UNIT I MANAGEMENT

Management is an individual or a group of individuals that accept responsibilities to run an

organisation. They Plan, Organise, Direct and Control all the essential activities of the organisation.
Management does not do the work themselves. They motivate others to do the work and co-ordinate
(i.e. bring together) all the work for achieving the objectives of the organisation. Management brings
together all Six Ms i.e. Men and Women, Money, Machines, Materials, Methods and Markets. They use
these resources for achieving the objectives of the organisation such as high sales, maximum profits,
business expansion, etc.

 According to Harold Koontz, "Management is the art of getting things done through and with
people in formally organized groups."
 According to Henri Fayol, "To manage is to forecast and to plan, to organize, to command, to co-
ordinate and to control."
 According to Peter Drucker, "Management is a multi-purpose organ that manages business and
manages managers and manages workers and work."

FEATURES OF MANAGEMENT

1. Continuous and never ending process Management is a Process. It includes four main functions,
viz., Planning, Organizing, Directing and Controlling. The manager has to Plan and organise all the
activities. He had to give proper Directions to his subordinates. He also has to Control all the
activities. The manager has to perform these functions continuously. Therefore, management is a
continuous and never ending process.
2. Getting things done through people The managers do not do the work themselves. They get the
work done through the workers. They should not be tricked, threatened or forced to do the work. A
favorable work environment should be created and maintained.
3. A group and not an individual activity Management is not an individual activity. It is a group
activity. It uses group (employees) efforts to achieve group (owners) objectives. It tries to satisfy the
needs and wants of a group (consumers). Nowadays, importance is given to the team (group) and
not to individuals.
4. Follows established principles or rules Management follows established principles, such as
division of work, discipline, unity of command, etc. These principles help to prevent and solve the
problems in the organisation.
5. Multidisciplinary in nature Management has to get the work done through people. It has to
manage people. This is a very difficult job because different people have different emotions,
feelings, aspirations, etc. So, management is a very complex job. Therefore, management uses
knowledge from many different subjects such as Economics, Information Technology, Psychology,
Sociology, etc. Therefore, it is multidisciplinary in nature.
6. Situational in nature Management makes plans, policies and decisions according to the situation.
It uses different plans, policies, decisions and styles for different situations. The manager first
studies the full present situation. Then he draws conclusions about the situation. Then he makes
plans, decisions, etc., which are best for the present situation.
7. Both an art and science Management is result-oriented. Therefore, it is an Art. Management
conducts continuous research. Thus, it is also a Science.
8. Management is intangible Management is intangible, i.e. it cannot be seen and touched, but it can
be felt and realised by its results. The success or failure of management can be judged only by its
results. If there is good discipline, good productivity, good profits, etc., then the management is
successful and vice-versa.

OBJECTIVES OF MANAGEMENT

1. Getting Maximum Results with Minimum Efforts - The main objective of management is to
secure maximum outputs with minimum efforts & resources. Management is basically concerned
with thinking & utilizing human, material & financial resources in such a manner that would result
in best combination. This combination results in reduction of various costs.
2. Increasing the Efficiency of factors of Production - Through proper utilization of various factors
of production, their efficiency can be increased to a great extent which can be obtained by reducing
spoilage, wastages and breakage of all kinds, this in turn leads to saving of time, effort and money
which is essential for the growth & prosperity of the enterprise.
3. Maximum Prosperity for Employer & Employees - Management ensures smooth and
coordinated functioning of the enterprise. This in turn helps in providing maximum benefits to the
employee in the shape of good working condition, suitable wage system, incentive plans on the one
hand and higher profits to the employer on the other hand.
4. Human betterment & Social Justice - Management serves as a tool for the upliftment as well as
betterment of the society. Through increased productivity & employment, management ensures
better standards of living for the society. It provides justice through its uniform policies.
IMPORTANCE OF MANAGEMENT

1. It helps in Achieving Group Goals - It arranges the factors of production, assembles and organizes
the resources, integrates the resources in effective manner to achieve goals. It directs group efforts
towards achievement of pre-determined goals. By defining objective of organization clearly there
would be no wastage of time, money and effort. Management converts disorganized resources of
men, machines, money etc. into useful enterprise. These resources are coordinated, directed and
controlled in such a manner that enterprise work towards attainment of goals.
2. Optimum Utilization of Resources - Management utilizes all the physical & human resources
productively. This leads to efficacy in management. Management provides maximum utilization of
scarce resources by selecting its best possible alternate use in industry from out of various uses. It
makes use of experts, professional and these services leads to use of their skills, knowledge, and
proper utilization and avoids wastage. If employees and machines are producing its maximum there
is no under employment of any resources.
3. Reduces Costs - It gets maximum results through minimum input by proper planning and by using
minimum input & getting maximum output. Management uses physical, human and financial
resources in such a manner which results in best combination. This helps in cost reduction.
4. Establishes Sound Organization - No overlapping of efforts (smooth and coordinated functions).
To establish sound organizational structure is one of the objective of management which is in tune
with objective of organization and for fulfillment of this, it establishes effective authority &
responsibility relationship i.e. who is accountable to whom, who can give instructions to whom,
who are superiors & who are subordinates. Management fills up various positions with right
persons, having right skills, training and qualification. All jobs should be cleared to everyone.
5. Establishes Equilibrium - It enables the organization to survive in changing environment. It keeps
in touch with the changing environment. With the change is external environment, the initial co-
ordination of organization must be changed. So it adapts organization to changing demand of market
/ changing needs of societies. It is responsible for growth and survival of organization.
6. Essentials for Prosperity of Society - Efficient management leads to better economical production
which helps in turn to increase the welfare of people. Good management makes a difficult task
easier by avoiding wastage of scarce resource. It improves standard of living. It increases the profit
which is beneficial to business and society will get maximum output at minimum cost by creating
employment opportunities which generate income in hands. Organization comes with new products
and researches beneficial for society.
MANAGEMENT AS a SCIENCE: Science is a systematic body of knowledge pertaining to a specific
field of study that contains general facts which explains a phenomenon. It establishes cause and effect
relationship between two or more variables and underlines the principles governing their relationship.
These principles are developed through scientific method of observation and verification through
testing.

1. Universally acceptance principles - Scientific principles represents basic truth about a particular
field of enquiry. These principles may be applied in all situations, at all time & at all places. E.g. -
law of gravitation which can be applied in all countries irrespective of the time. Management also
contains some fundamental principles which can be applied universally like the Principle of Unity
of Command i.e. one man, one boss. This principle is applicable to all type of organization -
business or non business.
2. Experimentation & Observation - Scientific principles are derived through scientific investigation
& researching i.e. they are based on logic. E.g. the principle that earth goes round the sun has been
scientifically proved. Management principles are also based on scientific enquiry & observation and
not only on the opinion of Henry Fayol. They have been developed through experiments & practical
experiences of large no. of managers. E.g. it is observed that fair remuneration to personal helps in
creating a satisfied work force.
3. Cause & Effect Relationship - Principles of science lay down cause and effect relationship
between various variables. E.g. when metals are heated, they are expanded. The cause is heating &
result is expansion. The same is true for management, therefore it also establishes cause and effect
relationship. E.g. lack of parity (balance) between authority & responsibility will lead to
ineffectiveness. If you know the cause i.e. lack of balance, the effect can be ascertained easily i.e. in
effectiveness. Similarly if workers are given bonuses, fair wages they will work hard but when not
treated in fair and just manner, reduces productivity of organization.
4. Test of Validity & Predictability - Validity of scientific principles can be tested at any time or any
number of times i.e. they stand the test of time. Each time these tests will give same result.
Moreover future events can be predicted with reasonable accuracy by using scientific principles.
E.g. H2 & O2 will always give H2O. Principles of management can also be tested for validity. E.g.
principle of unity of command can be tested by comparing two persons - one having single boss and
one having 2 bosses. The performance of 1st person will be better than 2nd.
MANAGEMENT AS AN ART: Art implies application of knowledge & skill to trying about desired
results. An art may be defined as personalized application of general theoretical principles for achieving
best possible results. Art has the following characters -

1. Practical Knowledge: Every art requires practical knowledge therefore learning of theory is not
sufficient. It is very important to know practical application of theoretical principles. E.g. to become
a good painter, the person may not only be knowing different colour and brushes but different
designs, dimensions, situations etc to use them appropriately. A manager can never be successful
just by obtaining degree or diploma in management; he must have also know how to apply various
principles in real situations by functioning in capacity of manager.
2. Personal Skill: Although theoretical base may be same for every artist, but each one has his own
style and approach towards his job. That is why the level of success and quality of performance
differs from one person to another. E.g. there are several qualified painters but M.F. Hussain is
recognized for his style. Similarly management as an art is also personalized. Every manager has his
own way of managing things based on his knowledge, experience and personality, that is why some
managers are known as good managers (like Aditya Birla, Rahul Bajaj) whereas others as bad.
3. Creativity: Every artist has an element of creativity in line. That is why he aims at producing
something that has never existed before which requires combination of intelligence & imagination.
Management is also creative in nature like any other art. It combines human and non-human
resources in useful way so as to achieve desired results. It tries to produce sweet music by
combining chords in an efficient manner.
4. Perfection through practice: Practice makes a man perfect. Every artist becomes more and more
proficient through constant practice. Similarly managers learn through an art of trial and error
initially but application of management principles over the years makes them perfect in the job of
managing.
5. Goal-Oriented: Every art is result oriented as it seeks to achieve concrete results. In the same
manner, management is also directed towards accomplishment of pre-determined goals. Managers
use various resources like men, money, material, machinery & methods to promote growth of an
organization.

MANAGEMENT AS BOTH SCIENCE AND ART

Management is both an art and a science. The above mentioned points clearly reveals that management
combines features of both science as well as art. It is considered as a science because it has an
organized body of knowledge which contains certain universal truth. It is called an art because
managing requires certain skills which are personal possessions of managers. Science provides the
knowledge & art deals with the application of knowledge and skills.

A manager to be successful in his profession must acquire the knowledge of science & the art of
applying it. Therefore management is a judicious blend of science as well as an art because it proves the
principles and the way these principles are applied is a matter of art. Science teaches to ’know’ and art
teaches to ’do’. E.g. a person cannot become a good singer unless he has knowledge about various ragas
& he also applies his personal skill in the art of singing. Same way it is not sufficient for manager to
first know the principles but he must also apply them in solving various managerial problems that is
why, science and art are not mutually exclusive but they are complementary to each other (like tea and
biscuit, bread and butter etc.).

