For our purpose, we shall designate the following six as the functions of a
manager: planning, organizing, staffing, directing, coordinating and
THE MEANING OF MANAGEMENT
 Management has been defined in many different ways by different
authors. Here is a sample: -
 Management is the art of getting things done through and with people
in formally organized groups.(Haimann, T.)
 Management is simply the process of decision-making and control over
the actions of human beings for the express purpose of attaining
predetermined goals.(Vance S.)
 Management is a social process entailing responsibility for the effective
and economical planning and regulations of the operations of an
enterprise in fulfillment of a given purpose or task (Brech E. F., 1957).
 Management is the coordination of all resources through the process of
planning, organizing, directing and controlling in order to attain a given
stated objective (Fayol H. 1916; & Koontz and O’Donnel, 1976)
CHARACTERISTICS OF MANAGEMENT:
 Management is an activity.
 (Management is Purposeful and goal-oriented.
 Management is a Social Process
 Management is getting things done.
 Management is an intangible force.
 Management is an Integrating Process.
 Management is separate from ownership.
 Management is a Universal Activity
 Management is a social science
THE ART AND SCIENCE OF MANAGEMENT
Management can be said to be both a science and an art. First, it is a science
because it is based on a set of organized knowledge founded on proper
scientific findings and exact principles. It is part of the branch of science
known as social science just like sociology, economics or history. The other
branches of science are physical science, biological science etc. Management
is also a behavioral science in which its theories and principles are based on
the situation.
Management can also be an art. An art refers to the best way of doing
something. Management can be said to be the process of directing scientific
knowledge to the accomplishment of objectives. Like any other art,
management is creative, develops new situations, new designs and new
systems needed to improve performance. Art therefore is the ‘know-how’ or
‘technique’ to achieve a desired result. The most productive art is always
based on an understanding of the science underlying it.
THE SCIENTIFIC METHOD IN MANAGEMENT.
The purpose of science is to explain phenomena. Science is based on the
belief that relationships can be found between two or more sets of events.
The scientific method involves determining facts through observation of
events and verifying their accuracy through continued observation. After
classifying and analyzing the facts observed, scientists establish causal
relationships known as hypotheses that they test for accuracy. When
hypotheses are supported, and are found to explain or predict reality they
become principles. However, principles are not permanent they can still be
challenged by future research and analysis and either modified or discarded.
Principles, Theory and Concepts: Principles, theory and concepts form the
structural framework of a science.
Principles are fundamental truths or what are believed to be truths at a given
time, explaining relationships between two or more sets of variables.
Theory is a systematic grouping of interrelated principles. It ties together
significant knowledge to form a framework.
Concepts are mental images of something formed by generalization from
particulars. Concepts are the building blocks of theory and principles.
However, they tend to always imply different things to different people. For
example concepts such as: management, organization, technology, labour
etc.
MANAGEMENT FUNCTIONS
controlling.
1. PLANNING : Planning is the most fundamental and the most pervasive of
all management functions Planning is concerned with 'what', 'how, and
'when' of performance. It is deciding in the present about the future
objectives and the courses of action for their achievement.
It thus involves: (a) determination of long and short-range objectives; (b)
development of strategies and courses of actions to be followed for the
achievement of these objectives; and (c) formulation of policies, procedures,
and rules, etc., for the implementation of strategies, and plans. Policies,
procedures and rules provide the framework of decision making, and the
method and order for the making and implementation of these decisions.
2. ORGANIZING : Organizing involves identification of activities required for
the achievement of enterprise objectives and implementation of plans;
grouping of activities into jobs; assignment of these jobs and activities to
departments and individuals; delegation of responsibility and authority for
performance, and provision for vertical and horizontal coordination of
activities
Organizing thus involves the following sub-functions : (a) Identification of
activities required for the achievement of objectives and implementation of
plans. (b) Grouping the activities so as to create self-contained jobs. (c)
Assignment of jobs to employees. (d) Delegation of authority so as to enable
them to perform their jobs and to command the resources needed for their
performance. (e) Establishment of a network of coordinating relationships.
3. STAFFING : Staffing is a continuous and vital function of management.
After the objectives have been determined, strategies, policies, programmes,
procedures and rules formulated for their achievement, activities for the
implementation of strategies, policies, programmes, etc. identified and
grouped into jobs, the next logical step in the management process is to
procure suitable personnel for manning the jobs.
It comprises several subfunctions : (a) Manpower planning involving
determination of the number and the kind of personnel required. (b)
Recruitment for attracting adequate number of potential employees to seek
jobs in the enterprise. (c) Selection of the most suitable persons for the jobs
under consideration. (d) Placement, induction and orientation. (e) Transfers,
promotions, termination and layoff. (f) Training and development of
employees.
4. DIRECTING : Directing is the function of leading the employees to perform
efficiently, and contribute their optimum to the achievement of
organizational objectives. Jobs assigned to subordinates have to be explained
and clarified, they have to be provided guidance in job performance and they
are to be motivated to contribute their optimum performance with zeal and
enthusiasm. The function of directing thus involves the following sub-
functions : (a) Communication (b) Motivation (c) Leadership
5. COORDINATION : Coordinating is the function of establishing such
relationships among various parts of the organization that they all together
pull in the direction of organizational objectives. It is thus the process of tying
together all the organizational decisions, operations, activities and efforts so
as to achieve unity of action for the accomplishment of organizational
objectives. Coordination, as a management function, involves the following
sub-functions: (a) Clear definition of authority-responsibility relationships (b)
Unity of direction (c) Unity of command (d) Effective communication (e)
Effective leadership
6. CONTROLLING : Controlling is the function of ensuring that the divisional,
departmental, sectional and individual performances are consistent with the
predetermined objectives and goals. Deviations from objectives and plans
have to be identified and investigated, and correction action taken.
Deviations from plans and objectives provide feedback to managers, and all
other management processes including planning, organizing, staffing,
directing and coordinating are continuously reviewed and modified, where
necessary
controlling involves the following process : (a) Measurement of performance
against predetermined goals. (b) Identification of deviations from these
goals. (c) Corrective action to rectify deviations.
Heading Management Administration
Meaning Management is an art of It is concerned with formulation of  Informational role
getting things done through extensive objectives / goal, plans &  Decisional role
others by directing their policies.
efforts towards achievement
of predetermined
goals.

Characteristic Management is Administration is a decision -making

s an function.
executing /
implementing function.
Process Managementdecideswho Administrationdecideswhat istobe
willdoit& done & when it is to be done. Interpersonal role
how will do it. 1. Figurehead
Purpose Management main function Administration main purpose is to  In the figurehead role, the manager is a symbol and represents the
is to get frame plans & policies. organization in matters of formality.
work done through others.  He / She performs official duties such as the signing of legal documents
Skill Technical and Human skills Conceptual and Human on behalf of the company, participation as a social necessity to greet
required. skills visito rs and customers and being available for people / agencies that
required. will only deal with him / her because of status and authority.
Level Middle & lower level Top level function.
function.
2. Leader
 The leader role is to motivating and directing their subordinates.
 The manager also looks after the interest of his subor dinates and also
LEVELS OF MANAGEMENT
tries to solve their work related problems.
 He also sets goals / objectives for his followers, co -ordinates the
individual goals with the organizational goals.
3. Liaison
 The liaison role is to get connected between organization and outsider
s.
 They have to interact with peers and people outside of the
organization.
 The manager’s networking skills to maintain internal and external
TOP LEVEL MANAGEMENT contacts for information exchange are essential.
 It consists of board of directors, chief executive or managing director.  The top level manager uses the liaison role to gain favors and
 The top management is the ultimate source of authority and it manages information, while the supervisor uses it to maintain the routine flow of
goals and policies for an enterprise. It devotes more time on planning and work
coordinating function.
 It controls & coordinates the activities of all the organization. INFORMATIONAL ROLE
 It prepares strategi c plans & policies for the enterprise. It also provides Monitor
direction. In the monitor role, the manager must establish and maintain information
 They also maintain the contacts with outside world. system; by building contacts both within and outside the organization and
MIDDLE LEVEL MANAGEMENT training staff to deliver information.
Disseminator
 The branch managers and departmental managers constitute middle level.
In the role of disseminator, the manager receives, interprets, and transmits
They devote more time to implement policies and strategies.
external information through the liaison role into the organization and
 They make plans for the sub-units of the organization.
internal information through the leader role between s ubordinates.
 They interpret and explainpolicies from top level management to lower
Spokesman
level.
In the role of spokesperson, the manager disseminates the organization’s
 Theyalsosendimportantreportsandotherimportantdatatotoplevel
information into the general public, such as customers, suppliers,
management.
government and the press.
 They are also responsible for inspiring lower level managers towards DECISIONAL ROLE
better performance. Entrepreneur
LOWER LEVEL MANAGEMENT In the entrepreneur role, the manager initiates and plans the controlled
 Lower level is also known as supervisory / operative level of management. change in the organization through exploiting opportunities or solving
 It consists of supervisors, foreman, section officers, superintendent etc. problems and taking action to improve existing operation.
 They are responsible for the quality as well as quantity of production. Disturbance Handler
 They communicate workers problems, suggestions, and other In the disturbance handler role, the manager reacts to spontaneous situ
recommendation etc. to the higher level and higher level goals and ations and unpredictable events which pose threats to the organization and
objectives to the workers. must take action to correct the situation.
 They help to solve the grievances of the workers. Resource Allocator
 They are responsible for providing training to the workers. In the resource allocator role, the manager decides where the organization
 They arrange necessary materials, machines, tools etc. for getting the will expand its efforts and makes choices o n the allocation of resources such
things done. as capital fund, time, materials and manpower.
 They prepare periodical reports about the performance of the workers. Negotiator
 They ensure discipline in the ent erprise as well as motivate workers. In the negotiator role, the manager negotiates on behalf of the organization
with other individuals or organizations for a new sales contract or
cooperation agreement.
ROLESOFMANAGER . asperMintzberg. OR
These roles can be grouped into three categories MANAGERIAL SKILLS/MANAGEMENT SKILLS

 Interpersonalrole
Conceptual Skills
 A conceptual skill is related with top level management.
 It includes analytical, creative and initiative skills.
 It helps the manager to fix goals or objective for whole organization and
plan for every situation.
 According to Prof. Daniel Katz, Conceptual skills are mostly required by
the top level management because they spend more time in planning,
organizing and problem solving.
Human Skills:
 Human relations skills are also called Interpersonal skills and it is
related with middle level management.
 It is an ability to work with people.
 Manager also lead, motivate, direct, communicate and develop team
spirit.
 Human relations skills are required by all managers at all levels of
management.
Technical Skills:
 It is capacity to use the differ ent tools / machinery and techniques in
an area in which a person is specialized.
 Technical skills required particularly with lower level management.
CLASSICAL APPROACH TO MANAGEMENT
The history and theory of management are important to managers for
various reasons:
 They help managers understand current developments and avoid
mistakes of the past
 They foster an understanding and appreciation of current situations
and developments and facilitates the prediction of future conditions
 They help managers organize information and approach problems
systematically. Without knowledge of theory, managers would be using
guess work, hunches, intuition and hopes which may not be useful in
the present complex and dynamic organization.
CLASSICAL MANAGEMENT THEORY
Classical theory is divided into scientific management and administrative
management.
Scientific management theory: Changes in economic and production
patterns during the industrial revolution led a few practicing managers to
examine the causes of inefficiency in production. It is these basic studies
that led to a system of management known as scientific management.
Scientific management has been defined as the application of scientific
method of study, analysis and problem solving in organizations.
SCIENTIFIC APPROACH OF MANAGEMENT GIVEN BY F. W. TAYLOR.
Frederick Winslow Taylor (1856-1915) is considered “father of scientific
management”, in other words, it is a classical management approach that
emphasizes the scientific study of work methods to improve the efficiency
of the workers.
Elements of scientif ic approach given by F.W. Taylor:
 Scientific Task Planning: Scientific task planning is all about the total
amount of work an average worker can do during a day under normal
conditions. Management should decide in advance what work is to be
done, by whom, where and when.
