers at all levels delegate authority and power which is
attached to their job positions. The subdivision of powers is very important to get
effective results.

Creating Responsibility and Accountability - The delegation process does not end
once powers are granted to the subordinates. They at the same time have to be
obligatory towards the duties assigned to them. Responsibility is said to be the
factor or obligation of an individual to carry out his duties in best of his ability as per
the directions of superior. Responsibility is very important. Therefore, it is that which
gives effectiveness to authority. At the same time, responsibility is absolute and
cannot be shifted.

Accountability, on the others hand, is the obligation of the individual to carry out his
duties as per the standards of performance. Therefore, it is said that authority is
delegated, responsibility is created and accountability is imposed. Accountability
arises out of responsibility and responsibility arises out of authority. Therefore, it
becomes important that with every authority position an equal and opposite
responsibility should be attached.

Therefore every manager,i.e.,the delegator has to follow a system to finish up the

delegation process. Equally important is the delegatees role which means his
responsibility and accountability is attached with the authority over to here.
Relationship between Authority and Responsibility

Authority is the legal right of person or superior to command his subordinates while
accountability is the obligation of individual to carry out his duties as per standards
of performance Authority flows from the superiors to subordinates,in which orders
and instructions are given to subordinates to complete the task. It is only through
authority, a manager exercises control. In a way through exercising the control the
superior is demanding accountability from subordinates. If the marketing manager
directs the sales supervisor for 50 units of sale to be undertaken in a month. If the
above standards are not accomplished, it is the marketing manager who will be
accountable to the chief executive officer. Therefore, we can say that authority flows
from top to bottom and responsibility flows from bottom to top. Accountability is a
result of responsibility and responsibility is result of authority. Therefore, for every
authority an equal accountability is attached.

Differences between Authority and Responsibility

Authority Responsibility
It is the legal right of a person or a It is the obligation of subordinate to
superior to command his subordinates. perform the work assigned to him.
Authority is attached to the position of Responsibility arises out of superior-
a superior in concern. subordinate relationship in which
subordinate agrees to carry out duty
given to him.
Authority can be delegated by a Responsibility cannot be shifted and is
superior to a subordinate absolute
It flows from top to bottom. It flows from bottom to top.

Importance of Delegation
Delegation of authority is a process in which the authority and powers are divided
and shared amongst the subordinates. When the work of a manager gets beyond
his capacity, there should be some system of sharing the work. This is how
delegation of authority becomes an important tool in organization function. Through
delegation, a manager, in fact, is multiplying himself by dividing/multiplying his
work with the subordinates. The importance of delegation can be justified by -

Through delegation, a manager is able to divide the work and allocate it to the
subordinates. This helps in reducing his work load so that he can work on important
areas such as - planning, business analysis etc.

With the reduction of load on superior, he can concentrate his energy on

important and critical issues of concern. This way he is able to bring effectiveness in
his work as well in the work unit. This effectivity helps a manager to prove his ability
and skills in the best manner.
 Delegation of authority is the ground on which the superior-subordinate
relationship stands. An organization functions as the authority flows from top level
to bottom. This in fact shows that through delegation, the superior-subordinate
relationship become meaningful. The flow of authority is from top to bottom which is
a way of achieving results.

Delegation of authority in a way gives enough room and space to the

subordinates to flourish their abilities and skill. Through delegating powers, the
subordinates get a feeling of importance. They get motivated to work and this
motivation provides appropriate results to a concern. Job satisfaction is an
important criterion to bring stability and soundness in the relationship between
superior and subordinates. Delegation also helps in breaking the monotony of the
subordinates so that they can be more creative and efficient.

Delegation of authority is not only helpful to the subordinates but it also helps the
managers to develop their talents and skills. Since the manager get enough time
through delegation to concentrate on important issues, their decision-making gets
strong and in a way they can flourish the talents which are required in a manager.
Through granting powers and getting the work done, helps the manager to attain
communication skills, supervision and guidance, effective motivation and the
leadership traits are flourished. Therefore it is only through delegation, a manager
can be tested on his traits.

Delegation of authority is help to both superior and subordinates. This, in a way,

gives stability to a concerns working. With effective results, a concern can think of
creating more departments and divisions flow working. This will require creation of
more managers which can be fulfilled by shifting the experienced, skilled managers
to these positions. This helps in both virtual as well as horizontal growth which is
very important for a concerns stability.

