Q.1 Define Management.

Explain the nature, scope and importance of

management in the context of modern society.

1.1 Introduction –

In the modern times one of the important human activities is

managing. Although management practice is as old as human
civilization, the importance of management has increased only after
Industrial Revolution. Whenever a group of people come together to
achieve certain common goals, management becomes essential to
ensure the co-ordination and control of individual activities in the
organization. As the society is using increasingly group efforts and a
large number of organized groups tend to become still larger, the
task of managing is becoming more complex and important.
Revolution in information technology and increasing use of
computerization has made lot of information available for modern
managers. In order to make optimum use of available resources
efficiently and effectively, knowledge and training of management
theory and practice has become essential to promote excellence
among the people working in the organizations especially for
managers aspiring managers and other professionals.

1.2 Definitions –

The term management has been interpreted differently by different

authors. Some of the definitions may be stated as follows. According
to Theo Haimann the term management has been used in three
different senses: i) as a noun ii) as a process iii) as a
discipline. As a noun a management is often used to refer to the
group of managerial personnel who are in charge of decision making
ii) In a second sense, term management is used to refer to the
process of management, which includes the process of planning,
organizing, directing, controlling etc. of the resources to achieve
organizational objectives. iii) Thirdly, the term management is used
to refer to the special body of knowledge and practice as the
separate discipline or subject of study in which people can obtain
training and specialization. Because of these interpretations it is
rather difficult to define the term management precisely.

1. According to McFarland, Management is a process by which

managers create, direct, maintain and operate purposive
organization through systematic, co-ordinated co-operative
human effort.”
2. Henry fayol – “ To manage is to forecast and plan, to
organize, to compound, to co-ordinate and to control.”
3. Ross Moore,” Management means decision making.”
4. Donald Clough, “ Management is the art and science of
decision making and leadership.”
5. Peterson and plowman, Management is a technique by
means of which the purposes and objectives of a particular
human group are determined, clarified and effectuated “
6. Brech, “Management is concerned with seeing that the job
gets done, its tasks all center on planning and guiding the
operations that are going on in the enterprises,
7. MOONEY and reiley – “ management is the art of directing
and inspiring people .”
8. The American Management Association-“ Management is
the art of getting things done through their people.
9. Koontz and O’ Donnel – “ Management is the creation and
maintenance of internal environment in an enterprise where
 individuals, working in groups, can perform efficiently and
effectively towards the attainment of group goals.
10. Louis Allen – “ Management is what management does”

Thus management may be defined as a process including various

activities like planning, organizing , directing, controlling co-
ordination etc in order to make optimum use of men machinery,
materials and money by way of preparing plans, policies and
purposes, for achieving organizational goals under healthy internal
environment.

1.3 Nature or characteristics of Management –

On the basis of critical analysis of various definitions of

management, the main features of management may be stated as
follows :

i) Management is a process

Management is a continuous activity which aims at making

optimum use of the available resources like men, machinery,
materials, and money, for achieving organizational goals.

ii) Management deals with several functions-

Management includes several functions such as planning,

organizing, staffing, directing co-ordinating, controlling,
motivating or actuating, controlling, decision making,
leadership and communication.

iii) Management is goal oriented

Every management activity is directed towards achieving

predetermined objectives of the organiation.

iv) Management is a group of organized activities.

Management plans, organizes, co-ordinates, directs and

controls the group efforts so as to achieve organizational
goals efficiently and effectively.

v) Management is basically a factor of production:

The factors of production include land, labour, capital and

entrepreneurs. A manager or entrepreneur mobilizes
resources like land, labour and capital to produce’ output to
satisfy needs of the society and earn profit.

vi) Management is a system of authority

A system is a set of component parts which are interrelated

and interdependent that work as a whole, Authority is a right
to command others to get desired work done. Management
uses authority to control the behaviour of the people at work.
People are the soul of the organization. Management’s tries
to integrate individual goals with the organizational goals so
as to run the organizations effectively.
vii) Management is a discipline

Management , although borrows several concept for other

social sciences, it has developed its own body of principles
and theories so as to become a special discipline or subject
of study for potential managers.

viii) Management is a purposeful activity

All the activities of management undertaken for the purpose

of achieving organizational goals.

ix) Management is a distinct activity

Management is distinct from other functions as it deals with

getting things done through and with others, which requires
special knowledge and skill to be effective.

x) Management is decision making and communication

Management has to take several decisions continuously and

communicate them to the subordinates for the purpose of
implementation. It is the quality of decisions that determines
the performance of the organization.

xi) Management is a science and also an art.

Science is defined as a systematized body of knowledge and

it uses scientific methods of observation measurement,
experimentation etc. Its principles are exact and university
applicable. Management has systematized body of
knowledge and its principles are evolved on the basis of
observation. But management being a social science, it is
not an exact science. So management is a soft or inexact
science.