The old saying that “Manager are Born” has been rejected in favor of “Managers are Made”. It has been
aptly remarked that management is the oldest of art and youngest of science. To conclude, we can say
that science is the root and art is the fruit.

MANAGEMENT AS A PROFESSION

Over a large few decades, factors such as growing size of business unit, separation of ownership from
management, growing competition etc have led to an increased demand for professionally qualified
managers. The task of manager has been quite specialized. As a result of these developments the
management has reached a stage where everything is to be managed professionally.

A profession may be defined as an occupation that requires specialized knowledge and intensive
academic preparations to which entry is regulated by a representative body. The essentials of a
profession are:

1. Specialized Knowledge - A profession must have a systematic body of knowledge that can be used
for development of professionals. Every professional must make deliberate efforts to acquire
expertise in the principles and techniques. Similarly a manager must have devotion and involvement
to acquire expertise in the science of management.
2. Formal Education & Training - There are no. of institutes and universities to impart education &
training for a profession. No one can practice a profession without going through a prescribed
course. Many institutes of management have been set up for imparting education and training. For
example, a CA cannot audit the A/C’s unless he has acquired a degree or diploma for the same but
 no minimum qualifications and a course of study has been prescribed for managers by law. For
example, MBA may be preferred but not necessary.
3. Social Obligations - Profession is a source of livelihood but professionals are primarily motivated
by the desire to serve the society. Their actions are influenced by social norms and values. Similarly
a manager is responsible not only to its owners but also to the society and therefore he is expected to
provide quality goods at reasonable prices to the society.
4. Code of Conduct - Members of a profession have to abide by a code of conduct which contains
certain rules and regulations, norms of honesty, integrity and special ethics. A code of conduct is
enforced by a representative association to ensure self discipline among its members. Any member
violating the code of conduct can be punished and his membership can be withdrawn. The AIMA
has prescribed a code of conduct for managers but it has no right to take legal action against any
manager who violates it.
5. Representative Association - For the regulation of profession, existance of a representative body is
a must. For example, an institute of Charted Accountants of India establishes and administers
standards of competence for the auditors but the AIMA however does not have any statuary powers
to regulate the activities of managers.

From above discussion, it is quite clear that management fulfills several essentials of a profession, even
then it is not a full fledged profession because: -

a. It does not restrict the entry in managerial jobs for account of one standard or other.
b. No minimum qualifications have been prescribed for managers.
c. No management association has the authority to grant a certificate of practice to various managers.
d. All managers are supposed to abide by the code formulated by AIMA,
e. Competent education and training facilities do not exist.
f. Managers are responsible to many groups such as shareholders, employees and society. A
regulatory code may curtail their freedom.
g. Managers are known by their performance and not mere degrees.
h. The ultimate goal of business is to maximize profit and not social welfare. That is why Haymes has
rightly remarked, “The slogan for management is becoming - ’He who serves best, also profits
most’.
LEVELS OF MANAGEMENT

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

1. Top level / Administrative level

2. Middle level / Executory
3. Low level / Supervisory / Operative / First-line managers

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

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

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

1. Top management lays down the objectives and broad policies of the enterprise.
2. It issues necessary instructions for preparation of department budgets, procedures, schedules etc.
3. It prepares strategic plans & policies for the enterprise.
4. It appoints the executive for middle level i.e. departmental managers.
5. It controls & coordinates the activities of all the departments.
6. It is also responsible for maintaining a contact with the outside world.
7. It provides guidance and direction.
8. The top management is also responsible towards the shareholders for the performance of the
enterprise.

Middle Level of Management The branch managers and departmental managers constitute middle
level. They are responsible to the top management for the functioning of their department. They devote
more time to organizational and directional functions. In small organization, there is only one layer of
middle level of management but in big enterprises, there may be senior and junior middle level
management. Their role can be emphasized as -
1. They execute the plans of the organization in accordance with the policies and directives of the top
management.
2. They make plans for the sub-units of the organization.
3. They participate in employment & training of lower level management.
4. They interpret and explain policies from top level management to lower level.
5. They are responsible for coordinating the activities within the division or department.
6. It also sends important reports and other important data to top level management.
7. They evaluate performance of junior managers.
8. They are also responsible for inspiring lower level managers towards better performance.

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

1. Assigning of jobs and tasks to various workers.

2. They guide and instruct workers for day to day activities.
3. They are responsible for the quality as well as quantity of production.
4. They are also entrusted with the responsibility of maintaining good relation in the organization.
5. They communicate workers problems, suggestions, and recommendatory appeals etc to the higher
level and higher level goals and objectives to the workers.
6. They help to solve the grievances of the workers.
7. They supervise & guide the sub-ordinates.
8. They are responsible for providing training to the workers.
9. They arrange necessary materials, machines, tools etc for getting the things done.
10. They motivate workers.

MANAGEMENT AND ADMINISTRATION

According to Theo Haimann, “Administration means overall determination of policies, setting of major
objectives, the identification of general purposes and laying down of broad programmes and projects”.
It refers to the activities of higher level. It lays down basic principles of the enterprise. According to
Newman, “Administration means guidance, leadership & control of the efforts of the groups towards
some common goals”.
Basis Management Administration

Meaning Management is an art of getting things done It is concerned with formulation of

through others by directing their efforts towards broad objectives, plans & policies.
achievement of pre-determined goals.

Nature Management is an executing function. Administration is a decision-making

function.

Process Management decides who should as it & how Administration decides what is to be
should he dot it. done & when it is to be done.

Function Management is a doing function because Administration is a thinking function

managers get work done under their supervision. because plans & policies are
determined under it.

Skills Technical and Human skills Conceptual and Human skills

Level Middle & lower level function Top level function

 SCINTIFIC MANAGEMENT

F.W. Taylor is one of the founders of classical thought/classical theory of management. He suggested
scientific approach to management also called scientific management theory. F. W. Taylor (1856-1915)
is rightly treated as the father of scientific management.

Principles of Scientific Management - four important underlying principles of management.

1. First, the development of a true science,

2. second, the scientific selection of the workers,
3. third, their scientific education and development,
4. Froth, intimate co-operation between management and their men.

1. The development of 'One best way" of doing a job. This suggests the task of finding out the best
method for achieving the objectives of a given job. The standards are decided scientifically for Jobs
and incentive wages were paid for all production above this standard. Here, job analysis and
standardization of tools, equipment, machinery, etc. are required.
2. Scientific selection of workers and their development through proper training.
3. Scientific approach by management. The management has to develop a true science in all fields of
work activity through scientific investigation and experiments.
4. Close co-operation of managers and workers (labour management relations) for better results and
understandings.
5. Elimination of conflict between methods and men. The workers are likely to resist to new methods.
This can be avoided by providing them an opportunity to earn more wages.

Features of Scientific Management

1. Scientific task setting: F. W. Taylor suggested the introduction of standard task which every
worker is expected to complete within one day (working hours) the task is to be calculated through
careful scientific investigation. For this, work study (i.e. method study and work measurement
study) is essential. Taylor suggested time study, motion study, fatigue study and rate-setting for the
introduction of scientific task. Time study is the art of observing and recording the time required to
do each detailed element in an industrial operation. Motion study refers to the study and analysis of
the movements of an operator while performing a job so that attempts can be made to remove
useless/unwanted movements from the process. Both the studies together help in determining the
best method of performing a job and the standard time allowed for it.
2. Planning the task: For performing the task by every worker, Taylor suggested the need of planning
the production activity accurately. This idea of planning is Taylor's gift to the science of
management. Planning of task gives answers to the following questions. What has to be done, how it
is to be done, where the work shall be done and when the work shall be done.
3. Scientific selection and training of workers: Taylor suggested the need of scientific selection of
workers for the plant/production activities. The procedure of selection must be systematic so as to
select the best and the most suitable persons for different types of jobs. Correct placement of
workers is equally important He also suggested the need of training of workers so as to raise their
ability or efficiency. Training is to be integrated with the promotion policy. He also suggested the
importance of cordial relations between management and workers.
4. Standardization: Taylor suggested the importance of standardization of tools and equipment,
materials, conditions of work and speed of machines. This brings co-ordination in different activities
and all workers will be able to perform the task assigned easily. The workers will have satisfactory
working conditions for work due to such standardization.
5. Specialization: Taylor suggested specialization in the administrative and organizational setup of the
plant He suggested functional foremanship. Taylor recommended eight functional foremen for different
activities and functions. The foremen suggested by him are like route clerk, instruction card clerk, speed
boss etc. Such specialization is useful for raising efficiency of the whole organisation.
6. Mental revolution: The techniques suggested by F. W. Taylor in his scientific management are
different as compared to traditional techniques and methods. Naturally, these techniques can be used
only when workers supervisors and managers accept them in theory and also in practice For this,
Mental revolution on their part is essential The success of scientific management rests basically on
the attitude of management and workers. They must give up their old ideas and methods and must
accept new scientific methods. For this, mental revolution on the part of both is essential.
Cooperation from workers and management for the introduction of scientific management depends
on this mental revolution.

Benefits / Advantages of Scientific Management

1. Application and use of scientific methods.

2. Wide scope for specialization and accurate planning.
3. Minimum wastages of materials, time and money.
4. Cordial relations between workers and management.
5. Benefits to workers (higher wages and less burden of work), management (cost reduction, better
quality productions) and consumers (superior goods at lower prices)
F. W. Taylor’s Contribution to the Development of Management Thought / Science

1. Emphasis on rational thinking: Taylor suggested rational thinking on the part of management for
raising efficiency and productivity. He wanted managements to replace old methods and techniques
by Modern methods which will raise productivity and offer benefits to all concerned parties. He was
in favour of progressive, scientific and rational thinking on the part of management on all
managerial problems. Such progressive outlook is essential for the introduction of new techniques
and methods in the Management.
2. Introduction of better methods and techniques of production: F. W. Taylor suggested the
importance of improved methods and techniques of production. Work-study techniques are his
contribution to management thought. He suggested new methods after systematic study and
research. Taylor recommended the use of new methods for raising overall efficiency and
productivity.
3. Emphasis on planning and control of production: Taylor suggested the importance of production
planning and control for high production, superior quality production and also for low cost
production. He introduced the concept of production management in a systematic way.
4. Importance of personnel and personnel department: Taylor suggested the importance of
manpower in management. He was in favour of progressive personnel policies for the creation of
efficient and satisfied labour force. He suggested the need of personnel department and its
importance. He favored incentive wage payment to workers.
5. Industrial fatigue and rest pauses: Taylor noted the nature of industrial fatigue and suggested the
introduction of suitable rest pauses for removing such fatigue of workers. He wanted to reduce the
burden of work on workers through the use of scientific methods.