Therefore, from the above points, we can justify that delegation is not just a process
but it is a way by which manager multiples himself and is able to bring stability,
ability and soundness to a concern.

Principles of Delegation [June 2014]

There are a few guidelines in form of principles which can be a help to the manager
to process of delegation. The principles of delegation are as follows: -

Principle of result excepted- suggests that every manager before delegating the
powers to the subordinate should be able to clearly define the goals as well as
results expected from them. The goals and targets should be completely and clearly
defined and the standards of performance should also be notified clearly. For
example, a marketing manager explains the salesmen regarding the units of sale to
take place in a particular day, say ten units a day have to be the target sales. While
a marketing manger provides these guidelines of sales, mentioning the target sales
is very important so that the salesman can perform his duty efficiently with a clear
set of mind.
 Principle of Parity of Authority and Responsibility- According to this principle, the
manager should keep a balance between authority and responsibility. Both of them
should go hand in hand.

According to this principle, if a subordinate is given a responsibility to perform a

task, then at the same time he should be given enough independence and power to
carry out that task effectively. This principle also does not provide excessive
authority to the subordinate which at times can be misused by him. The authority
should be given in such a way which matches the task given to him. Therefore,
there should be no degree of disparity between the two.

Principle of absolute responsibility- This says that the authority can be delegated
but responsibility cannot be delegated by managers to his subordinates which
means responsibility is fixed. The manager at every level, no matter what is his
authority, is always responsible to his superior for carrying out his task by
delegating the powers. It does not means that he can escape from his responsibility.
He will always remain responsible till the completion of task.

Every superior is responsible for the acts of their subordinates and are
accountable to their superior therefore the superiors cannot pass the blame to the
subordinates even if he has delegated certain powers to subordinates example if
the production manager has been given a work and the machine breaks down. If
repairmen is not able to get repair work done, production manager will be
responsible to CEO if their production is not completed.

Principle of Authority level- This principle suggests that a manager should

exercise his authority within the jurisdiction/framework given. The manager should
be forced to consult their superiors with those matters of which the authority is not
given that means before a manager takes any important decision, he should make
sure that he has the authority to do that on the other hand, subordinate should also
not frequently go with regards to their complaints as well as suggestions to their
superior if they are not asked to do. This principle emphasizes on the degree of
authority and the level upto which it has to be maintained.

Centralization and Decentralization

Centralization is said to be a process where the concentration of decision making is
in a few hands. All the important decision and actions at the lower level, all subjects
and actions at the lower level are subject to the approval of top management.
According to Allen, Centralization is the systematic and consistent reservation of
authority at central points in the organization. The implication of centralization can
be :-

Reservation of decision making power at top level.

 Reservation of operating authority with the middle level managers.
Reservation of operation at lower level at the directions of the top level.

Under centralization, the important and key decisions are taken by the top
management and the other levels are into implementations as per the directions of
top level. For example, in a business concern, the father & son being the owners
decide about the important matters and all the rest of functions like product,
finance, marketing, personnel, are carried out by the department heads and they
have to act as per instruction and orders of the two people. Therefore in this case,
decision making power remain in the hands of father & son.

On the other hand, Decentralization is a systematic delegation of authority at all

levels of management and in all of the organization. In a decentralization concern,
authority in retained by the top management for taking major decisions and framing
policies concerning the whole concern. Rest of the authority may be delegated to
the middle level and lower level of management.

The degree of centralization and decentralization will depend upon the amount of
authority delegated to the lowest level. According to Allen, Decentralization refers
to the systematic effort to delegate to the lowest level of authority except that
which can be controlled and exercised at central points.

Decentralization is not the same as delegation. In fact, decentralization is all

extension of delegation. Decentralization pattern is wider is scope and the
authorities are diffused to the lowest most level of management. Delegation of
authority is a complete process and takes place from one person to another. While
decentralization is complete only when fullest possible delegation has taken place.
For example, the general manager of a company is responsible for receiving the
leave application for the whole of the concern. The general manager delegates this
work to the personnel manager who is now responsible for receiving the leave
applicants. In this situation delegation of authority has taken place. On the other
hand, on the request of the personnel manager, if the general manager delegates
this power to all the departmental heads at all level, in this situation
decentralization has taken place. There is a saying that Everything that increasing
the role of subordinates is decentralization and that decreases the role is
centralization. Decentralization is wider in scope and the subordinates
responsibility increase in this case. On the other hand, in delegation the managers
remain answerable even for the acts of subordinates to their superiors.