 Time Study: The time study indicates that minimum time required
finishing a particular job. The time study would indicate the time taken
by workers to finish particular job is being recorded first and this
information is being used to devel op standard time.
 Motion study: Motion study is useful to find out best order of activity
to do a particular job.
 Functional Foremanship: In order to achieve better production control,
Taylor has given the concept of foremanship. Where the factory has divi
ded into various department. And each department has in-charge of
specialist. These functional foremanshipplayingroleofspecialist and
provideexpertadvicetoworkers.
 Standardization:InscientificManagementstandardshavetobesetwellin
advance forthetask,materials,workmethod,quality,time,andcostand
workingcondition etc. this helps in simplifying the process of production
and which reduce waste, improvequalityof product andmaximum
utilization ofavailable resources.
 Differential piece rate system: In order to motivate workers, incentive based
wage system has been developed. This concept of piece rate system is
based on competence of workers. The competent workers are paid
more wages than incompetent one. It also encou rages incompetent
workers to improve their performance and achieve their standards.
LIMITATIONS OF SCIENTIFIC APPROACH OF MANAGEMENT GIVEN BY F. W.
TAYLOR
 Unfair mechanism: Scientific Management main objective is to increase
workers’ productivitybut management didnot share thebenefitsof
increasedproductivity with workers.
 Depersonalized Work: Scientific management everything is standardized. In
short, workershavetodoworkrepeatedly.Thesegeneratemonotonyand
boredom.
 Un-psychological: In scientific Management there is no specific information
given thathowwagesshouldbedistributedasaresultitbecomesun-
psychological.
 Unoriginal:F.W.Taylor has copied this approach from someone else’s
approach.
 Unrealistic: F.W.Taylor has not believed in motivation, financial needs also.
That is the reason why this concept is unrealistic
BUSINESS OPERATION GIVEN BY HENRY FAYOL.
BUSINESS OPERATION:
According to Fayol, the business operations of an organization could be
divided into six activities.
Technical: producing and manufacturing products.
Commercial: Buying, selling and exchange.
Financial: Search for an optimal use of capital.
Security: protecting an employees and property.
Accounting: recording and taking stick of costs, profits and liabilities, maintain
balance sheets, and compilingstatistics.
Managerial:planning,organizing,commanding,coordinatingandcontrolling.
Fayolidentifiedfivemajorfunctions:Fayolhasidentifiedfivemajorfunctions:
planning, organizing, commanding, coordinating and controlling. Fayol’s five
management
HENRY FAYOL’S FOURTEEN PRINCIPLES OFMANAGEMENT
Division of work: According to Henry Fayol work should be divided and subdivided
with various individual according to their expertise skills and knowledge in a
particular area. With division of work it helps individual in acquiring speed, accuracy
in his performance. Specialization leads to effici ency and effectiveness for
organization.
AuthorityandResponsibility:theconceptofauthorityandresponsibilityareclosely
related. Authority was defined by Fayol as the right to give orders and powers to
matchduty. Responsibilityinvolvesbeing accountable,andisthereforenaturally
associatedwithauthority.Whoeverassumesauthorityalsoassumesresponsibility.
Unity of command: Subordinates should receive orders and be answerable to one
and only one boss at a time. In other words, subordinates should not receive
instructions from more than one person. Unity of command provides the
enterprise of disciplined, stable and orderly existence. It creates harmonious
relationship between superiors andsub-ordinates.
Unity ofDirection: the entire organization shouldbe moving towards a common
direction.Accordingtothisprinciple,effortsofallthemembersoftheorganization
should be directed towards common goal.
Subordination of Individual Interests to the General Interests: The interests of one
personshouldnottakepriorityovertheinterestsoftheorganizationasawhole.
Equity: Equity means all employees should be treated in organization as equally as
possible. Equity is combination of fairness, kindness and justice.
Order: this principle is concerned with proper and systematic arrangement of things
and people. Arrangement of things is called material order and people are called
socialorder. Materialorder –thereshould besafe,appropriateandspecificplace
foreverymaterialormachinery.Socialorder–selectionandappointmentofmost
suitable person on the right place. In short, right person at right place.
Scalar Chain: Managers in hierarchies are part of a chain like authority scale. Each
manager, from the first line supervisor to the president, possesses 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 cha in and adherence to it are
necessary if the organization is to be successful.
Discipline: According to Fayol, “Discipline means sincerity, respect of authority and
observance of rules and regulation of the enterprise”. This principle applies that
subordinate should respect their superiors and obey their order.
Initiative:Workersshouldbeencouragedtotakeinitiativeintheworkassignedto
them. Fayol advised to them. Fayol advised that management should provide
opportunity to its employees to suggest ideas, experiences and new method of
work.
Fair remuneration:Fayolsuggestedthatremuneration to bepaidto theworkers
should be fair, reasonable, satisfactory and rewarding of the efforts. As far as
possible remuneration should satisfy employer as well as employee. Fayol also
recommended provision of other benefits such as free education, medical
and residential facilities toworkers.
Stability: Fayol emphasized that employees should not be moved frequently, from
one job toanother.
StabilityofTenureofPersonnel:Retainingproductiveemployeesshouldalwaysbe a
highpriorityofmanagement.RecruitmentandSelectionCosts,aswellasincreased
product-reject rates are usually associated with hiring new workers.
Espirit de Corps: Management should encourage harmony and general good feelings
among employees.
NEO-CLASSICAL THEORY OF MANAGEMENT
While the scientific management theorists were more concerned with the
mechanics and structure of organization, the human relations school of
thought was more concerned with the human factor i.e. people and their
relationship with the organization, fellow workers and the job.
The emergence of industrial psychology in 1913 provided the impetus in the
studies on human problems in organizations.
The works of Elton Mayo (1880 – 1949).
Elton was an Australian practicing psychologist at Harvard University. He
carried out experiments at the Hawthorne Plant of Western Electric over a
period of time and his findings can be summarized as follows:-
 Individual workers cannot be treated in isolation but must be seen as
members of a group.
 The need to belong to a group and have status within it is more
important than monetary incentives or good working conditions.
 Informal groups at work exercise a strong influence over the behaviour
of workers.
 Supervisors need to be aware of these social needs and cater for them
if workers are to collaborate with the official/formal organization rather
than work against it.
DOUGLAS MCGREGOR (1967)
Like Schein’s classifications, McGregor’s theory X and theory Y are a set of
assumptions about people. After observing the actual practice of managers,
he proposed that they were operating on two levels.
THEORY X
 The average person has an inherent dislike for work and will avoid it if
possible.
 Because of dislike for work, people must be coerced, controlled,
directed and threatened with punishment to get them to work.
 The average human being prefers to be directed, wishes to avoid
responsibility, has limited ambition and wants security above all else.
THEORY Y
 The use of physical and mental effort in work is as natural as play or
rest.
 People will exercise self-direction and self control in the service of
objectives to which they are committed.
 Commitment to objectives is a function of the rewards associated with
achievement.
 The average human being learns under proper conditions not only to
accept but to seek responsibility.
 The capacity to exercise a relatively high degree of imagination,
ingenuity and creativity in the solution of organizational problems is
widely and not narrowly distributed.
 Under conditions of modern industrial life, the intellectual potentialities
of the average human being are only partially utilized.
Conclusions
 Attitudes and behaviour towards other people are a reflection of the
assumptions we make about people.
 McGregor’s theory X corresponds closely to Schein’s rational-economic
man, while theory Y corresponds to self-actualizing man.
 McGregor’s assumptions have found wide application in issues of
leadership than in general management.
 Based on these assumptions, managers should consider seriously
practices such as flexibility in working time, job enrichment,
performance appraisal, participation etc.
 In real life, a blend of the two assumptions can be observed.
SIX TYPES OF BUSINESS ORGANIZATIONS
1. Sole Proprietorship
A sole proprietorship, also known as a consultant, independent contractor, or
freelancer is a business owned by a single person. Sole proprietorships are
“the most common form of business organization" (Beatty, 2006, p. 755).
Pros and cons of a Sole Proprietorship
PROS
 Simplicity in retirement plans
 Easiest form of business to set up and dissolve
 Avoids the expense of forming a partnership or corporation
 Not required to file a separate tax return (although it will be on a
separate schedule)
 No need to register with the government (a few states and local
governments require sole proprietorships to possess a business license)
CONS
 You are on your own
 Unlimited personal liability for all debts of the business
 Limited financing options (cannot raise capital from outside investors)
 Self-employment taxes of 15.3% on the first $106,800 of earnings
 Business dissolves when owner dies or sells rights to business (new
owner must start new sole proprietorship)
2. GENERAL PARTNERSHIP
A general partnership is formed with two or more partners as business co-
owners.
PROS AND CONS OF A GENERAL PARTNERSHIP
PROS
You have someone to assist you in business matters allowing more time
away from the business
Partners provide additional financial backing as opposed to going it alone in a
sole proprietorship.
Simplicity and flexibility
CONS
Loss of total control resulting in decision making being done by the team
instead of by the individual
Each of the partners will have unlimited personal liability for all debts of the
business
Business income and expenses reported on a separate tax return
3. LIMITED PARTNERSHIP
A limited partnership is a partnership formed by two or more people having
at least one general partner and one limited partner.
Pros and cons of a Limited Partnership
Pros
Limited liability for limited partner
Easy to form
Perpetual existence – business continues as partners come and go
Only one partner is required to be a general partner
Cons
Selling of one’s partnership interest is only allowed if the partnership
agreement permits it.
Reinvested profits are taxed at the owners’ highest marginal tax rate
Sharing profits with others
Greater expense to form than a general partnership
General partners liable for debt
“C" CORPORATION
“C" corporation characteristics in regards to:
Liability - When choosing a form of business, the major legal consideration is
limited liability protection. The business owner(s) are only liable for the
capital they have invested and not their personal property.
Income taxes – Your salary is deductible as a business expense and
shareholders’ dividends are taxed at a 15% “qualified dividends" tax rate.
Perez states:
The lowest tax bracket for a C-Corp is the 15% bracket that goes from zero to
$50,000. It may be possible to manage your small business finances so that
your corporation will never pay more than 15% in taxes. (2009, p.3 ¶ 2)
Longevity or continuity of business – Relative ease of transferring shares and
adding shareholders means selling your business, bringing in a new business
partner, or transferring ownership to your children is easier than with a
partnership or sole proprietorship.
Control – Management is separate from shareholders. Managers don’t have
any ownership responsibilities and shareholders don’t take on any
management responsibilities. This separation keeps liabilities from poor
management decisions from depleting shareholder's personal assets.
Profit retention – Only “C" corporations can split profits between dividends
and retained earnings.
Pros
Limited liability
Greater flexibility than a “S" corporation
Multiple classes of stock
No restrictions on eligible owners
Some states have no corporate tax
Section 179 expensing election considerably lucrative (“S" corporations are
limited to just one amount)
Unlimited number and type of shareholders – beneficial when planning a
stock offering or requiring many investors
Ease of selling or transferring stock
Some states require no disclosure of corporate owners
Tax-free accident and health insurance to the employee
Perpetual existence – business can continue without their founders
May elect to use a fiscal instead of a calendar tax year (ability to shift income
between taxable years)
CONS
Double taxation - profits taxed at the corporate level and dividends at the
shareholders level
Greatest startup cost (incorporation fees, etc.)
Greatest cost of filing yearly-required paperwork (taxes, business license,
etc.)
S" CORPORATION
An “S" corporation is a “C" corporation that has elected for “S" corporation
tax status. With an “S" corporation, you receive the limited liability of a
corporate shareholder with the benefit of paying taxes as a sole proprietor or
partner.