Art refers to the way of doing specific things i.e. it indicates “

how an objective is to be achieved. it is the know-how to
achieve the desired results. Art needs continuous practice to
reach the level of perfection. An art is application of science.
Thus art and science are interrelated in the sense that
putting scientific principles into practice requires art, which
needs special knowledge and skills.

Management is both a science as well as an art. the science

of management provides certain principles that can guide
managers in the professional efforts, while the art of
management deals with tackling every situation in an
effective manner. Planning and organizing emphasize the
science of management while direction, communication
motivation coordination and control emphasize art of
management. Getting work done through people is an art of
management.
 xii) Principles of management have universal applicability

The principles and practices of management are universally

applicable. Whenever group efforts are made to achieve
common objectives.

xiii) Management is dynamic

Under dynamic environment management faces several

challenges hence efforts are made to develop and use new
techniques for managing the organizations effectively and
efficiently. as social change takes place, management also
changes to overcome the problems whenever they arise.

xiv) Management is a Profession –

Profession is an occupation for which specialized skills and

training are required and these skills are used not for private
profit but for the larger interests of the society. There is a
professional body to control the behaviour of its members.
At present management is not a full fledged profession but it
is heading towards becoming a profession.

xv) Management is beauty-

According to Saxena, “ Management is that the art behind

beauty. For example Taj at Agra Temples of Khajurao and
Konark, Temples of Modern Civilization like Multipurpose
River Valley projects, Steel factories of Rourkela, Bhilai and
Durgapur, Bharat heavy electricals and Hindustan Machine
Tools etc are all “ Beauty Spots” and their beauty is nothing
but the result of management. Thus management is only
magic that can convert sand into gold. Management is
universal in nature as it covers all the fields of human
civilization.

1.4 Role of Management

Mitzberg has identified ten managerial roles in the context of

management of modern organization as follows –

A) Interpersonal Roles –

1. The figurehead role (performing ceremonial and

social duties as the organization’s representative)

2. The leader role – leading the subordinates.

3. The liaison role (Communicating particularly with

outsiders)

B) Informational Roles –

4. The recipient role (receiving information about the

operation of an enterprise)

5. The disseminator role (Passing information to

subordinates.

6. The spokes person role (transmitting information to

those outside the organization.
 C) Decision Role

7) The entrepreneurial role

8) The disturbance handler role

9) The resource allocator role

10) The navigator role (dealing with various persons and

groups of persons)

1.5 Scope of Management

The scope of management is steadily expanding hence it is difficult

to precisely define the scope of management.

The scope of management may be explained in terms of functions of

management and in terms of operational management. The main
functions of management may be stated as follows:

A) Functions of Management—

1) Planning - Planning refers to deciding in advance

about the course of action in future. In order to
achieve organizational objectives, Planning is carried
out regarding what is to be done, how it is to be
done, when it is to be done and by whom it is to be
done. Thus planning is said to be the primary
function of management.

2) Organizing - The process of organizing includes 1)

division of work into component activities 2)
assigning tasks to the people 3) Defining
responsibilities 4) Delegation of authority and 5)
establishment of structural relationships to achieve
coordination The organization structure is a tool used
for achieving organizational goals.

3) Staffing - Staffing involves employing right type of

people in the positions created by organization
process. It includes recruitment and selection of
candidates , fixing financial compensation, training
and developing them to discharge organizational
functions efficiently and effectively.

4) Directing - Manager has to direct the subordinates

about performing their functions. So organizational
policies, objectives, structure, individuals in the
organization, authority and responsibility etc is
communicated to the employees. Once the
subordinates are oriented, the superiors have to
guide and lead them for better work performance
and motivate them to work with confidence and
enthusiasm. Thus directing includes communicating,
motivating and leading the subordinates.

5) Controlling - It deals with monitoring and identifying

deviations from planning so as to take necessary
steps and see that the plan is properly implemented.
Control process includes 1) Fixing appropriate
 standards for measuring work performance 2)
Comparing actual performance with planned work 3)
Finding variances between actual and planned
performance and identifying reasons for deviations
4) taking corrective actions. Control helps in
checking other functions for making the process of
management successful.

A manager has to carry out these functions. In

addition co-ordination which is considered as an
essence of management has to be achieved among
various activities in the organization.

B) Functional areas of management --

Management process includes organizational

functions. Functional management includes
production, finance, development, distribution,
purchasing, transport, maintenance, personnel and
office. However the broad functional areas include
production, marketing , finance and personnel areas.

a) Production management includes purchasing,

materials management, reseach and development
etc.

b) Marketing management involves distribution of the

products of the organization to the customers. It
includes advertising, marketing research, sales
management, etc.

c) Financial management deals with management of

financial resources and record keeping of various
transactions. It includes financial accounting
management accounting , costing, investment
management taxation etc.

d) Personnel or Human Resource Management - It

deals with the manatment of human resources of the
organization. It includes recruitment, selection,
training and development, wage and salary
administration industrial relations etc.