Implications of Decentralization

There is less burden on the Chief Executive as in the case of centralization.

In decentralization, the subordinates get a chance to decide and act
independently which develops skills and capabilities. This way the organization is
able to process reserve of talents in it.
In decentralization, diversification and horizontal can be easily implanted.
In decentralization, concern diversification of activities can place effectively since
there is more scope for creating new departments. Therefore, diversification growth
is of a degree.
 In decentralization structure, operations can be coordinated at divisional level
which is not possible in the centralization set up.
In the case of decentralization structure, there is greater motivation and morale
of the employees since they get more independence to act and decide.
In a decentralization structure, co-ordination to some extent is difficult to
maintain as there are lot many department divisions and authority is delegated to
maximum possible extent, i.e., to the bottom most level delegation reaches.
Centralization and decentralization are the categories by which the pattern of
authority relationships became clear. The degree of centralization and de-
centralization can be affected by many factors like nature of operation, volume of
profits, number of departments, size of a concern, etc. The larger the size of a
concern, a decentralization set up is suitable in it.

Delegation and Decentralization [December 2014]

Basis Delegation Decentralization

Managers delegate some

Right to take decisions is shared
of their function and
Meaning by top management and other
authority to their
level of management.
subordinates.

Scope of delegation is
limited as superior Scope is wide as the decision
Scope delegates the powers to making is shared by the
the subordinates on subordinates also.
individual bases.

Responsibility remains of
Responsibilit Responsibility is also delegated to
the managers and cannot
y subordinates.
be delegated

Freedom is not given to

Freedom to work can be
the subordinates as they
Freedom of maintained by subordinates as
have to work as per the
Work they are free to take decision and
instructions of their
to implement it.
superiors.

It is an important decision of an
Nature It is a routine function
enterprise.

Need on Delegation is important in Decentralization becomes more

purpose all concerns whether big or important in large concerns and it
small. No enterprises can depends upon the decision made
work without delegation. by the enterprise, it is not
 compulsory.

It is a systematic act which takes

Grant of The authority is granted by
place at all levels and at all
Authority one individual to another.
functions in a concern.

Grant of
Responsibility cannot be Authority with responsibility is
Responsibilit
delegated delegated to subordinates.
y

Degree of delegation Decentralization is total by nature.

varies from concern to It spreads throughout the
Degree
concern and department to organization i.e. at all levels and
department. all functions

It is an outcome which explains

Delegation is a process
relationship between top
Process which explains superior
management and all other
subordinates relationship
departments.

Delegation is essential of Decentralization is a decisions

Essentiality
all kinds of concerns function by nature.

Delegation is essential for
Significance
creating the organization
Decentralization is an optional
policy at the discretion of top
management.

It is considered as a general policy

Delegated authority can be
Withdrawal of top management and is
taken back.
applicable to all departments.

Freedom of Very little freedom to the

Considerable freedom
Action subordinates

Decentralization can be called as extension of delegation. When delegation of

authority is done to the fullest possible extent, it gives use to decentralization.

Barriers To Delegation Of Authority [December 2014]

The following are the common barriers in delegation of authority:

1. Reluctant To Delegate
Some managers are reluctant to delegate authority to subordinates. They believe
that they can take a better decision than their subordinates. This belief is often
found among those managers who have been recently promoted and those having
superiority complex. They have no proper plan to delegate authority. In such a
situation, subordinates will have less work and lose the commitment to implement
the manager;s decisions.

2. Fear Of Losing Importance

Managers who feel comfortable with authority,fear to delegate authority. They feel
that it will diminish their importance. Such managers delegate only that part of
authority to subordinates which relates to their job responsibility. They retain their
authority as a positional superior of an organization.

3. Loss Of Control
Some managers opine that they will lose control by delegating authority to their
subordinates.They feel that if they delegate authority to their subordinates, they
would not be sure to achieve assigned responsibilities from subordinates. Such fear
is reasonable in case managers are incapable of getting the jobs done from others.