The positive view of scientific management was described by Taylor as

1. "Science, not rule of thumb;

2. Harmony, not discord;
3. Co-operation, not individualism;
4. maximum output in place of restricted output.
5. The development of each man to his greatest efficiency and prosperity".
 BUREAUCRATIC THEORY BY MAX WEBER

Bureaucratic Theory was developed by a German Sociologist and political economist Max Weber
(1864-1920). According to him, bureaucracy is the most efficient form of organisation. The
organisation has a well-defined line of authority. It has clear rules and regulations which are strictly
followed.

According to Max Weber, there are three types of power in an organisation :-

1. Traditional Power,
2. Charismatic Power, The word "charisma" is from the Greek, and means "divine power." A leader
with charisma exercises something like divine powers over his or her followers.
3. Bureaucratic Power or Legal Power.

FEATURES OF BUREAUCRATIC ORGANISATION

1. There is a high degree of Division of Labour and Specialisation.

2. There is a well defined Hierarchy of Authority.
3. It follows the principle of Rationality, Objectively and Consistency.
4. There are Formal and Impersonal relations among the member of the organisation.
5. There are well defined Rules and Regulations. There rules cover all the duties and rights of the
employees. These rules must be strictly followed.
6. Selection and Promotion is based on Technical qualifications.
7. Only Bureaucratic or legal power is given importance.

Criticism of Bureaucratic Organisation

Bureaucratic organisation is a very rigid type of organisation. It does not give importance to human
relations. It is suitable for government organisations. It is also suitable for organisations where change
is very slow. It is appropriate for static organisations.

1. Too much emphasis on rules and regulations. The rules and regulations are rigid and inflexible.
2. No importance is given to informal groups. Nowadays, informal groups play an important role in all
business organisations.
3. Bureaucracy involves a lot of paper work. This results in lot of wastage of time, effort and money.
4. There will be unnecessary delay in decision-making due to formalities and rules.
5. Too much importance is given to the technical qualifications of the employees for promotion and
transfers. Dedication and commitment of the employee is not considered.
6. There is difficulty in coordination and communication.
 PLANNING

MEANING OF PLANNING- Planning is deciding in advance what is to be done, when where, how
and by whom it is to be done. Planning bridges the gap from where we are to where we want to go. It
includes the selection of objectives, policies, procedures and programmes from among alternatives. A
planning is a predetermined course of action to achieve a specified goal. Planning is the primary
function of management.
 According to Haimann- “Planning is the function that determines in advance what should be done.
It consist of selecting the enterprise objectives, policies, programmes, procedure and other means of
achieving these objectives”
 According to Koontz and O' Donnell, "Planning is an intellectual process, alert determination of
course of action, the basing of decision on purpose, facts and considered estimates.
NATURE OF PLANNING
1. Planning is an Intellectual Process- Planning is an intellectual process of thinking in advance. It is
a process of deciding the future on the series of events to follow. It is a process where a number of
steps are to be taken to decide the future course of action.
2. Planning is a Primary Function of Management- planning is basis of management process. All
other functions of management are designed to attain the goals under set planning. Without planning
there is nothing to organize and control.
3. Planning is a continuous Process- Planning is a continuous process and there is no end to it. It
involves continuous collection, evaluation and selection of data, and scientific investigation and
analysis of the possible alternative courses of action and the selection of the best alternative.
4. Planning is forward looking- planning involves anticipating the future course of events. Therefore
forecasting is best essence of planning. Forecasting involves the assessing the uncertain future and
making provision of it
5. Planning is goal oriented- planning is not an end in itself. Rather it is a means towards the
accomplishment of objectives. Planning is made to achieve desired objective of business All plans
emanate from objectives
6. Planning involves choice- planning is essentially choosing among alternatives course of action.
There is no used for planning if there is only one way of doing something.
IMPORTANCE OF PLANNING
1) Increases efficiency- Planning makes optimum utilization of all available resources. It helps to
reduce wastage of important resources and avoids their duplication. It aims to give highest returns at
the lowest cost. Planning thus increases the overall efficiency.
2) Reduces business-related risks-There are many risks involved in any modern business. Planning
helps to forecast these business-related risks. It also helps to take the necessary precautions to avoid
these risks. Thus, planning reduces business risks.
3) Facilitates proper coordination-Often, the plans of all departments of an organization are well
coordinated with each other. Similarly, the short-term, medium-term and long-term plans of an
organization are also coordinated with each other. Such proper coordination is possible only because
of efficient planning.
4) Gives right direction-it means to give proper information, accurate instructions and right guidance
to subordinates. Direction cannot be done without planning. It tells us what to do, how to do and
when to do it. Therefore, it helps to give right direction.
5) Keeps good control-In control, the actual performance of an employee is compared with the plans,
and deviations are found out and corrected. It is impossible to achieve a control without right
planning. Planning becomes important to keep a good control.
6) Helps to achieve objectives-Every organization has certain goals or objectives or targets. It keeps
working hard to fulfill these objectives. Planning helps an organization to achieve these objectives
but with some ease and swiftness.
7) Motivates the personnel-A good plan provides various financial and non-financial incentives to
both managers and employees. These incentives motivate them to work hard and achieve the
objectives of the organization. Thus, planning through various incentives helps to motivate the
personnel of an organization.
8) Encourages creativity and innovation-Planning encourages managers to express and/or use their
creativity and innovation. This brings satisfaction to the managers and success to the organization.
9) Helps in decision making-A manager makes many different plans. Then manager selects or
chooses the best of all available plans. Doing a selection or choosing something means to take a
decision. So, decision making is facilitated by planning.
Limitation of planning
1) Costly process: planning involves too much expenditure. Money & effort both are required in
planning. It includes collecting information, data forecasting & evaluation of alternatives. So,
planning has been accepted as costly process by small & medium size organization
2) Time consuming: planning is the time consuming process. It delays the business activity to come
in action. In the process of planning the procedures takes a lot of time which may create problem to
the organization where immediate action has to be made. So in such situation planning is not
suitable.
3) Lack of reliable data and problem of accurate premises: For planning assumptions have to be
developed for future action but future is uncertain and irregular. To make reliable data and accurate
premises is necessary., in the lack of reliable data and accurate premises, there is chance of business
loss and failure
4) Problem of rapid change: Planning is the game of prediction. Rapid changes may occur in macro
and micro level environment of business. planning is to be made in a flexible way to compress the
plans in the future
5) Encourage false sense of security: Planning encourages false sense of security against future risk
and uncertainty. As future is uncertain, it is unpredictable. Therefore, planning cannot give accurate
and reliable results.
Essentials of sound plan
1. It should be based on clearly defined objectives.
2. It must be simple and easy understandable.
3. It should provide proper analysis and classification of actions
4. It should be action oriented
5. It should be flexible and adoptable all changes in the organization
6. It must be economical
7. It should provide standards for the evaluation of performance and actions.
Types of planning
1. Operational plans- The specific results expected from departments, work groups, and individuals
are the operational goals. These goals are precise and measurable.
An operational plan is one that a manager uses to accomplish his or her job responsibilities.
Supervisors, team leaders, and facilitators develop operational plans to support tactical plans.
Operational plans can be a single use plan or an ongoing plan.
Single use plans apply to activities that do not recur or repeat. A one time occurrence, such as a special
sales program, is a single use plan because it deals with the who, what, where, how, and how much of
an activity. Like budget
Continuing or ongoing plans are usually made once and retain their value over a period of years while
undergoing periodic revisions and updates.
2. Tactical plans- A tactical plan is concerned with what the lower level units within each division
must do, how they must do it, and who is in charge at each level. Tactics are the means needed to
activate a strategy and make it work. Tactical plans are concerned with shorter time frames and
narrower scopes than are strategic plans. These plans usually span one year or less because they are
 considered short term goals. Long term goals, can take several years or more to accomplish.
Normally, it is the middle manager's responsibility to take the broad strategic plan and identify
tactical actions.

A strategic plan is an outline of steps designed with the goals of the entire organization as a whole in
mind, rather than with the goals of specific divisions or departments.

3. Contingency plans- Intelligent and successful management depends upon a constant pursuit of
adaptation, flexibility, and mastery of changing conditions. Strong management requires a “keeping all
options open” approach at all times — that's where contingency planning comes in.

Contingency planning involves identifying alternative courses of action that can be implemented if
and when the original plan proves inadequate because of changing circumstances.

Process of planning
1. Determine objectives of plans:

i. Plans are the means to achieve certain ends or objectives. Therefore, establishment of organizational
or overall objectives is the first step in planning.

ii. Setting objectives is the most crucial part of planning. The objectives should be set in key areas of
operations.

iii. They should be verifiable, they should as far as possible be specified in clear and measurable terms.

iv. The objectives are set in the light of the opportunities perceived by managers. The objectives must
be clear, specific and informative.

v. Establishment of goals is influenced by the values and beliefs of executives, mission of the
organization, organizational resources, and etc.

vi. Objectives provide the guidelines (what to do) for the preparation of strategic and procedural plans.

vii. One cannot make plans unless one knows what is to be accomplished. They set the pattern of future
course of action.

2. Developing the planning premises:

i. Before plans are prepared, the assumptions and conditions underlying them must be clearly defined
these assumptions are called planning premises and they can be identified through accurate
forecasting of likely future events.
ii. They are forecast data of an honest nature. Assessment of environment helps to disclose
opportunities and constraints.

iii. Analysis of internal (controllable) and external (uncontrollable) forces is essential for sound
planning premises are the critical factors which lay down the bounder for planning.

iv. They are vital to the success of planning as they supply per tenant facts about future. They need
revision with changes in the situation. Contingent plans may be prepared for alternate situations.

3. Reviewing Limitations:

i. In practice, several constraints or limitations affect the ability of an organization to achieve its
objectives. These limitations restrict the smooth operation of plans and they must be anticipated and
provided for.

ii. The key areas of Imitations are finance," human resources, materials, power and machinery. The
strong and weak points of the enterprise should be correctly assessed.

4. Deciding the planning period:

i. Once the broad goals, planning premises and limitations are laid down, the next step is to decide the
period of planning.

ii. The planning period should be long enough to permit the fulfillment of the commitments involved
in a decision.

iii. This is known as the principle of commitment. The planning period depends on several factors e.g.,
future that can be reasonably anticipated, time required to receive capital investments, expected
future availability of raw materials, lead time in development and commercialization of a new
product, etc.