1.6) Importance of Management

Management is essential for every type of organization to

enable it to achieve its objectives Management plans
organizational activities, utilizes organizational resources
most economically to achieve the objectives. The
significance of management may be stated as follows:

1. Accomplishment of group goals.

Management utilises the resources and adjusts.

Organization to to existing business environment,
makes plan and implements it. It controls the
performance and thus achieves group goals.
2) Controlling activities of organization-

Every organization deals with men, machines,

money, materials, methods , motivation , market and
management, out of which management is most
important as it controls all other Ms.

3) Effective Functioning of Business –

Management makes use of the talents and abilities

of the employees and through mutual understanding
get their co-operation, and by satisfying their needs
through motivation techniques achieve maximum
contribution from them in the process of achieving
organizational goals effectively.

4) Resource Development and utilization-

Management is the backbone of any business

organization. Management aims at developing the
resources so as to increase their productivity and
make optimum use of them towards achieving
organizational objectives efficiently.

5) Directing and controlling the organization-

Management directs and controls various activities in

the organization so that these activities take place
systematically, without deviating from the planned
ones towards achievement of organizational goals,
This helps management to make organization
efficient and progressive, under dynamic
environment.

6) Creating sound organizational structure –

Management takes case to develop sound

organizational structure by way of clearly defining
authority and responsibility relationships and staffing
the organizational positions by way of placing right
person at a right time.

7) Integrating various interests –

Management takes steps to integrate interests of

various groups directly or indirectly related to the
organization, such as shareholders, suppliers,
creditors , employees and the organization itself , in
the process of achieving organizational objectives .

8) Stability and Growth of the organization-

Business activities are subject to fluctuations on

account of changes in the tastes and preferences of
consumers, government policies, changes in
strategies adopted by competitors, and other
changes in the environment. The efficient
management through anticipating such changes
 takes necessary steps so that the organization tends
to grow with stability.

9) Developing team spirit and co-ordination-

Management , in order to take advantage of

synergetic effects, takes steps to develop team spirit
in the organization, so that the employees tend to
work as members of the team. At the same time,
management co-ordinates various departments so
as to get maximum contribution of them to achieve
organizational objectives.

10. Creativity and innovation -

Managers are aware about creativity and

development of human beings, hence they create
suitable internal environment to promote creativity
among the employees. Management also develops
new ideas, new techniques etc. And implement them
in the organization to achieve better performance
and higher efficiency

11. Meeting challenges of change-

In the modern business world, frequent changes

have become common. Hence management tends
to become proactive and keep their people and
organization well prepared to face the challenges of
changes and maintaining efficiency of the
organization.

12. Attainment of social objectives -

Organization is described as a subsystem of a larger

social system. It takes inputs from the society
processes them and produces goods and services to
satisfy the needs of the society. Thus the
management has to take care of social responsibility
of business and it has to protect interests of the
society also. Thus the standard of society depends
upon the quality and efficiency of management.
Efficient management makes optimum use of the
resources most economically and delivers such
goods and services to satisfy the needs of the
society. Thus the management has to take care of
social responsibility of business and it has to take
care of social responsibility of business and it has to
protect interests of the society also. Thus the
standard of society depends upon the quality and
efficiency of management. Efficient management
makes optimum use the resources most
economically and delivers such goods and services
to the society which will promote consumer
enlightenment or oversatisfaction and improve
quality of life of the people in the society . Thus
management plays an important role in modern
society.
 Thus it may be concluded that management plays a
key role in improving standard of living of the people
in the society through developing an ideal
organizational structure and making economic use of
available resources.

The knowledge of management theory and practice

enables managers to take more realistic view about
organizational and social problems and to find out
their effective solution management has to deal with
the people in and outside the organization but the
fact is that the structure and behaviour of the atom
are much less complex them the structure and
behaviour of the groups of people. To understand
and direct the behaviour of the people for objectives
achievement, some of the management principles
may be useful. Development of management tends
to affect the cultural level of the society by
increasing efficiently in the use of human and
material resources.

Limitation of management

***********

Q.2 Trace the history of evolution of Management thought from early

pioneers to the modern thinkers.