4. Mutual Distrust
Managers are often reluctant to delegate authority to subordinates if there is an
environment of distrust in the organization.A manager must have confidence in his
own ability to help, guide and control his subordinates before delegating authority. If
a manager does not have the ability to make a sound decision he does not believe
in his subordinates. He does not want to take risk to get jobs done from others.

5. Fear Of Subordinates
Managers are reluctant to delegate authority if they fear that it will expose their
shortcomings. They feel that their subordinates will perform better and may create
problems in their own career. They have no self-confidence and do not want to face
the competitive environment.

6. Incompetent Subordinates
Some subordinates are often unwilling to accept delegated authority because of
lack of self-confidence. They fear of making mistakes in their performance. It is the
responsibility of the superior to develop their self confidence by guiding them and
also creating a supportive environment.

7. Lack Of Motivation
Lack of motivational environment discourages subordinates to take responsibility
and accept authority. Such environment is found in organizations where there is lack
of reward and judgement system.

Difference between Recruitment and Selection [December 2014]

Basis Recruitment Selection

Meaning It is an activity of establishing contact It is a process of picking up more
between employers and applicants. competent and suitable employees.

Objective It encourages large number of It attempts at rejecting unsuitable

Candidates for a job. candidates.

Process It is a simple process. It is a complicated process.

Hurdles The candidates have not to cross over Many hurdles have to be crossed.
many hurdles.

Approach It is a positive approach. It is a negative approach.

Sequence It proceeds selection. It follows recruitment.

Economy It is an economical method. It is an expensive method.

Time Less time is required. More time is required.

Consuming

Employee Selection Process [December 2014]

Employee Selection is the process of putting right men on right job. It is a procedure
of matching organizational requirements with the skills and qualifications of people.
Effective selection can be done only when there is effective matching. By selecting
best candidate for the required job, the organization will get quality performance of
employees. Moreover, organization will face less of absenteeism and employee
turnover problems. By selecting right candidate for the required job, organization
will also save time and money. Proper screening of candidates takes place during
selection procedure. All the potential candidates who apply for the given job are
tested.

But selection must be differentiated from recruitment, though these are two phases
of employment process. Recruitment is considered to be a positive process as it
motivates more of candidates to apply for the job. It creates a pool of applicants. It
is just sourcing of data. While selection is a negative process as the inappropriate
candidates are rejected here. Recruitment precedes selection in staffing process.
Selection involves choosing the best candidate with best abilities, skills and
knowledge for the required job.

The Employee selection Process takes place in following order-

1. Preliminary Interviews- It is used to eliminate those candidates who do not

meet the minimum eligiblity criteria laid down by the organization. The skills,
academic and family background, competencies and interests of the
candidate are examined during preliminary interview. Preliminary interviews
are less formalized and planned than the final interviews. The candidates are
given a brief up about the company and the job profile; and it is also
examined how much the candidate knows about the company. Preliminary
interviews are also called screening interviews.
2. Application blanks- The candidates who clear the preliminary interview are
required to fill application blank. It contains data record of the candidates
such as details about age, qualifications, reason for leaving previous job,
experience, etc.
3. Written Tests- Various written tests conducted during selection procedure are
aptitude test, intelligence test, reasoning test, personality test, etc. These
tests are used to objectively assess the potential candidate. They should not
be biased.
4. Employment Interviews- It is a one to one interaction between the interviewer
and the potential candidate. It is used to find whether the candidate is best
suited for the required job or not. But such interviews consume time and
money both. Moreover the competencies of the candidate cannot be judged.
Such interviews may be biased at times. Such interviews should be
conducted properly. No distractions should be there in room. There should be
an honest communication between candidate and interviewer.
5. Medical examination- Medical tests are conducted to ensure physical fitness
of the potential employee. It will decrease chances of employee absenteeism.
6. Appointment Letter- A reference check is made about the candidate selected
and then finally he is appointed by giving a formal appointment letter.

Meaning of Span of Supervision [June 2015]

The span of supervision is also called as the span of control. It refers to the number
of subordinates a manager can effectively manage. If the number of subordinates
placed under a manager is small, he can control the subordinates effectively. But if
the number of subordinates is too small, he may not be able to accomplish the task.
Further, the managers time and energy may not be utilized properly.