5. Formulation of policies and strategies:

i. After the goals are defined and planning premises are identified, management can formulate policies
and strategies for the accomplishment of desired results.
ii. The responsibility for laying down policies and strategies lies usually with management. But, the
subordinates should be consulted as they are to implement the policies and strategies.
iii. Alternative plans of action should be developed and evaluated carefully so as to select the most
appropriate policy for the organization.
iv. Imagination, foresight, experience and quantitative techniques are very useful in the development
and evaluation of alternatives.
 6. Preparing operating plans:

i. After the formulation of overall operating plans, the derivative or supporting plans are prepared.
Several medium range and short-range plans are required to implement policies and strategies.

ii. These plans consist of procedures, programmers, schedules, budgets and rules. Such plans are
required for the implementation of basic plans.

iii. Operational plans reflect commitments as to methods, time, money, etc. These plans are helpful in the
implementation of long range plans.

iv. Along with the supporting, plans, the timing and sequence of activities is determined to ensure
continuity in operations.

7. Integration of plans:

i. Different plans must be properly balanced so that they support one another. Review and revision
may be necessary before the plan is put into operation.

ii. Moreover, the various plans must be communicated and explained to those responsible for putting
them into practice.

iii. The participation and cooperation of subordinates is necessary for successful implementation of
plans.

iv. Established plans should be reviewed periodically so as to modify and change them whenever
necessary.

v. A system of continuous evaluation and appraisal of plans should be devised to identify any
shortcomings or pitfalls of the plans under changing situations.

8. Implementation & Evaluation:

i. This step involves implementation of the chosen solutions, and often begins with development of an
implementation plan.
ii. This step involves evaluation of the results of implementation to determine whether the
implemented solutions are effective in achieving their goals.
iii. It also involves evaluating the environment to see if it has changed, thereby rendering the solutions
less effective, more effective or irrelevant.
iv. This step may begin with development of an evaluation plan well before evaluation actually takes
place.
 MANAGEMENT BY OBJECTIVES

Meaning of MBO- MBO is difficult to define. Organizations use it in different ways and for different
reasons. In broad terms, it may be stated that MBO is both a philosophy and an approach of
management.

It is a process in which superiors and subordinates sit together to

identify the common objectives and set the goals which are to be achieved by the subordinates, assess
the contribution of each individual and integrate individual objectives with those of the organisation so
as to make best use of the available resources of the organisation.

 According to George S. Odiorne, "Management by objectives can be described as a process

whereby the superior and subordinate managers of an organisation jointly identify its common
goals, define each individuals major area of responsibility in terms of results and use these measures
as guides for operating the unit and assessing the contribution of each of its member."
 According to Koontz, O'Donnell and Weihrich, "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 organisational and individual objectives."
Features Of Management By Objectives MBO:-
1. Superior-subordinate participation: MBO requires the superior and the subordinate to recognize
that the development of objectives is a joint activity. They must be jointly agree and write out their
duties and areas of responsibility in their respective jobs.
2. Joint goal-setting: MBO emphasizes joint goal-setting that are tangible, verifiable and measurable.
The subordinate with his superior sets his own short-term goals. It is examined both by the superior
and the subordinate that goals are realistic and attainable. In brief, the goals are to be decided jointly
through the participation of all.
3. Joint decision on methodology: MBO focuses special attention on what must be accomplished
(goals) rather than how it is to be accomplished. The superior and subordinate mutually methodology
to be followed in the attainment of objectives. They also mutually set standards and establish norms
for evaluating performance.
4. Makes way to attain maximum result: MBO is a systematic and rational technique that allows
management to attain maximum results from available resources by focusing on attainable goals. It
permits lot of freedom to make creative decisions on his own. This motivates subordinates and
ensures good performance from them.
5. Support from superior: When the subordinate makes efforts to achieve his goals, superior's helping
hand is always available. The superior acts as a coach and provides his valuable advice and guidance
to the subordinate. MBO facilitates effective communication between superior & subordinates for
achieving the objectives set.
Steps In Management By Objectives Planning:-

1) Goal setting: The first phase in the MBO process is to define the organizational objectives. These are
determined by the top management and usually in consultation with other managers. Once these goals
are established, they should be made known to all the members.
2) Manager-Subordinate involvement: After the organizational goals are defined, the subordinates
work with the managers to determine their individual goals. In this way, everyone gets involved in the
goal setting.
3) Matching goals and resources: Management must ensure that the subordinates are provided with
necessary tools and materials to achieve these goals. Allocation of resources should also be done in
consultation with the subordinates.
4) Implementation of plan: After objectives are established and resources are allocated, the
subordinates can implement the plan. If any guidance or clarification is required, they can contact
their superiors.
5) Review and appraisal of performance: This step involves periodic review of progress between
manager and the subordinates. Such reviews would determine if the progress is satisfactory or the
subordinate is facing some problems. Performance appraisal at these reviews should be conducted,
based on fair and measurable standards.
Advantages of Management By Objectives MBO:-
1. Develops result-oriented philosophy: MBO is a result-oriented philosophy. It does not favor
management by crisis. Managers are expected to develop specific individual and group goals, develop
appropriate action plans, properly allocate resources and establish control standards. It provides
opportunities and motivation to staff to develop and make positive contribution in achieving the goals
of an Organisation.
2. Formulation of dearer goals: Goal-setting is typically an annual feature. MBO produces goals that
identify desired/expected results. Goals are made verifiable and measurable which encourage high
level of performance. They highlight problem areas and are limited in number. The meeting is of
minds between the superior and the subordinates. Participation encourages commitment.
3. Facilitates objective appraisal: MBO provides a basis for evaluating a person's performance since
goals are jointly set by superior and subordinates. The individual is given adequate freedom to
 appraise his own activities. Individuals are trained to exercise discipline and self control. Management
by self-control replaces management by domination in the MBO process. Appraisal becomes more
objective and impartial.
4. Raises employee morale: Participative decision-making and two-way communication encourage the
subordinate to communicate freely and honestly. Participation, clearer goals and improved
communication will go a long way in improving morale of employees.
5. Facilitates effective planning: MBO programmes sharpen the planning process in an Organisation. It
compels managers to think of planning by results. Developing action plans, providing resources for
goal attainment and discussing and removing obstacles demand careful planning. MBO provides
better management and better results.
6. Acts as motivational force: MBO gives an individual or group, opportunity to use imagination and
creativity to accomplish the mission. Managers devote time for planning results. Both appraiser and
appraise are committed to the same objective. Since MBO aims at providing clear targets and their
order of, employees are motivated.
7. Facilitates effective control: Continuous monitoring is an essential feature of MBO. This is useful
for achieving better results. Actual performance can be measured against the standards laid down for
measurement of performance and deviations are corrected in time. A clear set of verifiable goals
provides an outstanding guarantee for exercising better control.
8. Facilitates personal leadership: MBO helps individual manager to develop personal leadership and
skills useful for efficient management of activities of a business unit. Such a manager enjoys better
chances to climb promotional ladder than a non-MBO type.
Limitations of Management By Objectives MBO :-

1) Time-consuming: MBO is time-consuming process. Objectives, at all levels of the Organisation, are
set carefully after considering pros and cons which consumes lot of time. The superiors are required to
hold frequent meetings in order to acquaint subordinates with the new system. The formal, periodic
progress and final review sessions also consume time.
2) Reward-punishment approach: MBO is pressure-oriented programme. It is based on reward-
punishment psychology. It tries to indiscriminately force improvement on all employees. At times, it
may penalize the people whose performance remains below the goal. This puts mental pressure on
staff. Reward is provided only for superior performance.
3) Increases paper-work: MBO programmes introduce ocean of paper-work such as training manuals,
newsletters, instruction booklets, questionnaires, performance data and report into the Organisation.
Managers need information feedback, in order to know what is exactly going on in the Organisation.
 The employees are expected to fill in a number of forms thus increasing paper-work. In the words of
Howell, "MBO effectiveness is inversely related to the number of MBO forms.
4) Creates organizational problems: MBO is far from a panacea for all organizational problems. Often
MBO creates more problems than it can solve. An incident of tug-of-war is not uncommon. The
subordinates try to set the lowest possible targets and superior the highest. When objectives cannot be
restricted in number, it leads to obscure priorities and creates a sense of fear among subordinates.
Added to this, the programme is used as a 'whip' to control employee performance.
5) Develops conflicting objectives: Sometimes, an individual's goal may come in conflict with those of
another e.g., marketing manager's goal for high sales turnover may find no support from the
production manager's goal for production with least cost. Under such circumstances, individuals
follow paths that are best in their own interest but which are detrimental to the company.
6) Problem of co-ordination: Considerable difficulties may be encountered while coordinating
objectives of the Organisation with those of the individual and the department. Managers may face
problems of measuring objectives when the objectives are not clear and realistic.
7) Lacks durability: The first few go-around of MBO are motivating. Later it tends to become old hat.
The marginal benefits often decrease with each cycle. Moreover, the programme is deceptively
simple. New opportunities are lost because individuals adhere too rigidly to established goals.
8) Problems related to goal-setting: MBO can function successfully provided measurable objectives
are jointly set and it is agreed upon by all. Problems arise when: (a) verifiable goals are difficult to set
(b) goals are inflexible and rigid (c) goals tend to take precedence over the people who use it (d)
greater emphasis on quantifiable and easily measurable results instead of important results and (e)
over-emphasis on short-term goals at the cost of long-term goals.
9) Lack of appreciation: Lack of appreciation of MBO is observed at different levels of the
Organisation. This may be due to the failure of the top management to communicate the philosophy of
MBO to entire staff and all departments. Similarly, managers may not delegate adequately to their
subordinates or managers may not motivate their subordinates properly. This creates new difficulties
in the execution of MBO programme.
 DECISION-MAKING

Decision-making is an essential aspect of management. It is a primary function of management.

Decisions are important as they determine both managerial & organizational actions. A decision may
be defined as "a course of action which is willfully chosen from among a set of alternatives to achieve a
desired result." It represents a well-balanced judgment and a commitment to action. Thus, management
is always a decision-making process.

According to Peter Drucker, "Whatever a manager does, he does through decision-making". A

manager has to take a decision before acting or before preparing a plan for execution.
According to R. C. Davis, "management is a decision-making process." Decision-making is an
intellectual process which involves selection of one course of action out of many alternatives.
According to Trewatha & Newport, "Decision-making is the selection of a course of action from
among two or more possible alternatives in order to get a solution for a given problem".