Pros and cons of an “S" Corporation
Pros
Limited liability
Pass-through of losses - corporate losses can pass through to shareholders
unlike in a “C" corporation (no double taxation)
No federal income taxes
No shareholder FICA tax on net income (unlike self-employment taxes of
15.3% on the first $106,800 of earnings for a sole proprietorship)
Perpetual existence – business can continue without their founders
Simpler than a “C" corporation
Cons
Subject to some of the same requirements of “C" corporations (keep
corporate minutes, hold shareholders and directors meetings, allow votes on
major corporate decisions by shareholders)
Must maintain financial exclusivity between private and corporate holdings
to avoid personal financial liability
State corporate income tax return may need to be filed
Must have at least one shareholder
Limited to a maximum of 100 shareholders (no foreign shareholders)
All shareholders must agree to the election of “S" corporation status
There can only be issuance of common shares which can limit capital raising
efforts
All gains and losses must be passed through to the shareholder's stock stake
in the company proportionately
Annual state franchise fee or tax
Less flexibility than a “C" corporation
Must use calendar year for tax reporting purposes (few exceptions)
LIMITED LIABILITY COMPANY
A limited liability company (LLC) is a hybrid between a partnership and
corporation.
Pros and cons of a Limited Liability Company
Pros
Limited liability
Hybrid between a partnership and corporation
Owners can report their share of profits or losses on their individual tax
returns
Can utilize pass-through taxation (if the owners decide to treat the LLC as a
sole proprietorship or a partnership)
Distribution of earnings among members is flexible - profits and losses don’t
have to be distributed in proportion to ownership
Can be managed by owner or outside manager
Can be single owner (a few states require more than one owner)
Cons
Generally required by state law to have written operating agreements -
rights and duties of the members much like a partnership agreement
Limited tax benefits versus sole proprietorship or general partnership
No perpetual existence (most states require the operating agreements of an
LLC to set a limit to the company’s existence.)
Requirements must be met to sell ownership interests
PUBLIC SECTOR
The public sector is that part of a country’s economy that is effectively
controlled by the government. This includes central government, state
government as well as local government bodies. The public sector includes
public companies, entities and public enterprises and services. An excellent
example of the public sector is the Indian Railways. The Indian railway system
is 100% owned and managed by the state.
 Departmental Organisation
 Public/ Statutory Organisation
 Government Organization
DEPARTMENTAL ORGANISATION
In this form of organisation, the public enterprise is run by a department of
the government. So they are an extension of the ministry of the government
itself. They are not independent entities but are a vital part of the
functioning of the government.
Departmental organisations are allocated a budget made by the legislature.
The revenue from all these enterprises goes into the Treasury of the country.
Usually, there are some very strict accounting controls applicable to them.
They must also be audited by the appropriate authorities every year.
PUBLIC ORGANISATION or Statutory Organisation
Statutory organisations or corporations come into existence by an Act of the
Parliament. This act will define the power, functions, responsibilities and the
rules and regulations of the corporation. Even the management structure will
be defined by the Act.
Such corporations are autonomous bodies under the law. They have full
organisational and financial control over the commercial activity that they
deal in. There will be a well-represented Board of directors and an elected
chairman or director. The employees of such an organisation are not
considered as civil servants.
While statutory corporations are fully owned by the state, they are
independently financed. The government may have to provide the startup
capital, but the corporation can borrow funds, from the government or even
in some cases from the public. The revenue that it earns is also at its disposal
to reinvest.
GOVERNMENT ORGANISATIONS
These are public sector companies, incorporated under the Companies Act
2013. They are formed purely for business reasons and are commercial
concerns. The composition is so that the government (centre, state or local)
owns a minimum of 51% of the company and its shares.
Government organisations are a separate legal entity. They can sue and be
sued. They can hold assets and properties in its
An example of this is the State Bank of India.
MASLOW’S HIERARCHY OF NEED THEORY. List and explain the qualities of a good leader.
Qualities of a good leader
Proactive vs. Reactive: The exceptional leader is always thinking three steps
ahead. Working to his/her own environment with the goal of avoiding problems
before they arise.
Flexible/Adaptable
Howdoyouhandleyourselfinunexpectedoruncomfortablesituations? An
effective leaderwilladapt tonewsurroundingsandsituations,doinghis/herbest
toadjust.
AGoodCommunicator:Asaleader,one must listen...a lot! Youmust be willing to
work to understand the needs and desires of others. A good leader asks many
questions, considers all options, and leads in the right direction.
Respectful: Treating others with respect will ultimately earn respect.
Quiet Confidence: Be sure of yourself with humble intentions.
Enthusiastic: Excitement is contagious. When a leader is motivated and excited
about the cause people will be more inclined to follow.
Open-Minded: Work to consider all options when making decisions. A strong leader
will evaluatetheinputfromallinterestedpartiesandworkforthebettermentofthe
whole.
Physiological Needs: Resourceful: Utilize the resources available to you. If you don't know the answer
Physiological needs are those required to sustain life, such as: to somethingfindoutbyaskingquestions.Aleadermustcreateaccesstoi
air nformation.
water Rewarding: An exceptional leader will recognize the efforts of others and
nourishment reinforce those actions. We all enjoy being recognized for our actions!
sleep Well Educated: Knowledge is power. Work to be well educated on community
According to Maslow's theory, if such needs are not satisfied then one's motivation policies, procedures, organizational norms, etc. Further, your knowledge of
will arise from the quest to satisfy them. Higher needs such as social needs and issues and information will only increase your success in leading others.
esteem are not felt until one has met the needs basic to one's bodily functioning. OpentoChange:Aleaderwilltakeintoaccountallpointsofviewandwillbewillingto
Safety changeapolicy,program,culturaltraditionthatisoutdated,ornolongerbeneficial
Once physiological needs are met, one's attention turns to safety and security in to the group as a whole.
order tobefreefromthethreatofphysicalandemotionalharm.Suchneedsmight Interested in Feedback: How do people feel about your leadership skill set? How
befulfilled by: can youimprove? Theseareimportantquestionsthataleaderneedstoconstantly
Living in a safe area askthe chapter. View feedback as a gift to improve
Medical insurance Evaluative: Evaluation of events and programs is essential for an organization/group
Job security to improve and progress. An exceptional leader will constantly evaluate and
Financial reserves change programs and policies that are not working.
According to Maslow's hierarchy, if a person feels that he or she is in harm's way, Organized: Are you prepared for meetings, presentations, and events and
higher needs will not receive much attention. confident that people around you are prepared and organized as well?
Social Needs Consistent: Confidence and respect cannot be attained without your leadership
Once a person has met the lower level physiological and safety needs, higher being consistent. People must have confidence that their opinions and thoughts will
level needs become important, the first of which are social needs. Social needs be heard and taken intoconsideration.
are those related to interaction with other people and may include: Delegator: An exceptional leader realizes that he/she cannot accomplish everything
Need for friends on his own. A leader will know the talents and interests of people around
Need forbelonging him/her, thus delegating tasks accordingly.
Need to give and receive love Initiative:Aleadershouldworktobethemotivator,aninitiator.He/shemustbea
Esteem key element in the planning and implementing of new ideas, programs, policies,
Onceapersonfeelsasenseof"belonging",theneedtofeelimportantarises. events
Esteem needs may be classified as internal or external. Internal esteem needs are
those related to self-esteem such as self-respect and achievement. External esteem WHAT IS PLANNING?
needs are those such as social status and recognition. Some esteem needs are:
Self-respect Planning is deciding what objectives to accomplish, the actions to be taken in
Achievement order to achieve them, the organizational position assigned to do them and
Attention who would be responsible for the actions needed.
Recognition
Reputation EXPLAIN THE CHARACTERISTICS (NATURE, PRINCIPLES) OF PLANNING .
Maslow later refined his model to include a level between esteem needs and Planning is goal-oriented.
self- actualization: the need for knowledge and aesthetics. Planning is made to achieve desired objective of business.
Self-Actualization Thegoalsestablishedshouldgeneralacceptanceotherwiseindividualefforts&
Self-actualization is the summit of Maslow's hierarchy of needs. It is the energies will go misguided and misdirected.
quest of reaching one's full potential as a person. Planningidentifiestheactionthatwouldleadtodesiredgoalsquickly&
fully satisfied; as one grows psychologically there are always new economically.
It provides sense of direction to various activities. E.g. Maruti Udhyog is
opportunities to continue to grow.
trying to capture once again Indian Car Market by launching diesel models.
Self-actualized people tend to have needs such as: Planning is lookingahead.
Truth Planning is done for future.
Justice It requires peeping in future, analyzing it and predicting it.
Wisdom Thus planning is based on forecasting.
Meaning A plan is a synthesis of forecast.
Self-actualized persons have frequent occurrences of peak experiences, which It is a mental predisposition for things to happen in future.
are energized moments of profound happiness and harmony. According to Planning is an intellectual process.
Maslow, only a small percentage of the population reaches the level of self - Planning is a mental exercise involving creative thinking, sound judgment and
actualization. imagination.
It is not a mere guesswork but a rotational thinking.
A manager can prepare sound plans only if he has sound judgement, foresight
and imagination
Planning is always based on goals, facts and considered estimates.
Planning involves choice & decision making.
Planning essentially involves choice among various alternatives.
Therefore, if there is only one possible course of action, there is no need
planning because there is no choice.
Thus,decisionmaking isanintegralpartof planning.
A manager is surrounded by no. of alternatives. He has to pick the best depending
upon requirements & resources of the enterprises.
Planningistheprimaryfunctionofmanagement/ PrimacyofPlanning.
Planning lays foundation for other functions of management.
It serves as a guide for organizing, staffing, directing and controlling.
Allthefunctionsofmanagementareperformedwithintheframeworkofplanslaid
out.
Therefore planning is the basic or fundamental function of management.
Planning is a Continuous Process.
Planning isaneverending functiondue tothe dynamicbusinessenvironment.
Plansarealsopreparedforspecificperiod of time andat theendofthat period,
plans aresubjectedtorevaluationandreviewinthelightofnewrequirementsand
changing conditions.
Planning never comes into end till the enterprise exists issues, problems may
keep cropping up and they have to be tackled by planning effectively.
Planning is allPervasive.
It is required at all levels of management and in all departments of enterprise.
Of course, the scope of planning may differ from one level to another.
The top level may be more concerned about planning the organization as a
whole whereas the middle level may be more specific in departmental plans and
the lower level plans implementation of the same.
Planning is designed for efficiency.
Planning leadsto accomplishment of objectivesat theminimumpossiblecost.
It avoids wastage of resources and ensures adequate and optimum utilization
of resources.
A plan is worthless or useless if it does not value the cost incurred on it.
Therefore planning must lead to saving of time, effort and money.
Planningleadstoproperutilizationofmen,money,materials,methodsand
machines.
Planning is Flexible.
Planning is done for the future.
Since future is unpredictable, planning must provide enough room to cope with
the changes in customer’s demand, competition, govt. policies etc.
Under changed circumstances, the original plan of action must be revised and
updated to make it morepractical
EXPLAIN THE IMPORTANCE (ADVANTAGES) OF PLANNING .
Planning facilitates management by objectives.
Planning begins with determination of objectives.
It highlights the purposes for which various activities are to be undertaken.
In fact, it makes objectives more clear and specific.
Planning helps in focusing the attention of employees on the objectives or
goals of enterprise.
Without planninganorganizationhasno guide.
Planning compels manager to prepare a Blue-print of the courses of action to
be followed for accomplishment of objectives.
Therefore, planning brings order and rationality into the organization.
Planning minimizes uncertainties.
Business is full of uncertainties.
There are risks of various types due to uncertainties.
Planning helps in reducing uncertainties of future as it involves anticipation of
future events.
Although future cannot be predicted with cent percent accuracy but planning
helps management to anticipate future and prepare for risks by necessary
provisions to meet unexpected turn ofevents.
Therefore with the help of planning, uncertainties can be forecasted which
helps in preparing standbysas aresult, uncertainties are minimizedtoagreat
extent.
Planning facilitatesco-ordination.
Planning revolves around organizational goals.
All activities are directed towards common goals.
There is an integrated effort throughout the enterprise in various departments
and groups.
It avoids duplication of efforts. In other words, it leads to better co -ordination.
Ithelpsinfindingoutproblemsofworkperformanceandaimsatrectifyingthe
same.
Planning improves employee’s moral.
Planning creates an atmosphere of order and discipline in organization.
Employees know in advance what is expected of them and therefore conformity can
be achieved easily.
Thisencouragesemployeestoshowtheirbestandalsoearnrewardforthesame.
Planning creates a healthy attitude towards work environment which helps in
boosting employees moral andefficiency.
Planning helps in achieving economies.