2.1 Introduction

Management in one or the other from had existed everywhere in the world
since the beginning of human civilization. Human beings are basically social
beings and they prefer to live in groups, so they are known as gregarious in
nature right from the beginning. There is lot of evidence of the use of
management principles in the context of the organization of public life in
Ancient Greece, the organization of the Roman Catholic Church and the
organization of military forces of ancient kingdoms. However the study of
modern management principles is the phenomena of twentieth century. In
early stages, field of management remained neglected because of indifferent
attitude adopted by sociologists, economists and political thinkers towards
trade, commerce and industry, as these activities were not well developed. It
was also believed that managers are born and cannot be made as the
management was considered as an art and not the science. The concept of
management actually developed along-with the growth of socio-economic,
political and scientific institutions. Thus management is an evolutionary
concept.
2.2 Development of Management Thought-

The process of development of the science of management can be studied

under the following six stages

1. Management in Antiquity
2. Management during the medieval period or pre scientific
management
3. Period of Taylor’s scientific approach to management (Scientific
management movement)
4. Fayol’s functional approach to management.
5. Human Relations or behaviour sciences movement.
6. Modern Theories let us discuss these approaches briefly as follows-

1. Management in Antiquity-

Management first began with family organization and later expanded to tribe
or community and later on entered into the formalized political organizations
such as those found in Baby Lonia and Mohen Jo Daro in India During those
days in these organizations, financial control and record keeping took the
form of clay tablets with inscriptions. The concept of managerial
responsibility was clearly evidenced through the code of Hammurabi. During
early days production and distribution activities were taking place on a very
small scale where personal supervision and leadership was necessary and
sufficient so management generally took the form of personal leadership.
Approach to administration was governed by customs and traditions, practical
thinking and guidelines rather than by any systematic or scientific theories. In
ancient Mesopotamia and even in India, there was a group of priests who did
management work. They were selfless and devoted philosophers so they
directed and governed by virtue of their authority and as representatives of
gods whom the people worshipped. They advised kings and rulers, planned
trade routes and organized the work of all the members of society including
labourers, artisans, soldiers, traders and housewives.

A) Egypt.:

The skill of Egyptian in planning and organizing the construction of

public edifices is evient from their pyramid and huge buildings. The
Egyptians also recognized the importance of specialization in total
organization as is indicated by their passing laws such as “No
tradesman could pursue any trade, save that handed down by his
parents. The Baby lonian empire along the Tigris and Eyphrates
provide us several examples of early managerial practices.

B) Greece –

Greeks provide us with the most extensive documentation of

management principles in Zenophon’s writing about the universality
of management, specialization, management as an art, employee
selection, delegation of authority and even motion study. These
examples enable us to conclude that modern management practices
originated from such historical developments.

The definition of management given by Socrates as a skill separate

from technical knowledge and experience is quite close to current
understanding of function.
C) Ancient Rome –

The complexity of administrative jobs led to considerable

development of management techniques. The existence of the
Roman magistrates with their functional areas of authority and
degree of importance indicates a scalar relationship, characteristic of
organization. The real genius of the Romans and the secret of
success of the Roman Empire lay in their ability to organize.
Through the use of scalar principle and the delegation of the
authority the state of city of Rome expanded to an empire only on
account of higher efficiency of organization, never existed before.

D) Military Organizations

There are several examples of the use of scientific management

principles being used by military leaders in various countries, in the
past in communicating their plans and objectives, promoting effective
morale for action and the relationship of individual with group
objectives.

E) The Bible –

It is mentioned in the Bible that, Moses says,” Chose ablemen out of

all Israel and make them heads over people, rulers of thousands,
hundreds, fifties and tens. And they judged at all seasons the hard
causes they brought up to Mores but every small matter they judged
themselves” this indicates foundation of some principles like
selection of competent personnel, delegation of authority etc.

F) Cameralists –

The cameralists were a group of German and Austrian public

administrators and intellectuals believed in universality of
management techniques and they emphasized specialization of
function, careful selection and training of subordinates for
administrative positions, simplification of administrative procedures
etc.

G) China-

The ancient Chinese philosophers were the first to recognize need

for systematic selection of employees, and staffing, which they
supplied through their civil service system. Ancient record provides
evidence to conclude that, Chinese were aware of certain principles
bearing on organizing, planning directing and controlling etc.

H) India –

India has rich cultural heritage which indicates high level of

intellectual development of Indians when the rest of the world was
not developed. Several instances in Vedas, upnishades and
puranas, as well as in Ramayan and Mahabharat provide support to
the claim that ancient Indians were aware of several modern
principles of management. Kingdoms of Mauryas’ and Chanakya’s
were efficiently managed only through adoption of modern
management principles. Kautilya’s Arthashstra, the science of
politics written in 321 BC. deals with a great variety of subjects
mainly relating to the theory of government. He covers the
 organization and management of trade and commerce, law and law
courts, social customs rights of women, agriculture mines factories
markets etc. Manusmriti also provides some evidence in this
respect, which indicate attempts of scientific inquiry of organizational
function and behaviour.

2) Management During the medieval period or pre-scientific Management

Medieval times is popularly known as dark ages about which much of

historical evidence is not available. However it is the period that serves as a
bridge between antiquity and the age of awakening known as the
Renaissance. During those days organization was characterized be feudal
structure where few persons like landlords was the owner of the means of
production while the rest of the population was treated as slaves.