Characteristics of Decision Making

1. Decision making implies choice: Decision making is choosing from among two or more alternative
courses of action. It is the process of selection of one solution out of many available. Managers have
to consider these alternatives & select best one actual execution.
2. Continuous activity/process: Decision-making is a continuous and dynamic process. It pervades all
organizational activity. Managers have to take decisions on various policy and administrative
matters. It is a never ending activity in business management.
3. Mental/intellectual activity: Decision-making is a mental as well as intellectual activity/process
and requires knowledge, skills, experience and maturity on the part of decision-maker. It is
essentially a human activity.
4. Goal oriented process: Decision-making aims at providing a solution to a given problem/ difficulty
before a business enterprise. It is a goal-oriented process and provides solutions to problems faced
by a business unit.
5. Time-consuming activity: Decision-making is a time-consuming activity as various aspects need
careful consideration before taking final decision. For decision makers, various steps are required to
be completed. This makes decision-making a time consuming activity.
6. Needs effective communication: Decision-taken needs to be communicated to all concerned parties
for suitable follow-up actions. Decisions taken will remain on paper if they are not communicated to
concerned persons. Following actions will not be possible in the absence of effective
communication.
7. Responsible job: Decision-making is a responsible job as wrong decisions prove to be too costly to
the Organization. Decision-makers should be matured, experienced, knowledgeable and rational in
their approach. Decision-making need not be treated as routing and casual activity. It is a delicate
and responsible job.

Advantages of Decision Making

1. Decision making is the primary function of management: The functions of management starts
only when the top-level management takes strategic decisions. Without decisions, actions will not
be possible and the resources will not be put to use.
2. Decision-making facilitates the entire management process: Decision-making creates proper
background for the first management activity called planning. It gives concrete shape to broad
decisions about business objectives taken by the top-level management. It is necessary conducting
management functions organising, staffing, and communicating.
3. Decision-making is a continuous managerial function: Managers working at all levels will have
to take decisions as regards the functions assigned to them. Continuous decision making is a must in
the case of all managers/executives.
4. Decision-making is essential to face new problems and challenges: Decisions are required to be
taken regularly as new problems, difficulties and challenges develop before a business enterprise.
New products may come in the market, new competitors may enter the market and government
policies may change. Such change leads to new problems and new decisions
5. Decision-making is a delicate and responsible job: Managers have to take quick and correct
decisions while discharging their duties. In fact, they are paid for their skill, maturity and capacity of
decision-making. Management activities are possible only when suitable decisions are taken.
Correct decisions provide opportunities of growth while wrong decisions lead to loss and instability
to a business unit.

Steps Involved In Decision Making Process

1. Identifying the Problem: Identification of the real problem before a business enterprise is the first
step in the process of decision-making. It is rightly said that a problem well-defined is a problem
half-solved. Information relevant to the problem should be gathered so that critical analysis of the
problem is possible.
2. Analyzing the Problem: After defining the problem, the next step in the decision-making process
is to analyze the problem in depth. This is necessary to classify the problem in order to know who
must take the decision and who must be informed about the decision taken.
3. Collecting Relevant Data: After defining the problem and analyzing its nature, the next step is to
obtain the relevant information/ data about it. All available information should be utilised fully for
analysis of the problem. This brings clarity to all aspects of the problem.
4. Developing Alternative Solutions: After the problem has been defined, diagnosed on the basis of
relevant information, the manager has to determine available alternative courses of action that
could be used to solve the problem.
5. Selecting the Best Solution: After preparing alternative solutions, the next step in the decision-
making process is to select an alternative that seems to be most rational for solving the problem.
The alternative selected must be communicated to those who are likely to be affected by it.
6. Converting Decision into Action: After the selection of the best decision, the next step is to
convert the selected decision into an effective action. Without such action, the decision will remain
merely a declaration of good intentions. Here, the manager has to convert 'his decision into 'their
decision' through his leadership.
7. Ensuring Feedback: Feedback is the last step in the decision-making process. Here, the manager
has to make built-in arrangements to ensure feedback for continuously testing actual developments
against the expectations. It is like checking the effectiveness of follow-up measures. Feedback is
possible in the form of organised information, reports and personal observations
 Organizing

Organizing in management refers to the relationship between people, work and resources used to
achieve the common objectives (goals). Organizing is the function of management which follows
planning. It is a function in which the management and combination of human, physical and financial
resources takes place.

According to Chester Barnard, “Organizing is a function by which the concern is able to define the
role positions, jobs related & co-ordination between authority & responsibility.

According to Theo Haimann, "Organising is the process of defining and grouping the activities of the
enterprise and establishing the authority relationships among them."

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

NATURE OR CHARACTERISTICS OF ORGANIZING

1. Division of Work: Division of work is the basis of an organization. In other words, there can be no organization
without division of work. Under this the entire work of business is divided into many departments .The work of
every department is further sub-divided into sub-works.
2. Coordination: Under organizing different persons are assigned different works but the aim of all these persons
happens to be the some - the attainment of the objectives of the enterprise. The work of one person starts from where
the work of another person ends. Therefore, everybody completes his work in time and does not delay the work of
others. It is thus, clear that it is in the nature of an organization to establish coordination among different works,
departments.
3. Common Objectives: There are various parts of an organization with different functions to perform but all move in
the direction of achieving a general objective.
4. Well-defined Authority and Responsibility: Under organization a chain is established between different posts
right from the top to the bottom. It is clearly specified as to what will be the authority and responsibility of every post.
Every individual working in the organization is given some authority for the efficient work performance.
5. Organization is a Structure of Relationship: Relationship between persons working on different posts in the
organization is decided. In other words, it is decided as to who will be the superior and who will be the subordinate.
Leaving the top level post and the lowest level post everybody is somebody's superior and somebody's subordinate.
The person working on the top-level post has no superior and the person working on the lowest level post has no
subordinate.
6. Organization is a Machine of Management: Organization is considered to be a machine of management
because the efficiency of all the functions depends on an effective organization. In other words, if the divisions
of work isnot done properly or posts are not created correctly the whole system of management collapses.
7. Organization is a Universal Process: Organization is needed both in business and non-business organizations. Not
only this, organization will be needed where two or more than two people work jointly. Therefore, organization has
the quality of universality.
8. Organization is dynamic Process: Organization is related to people and the knowledge and experience of the
people undergo a change. The impact of this change affects the various functions of the organizations. Thus,
organization is not a process that can be decided for all times to come but it undergoes changes according to the
needs.
IMPORTANCE OF ORGANISING
1. Increase in Managerial Efficiency: A good and balanced organization helps the managers to increase their
efficiency. Managers, through the medium of organization, make a proper distribution of the whole work among
different people according to their ability.
2. Proper Utilization of Resources: Through the medium of organization optimum utilization of all the available
human and material resources of an enterprise becomes possible. Work is allotted to every individual according to
his ability and capacity and conditions ant created to enable him to utilize his ability to the maximum extent. For
example, if an employee possesses the knowledge of modem machinery but the modem machinery is not available
in the organization, in that case, efforts are made to make available the modem machinery.
3. Sound Communication Possible: Communication is essential for taking the right decisional the right time.
However, the establishment of a good communication system is possible only through an organization. In an
organization the time of communication is decided so that all the useful information reaches the officers concerned
which in turn, help the decision-making.
4. Facilitates Coordination: In order to attain successfully the objectives of the organization, coordination among
various activities in the organization is essential. Organization is the only medium which makes coordination
possible. Under organization the division of work is made in such a manner as to make all the activities
complementary to each other increasing their inter-dependence.
5. Increase in Specialization: Under organization the whole work is divided into different parts. Competent persons
are appointed to handle all the sub-works and by handling particular work repeatedly they become specialists. This
enables them to have maximum work performance in the minimum time while the organization gets the benefit of
specialization.
6. Helpful in Expansion: A good organization helps the enterprise in facing competition. When an enterprise starts
making available good quality product at cheap rates, it increases the demand for its products. In order to meet the
increasing demands for its products an organization has to expand its business.
FORMAL AND INFORMAL ORGANIZATION
The formal organization refers to the structure of jobs and positions with clearly defined functions and relationships
as prescribed by the top management. This type of organization is built by the management to realize objectives of an
enterprise and is bound by rules, systems and procedures. . Informal organization, which does not appear on the
organization chart, supplements the formal organization in achieving organizational goals effectively and efficiently.
Therefore, it is obligatory for every manager to study thoroughly the working pattern of informal relationships in the
organization and to use them for achieving organizational objectives.

The formal organization is built around four key pillars. They are:
1. Division of labor
2. Scalar and functional processes
3. Structure and
4. Span of control
Characteristic Features of formal organization
1. Formal organization structure is laid down by the top management to achieve organizational goals
2. It prescribes the relationships amongst the people working in the organization.
3. The organization structures is intentionally designed to enable the people of the organization to work together for
accomplishing the common objectives of the enterprise
4. A formal organization is bound by rules, regulations and procedures. In a formal organization, the position,
authority, responsibility and accountability of each level are clearly defined.
5. Organization structure is based on division of labor and specialization to achieve efficiency in operations
Advantages of formal organization
1. The formal organization structure concentrates on the jobs to be performed. It, therefore, makes everybody
responsible for a given task.
2. A formal organization is bound by rules, regulations and procedures. It thus ensures law and order in the
organization.
3. The organization structure enables the people of the organization to work together for accomplishing the common
objectives of the enterprise
Disadvantages or criticisms of formal organization
1. The formal organization does not take into consideration the sentiments of organizational members.
2. The formal organization does not consider the goals of the individuals. It is designed to achieve the goals of the
organization only.
3. The formal organization is bound by rigid rules, regulations and procedures. This makes the achievement of goals
difficult
INFORMAL ORGANIZATION
Informal organization refers to the relationship between people in the organization based on personal attitudes,
emotions, prejudices, likes, dislikes etc. an informal organization is an organization which is not established by any
formal authority, but arises from the personal and social relations of the people. These relations are not developed
according to procedures and regulations laid down in the formal organization structure; generally large formal groups
give rise to small informal or social groups. These groups may be based on same taste, language, culture or some
other factor.
Characteristics features of informal organization
1. Informal organization is not established by any formal authority. It is unplanned and arises spontaneously.
2. Informal organizations reflect human relationships. It arises from the personal and social relations amongst the
people working in the organization.
3. Formation of informal organizations is a natural process. It is not based on rules, regulations and procedures.
4. The inter-relations amongst the people in an informal organization cannot be shown in an organization chart.
5. In the case of informal organization, the people cut across formal channels of communications and communicate
amongst themselves.
6. Informal organizations are based on common taste, problem, language, religion, culture; etc.it is influenced by the
personal attitudes, emotions, whims, likes and dislikes etc. of the people in the organization.
Benefits of Informal organization
1. It blends with the formal organization to make it more effective.
2. Many things which cannot be achieved through formal organization can be achieved through informal
organization.
3. The presence of organization in an enterprise makes the managers plan and act more carefully.
4. Informal organization acts as a means by which the workers achieve a sense of security and belonging. It provides
social satisfaction to group members.
5. An informal organization has a powerful influence on productivity and job satisfaction.
6. The informal leader lightens the burden of the formal manager and tries to fill in the gaps in the manager's ability.
7. Informal organization helps the group members to attain specific personal objectives.
Formal Organization Informal Organization
1. Formal organization is established with the Informal organization springs on its own. Its goals are
explicit aim of achieving well-defined goals ill defined and intangible
2. It recognizes certain tasks which are to be Informal organization does not have any well-defined
carried out to achieve its goals tasks
3. The roles and relationships of people in formal In informal organization the relationships among
 organization are impersonally defined people are interpersonal
4. The communication system in formal In informal organization, the communication pattern is
organization follows certain pre-determined haphazard, intricate and natural
patterns and paths
5. Formal organization is relatively slow to Informal organization is dynamic and very vigilant.
respond and adapt to changing situations and It is sensitive to its surroundings.
realities
6. In formal organization, much emphasis is Informal organization is characterized by relative
placed on efficiency, discipline, conformity, freedom, spontaneity, by relative freedom, spontaneity,
consistency and control homeliness and warmth

Types of Organization Structure

Organization structure is defined as "The logical arrangement of task and the network of
relationships and roles among the various positions established to carry out the activities necessary to
achieve the predetermined objectives of business". Internal Organization structure constitutes the
arteries and veins through which the blood of work flows in the body of Organization.