Effective planning secures economy since it leads to orderly allocation of resources
to various operations.
Italsofacilitatesoptimumutilizationofresourceswhichbringseconomyin
operations
It also avoids wastage of resources by selecting most appropriate use that
will contribute to the objective of enterprise. For example, raw materials can be
purchased inbulkandtransportation costcanbeminimized.Atthesametimeit
ensuresregular supply for the production department, that is, overall efficiency.
Planning facilitates controlling.
Planningfacilitatesexistenceofcertainplanned goalsandstandardof
performance.
It provides basis ofcontrolling.
Wecannotthinkofaneffectivesystemofcontrollingwithoutexistenceofwell
thought out plans.
Planningprovidespre-determined goalsagainst whichactual performance is
compared.
In fact, planning and controlling are the two sides of a same coin. If planning is
root, controlling is thefruit.
Planning provides competitiveedge.
Planning provides competitive edge to the enterprise over the others which do
not have effective planning. This is because of the fact that planning may involve
changing in work methods, quality, quantity designs, extension of work, redefining
of goals, etc.
Withthehelpof forecastingnot onlythe enterprisesecuresitsfuturebutat the
same time it is able to estimate the future motives of its competitor which
helps in facing future challenges.
Therefore, planning leads to best utilization of possible resources, improves quality
of production and thus the competitive strength of the enterprise is improved .
Planning encourages innovations.
Intheprocess ofplanning,managershavetheopportunities ofsuggesting ways
and means of improvingperformance.
Planningisbasicallyadecisionmakingfunction whichinvolvescreativethinking
and imagination that ultimatelyleads to innovation ofmethodsandoperations
forgrowth and prosperity of the enterprise.
PROCESS (STEPS) OFPLANNING
1. Establishment ofobjectives
Planning requires a systematic approach.
Planning starts with the setting of goals and objectives to be achieved.
Objectives provide a rationale for undertaking various activities as well as
indicate direction of efforts.
Moreoverobjectivesfocustheattentionofmanagersontheendresultstobe
achieved.
As a matter of fact, objectives provide nucleus to the planning process.
Therefore, objectives should be stated in a clear, precise and unambiguous
language. Otherwise the activities undertaken are bound to be ineffective.
As far as possible, objectives should be stated in quantitative terms. For
example, Number of men is working, wages given, units produced, etc. But
such an objective. cannot be stated in quantitative terms like performance
of quality control manager, effectiveness of personnelmanager.
Such goals should be specified in qualitative terms.
Henceobjectives shouldbe practical,acceptable, workableandachievable.
2. Establishment of PlanningPremises
Planningpremisesaretheassumptionsaboutthe livelyshapeofeventsinfuture.
They serve as a basis of planning.
Establishment of planning premises is concerned with determining where one
tends to deviate from the actual plans and causes of such deviations.
It is to find out what obstacles are there in the way of business during the
course of operations.
Establishmentofplanning premisesisconcerned to takesuch stepsthat avoid
these obstacles to a great extent.
Planning premises may be internal or external. Internal includes capital
investment policy, management labor relations, philosophy of management, etc.
Whereas external includes socio- economic, political and economic changes.
Internal premises are controllable whereas external are non- controllable.
3. Choice of alternative course of action
When forecast are available and premises are established, a number of
alternative course of actions have to be considered.
Forthispurpose,eachandeveryalternativewillbeevaluatedbyweighingitspros
and consin thelight of resources available and requirements of theorganization.
The merits, demerits as well as the consequences of each alternative must be
examined before the choice is being made.
After objective and scientific evaluation, the best alternative is chosen.
The planners should take help of various quantitative techniques to judge the stability
of an alternative.
4. Formulation of derivativeplans
Derivative plans are the sub plans or secondary plans which help in the achievement
of main plan.
Secondary plans will flow from the basic plan. These are meant to support and
expedite the achievement of basic plans.
Thesedetailplansincludepolicies,procedures,rules,programmes,budgets,
schedules, etc. For example, if profit maximization is the main aim of the
enterprise, derivative plans will include sales maximization, production
maximization, and cost minimization.
Derivative plans indicate time schedule andsequence of accomplishing various tasks.
5. Securing Co-operation
After the plans have be en determined, it is necessary rather advisable to
take subordinates or thosewho have to implement these plans into confidence.
The purposes behind taking them into confidence are :-
Subordinatesmayfeelmotivatedsincetheyareinvolvedindecisionmaking
process
The organization may be able to get valuable suggestions and improvement
in formulation as well as implementation of plans.
Also the employees will be more interested in the execution of these plans.
6. Follow up/Appraisal of plans
After choosing a particular course of action, it is put into action.
Aftertheselectedplanisimplemented,itisimportanttoappraiseitseffectiveness.
This is done on the basis of feedback or information received from
departments or persons concerned.
This enables the management to correct deviations or modify the plan.
This step establishes a link between planning and controlling function.
The follow up must go side by side the implementation of plans so that in the light
of observations made, future plans can be made more realistic.
TYPES OF PLANS
Plans are hierarchical. They range from the broad mission or purpose of the
organization to specific strategies.
SCOPE OF PLANS
Strategic plans - These are broad plans developed by top managers to guide
the general direction of the firm. They follow from major goals of the firm
and indicate what business the firm is in or what business it intends to be in.
They show where the firm will position itself within its environment.
Tactical plans - They have a moderate scope and immediate timeframe. They
are concerned with how to implement the strategic plans that are already
developed. They deal with specific resources and time constraints. They
mainly focus on people and action. They are mainly associated with middle
management.
OPERATIONAL PLANS
They have the narrowest focus and they fall into many types. They include:
Standing plan- these are developed to handle recurring and relatively
routine situations. When the same situations occur repeatedly, managers
have to develop policies, rules and standard operating procedures to control
the way employees perform their tasks.
Single use plans – are developed handle non-programmed decision making
in an unusual or unique situation, e.g. specific action plan to complete a
project or programme.
Long-range planning – covers several time periods from 5 years. They are
mostly associated with with activities such as major expansion of facilities,
development of top managers, change of manufacturing systems etc.Top
managers are responsible for long range planning (modernization of Kenyan
airports is a KAA long range plan driven by top management)
Intermediate planning – they are less than five years and because of the
uncertainty associated with long-range plans, intermediate plans are the
primary concern of most organizations. They are usually developed by both
top and middle management. They are the building blocks in the pursuit of
long range plans.
Short range planning – These cover time periods of one year or less. They
focus on day to day activities and provide a concrete base for evaluating
progress towards achievement of intermediate and long range plans e.g. the
economic survey.
Levels of planning
Planning takes place at three levels of management: corporate, business and
functional.
Corporate level strategy: The corporate level plan contains top management
decisions pertaining to the organization’s mission and goals, overall strategy
and structure. The corporate level strategy indicates the industry and
markets the organization intends to operate in. It also provides the
framework within which managers create their business level plan.
Business level strategy: states the methods the division or business it intends
to use to compete against its rivals in an industry. The business level plan
provides the framework within which functional managers propose to pursue
to help the division attain its business level goals which in turn will allow the
organization to avhieve its corporate goals.
Functional level strategy: These set out the actions managers intend to take
at the level of departments such as manufacturing, marketing, and research
and development to allow the organization to attain its goals.
Consistency across the three levels is important for success. Functional
strategies should be consistent with divisional goals while business goals
should in turn be consistent with corporate strategies.
Strategic planning
Strategic planning is the formalized long-range planning process used to
define and achieve organizational goals. It involves: selecting an
organizational goal, determining the policies and strategic programmes
necessary to achieve specific objectives, establishing the methods necessary
to ensure that policies and strategic programmes are implemented. A vital
component in strategic planning is organizational goals. They provide a sense
of direction for organizational activities. Goal includes purpose, mission and
objectives.
Characteristics of strategic plans
- deals with fundamentals of basic problems by providing answers
questions such as: what business should we be in? who are our
customers or who should they be?
- Provides the basis for detailed planning and the day to day
managerial decisions
- Involves a longer time-frame than other forms of planning
- It is a top management activity as they have the information
necessary for strategic decisions
- Helps integrate and unify the actions of the organization over
time
 - It provides guidance and boundaries for potential planning
MANAGEMENT BY OBJECTIVES (MBO)
MBO owes its importance to Peter Drucker (1954).
MBO is a comprehensive managerial system that integrates many key
managerial activities in a systematic manner, consciously directed towards
the effective and efficient achievement of Organization and individual
objectives.
MBO – is a technique designed to achieve the integration of individual and
organizational goals.
The process of MBO involves: -
 Planning premises should have support of top management and
subordinates should understand the process.
 Subordinates should have clear understanding of Org. purpose, mission,
goals and strategies.
 Initial discussion between managers and subordinates to formulate
goals.
 Check points established to measure progress.
 Evaluation of degree of goal attainment to analyze results achieved.
Benefits of MBO.
Better managing – MBO forces managers to think of planning for results
rather than merely planning for activities
 Clarify organization roles and structures. Forces managers to make use
of the people around them through delegation, decentralization to
work e.t.c.
 Encourages personal commitment:
 Clearly defined objectives encourage commitment as people know
exactly what is expected from them.
 People become masters of their own fate.
 Development of effective controls.
 Involves measuring results and taking action to correct deviations from
plans to ensure goals are reached.
 Improved communication because of the process of goal discussion
between managers and subordinates.
Weaknesses of MBO.
 Failure to teach the philosophy of MBO.
 Not all managers are familiar with MBO and may not be able to explain
it to subordinates.
 Failure to give guidelines to goal-setters.
 Cannot work if Org. goals, mission and purpose are not clear to the
managers who are expected to implement MBO. Managers need
planning premises – i.e. assumptions as to the future, knowledge of
major Org. policies.
 Difficulty of setting goals.
 Goal setting can be technical and complex, requires thorough
knowledge and study.
 Dangers of inflexibility.
 Managers are reluctant to change objectives or allow subordinates to
change them due to obsolescence.
MANAGEMENT BY EXCEPTION (MBE) is a method of control. Managers
intervene the work of employees only when they work outside the
prescribed scope or when they can't meet the standard. Manager leaves
employee free till they work within the scope and within they meet the
standard."
The key benefit of MBE is managers do not have to overlook all monitoring
procedures. They can concentrate on their core responsibilities and can only
respond to important deviations. This saves precious time and energy of the
management which benefits the overall organization in carrying out their
business. Delays in daily operations will not be hindered frequently. Also,
problematic issues can be identified more rapidly. Further, as employees are
given a task and less supervised, they are indirectly motivated by a self-
driven approach to attaining the given goals / tasks.
MBE has its disadvantages too:
1. Mistakes in calculations the budgets can lead to higher variances
and finding the root causes can be a time-consuming task.
2. Dependency on accounting department is too high, and the
probability of accurate forecasting is questionable.
3. Important decisions will be with senior management and
participation of employees is less. This can be a demotivating factor.
CHARACTERISTICS (NATURE, PRINCIPLES) OF ORGANIZING
Identifying and Enumerating the Activities: After the objective is selected,
the management has to identify total task involved and its break -up
closely related component activities that are to be performed by and
individual or division or a department.
Assigning the Duties: When activities have been grouped according to similarities
and common purposes, they should be organized by a particular department.
Within the department, the functional duties should be allotted to particular
individuals.
Defining and Granting the Authority: The authority and responsibility should
be well defined and should correspond to each other. A close relationship
betweenauthority and responsibility should be established.
Creating Authority Relationship: After assigning the duties and delegations of
authority, the establishment of relationship is done. It involves deciding who will
a ct under whom, whowillbehissubordinates,whatwillbehisspanofcontroland
what will be his status in the organization. Besides these formal relationships,
someinformalorganizations should also bedeveloped.
Specialization and division of work: The entire philosophy of organization is
centered on the concepts of specialization and division of work. The division of
work is assigning responsibility for each organizational component to a
specific individual or group thereof. It becomes specialization when the
responsibility for a specific task lies with a designated expert in that field. The
efforts of the operatives are coordinated to allow the process at hand to
function correctly. Certain operatives occupy positions of management at
various points in the process to ensure coordination.