In the south East Asia trade and industry were flouishing where the
management of industry and trade, existence of the craft guides and
federation of guilds, the organization and management of finance , the
operation of banking, the dominance of middle class helping entrepreneurs to
take quick decisions and huge capacity of traders to undertake risks and its
management etc are the examples indicating that people were knowing some
of the management principles of modern times. In India small scale and
cottage industries were developing because of increasing demand for Indian
products in European markets. Master craftsmen were managing their
enterprises efficiently Marketing was no problem hence for increasing
production they had no alternative but to motivate employees through
establishing family bonds between employers and employees. Trade was
efficiently managed by Indian and foreign traders.

In spite of these developments, no written evidence is available about this

period. People were mostly interested in self preservation. Those who wrote
were mostly members of religious organizations or writers of the courts of the
rulers. Hence their writing was related to religion, government administration,
waging wars and the laws of land. Around 900 AD Alfarabi mentions of the
traits of a manager for administration of a kingdom.

In 1100 AD. Gazali in his book has mentioned management practices

especially qualities to be possessed by Kings for administration purposes.
These qualities include justice, intelligence, patience and modesty. He
suggests that an administers should not have traits like envy, arrogance,
narrow mindedness and malice.

The books written by Lone also deal with the knowledge of management
possessed by the businessmen of Italy in 15th century.

In 16th century the maritime activity was as its top when the government ship
yard was managed like modern lines of management covering production,
finance and accounting functions.

Machiavell in his writings have emphasized importance of certain principles

of management like reliance on mass consent, cohesiveness, leadership, will
to survive etc.

During 14th to 16th century India was known as the industrial workshop of the
world. There were private factories and State enterprises known as “Imperial
Karkhanas “is an example of mixed economy. The industry and trade were
carried on according to the principles of management production in factories ,
recruitment and selection, development, compensation of employees,
procurement of finances and marketing of goods etc functional areas of
 management were carried on according to the modern principles and practice
of management. Craft guides and federation of guides led to the increase in
efficiency in management.

Travellers accounts and chronicals like Ain-I-Akbari, tarikh-I-Firuz Shahi,

Dastur-ul Aml etc describe the manner in which trade industry and commerce
wre carried out efficiently and successfully.

3) Period of Taylor’s Scientific Management Movement-

The period of 18th and 19th centuries is known as the period of managerial
awakening. The evolution of management concept has been closely
associated with evolution of manufacturing processes.

Industrial Revolution took place during the period of 1760 to 1840 in England
and later on spread to America in 1790 and in continental Europe, it came to
India only in 1860 . The Industrial Revolution marked the beginning of a new
phase in industrial activities, through complete transformation in the system
of production and distribution. Industrial Revolution may be defined as a
process of bringing about revolutionary changes in the system of economic,
technological and scientific areas of production processes. The machines
were designed to increase productivity. Human and animal energy was
replaced by steany engines and electricity. A large number of laborious tasks
were removed from the production activities. The workers instead of working
with their inefficient handtools started working with developed equipment’s
so that they could substitue machine power for muscle power. Since
machinery used was massive , stationary and dependent on a given source
of power such as waterfall, it became necessary to locate materials and
equipment in a central plant. So factory system came into existence and
became deminant feature of the economy. Workers from agriculture in rural
areas started moving towards factory sites and urbanization started making
progress in the economy. Under this system an entrepreneur or a group of
promoters collected huge capital through the system of shareholders and
hired labour, land and other resources for processing them and converting
them in goods on a large scale to satisfy needs of the people. Thus mass
production became the order of the day. The system of mass production was
advantageous to manufacturers and consumers as cheaper products were
available in plenty, while manufacturers were able to earn huge profits.
However it resulted into unequal distribution of income and wealth in the
society and division of society into rich capitalists and poor labours. The
capitalists concentrated on profit maximization through exploitation of labour
and workers became slave of machines. These developments attracted
attention of social thinkers and management experts.

4) Scientific Management Movement –

Industrial Revolution and its effects on the structure of production also

brought about changes in the concept and conduct of management, charles
babbage, james watt, Rober, Owen, Henry Towne, saint Simon etf.
challanged the traditional management based on traditions and guess work,
by introducting new ideas and approaches to management. It was followed
by Taylor, Gantt, Emerson, Gilbreths, etc. They observed that the
introduction of mass production, large scale industry and use of expensive
machinery and equipment resulted in difficulties in maintaining harmoneous
relations between employer and employees. It called for developing new
methods and principles for solving problems of management.

F.W.Taylor (1856-1915)
Taylor in his early career as machinists and a foreman observed much
disorder and wastages of human and other resources at work place. People
were habituated in traditional ways of ding things even in organized settings.
Much reliance was placed on rule of thumb, initiative and trial and error
approaches. Taylor as a man of great initiative and imagination devoted
himself to the task of improving the techniques of management. He was firm
believer in Protestant work ethic the cannons of which were hardwork,
achievement, austerity , efficiency, order discipline and the pursuit of self
interest. It was believed that” work is worship.” Taylor as a rationalist tried to
apply the cannons or rules of work ethic to actual work situations by adopting
engineering techniques and approaches. he emphasized that there was a
science of doing things and petting things done by others. He carried out a
large number of experiments, empirical investigations in actual work settings
on a wide range of operational matters. He adopted scientific methods.

a) Approach to scientific Management.