1. Line Organization structure.

2. Functional Organization structure.
3. Line and staff Organization structure.
4. Product Organization structure.
5. Matrix Organization structure.

Line Organization Structure: Line Organization (also called Military/Scalar Organization) is the
oldest and the simplest form of internal Organization structure. It was first developed by the Roman
army and later adopted by armies all over the world. In the line Organization, the line of authority
moves directly from the top level to the lowest level in a step-by-step manner. It is straight and vertical.
The top-level management takes all major decisions and issues directions for actual execution.

Advantages of Line Organization Structure

1. Simplicity: Line Organization structure is easy to understand and follow by superiors and
subordinates. It is simple and clear as regards authority and accountability.
2. Prompt decisions: Line Organization facilitates prompt decision-making at all levels as the
authority given is clear and complete.
3. Discipline: It brings discipline in the Organization due to unity of command, delegation of authority
and direct accountability.
4. Economical: Line Organization is economical as experts are not appointed.
5. Quick communication, high efficiency, flexibility and high employee morale are some more
advantages of line Organization structure.

Limitations of Line Organization Structure

1. Heavy burden on line executives: The line executives are given too many duties and
responsibilities. Even the quality of the decisions of executives may suffer due to heavy burden of
duties and responsibilities.
2. Non-availability of services of experts: There is absence of skilled experts in line organisation.
Expert assistance is not available promptly when needed by line executives.
3. Delays in communication, limited freedom to employees and unsuitability to modern large
business units are some more demerits of line Organisation.

Functional Organization Structure

F.W.Taylor, founder of scientific management, conceived the functional Organization structure.

According to him, it is unscientific to overload a foramen with the entire responsibility of running a
department. He introduced a system of functional foremanship in his Organization. In his functional
foremanship, there will be eight specialists' foremen who will be required to guide, direct and control
the work.

In the functional Organization suggested by F.W.Taylor, the job of management is divided according
to specialization. As a result, functional departments are created. For example, the personnel department
will look after the recruitment, selection, training, wage payment, etc. of all persons of the
Organization. Similar will be the position of other departments like production, sales, etc. The scope of
work of the department is limited but the area of authority is unlimited.

Merits of Functional Organization Structure

1. Facilitates specialization: Functional Organization structure facilitates division of work and

specialization. Each boss has specialized knowledge of his functional area. He is in a better position
to guide and help the workers.
2. Benefits of large-scale operations: Functional Organization offers the benefit of economy of large-
scale operation. In this Organization, one administrative unit manufactures all products. The
available machinery, equipment and facilities are used fully for large-scale production.
3. Facilitates effective coordination: Functional Organization facilitates effective coordination within
the function. This is possible as one boss is in-charge of a particular function and he looks after all
activities, which come within that function.
4. Operational flexibility: Functional Organization possesses operational flexibility. Necessary
changes can be introduced easily to suit the needs of the situation without any adverse effect on the
efficiency.
5. Ensures effective supervision: Functional Organization facilitates effective supervision by the
functional heads and foremen. Due to specialization, they concentrate on the specific functional area
and also keep effective supervision on their subordinates.

Demerits of Functional Organization Structure

1. Absence of unity of command: Unity of command is absent in the functional Organization as each
worker gets orders and instructions from several bosses.
2. Fixing responsibility is difficult: In functional Organization, responsibility is difficult to fix on a
specific person. This is because the responsibility itself is divided among many.
3. Unsuitable to non-manufacturing activities: Functional Organization can be introduced in the
case of manufacturing activities. However, its application to non-manufacturing activities such as
marketing, etc. has not been successful.
4. Costly: Functional Organization is costly, as more specialists are required to be appointed.

Line and Staff Organization Structure

In the line and staff Organization, line executives and staff (specialists) are combined together. The line
executives are 'doers' whereas staff refers to experts and act as 'thinkers'. The following chart shows line
and staff Organization structure: The line executives are concerned with the execution of plans and
Policies. They do their best to achieve the organizational objectives. The staff concentrates their
attention on research and planning activities. They are experts and conduct advisory functions.

The staff specialists offer guidance and cooperation to line executives for achieving organizational
objectives. For avoiding the conflicts between line and staff, there should be clear demarcation between
the line and staff functions. This avoids overlapping of functions and possible conflicts. .
According to Louis Allen, "Line refers to those positions and elements of the Organisation, which
have the responsibility and authority and are accountable for accomplishment of primary objectives.
Staff elements are those which have responsibility and authority for providing advice and service to
the line in attainment of objectives".

Merits of Line and Staff Organization

1. Fewer burdens on executives: Line executives get the assistance of staff specialists. This reduces
the burden of tine executives. This raises overall efficiency and facilitates the growth and expansion
of an enterprise.
2. Services of experts available: The benefits of services of experts are provided to line managers.
Highly qualified experts are appointed and they offer guidance to line executives.
3. Sound decision-making: Line and staff Organization facilitates sound management decisions
because of the services of experts and specialists. The decisions are also taken in a democratic
method i.e. in consultation with the experts.
4. Limited tension on line managers: The pressure of work of line bosses is brought down as they are
concerned only with production management.
5. Benefits of specialization: There is division of work and specialization in this Organisation.
Naturally, the benefits of division of work and specialization are easily available.

Demerits of Line and Staff Organisation

1. Delay in decision-making: The process of decision-making is delayed, as line executives have to

consult staff experts before finalizing the decisions. The decisions of line managers are likely to be
delayed due to this lengthy procedure.
2. Conflicts between line and staff executives: In this Organization, quarrels and conflicts between
line managers and staff specialists are quite common. The line managers are generally not interested
in the advice offered by experts. Secondly, specialists feel that the line bosses lack knowledge of
new ideas.
3. Costly Organization: Line and staff Organization is a costly Organization as the line executives are
supported by highly paid staff executives who are experts. All this adds to the overhead expenses
and the cost of production increases.
4. Complicated operation: This Organization is too complicated in actual operation because of dual
authority, division of functions and too much dependence on staff. The unity of command principle
is violated.
Organization Chart

Organization structure of a company can be shown in a chart. Such chart indicates how different
departments are interlinked on the basis of authority and responsibility. It is a simple diagrammatic
method of describing an Organization structure. It indicates how the departments are linked together on
the basis of authority and responsibility. Organization chart is like a blue print of a building. It indicates
the number and types of departments, superior-subordinate relationship, chain of command and
communication.

According to George Terry, Organization chart is "a diagrammatical form which shows important
aspects of an Organization, including the major functions and their respective relationships, the
channels of supervision and the relative authority of each employee who is in-charge of each
respective function".

Advantages of Organizational Chart.

1. Brings clarity to the Organization: The very process of preparing a chart makes the executive
think more clearly about the Organisation relationships.
2. Provides dear picture of the Organisation: Once the charts are prepared, they provide lot of
information about the Organisation, both to the members of the Organisation as well as to the
outsiders. This information relates to number and types of departments, superior subordinate
relationships, chain of command and communication and job titles of each employee.
3. Facilitates training of employees: Organization charts are useful in familiarizing and training new
employees.
4. Ensures organizational changes: Organization charts provide a starting point for planning
organizational changes after having discovered the weaknesses of the existing structure.
5. Provides quick understanding: A chart serves as a better method of visualizing an Organization
than a lengthy written description of it.

Limitations of Organisational Chart

1. Details are not provided: The Organisation chart does not provide all the details of Organisation
structure created. For example, the chart will show the line of authority but not the extent of
authority.
2. Informal relationship is not shown: The chart fails to give details of informal relationship
available in a firm. In fact, human relationships cannot be shown on a chart.
 3. Updated position is not available: The chart shows the position of Organization structure when it
was formed. It gives a static picture of the Organization. Changes made thereafter may not be
available in such charts.
4. Lacks flexibility: Organization chart lacks an element of flexibility. Such chart also brings an
element of rigidity in the working of an Organization.
Types of Organisation Chart
1. Vertical chart: One of the most popular methods is the vertical chart in which the highest job is
shown at the top with other jobs shown in a descending order, connected by lines to show the
authority and the line of communication.
2. Horizontal chart: This chart shows the Organisation structure in the form of a pyramid.
3. Circular chart: The top management is shown at the centre of the circle and other management
levels are shown in concentric circles.
4. Departmental chart: This chart is devoted exclusively to particular department and gives details of
relationships, authority, responsibility, etc. within the department.