Orientation towards goals: Every organization has its own purposes and
objectives. Organizing is the function employed to achieve the overall goals of the
organization. Organization harmonizes the individualgoals of the employees with
overallobjectives of the firm
Composition of individuals and groups: Individuals form a group and the groups
form an organization. Thus, organization is the composition of individual
and groups. Individuals are grouped into departments and their work is
coordinated and directed towards organizational goals.
Continuity: An organization is a group of people with a defined relationship in
which they work together to achieve the goals of that organization. This
relationship does not come to end after completing each task. Organization is a
neverendingprocess.
IMPORTANCE (ADVANTAGES) OFORGANIZING
Facilitated Administration and management:
 Stimulates Creativity:
 Co-ordination in the Enterprises
 EliminatesOverlappingandDuplicationorwork:
 Helps to achieve organizational goal:
 Optimum use ofresources:
 To perform managerial function:
  facilitates growth and diversification:
 Humane treatment of employees:
PROCESS (STEPS) OFORGANIZING
Identification and Division of Work:
The first step of organizing is the identification and division of work. At this step,
the total work is divided into various activities.
Forexample,thevariousactivitiesofamobilephonemanufacturingcompanycan
be like this (i) purchase of raw material, (ii) purchase of manufa ctured parts,
(iii) Production, (iv) stocking of goods, (v) research, (vi) advertisement, (vii)
sales, (viii) financial arrangement (ix) maintenance of accounts, (x)
correspondence (xi) arrangement of employees,etc.
Departmentalization:
The departmentalization of activities starts once the various activities have
been designedto achieve the objectivesof the company. The activities ofthe same
nature are grouped together and assigned to a particular department (It is known
as grouping.) e.g., purchase of raw material, purchase of manufacturedparts, etc.
aregiven to the purchase department.
And productions, stocking the goods, research activities are given to the
production department. Similarly, advertisement and sales can be given to
the marketing department and the financial arrangements, maintenance of
accounts and correspondence can be put in the charge of finance department.
Assignment of Duties:
At this stage, the responsibility of each individual or post is decided, e.g., the
purchase manager will be given the task of purchasing goods, the sales manager will
be given the workofsaleofgoods,theadvertisingmanagerwillbegiventheworkof
advertisement and in the same way the finance manager will be given the
responsibility of making financial arrangements.
While assigning these duties, it is important to match the nature of the work and
the capabilities of the person to whom the work is given.
Establishing Reporting Relations:
When two or more than two persons work for the attainment of common goa ls
their interrelationshipmustbedefinedveryclearly.Everybodyshouldknowasto
whoishis superior and subordinate?
For example, the purchase manager will be the superior for all the employees of
the purchasedepartment;theywillreceiveordersfrom himandwillalsobe
responsibleto him.
CHARACTERISTICS (NATURE, PRINCIPLES) OF STAFFING
Staffing is a function of management: Staffing is one of the important functions of
management. Previously the staffing was considered as the part of the
organizing function but now it is considered as a separate and distinct function of
management and provides the due importance to the manning of the
organizational roles
Managerial Responsibility: Staffing is an integral part of the management process and
also it is the responsibility of every manager. In the large or big organization
staffing function is performed by the separate personnel department. It is the
duty of every manager to perform the staffing activities such as selection,
training, performance appraisal, and remuneration of the employees.
Affected by internal and external environment: The performance of the
staffing functiondependsuponboththeinternalandexternalfactors.Internal
factorsinclude the policies and rules of the company regarding the recruitment,
selection, promotion, and transfer of employees. Further the external factors
include the government policies and the education policies which affect the
demand a nd supply of the suitable manpower in theeconomy.
Concerned with the humanelement: Thefunction of staffing is concerned with
the recruitment and selection of the human resources. Additionally the human
relation skills are required for training, development, and performance appraisal of
the employees in theorganization.Soifthefunctionofstaffingisperformed
properlyitwillcertainlyhelp in improving the human relations in the
organization.
Staffing is a continuous function: Staffing function is continuously performed in
the establishedaswellasintheneworganization.Intheneworganizationthe
functionsof recruitment and selection are given more importance and in the
established organizations the functions of promotion, development, training ,
and the performance appraisal of the employees is given more importance. So
staffing is the continuous and neverendingprocessbecauseofthechangesinthe
workforceoftheorganization.
Purpose:Thepurposeofstaffingistoensurethattherightnumberandtherighttype
of thepeopleareworkingontherightjobsattherighttimeandrightplace.Its
objectiveis to ensure optimum and efficient manpower in the enterprise.
IMPORTANCE (ADVANTAGES) OF S TAFFING
Facilitating the availability of competent staff: The efficient performance of
the company depends upon the quality of the people employed. Staffing
discovers the efficientandtalentedstaffforthevariouspositionsinthe
organization,whichproveas an asset for the enterprise.
Optimum use ofhuman resources: Recruitment, selection, training, and
development of the human resources require a large amount of outlay and cost of
the companies. So for getting themaximum output from thepersonnel sta ffing
function is requiredto be performed in the efficient manner.
Development of human resources: Staffing adopts various measures to develop
the managers to their maximum sothat they canaccept more challenging jobs and
shoulder moreresponsibilities.Staffingtrainsanddevelopsthepersonnel'sforthe
futurejobs.
Motivating thehumanresources: Staff is placed onthejob, forwhichtheyarebest
suitable, which gives them sense of satisfaction and pleasure. Staffing also help
in determining the capability of employees for the promotions and the other
financial
non-financial incentives. So suitable incentives are provided to the employees
which motivates them to perform better at work.
Supplying the necessary information: Staffing provides the info rmation
regarding promotion,transfer,retirement,anddemotionofemployeesinthe
organization.This informationhelpsintakingvariousimportantdecisions
regardingtheemployees.
Ensuring the maximum productivity: Selection of the most suitable employee for
the every job provides the right men on the right job. This ensures the
maximum productivitywiththeminimumwastage.Staffingalsoincreasesthe
productivityofthe workers as they are placed on their best suited jobs.
PROCESS (STEPS) OFSTAFFING
Determining manpower requirement: The first step in the process of staffing is
to determine the number and type of manpower required in the
organization. In this complicated environment this determination is done by
the top management. The period for which the personnel's are required is also
determined. This determination of the manpower requirements is made after
considering the acquisition, utilization, improvement, and preservation of the
organization's human ass ets.
Recruitment and selection: In this step the acquisition of the most competent
and qualified staff to meet the manpower requirements is made. After this the
applicants are evaluated for the different positions. The best candidates are
selected and the right jobs are assigned to them.
Training and the development of the personnel: In this step the training and
developmentoftheemployeesisarrangedtosecuretheefficiencyofthe
operations. Trainingincreasestheefficiencyoftheemployeesandmakes them
morecompetent and useful for the organization.
Performance appraisal: Periodic evaluation of the employees is made to know
about their capabilities. This evaluation of the employees is made in the terms of
verifiable objectives.
Compensation: In this stepthe compensation and remuneration of the
employees or workers is determined. While determining the remuneration it is
considered that the personnel's should get the remuneration according to the
work done by them. Further, the incentives are also determined for motivating the
employees for performing better at work.
Job Changes: According to the needs of the enterprise the suitable employees
are promoted to the higher ranks.Alsoifthere is requirement the employeescan
alsobe shiftedfrom onejob to another with thesamelevelof responsibilities and
rank.
CHARACTERISTICS ( FEATURES, NATURE, PRINCIPLES) OF DIRECTING
Pervasive Function: Directing is required at all levels of organization. Every
manager provides guidance and inspiration to his subordinates
Continuous Activity: Direction is a continuous activity as it continuous throughout
the life of organization.
Human Factor:Directing function is related to subordinates andtherefore it is related
to human factor. Since human factor is complex and behavior is unpredictable,
direction function becomesimportant.
Creative Activity: Direction function helps in converting plans i nto
performance. Without this function, peoplebecome inactiveandphysical resources
aremeaningless.
Executive Function: Direction function is carried out by all managers and executives
at alllevelsthroughouttheworkingofanenterprise;asubordinate receives
instructions from his superioronly.
Delegate Function: Direction is supposed to be a function dealing with human
beings. Human behavior is unpredictable by nature and conditioning the
people’s behavior towards the goals of the enterprise is what the executive
does in this function. Therefore, it is termed as having delicacy in it to tackle
human behavior.
IMPORTANCE (ADVANTAGES) OFDIRECTING
It Initiates Actions: Directions is the function which is the starting point of the
work performance of subordinates. It is from this function the action takes
placed, subordinates understand their jobs and do according to the instructions
laid. Whatever are plans laid, can be implemented only once the actual work
starts. It is there that direction becomes beneficial.
It Ingrates Efforts: Through direction, the superiors are able to guide, inspire
and instruct the subordinates to work. For this, efforts of every individual
towards accomplishment of goals are required. It is through direction the
efforts of every department can be related and integrated with others. This
can be done through persuasive leadership and effective communication.
Integration of efforts bring effectiveness and stability in a concern.
Means of Motivation: Direction function helps in achievement of goals. A
manager makes use of the element of motivation here to improve the
performances of subordinates. This can be done by providing incentives or
compensation, whether monetary or non - monetary, whichserves as a “Morale
booster” to thesubordinates Motivation is also helpful for the subordinates to
give the best of their abilities which ultimately helps ingrowth.
It Provides Stability: Stability and balance in concern becomes very important for
long term sun survival in the market. This can be brought upon by the managers
with the help of four tools or elements of direction function - judicious blend
of persuasive leadership,effectivecommunication, strict supervisionandefficient
motivati on.Stability isveryimportantsincethatisanindexofgrowthofan
enterprise.Thereforeamanager canuseofallthefourtraitsinhimsothat
performancestandardscanbemaintained.
Copingupwiththechanges:Itisahumanbehaviorthat humanbeingsshow
resistance to change. Adaptability with changing environment helps in
sustaining planned growth and becoming a market leader. It is directing
function which is of use to meet with changes in environment, both internal
as external. Effective communication helps in coping upwiththe changes. It is
theroleof managerhere to communicatethe nature and contents of changes
very clearly to thesubordinates. This helps in clarifications, easy adaptionsand
smooth running ofanenterprise. Forexample, if aconcern shifts from
handlooms to power looms, an important change in technique of production
takes place.Theresultingfactorsarelessofmanpowerandmoreofmachinery.
Thiscanbe resisted by the subordinates. The manager here can explain that the c
hange was in the benefit of the subordinates. Through more mechanization,
production increases and thereby the profits. Indirectly, the subordinates
are benefited out of that in form of higher remuneration.
Efficient Utilization of Resources: Direction finance helps in clarifying the role of every
subordinate towards his work. The resources can be utilized properly only when less
of wastages, duplication of efforts, overlapping of performances, etc. don’t take
place. Through direction, the role of subordinates become clear as manager makes
use of his supervisory, the guidance, the instructions and motivation skill to
inspire the subordinates. This helps in maximum possible utilization of resources of
men, machine, materials andmoney whichhelps in reducing costs and increasing
profits.
CHARACTERISTICS (NATURE, PRINCIPLES) OF CONTROLLING
ControlisaManagerialProcess:Managementprocesscomprisesoffivefunctions, viz.,
planning, organizing, staffing, directing and controlling. Thus, control is part
of the process of management.
Control is forward looking: Whatever has happened has happened, and the
manager can take corrective action only of the future operations. P ast is relevant to
suggest what has gone wrong and how to correct the future.
Control exists at each level of Organization: Anyone who is a manager, has to involve
intocontrol–maybeChairman,ManagingDirector,CEO,Departmentalhead,or
first line manager. However, at every levelthe control will differ – top
management would be involved in strategic control, middle management into
tactical control and lower level into operationalcontrol.
ControlisaContinuousProcess:Controllingisnotthelastfunctionofmanagementbut
itisacontinuousprocess.Controlisnotaone-timeactivity,butacontinuous
process. The process of setting the standards needs constant analysis and
revision depending upon external forces, plans, and internal performance.