Taylor developed the following elements of approach to scientific

Management on the basis of his experimentation and investigation of actual
work situation.

1) Science, not rule of Thumb—

In place of traditional method of doing work, scientific

methods need to be applied. Under scientific management
each element of work and the motions required to perform it
are scientifically analysed to determine standard time and
standard method of doing it, with maximum efficiency. The
time and methods of doing a piece of work are fixed with
great objectivity. The kinds of tools to be used and the
working conditions are also arranged scientifically Thus there
is no scope for rule of thumb approach or hit or miss method.

2) Harmony, not discord

Scientific management emphasizes handsome payments to

workers for motivating them to produce more. It also
explains how to do it. Thus workers perform on their jobs
sincerely and enthusiastically and do not avoid work, As
productivity increases management gains so it is prepared to
pay more wages. It results into developing harmonious
relations between employees and management.

3) Co-operation , not individualism –

Scientific management concentrates on developing co-

operation between workers and management and also
among the workers. Workers through co-operation get
advantage of synergy, to increase production and
productivity higher efficiency and economy, leading to higher
profits through larger sales of better quality products at lower
prices.

4) Maximum output, not restricted output—

Under scientific management, both, management and

workers are interested in producing maximum output at
minimum cost. Maximum output generates more profits for
management due to large-scale production and lower
 production costs. For workers it will increase their share in
prosperity of the business through higher wages and bonus.
To achieve higher production and productivity management
provides standard materials, standard tools and standardized
working conditions, while workers tend to do their jobs most
efficiently and economically.

5) Development of each man to his greatest efficiency and

prosperity-

Under Scientific management workers are carefully selected

and trained in accordance to the requirements of their jobs.
For this purpose physical, educational and psychological
requirements of each job are clearly specified and the person
most suitable for the post is selected. Workers are also
regularly trained to increase their efficiency and keeping their
up-to-date in all the aspects of their work. This promotes
attachment of workers to their jobs and enable them to earn
higher wages and mental satisfaction.

B) Principles of Scientific Management -

Taylor developed principles of scientific management which may be

summaries as follows –

1) Separation of planning from doing-

The workers were themselves deciding how to do the work

and what machines tools and equipment would to be used to
perform the job. However Taylor emphasized that there
should be separation of planning from doing. Planning being
intellectual job must be done by specialists or supervisors
while workers should concentrate only on doing the job
efficiently.

2) Functional Foremanship :

Eight Boss Scheme. Taylor regarded planning as the very

basis of scientific management. He advocated that planning
should be left to production planning department which have
a number of experts. So planning may be done in the office
while execution of plan was the responsibility of workers who
are working on the shop floor on factory site.

a) Planning department may look after planning the

work so as to gain specialization . The planning
department should have four specialists as follows –

i) Route Clerk - To determine the sequence of

mechanical and manual operations to be
performed in doing a job.

ii) Instruction Card Clerk- To lay down

instructions for workers so that workers can
perform their jobs as per instructions given
to them.

iii) Time and cost clerk- To see the timetable

for doing a job according to the
predetermined route and time schedule and
 to specify the materials and labour costs for
each operation.

iv) Disciplinarian - To see that each job is done

in a systematic and perfect manner.

b) Operating Function -- At factory site there should be four

specialists to look after four activities—

v) Garg Boss - to do all necessary preliminary

work like arranging machines, materials
tools etc. for workers concerned to proceed
with their jobs.

Development Science not

of each man to rule of Thumb
his greatest
efficiency and
prosperity

Concept of
Scientific Harmony
Management not discord

Maximum
output not
restricted Co-operation
output not
individualism

Functional Foremanship

Planning Function Operating Function

Route Instruction Time and Disciplinarian

Clerk

Speed Inspector Maintenance Gang

Boss Foreman Boss
 vi) Speed Boss-

To ensure that each job is done well and in time and speed of machine is
properly controlled.

vii) Inspector -

To see that work confirms the standards of quality laid down by the planning
department.

viii) Repair and Maintenance Boss-

To see that all the machines, tools and equipment’s in the factory are
maintained in perfect working order.