CENTRALIZATION AND DECENTRALIZATION

CENTRALIZATION:
It is the process of transferring and assigning decision-making authority to higher levels of an organizational
hierarchy. The span of control of top managers is relatively broad, and there are relatively many tiers in the
organization.
Characteristics
1) Philosophy / emphasis on: top-down control, leadership, vision, strategy.
2) Making: strong, authoritarian, visionary, charismatic
3) Organizational change: shaped by top, vision of leader.
4) Execution: decisive, fast, coordinated. Able to respond quickly to major issues and changes.
5) Uniformity. Low risk of dissent or conflicts between parts of the organization.
Advantages of Centralization
1) Provide Power and prestige for manager
2) Promote uniformity of policies, practices and decisions
3) Minimal extensive controlling procedures and practices
4) Minimize duplication of function
Disadvantages of Centralization
1) Neglected functions for mid. Level, and less motivated beside personnel.
2) Nursing supervisor functions as a link officer between nursing director and first-line management.
DECENTRALIZATION:
It is the process of transferring and assigning decision-making authority to lower levels of an organizational
hierarchy. The span of control of top managers is relatively small, and thereare relatively few tears in the organization,
because there is more autonomy in the lower ranks.
Characteristics
1) Philosophy / emphasis on: bottom-up, political, cultural and learning dynamics.
2) Making: democratic, participative, detailed.
3) Organizational change: emerging from interactions, organizational dynamics.
4) Execution: evolutionary, emergent. Flexible to adapt to minor issues and changes.
5) Participation, accountability. Low risk of not-invented-here behavior.
Three Forms of decentralization
•De-concentration: The weakest form of decentralization. Decision making authority is redistributed to lower or
regional levels of the same central organization.
•Delegation: A more extensive form of decentralization. Through delegation theresponsibility for decision-making
are transferred to semi-autonomous organizations notwholly controlled by the central organization, but ultimately
accountable to it.
• Devolution: A third type of decentralization is devolution. The authority for decision-making is transferred
completely to autonomous organizational units.
Advantages of Decentralization
1) Raise morale and promote interpersonal relationships
2) Reduce from the daily administration
3) Bring decision-making close to action
4) Develop Second-line managers
5) Promote employee’s enthusiasm and coordination
6) Facilitate actions by lower-level managers
Disadvantages of Decentralization
1) Top-level administration may feel it would decrease their status
2) Managers may not permit full and maximum utilization of highly qualified personnel
3) Increased costs. It requires more managers and large staff
4) It may lead to overlapping and duplication of effort Centralization and Decentralization are two opposite
ways to transfer decision-making power and to change the organizational structure of organizations
accordingly.
5) There must be a good balance between centralization and decentralization of authority and power. Extreme
centralization and decentralization must be avoided
 DELEGATION OF AUTHORITY
A manager alone cannot perform all the tasks assigned to him. In order to meet the targets, the manager should
delegate authority. Delegation of Authority means division of authority and powers downwards to the subordinate.
Delegation is about entrusting someone else to do parts of your job. Delegation of authority can be defined as
subdivision and sub-allocation of powers to the subordinates in order to achieve effective results.
Elements of Delegation
1. Authority- in context of a business organization, authority can be defined as the power and right of a person to use
and allocate the resources efficiently, to take decisions and to give orders so as to achieve the organizational
objectives. Authority must be well- defined. All people who have the authority should know what is the scope of
their authority is and they shouldn’t mis utilize it. Authority is the right to give commands, orders and get the things
done. The top level management has greatest authority. Authority always flows from top to bottom. It explains how
a superior gets work done from his subordinate by clearly explaining what is expected of him and how he should go
about it. Authority should be accompanied with an equal amount of responsibility.
2. Responsibility- is the duty of the person to complete the task assigned to him. A person who is given the
responsibility should ensure that he accomplishes the tasks assigned to him. If the tasks for which he was held
responsible are not completed, then he should not give explanations or excuses. Responsibility without adequate
authority leads to discontent and dissatisfaction among the person. Responsibility flows from bottom to top. The
middle level and lower level management holds more responsibility. The person held responsible for a job is
answerable for it. If he performs the tasks assigned as expected, he is bound for praises. While if he doesn’t
accomplish tasks assigned as expected, then also he is answerable for that.
3. Accountability- means giving explanations for any variance in the actual performance from the expectations set.
Accountability cannot be delegated. For example, if ’A’ is given a task with sufficient authority, and ’A’ delegates
this task to B and asks him to ensure that task is done well, responsibility rest with ’B’, but accountability still rest
with ’A’. The top level management is most accountable. Being accountable means being innovative as the person
will think beyond his scope of job. Accountability, in short, means being answerable for the end result.
Accountability can’t be escaped. It arises from responsibility.
DELEGATION PROCESS
The steps involved in delegation are given below
1. Allocation of duties –The delegator first tries to define the task and duties to the subordinate. He also has to define
the result expected from the subordinates. Clarity of duty as well as result expected has to be the first step in
delegation.
2. Granting of authority –Subdivision of authority takes place when a superior divides and shares his authority with
the subordinate. It is for this reason; every subordinate should be given enough independence to carry the task given
 to him by his superiors. The managers at all levels delegate authority and power which is attached to their job
positions. The subdivision of powers is very important to get effective results.3.
3. Assigning of Responsibility and Accountability –The delegation process does noted once powers are granted to
the subordinates. They at the same time have to be obligatory towards the duties assigned to them. Responsibility is
said to be the factor or obligation of an individual to carry out his duties in best of his ability as per the directions of
superior. Therefore, it is that which gives effectiveness to authority. At the same time, responsibility is absolute and
cannot be shifted.
4. Creation of accountability – Accountability, on the others hand, is the obligation of the individual to carry out his
duties as per the standards of performance. Therefore, it is said that authority is delegated, responsibility is created
and accountability is imposed. Accountability arises out of responsibility and responsibility arises out of authority.
Therefore, it becomes important that with every authority position an equal and opposite responsibility should be
attached.
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 superior and a subordinate in an organization.
Factors Affecting Span of control:
1. Capacity of Superior: Different ability and capacity of leadership, communication affect management
of subordinates.
2. Capacity of Subordinates: Efficient and trained subordinates affect the degree of span of management.
3. Nature of Work: Different types of work require different patterns of management.
4. Degree of Centralization or Decentralization: Degree of centralization or decentralization affects the span of
management by affecting the degree of involvement of the superior in decision making.
5. Degree of Planning: Plans which can provide rules, procedures in doing the work higher would be the degree of
span of management.
6. Communication Techniques: Pattern of communication, its means, and media affect the time requirement in
managing subordinates and consequently span of management.
Span of control is of two types:
1. 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.
Advantages:
1. Close supervision
2. Close control of subordinates
3. Fast communication
Disadvantages:
1. Too much control
2. Many levels of management
3. High costs
4. Excessive distance between lowest level and highest level

2. Wide span of control: Wide span of control means a single manager or supervisor overseesa large number of
subordinates. This gives rise to a flat organizational structure.
Advantages:
1. More Delegation of Authority
2. Development of Managers
3. Clear policies
Disadvantages:
1. Overloaded supervisors
2. Danger of superior’s loss of control
3. Requirement of highly trained managerial personnel
4. Block in decision making
 STAFFING

MEANING OF STAFFING- Staffing is that part of the process of management which is concerned
with acquiring, developing, employing, appraising, remunerating and retaining people so that right type
of people are available at right positions and at right time in the organisation. The term staffing in
management consists of:

1. Selecting the right person for the right post.

2. Training and development.
3. Giving proper remuneration and motivation.
4. Performance appraisal of employees.
5. Proper promotions, transfers, etc

1. According to McFarland "Staffing is the function by which managers build an organisation through
the recruitment, selection, and development of individuals as capable employees"
2. According to O donnell “Staffing involves managing the organistation structure through proper and
effective selection appraisal & development of personnel to fill the roles designed to the structure.
NATURE OF STAFFING

1. Staffing is an important managerial function- Staffing function is the most important managerial
act along with planning, organizing, directing and controlling. The operations of these four functions
depend upon the manpower which is available through staffing function.
2. Staffing is a continuous activity-This is because staffing function continues throughout the life of an
organization due to the transfers and promotions that take place.
3. The basis of staffing function is efficient management of personnel’s- Human resources can be
efficiently managed by a system or proper procedure, that is, recruitment, selection, placement,
training and development, providing remuneration, etc.
4. Staffing helps in placing right men at the right job. It can be done effectively through proper
recruitment procedures and then finally selecting the most suitable candidate as per the job
requirements.
5. Staffing is performed by all managers-Staffing is performed by all managers depending upon the
nature of business, size of the company, qualifications and skills of managers, etc. In small
companies, the top management generally performs this function. In medium and small scale
enterprise, it is performed by the personnel department of that concern.
 ESSENTIALS OF A GOOD STAFFING POLICY

 It should take into account the interest of both employer and employees
 It should be complete in every respect
 It should be simple and precise
 It should be flexible
 It should be variations in the capabilities, interest and attitudes of employees
ELEMENTS OF STAFFING

1) PROCUREMENT - Employment of proper number and kind of personnel is the first function
of staffing this involves: Manpower planning, Recruitment, Selection, and Placement.
2) DEVELOPMENT- After placing the individual on various jobs it is necessary to train them so that
they can perform their jobs efficiently. Proper development of personnel is essential to increase their
skill in the proper performance of their jobs. Training is the process of improving the knowledge and
skills of personnel
3) COMPENSATION- Compensating personnel means determining adequate and equitable
remuneration of personnel for their contributions to the organizational goals. Both monetary and non
monetary rewards are decided keeping in view human needs, job requirements, prevailing wage
levels, organization’s capacity to pay etc.
4) INTEGRATION- It involves developing a sense of belonging to the enterprise. Sound
communication system is required to develop harmony and team spirit among employees. Effective
machinery is required for the quick and satisfactory redressal of all problems and grievances of
employees, it is essential to motivate employees towards the accomplishment of organizational goals.
Discipline and labour relation are important elements of integration.
5) MAINTENANCE- It involves provision of such facilities and services that are required to maintain
the physical and mental health of employees. These include measures for health, safety and comfort of
employees. Various welfare services may consists of provision of cafeteria, restrooms, group
insurance, recreation club, education of children of employees.
PROCESS OF STAFFING

1) MANPOWER PLANNING
2) RECRUITMENT
3) SELECTION
4) TRAINING & DEVELOPMENT
5) PERFORMANCE APPRAISAL
 MANPOWER PLANNING

Manpower Planning which is also called as Human Resource Planning consists of putting right number
of people, right kind of people at the right place, right time, doing the right things for which they are
suited for the achievement of goals of the organization. Human Resource Planning has got an important
place in the arena of industrialization. The procedure is as follows:

1. Analysing the current manpower inventory

2. Making future manpower forecasts
3. Developing employment programmes
4. Design training programmes

Steps in Manpower Planning

1) Analysing the current manpower inventory- Before a manager makes forecast of future
manpower, the current manpower status has to be analysed. For this the following things have to be
noted-
 Type of organization
 Number of departments
 Number and quantity of such departments
 Employees in these work units
2) Making future manpower forecasts- Once the factors affecting the future manpower forecasts are
known, planning can be done for the future manpower requirements in several work units.
a) Expert Forecasts: This includes informal decisions, formal expert surveys and Delphi
technique.
b) Trend Analysis: Manpower needs can be projected through extrapolation (projecting past
trends), indexation (using base year as basis), and statistical analysis (central tendency measure).
c) Work Load Analysis: It is dependent upon the nature of work load in a department, in a branch
or in a division.
d) Work Force Analysis: Whenever production and time period has to be analysed, due
allowances have to be made for getting net manpower requirements.
e) Other methods: Several Mathematical models, with the aid of computers are used to forecast
manpower needs, like budget and planning analysis, regression, new venture analysis.
3) Developing employment programmes- Once the current inventory is compared with future
forecasts, the employment programmes can be framed and developed accordingly, which will
include recruitment, selection procedures and placement plans.
4) Design training programmes- These will be based upon extent of diversification, expansion plans,
development programmes, etc. Training programmes depend upon the extent of improvement in
technology and advancement to take place. It is also done to improve upon the skills, capabilities,
knowledge of the workers.