ControliscloselylinkedwithPlanning:Planningandcontrollingarecloselylinked.The
two are rightly called as ‘Siamese twins’ of management. “Every objective, every
goal, every policy, every procedure and every budget become standard against
which actu al performanceiscompared.Planningsets theship’scourseand
controllingkeepsiton course. When the ship begins to veer off the course, the
navigator notices it and recommends a new heading designed to return the
ship to its proper course. Once control process is over its findings are
integrated into planning to prescribe new standards for control
PurposeofControllingisGoalOrientedandhencepositive:Controlistherebecause
withoutit thebusinessmaygooffthetrack.Thecontrollinghasposit ivepurpose
both fortheorganization(to makethings happen)andindividuals (to giveupapart
oftheir independence for the attainment of organizational goals).
IMPORTANCE (ADVANTAGES) OFCONTROLLING
GuidestheManagement inAchievingPre-determinedGoals:Thecontinuous flow of
informationaboutprojectskeepsthelongrangeofplanningontherighttrack.It
helps in taking corrective actions in future if the performance is not up to the
mark.
Ensures Effective Use of Scarce and Valuable Resources: The control system helps in
improving organizational efficiency. Various control devices act as motivators
to managers. The performance of every person is regularly monitored and any
deficiency if present is corrected at the earliest. Controls put psychological
pressure on persons in the organization. On the other hand control also
enables management to decide whether employees are doing right things.
Facilitates Coordination: Control helps in coordination of activities through unity
of action.Everymanagerwilltrytocoordinatetheactivitiesofhissubordinatesin
orderto achieve departmental goals. Similarly the chief executive also
coordinates the functioning of various departments. The control acts as a check on
the performance and proper results are achieved only when activities are
coordinated.
Leads to Delegation and Decentralization of Authority: A decision about follow-
up actionisalsofacilitated. Controlmakes delegationeasier/better. Decentra
lizationof authority is necessary in big enterprises. The management cannot
delegate authority withoutensuringpropercontrol.Thetargetsorgoalsofvarious
departmentsareused as a control technique. Various control techniques like
budgeting, cost control; pre actionapprovalsetc.allowdecentralizationwithout
losingcontroloveractivities.
Spares Top Management to Concentrate on Policy Making: For control
processes management’s attention is not required every now and then. The
management by exception enables top management to concentrate on policy
formulation.
PROCESS (STEPS) OFCONTROLLING
Establish the Standards: Within an organization’s overall strategic plan,
managers define goals for organizational departments in specific, precise,
operational terms that include standards of performance to compare with
organizational activities. However, for some of the activities the standards
cannot be specific and precise. Standards, against which actual performanc e
will be compared, may be derived from past experience,statisticalmethodsand
benchmarking(baseduponbestindustry practices). As far as possible, the standards
are developed bilaterally rather than top management deciding unilaterally,
keeping in view the organization’s goals. Standards may be tangible (clear,
concrete, specific, and generally measurable) – numerical standards
monetary,physical,and time standards; and intangible
(relating to human characteristics) – desirable
attitudes, high morale , ethics, and cooperation.
Measure Actual Performance: Most organizations
prepare formal reports of performance measurements
both quantitative and qualitative (where quantification is not possible) that the
managers review regularly. These measurements should be relatedtothe
standardssetinthefirststepofthecontrolprocess.Forexample,ifsales growth is a
target, the organization should have a means of gathering and reporting sales
data. Data can be collected through personal observation (through management
by walking around the place where things are happening), statistical reports
(made possible by computers), oral reporting (through conferencing, one -to-one
meeting, or telephone calls), written reporting (comprehensive and concise,
accounting in formation
– normally a combination of all. To be of use, the information flow should be
regular and timely.
Compare Performance with the Standards: This step compares actual activities
to performance standards. When managers read computer reports or walk t
hroughtheir plants, they identify whether actual performance meets,
exceeds, or falls short of standards. Typically, performance reports simplify
such comparison by placing the performancestandardsforthereporting period
alongsidetheactualperformancefor thesameperiodandbycomputingthe
variance—thatis,thedifferencebetweeneach actualamountandtheassociated
standard.Themanagermustknowofthestandard permitted variation (both
positive and negative). Management by exception is most appropriate and
practical to keep insignificant deviations away. Timetable for the comparison
depends upon many factors including importance and complexity attached with
importance andcomplexity.
Take Corrective Action and Reinforcement of Successes: When performance deviates
from standards,managers must determine what changes,if any,are necessary and
how to apply them. In the productivity and quality -centered environment,
workers and managers are often empowered to evaluate their own work.
After the evalua tor determines the cause or causes of deviation, he or she
can take the fourth step — corrective action. The corrective action may be to
maintain status quo (reinforcing successes), correcting the deviation, or changing
standards. The most effective course may be prescribed by policies or may be
best left up to employees’ judgment and initiative. The corrective action may
be immediate or basic (modifying the standards themselves).
PRINCIPLES OF ORGANIZATION
Principle of unity of objectives: Organizational goals, departmental goals, and
individual goals must be clearly defined. All goals and objectives must have
uniformity. When there is contradiction among different level of goals desired
goals can’t be achieved. Therefore, unity of objectives is necessary.
Principleofspecialization: Soundandeffectiveorganization believes on
organization. The term specialization is related to work and employees. When an
employee takes special type of knowledge and skill in any area, it is known as
specialization. Modern business organization needs the specialization, skill and
knowledge by this desired sector of economy and thus, efficiency would be
established.
Principle of coordination: In an organization many equipment, tools are
used. Coordination canbeobtained by groupeffort that emphasizeonunity of
action.
Principleofauthority:Authorityisthekindofrightandpowerthroughwhichit
guides anddirectstheactionsofotherssothattheorganizationalgoalscanbe
achieved.Itis alsorelated with decision making. It is vested in particular position,
not to the person because authority is given by an institution and therefore it is
legal. It generally flows from higher level to lowest level of management.
Principleofresponsibility:Authenticbodyofanorganizationistoplevelmanagement,
top level management direct the subordinates. Departmental managers and
other personneltakethedirectionfromtoplevelmanagementtoperformthe
task.Authority is necessary to perform the work .only authority is not
provided to the people but
obligation is also provided. So the obligation to perform the duties and task is known
as responsibility. Responsibility can’t be delegated. It can’t be avoided.
Principle of delegation: Process of transferring authority and creation of
responsibility between superior and subordinates to accomplish a certain task is
called delegation of authority. Authority is only delegated, not responsibilities in
all levels of management. The authority delegated should be equal to
responsibility .
Principleofefficiency:Inenterprisedifferentresourcesareused.Theseresourcesmust
beusedineffectivemanner.Whentheorganizationfulfilltheobjectiveswith
minimum cost, it is effective. Organization must always concentrate on
efficiency.
Principleofunityofcommand: Subordinatesshouldreceiveordersfromsingle
superior at a time and all subordinates should be accountable to that superior.
More superior leads to confusion, delay and so on.
Principle of span of control: Unlimited subordinates can’t be supervised by
manager, this principle thus helps to determine numerical limit if subordinates to be
supervis ed by a manager. This improves efficiency.
Principle of balance: The functional activities their establishment and other
performances should be balanced properly. Authority, centralization,
decentralization mustbebalanceequally. Thisisverychallenging jobbutefficient
management must keep it.
Principle of communication: Communication is the process of
transformationof information from one person to another of different levels. It
involves the systematic and continuous process of telling, listening and
understanding opinions ideas, feelings, information, views etc, in flow of
information.
Principle of personal ability: For sound organization, human resources are
important. Employees must be capable. Able employees can perform higher.
Mainly training and developmentprogramsmustbeencouragedtodevelopthe
skillintheemployees.
Principle of flexibility: Organizational structure must be flexible considering
the environmental dynamism. Sometimes, dramatically change may occur in
the organization and in that condition, organization should be ready to accept the
change .
Principle of simplicity: This principle emphasizes the simplicity of
organizational structure, the structure if organization should be simple with
minimum number of levels do that its member an understand duties and
authorities
FORMAL ORGANISATION:
Whenthemanagersarecarryingonorganisingprocessthenasaresultoforganising
process an organisational structure is created to achieve systematic working
and efficient utilization of resources. This type of structure is k nown as formal
organisational structure.
Formal organisational structure clearly spells out the job to be performed by
each individual, the authority, responsibility assigned to every individual, the
superior - subordinate relationship and the designation of every individual inthe
organisation. This structure is created intentionally by the managers for
achievement of organisational goal.
Features of Formalorganisation:
The formal organisational structure is created intentionally by the process of organisi
ng.
Thepurposeofformalorganisationstructureisachievementoforganisational
goal.
Informalorganisational structure each individual is assigneda specificjob.
In formal organisation every individual is assigned a fixed authority or decision -
making power.
Formalorganisationalstructureresultsincreationofsuperior-subordinate
relations
Formal organisational structure creates a scalar chain of communication in
the organisation.
ADVANTAGES OF FORMALORGANISATION:
Systematic Working: Formal organisation structure results in systematic and
smooth functioning of anorganisation.
Achievement of Organisational Objectives: Formal organisational structure
is established to achieve organisational objectives.
NoOverlappingofWork:Informal organisationstructureworkissystematically
divided among various departments and employees. So there is no chance of
duplication or overlapping of work.
Co-ordination: Formal organisational structure results in coordinating the
activities of various departments.
Creation of Chain of Command: Formal organisational structure clearly defines
superior subordinate relationship, i.e., who reports to whom.
MoreEmphasison Work: Formal organisational structure lays more emphasis on
work than interpersonal relations.
DISADVANTAGES OF FORMALORGANISATION:
DelayinAction:Whilefollowingscalarchainand chain of commandactions getdelayed
in formal structure.
Ignores Social Needs of Employees: Formal organisational structure does not
give importance to psychological and social need of employees which may
lead to demotivation of employees.
EmphasisonWorkOnly:Formalorganisationalstructuregivesimportancetowork
only; it ignores human relations, creativity, talents, etc.
INFORMAL ORGANISATION
In the formal organisational structure individuals are assigned various job
positions. While working at those job positions, the individuals interact with
each other and develop some social and friendly groups in the organisation. This
network of social and friendly groups forms another structure in the
organisation which is called informal organisational structure.
The informal organisational structure gets created automatically and the main
purpose of such structure is getting psychological satisfaction. The existence
of info rmal structure depends upon the formalstructure because people
working at different job positions interact with each other to form informal
structure and the job positions are created in formal structure. So, if there is no
formal structure, there will be no job position, there will be no people working
at job positions and there will be no informal structure.
FEATURES OF INFORMALORGANISATION:
Informal organisational structure gets created automatically without any
intended efforts of managers
 Informal organisational structure is formed by the employees to get
psychological satisfaction.
 Informalorganisationalstructuredoes notfollow anyfixedpathofflow of
authorityor communication.
 Source of information cannot be known under informal structure as any
person can communicate with anyone in the organisation.
 The existence of informal organisational structure depends on the formal
organisation structure.
ADVANTAGES OF INFORMALORGANISATION:
Fast Communication: Informal structure does not follow scalar chain so there can
be faster spread ofcommunication.
Fulfills Social Needs: Informal communication gives due importance to
psychological and social need of employees which motivate the employees.
CorrectFeedback:Throughinformalstructurethetoplevel managerscanknowthe
real feedback of employees on various policies and plans.
Strategic Use of Informal Organisation. Informal organisation can be used to get
benefits in the formal organisation in the following way:
Theknowledgeofinformalgroupcan be usedto gathersupport ofemployees and
improve theirperformance.
Through grapevine important information can be transmitted quickly.
By cooperating with the informal groups the managers can skillfully take the
advantage of both formal and informal organisations.
DISADVANTAGES OF INFORMALORGANISATION:
Spread Rumors: According to a survey 70% of information spreads through
informal organisational structure are rumors which may mislead the employees.
No Systematic Working: Informal structure does not form a structure for
smooth working of anorganisation.
MayBringNegativeResults:Ifinformalorganisationopposesthepoliciesandchanges
ofmanagement,thenitbecomesverydifficult toimplement theminorganisation.
More Emphasis to Individual Interest: Informal structure gives more importance
to satisfaction of individual interest as compared to organisational interest.
LIST AND EXPLAIN DIFFERENT TYPES OF ORGANIZATION .