On the other hand, if the number of subordinates is too large, effective control may
not be easy. The General Manager of an enterprise may be a boss for thousands of
persons. But the persons with whom he may come in personal contact may not be
more than 2 or 3 dozens. And the number of persons whom he can effectively
supervise and control may be less than a dozen.

Factors Influencing the Span of Supervision [June 2015]

There are a number of factors that influence or determine the span of supervision in
a particular organization, the most important of these are as follows:

1. The Capacity and Ability of the Executive:

The characteristics and abilities such as leadership, administrative capabilities,

ability to communicate, to Judge, to listen, to guide and inspire, physical vigour etc.
differ from person to person. A person having better abilities can manage effectively
a large number of subordinates as compared to the one who has lesser capabilities.

2. Competence and Training of Subordinates:

Subordinates who are skilled, efficient, knowledgeable, trained and competent

require less supervision, and therefore, the supervisor may have a wider span in
such cases as compared to inexperienced and untrained subordinates who require
greater supervision.

3. Nature of Work:

Nature and importance of work to be supervised is another factor that influences

the span of supervision. The work involving routine, repetitive, unskilled and
standardized operations will not call much attention and time on the part of the
supervisor. As such, the supervisors at the lower levels of organization can
supervise the work of a large number of subordinates. On the other hand, at higher
levels of management, the work involves complex and a variety of Jobs and as such
the number of subordinates that can be effectively managed should be limited to a
lesser number.

4. Time Available for Supervision:

The capacity of a person to supervise and control a large number of persons is also
limited on account of time available at his disposal to supervise them. The span of
control would be generally narrow at the higher levels of management because top
managers have to spend their major time on planning, organizing, directing and
controlling and the time available at their disposal for supervision will be lesser. At
lower levels of management, this span would obliviously be wide because they have
to devote lesser time on such other activities.

5. Degree of Decentralization and Extent of Delegation:

If a manager clearly delegates authority to undertake a well- defined task, a well

trained subordinate can do it with a minimum of supervisors time and attention. As
such, the span could be wide. On the contrary, if the subordinates task is not one
he can do, or if it is not clearly defined, or if he does not have the authority to
undertake it effectively, he will either fail to perform it or take a disproportionate
amount of the managers time in supervising and guiding his efforts.

6. Effectiveness of Communication System:

The span of supervision is also influenced by the effectiveness of the
communication system in the organization. Faulty communication puts a heavy
burden on managers time and reduces the span of control. On the other hand, if
the system of communication is effective, larger number of managerial levels will be
preferred as the information can be transmitted easily. Further, a wide span is
possible if a manager can communicate effectively.

7. Quality of Planning:

If plans and policies are clear and easily understandable, the task of supervision
becomes easier and the span of management can be wider. Effective planning helps
to reduce frequent calls on the superior for explanation, instructions and guidance
and thereby saves in time available at the disposal of the supervisor enabling him
to have a wider span. Ineffective plans, on the other hand, impose limits on the
span of management.

8. Degree of Physical Dispersion:

If all persons to be supervised are located at the same place and within the direct
supervision of the manager, he can supervise relatively more people as compared
to the one who has to supervise people located at different places.

9. Assistance of Experts:

The span of supervision may be wide where the services of experts are available to
the subordinate on various aspects of work. In case such services are not provided
in the organization, the supervisor has to spend a lot of time in providing assistance
to the workers himself and as such the span of control would be narrow.

10. Control Mechanism:

The control procedures followed in an organization also influence the span of

control. The use of objective standards enables a supervisor management by
exception by providing quick information of deviations or variances. Control
through personal supervision favours narrow span while control through objective
standards and reports favour wider span.

11. Dynamism or Rate of Change:

Certain enterprises change much more rapidly than others. This rate of change
determines the stability of policies and practices of an organization. The span of
control tends to be narrow where the policies and practices do not remain stable.

12. Need for Balance:

According to Koontz and O Donnel, There is a limit in each managerial position to

the number of persons an individual can effectively manage, but the exact number
in each case will vary in accordance with the effect of underlying variable and their
impact on the time requirements of effective managing.
Graicunas Theory on Span of Management [June 2015]

A French management consultant, V.A. Graicunas, introduced a theory on span of

management which explains three kinds of relationships that a superior can have
with subordinates. He formulated a theory and suggested the number of
subordinates under one superior based on mathematical calculations. Superior-
subordinate relationships are based on mathematical formulae.