3) Elements of Scientific Management-

The main elements of scientific Management are as stated below-

i) Work Study- It involves work measurement and work improvement

through scientifically conducted Time and Motion Studies, Method
Studies and Fatigue studies.

ii) Standardization of tools and equipment for work men, machine

speeds and working conditions.

iii) Scientific selection, placement and training of workers by a

centralized personnel department.

iv) Bilateral Mental Revolution-

Scientific management emphasises complete mental revolution on

the part of both, employees and managers. Employees should
undergo complete revolution about their duties toward their work,
toward their fellowmen and toward their management and
employers. At the same time equally there should be mental
revolution on the part of management side. The foremen, the
superintendent the owner of business, Board of Directors ,
managers, regarding their duties towards their fellow workers in the
field of management, toward their workmen and toward their workers
and toward their problems. Thus, without complete mental revolution
on the both the sides, scientific management cannot come into
existence.

v) Financial Incentives –

In order to motivate workers for higher production and productivity,

Taylor introduced the differential piece rate system. He emphasized
that the wage should be based on individual performance and on the
position occupied by the worker. The wage rate should be based on
accurate knowledge of worker’s performance.

vi) Economy-

According to the principle of economy while applying scientific

management, not only scientific and technical aspects be taken into
consideration but also aspects of profit and economy need to be
 considered. The techniques of cost estimates and cost control may
be used.

vii) Mechanism of Management-

Taylor warned that the philosophy of scientific management should

not be confused with the mechanisms of management. Some of the
mechanisms include time study, functional foremanship
standardization of tools and implements, planning room, the
differential wage rate, a routing system, modern cost system etc.

Critical Evaluation of Scientific Management

Scientific management of business is beneficial to business, employees and the

society as a whole

a) Benefits to Business –

1) Scientific management helps business organizations to reduce costs

of production.
2) Scientific management enables business units to have effective
production planning and control.
3) It promotes standardisation and simplification
4) It leads to higher profits through reducing production costs
significantly.

b) Benefits to workers –

1) Scientific management leads to the improvement in working

conditions.
2) It also helps in improving the standard of living of the workers.
3) Under scientific management workers are given opportunity to get
free training to upto date their knowledge in the techniques of job
performance so as to increase their efficiency and productivity.

c) Benefits to society –

1) Scientific management through its techniques helps in producing

larger output at lower cost per unit. So society experiences plenty of
supply of better quality products at lower prices.

2) It also promotes industrial peace through maximization of satisfaction

of both employees and management.

3) It also promotes economic prosperity of the society.

Criticism of Scientific Management –

In-spite of several merits, the scientific management has been criticized by workers
and their unions, employers, psychologists and theorists.

a) Workers’ Criticism-

Workers and their unions criticize scientific management on following

grounds.
 1) Scientific management forces workers to work their maximum
capacity without considering harmful effects of speeding up of work
on their physical and mental health.
2) It makes the work more monotonous as everything is standardized
and supervisors plan their work. it reduces workers to a cog in the
machine.
3) It reduces employment opportunities as increase in productivity of
workers, there is reduction in employment opportunities.
4) under scientific management, standardization of output wages and
working conditions ,tends to reduce importance of trade unions in the
eyes of the workers.
5) Scientific management is beneficial but owners take away all the
benefits.

b) Employers’ Criticism

1) Introduction of scientific management involves huge expenditure on

standardization, so it is costly.
2) Scientific management takes very long time to introduce it.

c) Theorists’ Crit6icism.

1) According to theorist scientific management concentrates on

production aspects of management while other aspects such as
marketing, finance etc are completely neglected.
2) It places excessive emphasis on details, as a result workers are
alienated from their jobs & may result in frustration of workers in the
long run and decline in production.
3) It treats workers as lazy , irresponsible persons so they are made to
work under standardized conditions under strict control. It assumes
that workers oppose evenslight changes in their work methods work
environment.
4) SCientific management, seperates planning and performance. Such
as lack of interaction between planning and execution may adversely
affect both the aspects.

d) Psychologist’s Criticism-

1) Scientific management may cause frustration among workers.

2) It may promote monitory in performance of the workers.
3) It may speed up the workers which may lead to sickness and
accidents and rate of spoilage may increase.
4) Scientific management emphasizes payment of wages according to
output produced. This benefits only efficient and experienced
workers. New and inexperienced and sick workers have to satisfy
themselves with limited earnings. This creates sense of insecurity
among workers in general.

In spite these criticisms, taylor’s techniques were perfected by Gantt, Barth,

Gilbreth etc. These techniques are accepted even today it only implies that
the concept of scientific management was nearly thirty years ahead of time.
It is true that it lard solid foundation for development of management on
scientific lines.
4) Fayol’s Functional Approach to Management-

Henry Fayol (1841-1925) is known as “ The Father of Principles of

Management,” who occupies an important place as a outstanding contributor
to modern management thought. During his long and successful career as
an industrial manager he studied in details management theory and practice
and developed certain guidelines for managers which are known as
principles of administration and management.

Concept of management-

Fayol Concluded that management was universal, as an activity common to

all human undertakings where a group of people come together to achieve
common goals. he divided total industrial activities into six main categories.