A LINE ORGANISATION has only direct, vertical relationships between different
levels in the firm. There is only line departments-departments directly involved in
accomplishing the primary goal of the organisation. For example, in a typical firm, line
departments include production and market ing. In a line organisation
authority follows the chain of command
FEATURES
Line organization has an only direct vertical relationship between different levels in
the firm.
ADVANTAGES:
 A line structure tends to simplify and clarify responsibility, autho rity and
accountability relationships. The levels of responsibility and authority
are likely to be precise and understandable.
 Tendstosimplifyandclarifyauthority,responsibilityandaccountability
relationships
 Becauselineorganisationsareusuallysmall,managementsandemployees
havegreater closeness.
 A line structure promotes fast decision making and flexibility.
 Simple to understand.
DISADVANTAGES:
 As the firm grows larger, line organisation becomes more ineffective.
 Improvedspeedand flexibilitymaynot offset thelackofspecialized
knowledge.
 Managers may have to become experts in too many fields.
 There is a tendency to become overly dependent on the few key people
who an perform numerous jobs.
 Neglects specialists inplanning
 Overloads key persons.
STAFF OR FUNCTIONAL AUTHORITY ORGANISATION
 The jobs or positions in an organisation can be categorized as:
 Lineposition: A position in thedirect chainof commandthat is responsible
for the achievement of an organization’s goals and
 Staffposition: Apositionintendedtoprovideexpertise,adviceandsupport
forthe line positions.
 Theline officers ormanagershavethedirect authority(knownas line
authority)to be exercisedbythemtoachievetheorganisationalgoals.The
staffofficersormanagers havestaffauthority(i.e.,authoritytoadvicethe
line)overtheline.Thisisalsoknownas functional authority.
 An organisation where staffs departments have authority over line personnel
in narrow areas of specialization is known as functional authority
organisation.
 In the line organisation, the line managers cannot be experts in all the functions
they are required to perform. But in the functionalauthority organisation,
staff personnel who are specialists in some fields are given functional
authority (The right of staff specialists to issue orders in their own names in
designated areas).
The principle of unity of command is violated when functional authority exists
i.e., a worker or a group of workers may have to receive instructions or orders
from the line supervisor as well as the staff specialist which may result in
confusion and the conflicting orders from multiple sources may lead to
increased ineffectiveness. Some staff specialists may exert direct authority over
the line personnel, rather than exert
advice authority (for example, quality control inspector may direct the worker as
well as advise in matters related to quality).
While this type of organisational structure overcomes the disadvantages of a pure
line organisaional structure, it has some major disadvantages:
Thepotentialconflictsresultingfromviolationofprincipleofunityofcommandand
Thetendencytokeepauthoritycentralizedat higherlevelsintheorganisation.
LINE AND STAFF ORGANIS ATION
 Most large organisations belong to this type of organisational structure.
These organisations have direct, vertical relationships between
different levels and also specialists responsible for advising and assisting line
managers. Such organisations have both line and staff departments. Staff
departments provide line people with advice and assistance in specialized
areas (for example, quality control advising production department).
 The line functions are production and marketing whereas the staff
functions include personnel,quality control,researchand development,
finance, accounting etc. Thestaff authority of functional authority
organisational structure is replaced by staff responsibility so that the
principle of unity of command is not violated.
 Three types of specialized staff can be identified:
 Advising,
 Service and
 Control.
FEATURES:
 Line and staff have direct vertical relationship between different levels.
 Staff specialists are responsible for advising and assisting line
managers/officers in specialized areas.
 These types of specialized staff are (1) Advisory, (2)Service, (3) Control
 Advisory: Management information system, Operation Research and
Quantitative Techniques, Industrial Engineering, Planning etc
 Service: Maintenance, Purchase, Stores, Finance, Marketing.
 Control: Quality control, Cost control, Auditing etc.
ADVANTAGES:
 Use of expertise of staff specialists.
 Span of control can be increased
 Relieves line authorities of routine and specialized decisions.
 No need for all round executives.
DISADVANTAGES:
 Conflict between line and staff may still arise.
 Staff officers may resent their lack of authority.
 Co-ordination between line and staff may become difficult
EXPLAIN (DIFFERENTIATE) CENTRALIZATION AND DECENTRALIZATION
Basis of Comparison Centralization Decentralization
Meaning The retention of powers The dissemination of Abilities of the manager: Some managers are better organized, better at
and authority with respect authority, responsibility and explaining things to subordinates, and more efficient in performing their jobs. Such
to planning and decisions, accountability to the various managers can functioneffectivelywithawiderspanofmanagementthanaless
with the top management, management levels, is skilledmanager.
is known as known as Technology: Cell phones, email, and other forms of technology that facilitat e
Centralization. Decentralization. communication and the exchange of information make it possible for
managers to increase their spans of management over managers who do not have
Communication Flow Vertical Open and Free access to or who are unable to use the technology. and also explain its
Decision Making Slow Comparatively faster advantages (benefits/merits) .

Advantage Proper coordinationand Sharing of burden and DEPARTMENTATION

Leadership responsibility
Powerofdecision Lies with the top Multiplepersonshavethe
making management. power
of decision making.
Reasons Inadequate control overthe Considerable control
organization over the
organization
Best suited for Small sized organization Large sized organization
FACTORS AFFECTING CENTRALIZATION AND DECENTRALIZATION
 Importance of the decision: How would be decision made affect the culture
and image of the organization.
 Size of the organization: A larger organization with several duties and
function would highly need a much decentralized structure on its divisions.
 Willingnessoftoppeopletodelegatepower:Leadershipstyleatthetop
contributesso much to any kind of organization structure. Democratic
leadership is much more willing to discuss and delegate some duties to
others.
 Willingness of the subordinates to accept responsibility: There should be
interest from the subordinates to take responsibility and assume authority
to enable delegation of duties to takeplace.
 Availabilityofmanagementtalents:Thesubordinatesshouldhaveenough
managerial know-howandskillstobeabletomakejustandproperdecisions
thatisintheinterest of the organization. This would mean training them
to be in a position to carry out decision making efficiently.
 Rate of growth: Organization which is static would remain for long time
centralized as there are no more duties and programmes to be
decentralized as opposed to continually growing organization which
could have a branch in a different area, be it geographical or operational
that will need line managers.
SPAN OF CONTROL
 Span of Control means the number of subordinates that can be managed
efficiently and effectively by a superior in an organization. It suggests how
the relations are designed between a superior and a subordinate in an
organization.
Span of control is of two types:
 Narrow span of control: Narrow Span of control means a single manager or
supervisor oversees few subordinates. This gives rise to a tall organizational
structure.
 Wide span of control: Wide span of control means a single manager or
supervisor oversees a large number of subordinates. This gives rise to a
flat organizational structure.
FACTORS AFFECTING SPAN OF CONTROL
Job complexity: Subordinate jobs that are complex, ambiguous, dynamic or
otherwise complicated will likely require more management involvement
and a narrower span of management
Similarityofsubordinatejobs:Themoresimilarandroutinethetasksthatsubordinates
areperforming,theeasieritisforamanagertosuperviseemployeesandthewider
the span of management that will likely be effective.
Physical proximity of subordinates: The more geographically dispersed a group
of subordinates the more difficult it is for a manager to be in regular contact
with them and the fewer employees a manager could reasonably oversee,
resulting in a narrower span ofmanagement.
Abilities of employees: Managers who supervise employees that lack ability,
motivation,orconfidencewillhavetospendmoretimewitheachemployee.The
result will be that the manager cannot supervise as many employees and
would be most effective with a narrower span of management.
 Departmentalization is an aspect of organizational design that includes the
subdivision of a business into units based on their function or other criteria.
 In departmentalization, similar activities are grouped together to form
various departments.
 For example, all the activities relating to accounts are grouped together to
make the accounts department.Similarly,wehavepurchasedepartment,
production department, salesdepartment,financedepartment,human
resource(HR)department,etc.
 So, departmentalization is the process of dividing the organization into
different departments. It is the process by which an organization expands
horizontally. There are many bases or types of departmentalization. A
department consists of, head of department, specific functions and staff.
The head of department (HOD) is responsible to the CEO of the organization
for the functions of his department.
ADVANTAGES OF DEPARTMENTATION
Develop specialization: Departmentalization leads to the benefits of
specialization. In departmentalization, works are divided into different
departments on the basis of their nature and responsibility is entrusted to
skilled and efficient manager. When a manager is involved in one specific
function, his expertise and efficiency increases in that particular field
Administrative control: In departmentalization, the standard of performance of
each department and objective to be achieved is planned. Whenactual performance
deviates withplannedperformance,correctivemeasuresaretakentoremovethe
barriers.
Fixation ofresponsibility: Departmentalization divides works into different units on
the basis of nature and responsibility is entrusted to departmental managers.
And the departmental managers are accountable to the job performed by
the staff of their concerned departments.
Helpful for expansion: Departmentalization facilitates top manager to direct
and supervise the work performed by subordinate managers. It also helps to
divide work into different units on the basis of nature, and responsibility is
entrusted to departmental managers. Such division of work, thus, is helpful
for expansion of business.
Management development: Departmentalization helps to develop new man
agers by providing them opportunity to take independent decision and initiatives.
Consequently, ahighskilledsubordinatelevelmanagercanget opportunityto
promotetothehigher level.
METHODS (TYPES/ BASES) OF DEPARTMENTATION
Functionaldepartmentalization: Grouping activities by functions performed.
Activities canbegroupedaccordingtofunction(workbeingdone)topursue
economiesofscale by placing employees with shared skills and knowledge into de
partments for example human resources, IT, accounting, manufacturing, logistics,
and engineering. Functional departmentalization can be used in all types of
organizations.
Product departmentalization: Grouping activities by product line. Tasks can also
be groupedaccordingtoaspecificproductorservice,thusplacingallactivities
relatedto the product or the service under one manager. Each major product
area in the corporation is under the authority of a senior manager who is
specialist in, and is responsible for, everything related to the product line. LA
Gear is an example of company that uses product departmentalization. Its
structure is based on its varied product lines which include women’s footwear
etc.
Customerdepartmentalization:Groupingactivities onthebasisofcommon
customers ortypesofcustomers.Jobsmaybegroupedaccordingtothetypeof
customerserved by the organization. The assumption is that customers in
each department have a common set of problems and needs that can best be
met by specialists. The sales activitiesinanofficesupplyfirmcanbebrokendown
intothreedepartmentsthatserve retail, wholesale and government accounts.
Geographic departmentalization: Grouping activities on the basis of territory. If
an organization's customers are geographically dispersed, it can group jobs
based on geography. For example, the organization structure of Coca-Cola has
reflected the company’soperationintwobroadgeographicareas–theNorth
Americansectorand the international sector,
Process departmentalization: Grouping activities on the basis of product or service
or customer flow. Because each process requires
different skills, process departmentalization allows
homogenous activities to be categorized. For example, the applicants might need
to go through several departments namely validation, licensing and treasury,
before receiving the driver’s license.
Divisionaldepartmentalization:Whenthefirmdevelopsindependentlinesof
business that operate as separate companies, all contributing to the corporation
profitability, the design is called divisional departmentalization or (M-FORM).
BASIC PRINCIPLES OF ORGANIZING
Effective organizations are guided by the following principles:
 Division of work and specialization – involves dividing total workload
into tasks that can be logically and effectively performed by individuals
with specialized knowledge
 Departmentation – refers to the logical grouping into manageable sizes
of organizational activities belonging together. The departments
created constitute the organization’s structure and appear on the
organizational chart. (A department is a distinct area, division or branch
over which a manager has authority over performance e.g. production,
accounts or sales)
 Coordination - the process of integrating departments both
horizontally and vertically. It is achieved through authority
relationships, which involve allocation of responsibility and authority to
each position in the organizational structure.
 Chain of command – defines the reporting lines of individuals and
groups in the organizations
 Unity of command – implies that each subordinate must have only one
manager to report to
 Span of control – refers to the number of subordinates working under
one manager
DELEGATION OF AUTHORITY
Delegation is the process by which managers assign a portion of their total
workload to others. It includes assigning formal authority and responsibility
for completion of specific activities.
Why delegate?