The kind of relationships and the formulae for arriving at the number of
relationships is as follows:

Graicunas identified three types of relationships:

1. Direct single relationships,

2. Direct group relationships, and

3. Cross relationships.

1. Direct single relationship:

This is the relationship between the superior and his immediate subordinates. It
represents direct contact of the superior with his subordinates. If there are 3
subordinates (A, B and C) under one superior (X), there will be three direct single
relationships, represented by the formula n. These are relationships between X and
A, X and B, and X and C.

2. Direct group relationships:

This is the relationship of superior with subordinates in the presence of other

subordinates. All possible combinations of superior and subordinate relationship-
exist in group relationships. It represents contact of the superior with one or more
subordinates while others (one or more) assist the relationships.
For one superior (X) and three subordinates (A, B, C), there will be 9 direct group
relationships as follows:

1. X and A with B providing assistance

2. X and A with C providing assistance

3. X and B with C providing assistance

4. X and A with BC providing assistance

5. X and B with AC providing assistance

6. X and C with AB providing assistance

7. X and AB with C providing assistance

8. X and AC with B providing assistance

9. X and BC with A providing assistance

The number of relationship (9) is represented by the formula:

3. Cross relationships:

While the subordinates work under the same superior, they also interact amongst
themselves. These are the relationships amongst subordinates. As interaction with B
and Bs interaction with A will be different as viewed by the managers and,
therefore, this relationship will also be different. Based on the formula n (n -1), with
3 subordinates, 6 such relationships will be formed.

These are between:

A and B

Band A

A and C

C and A

B and C

C and B

With every increase in the number of subordinates by one, increase in the number
of relationships is by more than one. While, with 2 subordinates, the total number of
relationships is 6, with 3 subordinates, it is 18.
The theory does not seem to have any practical application as it emphasises on the
number of relationships and not on the importance of relationships. Based on
Gaicunas theory, many other management thinkers also suggested numerical limits
on the span of management, ranging from 3 to 9 for top managerial positions and 8
to 30 for supervisory management. More than the number of subordinates that can
affect the ability to manage the subordinates, managerial effectiveness is judged by
the situational factors that can affect the span of management.

Why is motivation important? [June 2015]

Motivation is important simply because it allows you as a leader to meet and even
exceed your own organizational goals! After all, that's the whole point of leading,
isn't it? In fact, without a motivated workforce, your organization will be in a very
precarious position. Once at this intersection, there are only two possible final
destinations: bankruptcy or fix the motivational issues among your workforce.
Eventually, one or the other will prevail!
Benefits of a motivated workforce

There are numerous benefits of having motivated employees:

Cost savings: Motivated employees will not only work faster, but they will
use their creativity to recommend process improvements that can lead to
millions of dollars of saving for your organization.
Increased quality: Motivated employees will produce quality products,
costing you less resources for rework.
Reduced turn over: Turn-over doesn't only cost you money to replace the
individuals, but it also slows down your organization's progress while
replacements are being trained.
Speed to market: Everyone wants their product or services yesterday!
Actually, the day you release your new product, people will already want a
newer version! Having a motivated workforce will ensure that your product
release cycle is reduced minimally.
Increased product value: With motivated employees you will have a better
product or service, because the staff will feel like this is their product and
will want to make sure that it provides real value to the customers. They
will go the extra mile to make your product stand out of from the
competition!
Contributing to a better society: Motivated employees make happy people,
who in turn contribute to a better society.

Motivation-Hygiene Theory [June 2015]

The psychologist Fredrick Herzberg asked the same question in the 1950s and 60s
as a means of understanding employee satisfaction. He set out to determine the
effect of attitude on motivation, by asking people to describe situations where they
felt really good, and really bad, about their jobs. What he found was that people
who felt good about their jobs gave very different responses from the people who
felt bad.