Importance of Manpower Planning

1. Key to managerial functions- The four managerial functions, i.e., planning, organizing, directing
and controlling are based upon the manpower. Human resources help in the implementation of all
these managerial activities. Therefore, staffing becomes a key to all managerial functions.
2. Efficient utilization- Efficient management of personnels becomes an important function in the
industrialization world of today. Setting of large scale enterprises requires management of large
scale manpower. It can be effectively done through staffing function.
3. Motivation- Staffing function not only includes putting right men on right job, but it also comprises
of motivational programmes, i.e., incentive plans to be framed for further participation and
employment of employees in a concern.
4. Better human relations- A concern can stabilize itself if human relations develop and are strong.
Human relations become strong trough effective control, clear communication, effective supervision
and leadership in a concern. Staffing function also looks after training and development of the work
force which leads to co-operation and better human relations.
5. Higher productivity- Productivity level increases when resources are utilized in best possible
manner. Higher productivity is a result of minimum wastage of time, money, efforts and energies.
This is possible through the staffing and its related activities ( Performance appraisal, training and
development, remuneration)

Need of Manpower Planning

1. Shortages and surpluses can be identified so that quick action can be taken wherever required.
2. All the recruitment and selection programmes are based on manpower planning.
3. It also helps to reduce the labour cost as excess staff can be identified and thereby overstaffing can
be avoided.
4. It also helps to identify the available talents in a concern and accordingly training programmes can
be chalked out to develop those talents.
5. It helps in growth and diversification of business. Through manpower planning, human resources
can be readily available and they can be utilized in best manner.
 RECRUITMENT

“Recruitment is the process of searching the candidates for employment and stimulating them to apply
for jobs in the organisation”. Recruitment is the activity that links the employers and the job seekers. A
process of finding and attracting capable applicants for employment. The process begins when new
recruits are sought and ends when their applications are submitted. The result is a pool of applications
from which new employees are selected.

SOURCES OF RECRUITMENT

1. Internal Recruitment - is a recruitment which takes place within the concern or organization.
Internal sources of recruitment are readily available to an organization. Internal sources are
primarily three - Transfers, promotions and Re-employment of ex-employees. Re-employment of
ex-employees is one of the internal sources of recruitment in which employees can be invited and
appointed to fill vacancies in the concern. It also saves time, money and efforts.

Internal sources are primarily three types

a. Transfers
b. Promotions (through Internal Job Postings) and
c. Re-employment of ex-employees - Re-employment of ex-employees is one of the internal sources
of recruitment in which employees can be invited and appointed to fill vacancies in the concern.

2. External Recruitment - External sources of recruitment have to be solicited from outside the
organization. External sources are external to a concern. But it involves lot of time and money. The
external sources of recruitment include - Employment at factory gate, advertisements, employment
exchanges, employment agencies, educational institutes, labour contractors, recommendations etc.
a. Employment at Factory Level - This a source of external recruitment in which the applications for
vacancies are presented on bulletin boards outside the Factory or at the Gate. This kind of
recruitment is applicable generally where factory workers are to be appointed. There are people who
keep on soliciting jobs from one place to another.
b. Advertisement - It is an external source which has got an important place in recruitment procedure.
The biggest advantage of advertisement is that it covers a wide area of market and scattered
applicants can get information from advertisements. Medium used is Newspapers and Television.
c. Employment Exchanges - There are certain Employment exchanges which are run by government.
Most of the government undertakings and concerns employ people through such exchanges. Now-a-
days recruitment in government agencies has become compulsory through employment exchange.
 d. Employment Agencies - There are certain professional organizations which look towards
recruitment and employment of people, i.e. these private agencies run by private individuals supply
required manpower to needy concerns.
e. Educational Institutions - There are certain professional Institutions which serves as an external
source for recruiting fresh graduates from these institutes. This kind of recruitment done through
such educational institutions, is called as Campus Recruitment. They have special recruitment cells
which helps in providing jobs to fresh candidates.
f. Recommendations - There are certain people who have experience in a particular area. They enjoy
goodwill and a stand in the company. There are certain vacancies which are filled by
recommendations of such people. The biggest drawback of this source is that the company has to
rely totally on such people which can later on prove to be inefficient.

SELECTION

Employee Selection is the process of putting right men on right job. It is a procedure of matching
organizational requirements with the skills and qualifications of people. Effective selection can be done only
when there is effective matching. By selecting best candidate for the required job, the organization will get
quality performance of employees. By selecting right candidate for the required job, organization will also
save time and money. Recruitment precedes selection in staffing process. Selection involves choosing the
best candidate with best abilities, skills and knowledge for the required job.

The Employee selection Process takes place in following order-

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

Basis Recruitment Selection

Meaning It is an activity of establishing contact It is a process of picking up more competent

between employers and applicants. and suitable employees.

Objective It encourages large number of Candidates for It attempts at rejecting unsuitable candidates.
a job.

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

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

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

Sequence It proceeds selection. It follows recruitment.

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

Time Less time is required. More time is required.

Consuming
 INTERVIEW

1) Structured Interview- Here, every single detail of the interview is decided in advance. The
questions to be asked, the order in which the questions will be asked, the time given to each
candidate, the information to be collected from each candidate, etc. is all decided in advance.
Structured interview is also called Standardized, Patterned, Directed or Guided interview. Structured
interviews are preplanned.

2) Unstructured Interview- This interview is not planned in detail. Hence it is also called as Non-
Directed interview. The question to be asked, the information to be collected from the candidates,
etc. are not decided in advance. These interviews are non-planned and therefore, more flexible.
Candidates are more relaxed in such interviews. They are encouraged to express themselves about
different subjects, based on their expectations, motivations, background, interests, etc.

3) Group Interview- All the candidates or small groups of candidates are interviewed together. The
time of the interviewer is saved. It is similar to a group discussion. A topic is given to the group, and
they are asked to discuss it. The interviewer carefully watches the candidates. He tries to find out
which candidate influences others, who clarifies issues, who summarizes the discussion, who speaks
effectively, etc.

4) Exit Interview- When an employee leaves the company, he is interviewed either by his immediate
superior or by the HRD manager. This interview is called an exit interview. Exit interview is taken
to find out why the employee is leaving the company. Sometimes, the employee may be asked to
withdraw his resignation by providing some incentives. Exit interviews are taken to create a good
image of the company in the minds of the employees who are leaving the company.

5) Depth Interview- This is a semi-structured interview. The candidate has to give detailed
information about his background, special interest, etc. He also has to give detailed information
about his subject. Depth interview tries to find out if the candidate is an expert in his subject or not.
Here, the interviewer must have a good understanding of human behaviour.

6) Stress Interview- The purpose of this interview is to find out how the candidate behaves in a
stressful situation. That is, whether the candidate gets angry or gets confused or gets frightened or
gets nervous or remains cool in a stressful situation. Here, the interviewer tries to create a stressful
situation during the interview. This is done purposely by asking the candidate rapid questions,
criticising his answers, interrupting him repeatedly, etc.
 7) Individual Interview- This is a 'One-To-One' Interview. It is a verbal and visual interaction
between two people, the interviewer and the candidate, for a particular purpose. The purpose of this
interview is to match the candidate with the job. It is a two way communication.

8) Informal Interview- Informal interview is an oral interview which can be arranged at any place.
Different questions are asked to collect the required information from the candidate. Specific rigid
procedure is not followed. It is a friendly interview.

9) Formal Interview- Formal interview is held in a more formal atmosphere. The interviewer asks
pre-planned questions. Formal interview is also called planned interview.

10) Panel Interview- Panel means a selection committee or interview committee that is appointed for
interviewing the candidates. The panel may include three or five members. They ask questions to
the candidates about different aspects. They give marks to each candidate. The final decision will be
taken by all members collectively by rating the candidates.

TRAINING AND DEVELOPMENT

In simple terms, training and development refers to the imparting of specific skills, abilities and
knowledge to an employee. A formal definition of training & development is… it is any attempt to
improve current or future employee performance by increasing an employee’s ability to perform
through learning, usually by changing the employee’s attitude or increasing his or her skills and
knowledge.

According to Flippo, “Training is the act of increasing knowledge and skills of an employee for
doing a particular job"

The major outcome of training is learning. A trainee learns new habits, refined skills and useful
knowledge during their training programmes, which helps them to improve their performance. Training
can also be defined as activities designed to change the behaviour

Training & Development = Standard performance – Actual performance.

Importance of Training

1) It leads to improved profitability and/or more positive attitudes towards profit orientation. Improves
the job knowledge and skills at all levels of the organization
2) Improves the morale of the workforce
3) Helps people identify with organizational goals
4) Helps create a better corporate image
5) Fosters authenticity, openness and trust
6) Improves relationship between boss and subordinate
7) Aids in organizational development learns from the trainee
8) Helps prepare guidelines for work
9) Aids in understanding and carrying out organizational policies.
10) Provides information for future needs in all areas of the organization
11) Organization gets more effective decision-making and problem-solving skills
12) Aids in development for promotion from within
13) Aids in developing leadership skills, motivation, loyalty, better attitudes, and other aspects that
successful workers and managers usually display
14) Aids in increasing productivity and/or quality of work
15) Helps keep costs down in many areas, e.g. production, personnel, administration, etc.
16) Develops a sense of responsibility to the organization for being competent and knowledgeable
17) Improves Labour-management relations
18) Reduces outside consulting costs by utilizing competent internal consultation
19) Stimulates preventive management as opposed to putting out fires
20) Eliminates suboptimal behavior (such as hiding tools)
21) Creates an appropriate climate for growth, communication
22) Aids in improving organizational communication