 Get more work done
 Subordinates may have some unique expertise which the manager lacks
 Helps develop subordinates managerial skills
 Enhances prompt action
 Superiors can take higher level tasks
 Better decisions as they are made lower down where the problems are
What are the barriers to delegation?
 Reluctance/inability to delegate due to lack of planning what to and not
to delegate
 Insecurity due to fear that subordinates may do better and threaten
their positions
 Lack of confidence in the subordinate to do the job
 Reluctance by subordinate to accept delegation due to fear of failure,
lack of rewards, risk avoidance tendencies etc.
 Incompetent subordinates
Some guidelines to effective delegation
 Free communication to ensure subordinates understand their
responsibility, authority and accountability
 Balance responsibility and authority- give enough authority to
achieve desired results
 Define the expected results clearly
 Evaluate the experience and competence of the subordinate
before delegating
 Be flexible with delegation- modify, increase, decrease or
withdraw
 Supportive managerial climate free from fear, frustration and
threats
 Put in place checks and controls to ensure delegated authority is
not abused
This refers to the process by which a supervisor gives a subordinate the
authority to do the supervisors job. A manager, however, cannot delegate
the functions of planning, organizing, leading and control as this would lead
to breakdown in organizational performance.
Delegation of responsibility
Responsibility cannot be delegated. A supervisor’s responsibility is not
diminished because of delegation of authority to a subordinate. In fact,
responsibility may increase because in addition to ensuring that the
delegated work is done, he has to supervise the subordinate. Whether a
manager does the work or chooses to delegate to a subordinate, he retains
complete responsibility for the accomplishment of the task.
DEPARTMENTALIZATION
Departmental specialization can take many forms such as functional,
product, geographical or matrix designs.
What are the advantages and disadvantages of each design? What factors
would organizations consider when choosing a particular design?
Functional design: Each major function reports to the CEO and other sub
functions report to the major functional heads. The idea is to group
specialists with similar interests and training together e.g. marketing, HRM,
finance or IT. This is the most common design
Product design: this is common in organizations that deal in multiple
products. It is a modification of the functional design. Each major product or
line is managed by an executive who reports to the CEO. The product
manager has control over the functions in his division such as sales,
marketing, HR and finance.
Geographical design: Where an organization operates in a wide geographical
area, territorial groupings are designed. A company’s activities are divided
into regions with a manager for each with a home office for coordinating the
activities of the geographical units.
Customer design: Activities are structured to respond to specific groups of
customers. For example, the lending activities in banks that are tailored to
meet the needs of different customers say business/corporate clients,
personal, mortgage or small business.
Matrix design: this involves a grid or matrix of authority flows. Authority
flows both vertically and horizontally while vertical authority is exercised by
functional managers, horizontal authority is vested in project managers so
that some employees find themselves reporting to two managers. Project
managers have formal authority over budgetary funds, time and tasks.
Advantages
Matrix designs are useful when:
The activity has a definite completion date
Cost constraints are a critical factor
Specialized skills are required for the completion of a project
Activity is new or unfamiliar to the participants
When a high degree of competence is required and flexibility is needed
The need to share resources and reduce costs
Disadvantages
Conflict over allocation of resources and division of authority
Dilution of functional authority
Divided loyalty for project teams
It sacrifices the principle of unity of command
LINE AND STAFF RELATIONSHIPS
The concepts of line and staff can be viewed both as functions and as
authority relationships.
Line functions: Refers to those functions that have direct responsibility for
accomplishing the objectives of the firm. The managers responsible are line
managers and the others are line employees.
Line authority: refers to the chain of command where line officials have
authority over subordinates e.g. a manager and a subordinate. This is
exercised by all managers irrespective of whether they are line or staff.
Staff functions: refer to those functions that support the line functions by
providing expertise, advice and support. Examples are HRM, finance or
research and development
 Status conflict- who is more important or strategic to the organization
than the other in terms of contribution
 Failure to understand the line–staff roles - e.g. forcing policies that
make the line to feel that their authority to manage is being
undermined
 Lack of clear responsibility between line and staff
 Staff see line management as resistant to attempts to provide
assistance and guidance
NB: The distinction between a line manager and staff manager is not
absolute. There is a fine line between offering professional advice and giving
instructions
Functional Leaders – Are those whose influence comes from the work done
rather than position such as experts.
APPROACHES TO LEADERSHIP STUDIES
Three approaches have been used in the study of leadership. These are:
 Trait
 Behavioural
 Situational/contingency
(I) TRAIT APPROACH
The earliest studies on leadership focused on the qualities of effective
leaders such as bravery, loyalty, honesty, and compassion. However, as
traits are many, research findings often disagreed on which are the most
important traits. Keith Davis (1972), in human behaviour at work,
summarized the traits and gave four general characteristics namely:-

COORDINATION Intelligence – leaders tend to have higher intelligence than their followers.
Social maturity and breadth – leaders tend to be emotionally mature and
have broad range of interests.
This is the process of linking the activities of the various departments of the
Inner motivation and achievement drives – leaders want to accomplish
organization. Coordination is maintained through rules and procedures such
things, achieve goals and are intrinsically motivated.
as standard procedures. Human Relations attitudes - leaders are able to work with others, and tend
to respect others.
Liason roles – act as a common point of contact e.g. a spokesperson who
facilitates flow of information between units. Criticisms of the Trait Approach
Not all leaders possess all the traits.
Task force – involves representatives from various groups coming together Many non-leaders possess most of the traits.
to work on a common project and dissolve thereafter. The trait approach gives no guidance as to how much of any trait a person
should have.
Research findings do not agree as to which are leadership traits and what
their relationships are to instances of leadership.
Management characteristics Leadership Characteristics The so called traits are nothing but patterns of behavior
Administers and problem-solves. Innovates- means alertness to
(ii) Behaviourist Approach
Works within a system. opportunities, uses imagination and
Focuses on control. vision to capitalize on them. As a result of the failure of the trait approach to leadership, the focus shifted
Short range view. Works on the system
on the individual behaviours of leaders. The main concern was on the
Accepts the status quo. focuses on people. leadership styles of leaders. Leadership styles refer to the way a leader
Sets things in motion by means of Inspires trust. typically behaves towards his followers/group members. These styles have
methods and techniques. Long range view. been classified into:
Attitude of doing. Challenges the status quo.
Is a natural unforced ability to inspire
Autocratic Leadership – This approach refers to where all authority centers
people. around the leader. The manager enforces decisions by use of rewards and
Attitude of serving punishments (ability to withhold or give rewards and punishment),
communication is in one direction - from manager to subordinate and
conformity and obedience on the part of followers is expected.

Disadvantages:

Has negative effect on group morale – decisions may not be supported.

Can create ‘yes’ mentality among group members.

TYPES OF LEADERS. (ii) Democratic/Participative Leadership.

Considers the suggestions of members and leader. It is a human relations
Charismatic Leaders – These are those whose influence is derived form the approach where all group members are seen as important contributors to
personality e.g. Napoleon, Kenyatta, Billy Graham, Nelson Mandela, decision.
Desmond Tutu etc. This type resides only in a few people and cannot be
acquired by training – it is natural. Advantages:
- increased morale of members.
Traditional Leaders –These are those whose position is assured by birth e.g. - support for final decision.
Kings, Queens, tribal chieftains etc. It is limited and not applicable to - better decisions through shared ideas.
workplaces except in family businesses.
Disadvantages:
Situational Leaders -Their influence is effective by being in the right place at - Slower decision.
the right time – It is impromptu and temporary eg. One who steps to direct - Diluted accountability for decisions.
traffic in a jam. - Possible compromises designed to please all.

Appointed Leaders –Refers to those whose influence arises from position
e.g. managers and supervisors. It is a bureaucratic type of leadership where
legitimate power comes from the position in the hierarchy.
(iii) Laisser Faire Leadership
‘Allow (them) to do’ style – leadership exercises very little control or
influence over group members. Members are given a goal and left alone to
decide how to achieve it. Role of leader is facilitative.

Advantages
Increased opportunity for individual development.
All persons are given a chance to express themselves and function
independently.
Disadvantages
Lack of group cohesion and unity toward org. goals.
Lack of direction and control.
Inefficiency and chaos.
CHAIN OF COMMAND
In an organizational structure, “chain of command” refers to a company's
hierarchy of reporting relationships -- from the bottom to the top of an
organization, who must answer to whom. The chain of command not only
establishes accountability, it lays out a company’s lines of authority and
decision-making power. A proper chain of command ensures that every task,
job position and department has one person assuming responsibility for
performance.
COMMAND CHAIN FORMATION
The command chain doesn't happen accidentally. Organizational designers
lay it out as the last step in creating an organizational structure. Planners first
consider a company’s goals since organizational structure must support
strategy. Designers next determine the tasks needed to reach the goals.
Departmentalization follows as designers decide how to group the tasks.
Grouping affects resource sharing and the ease with which people
communicate and coordinate work. After departmentalizing, designers assign
authority for tasks and areas. Once authority is assigned, planners can finally
lay out the relationships between positions, thereby creating a chain of
command.
BENCHMARKING
is a strategy tool used to compare the performance of the business processes
and products with the best performances of other companies inside and
outside the industry.
Benchmarking is the search for industry best practices that lead to superior
performance
WHEN.
 Benchmarking can be used at any time, but is usually performed in
response to needs that arise within a company. According to C.J.
McNair and Kathleen H.J. Leibfried in their book Benchmarking: A Tool
for Continuous Improvement, some potential "triggers" for the
benchmarking process include:
 quality programs
 cost reduction/budget process
 operations improvement efforts
 management change
 new operations/new ventures
 rethinking existing strategies
 competitive assaults/crises
WHY.
 This is the most important question in management's decision to begin
the benchmarking process. McNair and Leibfried suggest several
reasons why companies may embark upon benchmarking:
 to signal management's willingness to pursue a philosophy that
embraces change in a proactive rather than reactive manner;
 to establish meaningful goals and performance measures that reflect an
external/customer focus, foster "quantum leap" thinking, and focus on
high-payoff opportunities;
 to create early awareness of competitive disadvantage; and
 to promote teamwork that is based on competitive need and is driven
by concrete data analysis, not intuition or gut feeling.
TYPES
Strategic benchmarking. Managers use this type of benchmarking to identify
the best way to compete in the market. During the process, the companies
identify the winning strategies (usually outside their own industry) that
successful companies use and apply them to their own strategic process. It is
also common to compare the strategic goals in order to spot new strategic
choices.
Performance benchmarking. It is concerned with comparing your company’s
products and services. According to Bogan & English[8] the tool mainly
focuses on product and service quality, features, price, speed, reliability,
design and customer satisfaction, but it can measure anything that has the
measurable metrics, including processes. Performance benchmarking
determines how strong our products and services are compared to our
competition.
Process benchmarking. It requires to look at other companies that engage in
similar activities and to identify the best practices that can be applied to your
own processes in order to improve them. Process benchmarking is a separate
type of benchmarking, but it usually derives from performance
benchmarking.
INTERDEPENDENCE
Technological interdependence is the degree to which different parts of the
organization must exchange information and materials in order to perform
their required activities. There are three major types of technological
interdependence:
Pooled interdependence
The type that involves the least interdependence is known as a pooled
interdependence, in which units operate independently but their individual
efforts are important to the success of the organization as whole. For
example, if the local branch of the bank performs poorly and loses
customers, its problems will have negative effect on the health of the bank as
a whole.
Sequential interdependence
With sequential interdependence, one unit must complete its work before
the next unit in the sequence can begin work. For example, a strike over a
local issue at one plant of General Motors frequently causes workers at other
plants to be laid off temporarily.
Reciprocal interdependence
The most complex situation is reciprocal interdependence, in which one
unit's outputs become inputs to other unit and vice versa. When an airplane
lands, the flight crew turns the plane over to the maintenance crew. After
refuelling the plane, and performing other necessary activities, the
maintenance crew releases the plane back to the flight crew so that the
plane can continue its journey. Reciprocal interdependence is likely to
require greater efforts at horizontal coordination than do the other two
types of technological interdependence.
Thus managers need to give some thought to technological interdependence,
when developing organization structur