These results form the basis of Herzberg's Motivation-Hygiene Theory (sometimes

known as Herzberg's Two Factor Theory). Published in his famous article, "One More
Time: How do You Motivate Employees," the conclusions he drew were
extraordinarily influential, and still form the bedrock of good motivational practice
nearly half a century later.
Motivation-Hygiene Theory

Herzberg's findings revealed that certain characteristics of a job are consistently

related to job satisfaction, while different factors are associated with job
dissatisfaction. These are:

Factors for Satisfaction Factors for Dissatisfaction

Company policies
Achievement
Supervision
Recognition
Relationship with supervisor and peers
The work itself
Work conditions
Responsibility
Salary
Advancement
Status
Growth
Security

The conclusion he drew is that job satisfaction and job dissatisfaction are not
opposites.

The opposite of Satisfaction is No Satisfaction.

The opposite of Dissatisfaction is No Dissatisfaction.

Remedying the causes of dissatisfaction will not create satisfaction. Nor will adding
the factors of job satisfaction eliminate job dissatisfaction. If you have a hostile work
environment, giving someone a promotion will not make him or her satisfied. If you
create a healthy work environment but do not provide members of your team with
any of the satisfaction factors, the work they're doing will still not be satisfying.

According to Herzberg, the factors leading to job satisfaction are "separate and
distinct from those that lead to job dissatisfaction." Therefore, if you set about
eliminating dissatisfying job factors, you may create peace but not necessarily
enhance performance. This placates your workforce instead of actually motivating
them to improve performance.

The characteristics associated with job dissatisfaction are called hygiene factors.
When these have been adequately addressed, people will not be dissatisfied nor will
they be satisfied. If you want to motivate your team, you then have to focus on
satisfaction factors like achievement, recognition and responsibility.
To apply the theory, you need to adopt a two-stage process to motivate people.
Firstly, you need to eliminate the dissatisfaction they're experiencing and, secondly,
you need to help them find satisfaction.
Step One: Eliminate Job Dissatisfaction

Herzberg called the causes of dissatisfaction "hygiene factors." To get rid of them,
you need to:

Fix poor and obstructive company policies.

Provide effective, supportive and non-intrusive supervision.
Create and support a culture of respect and dignity for all team members.
Ensure that wages are competitive.
Build job status by providing meaningful work for all positions.
Provide job security.

All of these actions help you eliminate job dissatisfaction in your organization. And
there's no point trying to motivate people until these issues are out of the way!

You can't stop there, though. Remember, just because someone is not dissatisfied, it
doesn't mean he or she is satisfied either! Now you have to turn your attention to
building job satisfaction.
Step Two: Create Conditions for Job Satisfaction

To create satisfaction, Herzberg says you need to address the motivating factors
associated with work. He called this "job enrichment." His premise was that every
job should be examined to determine how it could be made better and more
satisfying to the person doing the work. Things to consider include:

Providing opportunities for achievement.

Recognizing people's contributions.
Creating work that is rewarding and that matches people's skills and abilities.
Giving as much responsibility to each team member as possible.
Providing opportunities to advance in the company through internal
promotions.
Offering training and development opportunities, so that people can pursue
the positions they want within the company.

Employee Motivation: Financial and Non-financial Techniques of Staff Motivation

[June 2015]

Regardless of which theory of employee motivation is followed, the research studies

on motivation conclude that interesting work, appreciation, pay, good working
conditions, and job security are important factors in helping to motivate. For
enhancing motivation in your organization first study the following:

(a) An analysis of what motivates individual staff members

(b) The performance objectives of the individual

(c) The strategic goals of the organization

(d) The values and culture of the organization

After above actions device the techniques .The techniques can be of two types
Financial and non Financial
Financial/Incentives Techniques of Motivation:

Financial techniques refer to monetary rewards. Incentives are nothing but the
inducements provided to employees in order to motivate them. There should be
direct relationship between efforts and rewards, financial reward should be
substantial in value and must be in parity with others.

Under -paying staff sends the message that your firm doesnt value their work.
Money is not a prime motivator but this should not be regarded as a signal to
reward employees poorly or unfairly.

The financial incentives include:

1. Pay and Allowances:

It includes basic pay, grade pay, and dearness allowance; travelling allowance, pay
increments, etc. Good pay and allowances help the organization to retain and
attract capable persons.

However, good pay and allowances need not motivate all the people, especially who
are enjoying security of job in government organizations and those for whom
corruption is a way of life.

Some of the other issues are associated with bad attitudes, grievances,
absenteeism, turnover, poor organizational citizenship, and adverse effect on
employees mental and physical health.
2. Incentive Pay:

Incentive pay plans are meant to increase output, which can be measured
quantitatively. For incentive plan targets, the employees must have confidence that
they can achieve the targets.
3. Gain Sharing:

It is a reward system in which team members earn bonus for increasing productivity
or reduce wastages. To illustrate, if the wastage is reduced from 5% to less the
benefits may be shared equally with the team.
4. Profit Sharing:

It means sharing of profits with the employees by way of distribution of bonus. Profit
sharing plan has its shortcomings one, that it has become a regular feature in
government departments irrespective of performance and two, it may have no
relation with individual efforts.
5. Stock Options:
Many companies use employee stock options plans to compensate, retain, and
attract employees. These plans are contracts between a company and its
employees that give employees the right to buy a specific number of the companys
shares at a fixed price within a certain period of time.

Employees who are granted stock options hope to profit by exercising their options
at a higher price than when they were granted. In India, stock options have
primarily been used as a retention tool for a more selective group of employees.
6. Retirement Benefits:

It includes the accumulated provident fund, gratuity, leave encashment and

pension. The provision of terminal benefits provides assurance to employees during
the service for their future
Non-financial Incentives/Techniques:

Non-financial incentives do not involve money payments. These are also important
in motivating employees as they bring in psychological and emotional satisfaction
to them.

These include so many techniques. People do work for money-but they work even
more for meaning in their lives. In fact, they work to have fun.

Some of the important non-financial incentives include:

1. Job security:

Nothing can motivate a worker, appointed temporarily, better than provision of job
security. Even if a temporary worker puts in greater efforts, lack of job security will
always pose a threat. If such a worker is given job security, he will be more
committed to the organization.
2. Challenging work:

Workers, who are dynamic in nature, do not show preference for routine jobs. They
are always ready to accept challenging assignments, challenge can be brought
through mentoring, job redesigning job enlargement and job enrichment.
Understand the capabilities of every individual in the organization and accordingly
assign him work.
3. Recognition:

It is important that the employer recognizes hard work. Even a word of appreciation
from him would motivate the employees to maintain the same level of performance
or do even better. Employees ranked a personal thank you as the most sought
after form of recognition, followed by a handwritten note of appreciation from the
boss.
4. Better job Titles:

Job titles do matter. Employees do show preference for certain designations. A

salesman, for example, would like to be designated as a sales executive and a
sweeper to be Sanitary Inspector.
5. Opportunities for Advancement:
There should never be a stagnation point for any employee during the prime time of
his career. The employer must always provide opportunities for his employees to
perform well and move up in the hierarchy.
6. Empowerment:

To stimulate an employee is his involvement in certain crucial decisions. For

example, if the management decides to buy a new machinery for the factory, the
workers viewpoints may be secured before making the final decision. The
management should avoid unilateral decisions on such matters.
7. Competition:

The management can encourage healthy competition among the employees. This
would, certainly, motivate them to prove their capabilities. The management can
also rank the employees according to performance. Such of those employees who
have performed very well may be given merit certificates.
8. Job Rotation:

By job rotation we mean that the employees will be exposed to different kinds of
job. This certainly would break the monotony of employees. For example, in a bank
an employee may work in the Savings Bank Section for sometime after which he
may be posted to the cash section. Such a change not only motivates the
employees to perform well but also prepares him to be versatile.
9. Lead by Example be passionate and energetic:

Leaders should demonstrate the attitudes, values, actions, and mindsets that they
want among their staff. Leaders are always considered as role models.
10. Encourage the use of humour and creativity:

Incorporating humour into the workplace can alleviate stress and create a more
positive environment for everyone. Strategies to enhance humour include having a
daily cartoon or joke sent to all staff via e-mail, encouraging laughter, finding fun in
events that did not turn out as planned or expected etc.
11. Treat your people as human beings neither inferior, nor superior:

Show trust and respect, motivate them for creativity, create a safe-to-risk
environment, keep them informed of relevant developments inside the
organisation, mistakes be treated as learning tools instead of blaming them, act as
an advocate for their employees and be a visible champion for them, provide
resources and support required by staff to complete their jobs, promote and provide
two-way feedback, address stress and burnout, and implement work/life balance
initiatives.