1) Technical (Production , manufacture and adoption)

2) Commercial (buying , selling and exchange)
3) Financial (Search for and optimum use of capital)
4) security (Protection of property and persons)
5) Accounting (Stock taking, balance sheets, costs and statistics)
6) Managerial (Planning , organizing commanding, co-ordinating and
controlling)

Out of all these activities management was the most important activity
affecting performance of the organization and hence needed more attention.

Fayol developed his approach to study management in three parts.

a) Managerial qualities and Training.

b) Elements of management and
c) General Principles of Management.

Let us discuss these briefly as follows –

A) Managerial Qualities and Training.

Fayol was the first thinker to identify essential qualities for a person
to become effective and efficient manager. These qualities are as
follows

i) Physical (health , Vigor, and address)

ii) Mental (ability to understand and learn, judgement, mental
vigour and adaptability)
iii) Moral (energy, firmness, willingness to accept responsibility
with initiative, loyalty, tack and dignity)
iv) General Education (General acquaintance with not belonging
exclusively to the function performed.
v) Special knowledge (related to the function) and
vi) Experience (knowledge obtained from the work)

Fayol believed that managerial ability can be acquired, in the

someway as technical ability, first in the schools or management
institutions and later in the workshop or industrial organization)
 B) Elements of Management-

The elements of management are basically the functions of

management. According to Fayol there are five elements of
management. these are

1) Prevoyance – (Planning or looking ahead)

2) Organization 3) Co-ordination 4) Command and
5) Control . He emphasized that out of these province is important, as it
includes not only to assess the future but also to make provision for
it. Second, to organize a business means to provide it with
everything necessary for its functioning such as raw materials tools
capital and personnel. Third, by co-ordination means binding
together, unifying and harmonizing all the activities and efforts of the
organization. Fourth, commanding is the operation of organization.
In order to command efficiently manager must have through
knowledge of his personnel and be aware about agreements binding
business and employees and conduct periodic audits of organization
and use summarized charts, and aim at making unity, energy,
initiative and loyalty prevail among personnel. Fifth by controlling,
means a process of verifying whether everything takes place in
conformity with the plan adopted , the instructions issued and
principles established. Fayol emphasized universality of
management principles as these principles are applicable not to
business organizations but also to political, educational religious,
philanthropic and other organizations.

c) General Principles of Management-

On the basis of his own experience in the field Fayol developed

fourteen principles of management as stated below-

1) Division of work-

A person can acquire greater skill when he specializes in a

single operation. It also saves time are energy that is wasted
when ther is a change from one work to another or from one
process to another. Fayol emphasized division of work to
take advantage of specialization. He believed that the
division of work can be applied at all levels in the
organization. The experience and ense of proportion will
decide the extent to which division of work can be used
successful by avoiding disadvantages of over specialization.

2) Authority and Responsibility-

Authority and responsibility are related as responsibility

arises from and hence corollary of the authority. He
observed that the official authority of a manager is derived
from his position in the organization and his personal
authority is derived from his intelligence, experience, moral
worth, past services etc. To be an efficient manager both,
personal and official authorities are required. People want
authority but fear responsibility. Authority without
responsibility may make a person ineffective and
irresponsible which is not desirable.
3) Discipline –

According to Fayol “ Discipline is the essence of obedience,

application, energy, behavior and outward marks of respect
observed in accordance with the standing agreements
between the firm and its employees.” The agreements
between management and workers must be obeyed in
totality without any dissent. Discipline is absolutely essential
for smooth functioning of the organization. Discipline may be
self imposed or command discipline. Self imposed discipline
originates from within the individual and is in the nature of
spontaneous response to a skillful leader. Command
discipline originates from a recognized authority and utilizes
deterrents to secure compliance with the desired action ,
which is expressed by established customs, rules,
regulations etc. Discipline can be enforced only if 1) There
are good supervisors at all levels, ii) Agreements are clear
and fair and iii) Sanctions or punishments are judiciously
applied.

4) Unity of command –

Any person in the organization should receive orders from

only one superior in order to avoid conflict in instructions and
to promote feeling of personal responsibility for results. The
principle of unity of command makes authority responsibility
relationships clear. It is important for maintaining
organizational efficiency.

5) Unity of Direction –

Unity of Directions means “ One head one plan.” Each

group of activities having the same objective must have one
head and one plan. Thus unity of direction and unity of
command are not the same but are entirely different things.
Unity of direction is provided by sound organization and it
means that efforts of all members of the organization should
be directed to achieve common goals while unity of
command deals with functioning of persons There can be no
unity of command without unity of direction.

6) Subordination of Individual interests to General Interest-

On account of ignorance, ambition, selfishness Laziness,

weakness etc human passions general interests may be
ignored sometimes infavour of individual interests.
Whenever such a conflict appears, action should be taken to
restore the supremacy of general interests.

7) Remuneration of Personnel –

Fayol emphasized that remuneration and methods of

payment should be just and fair so as to provide maximum
satisfaction to employees and employers. The rate of
remuneration should take into consideration factors like cost
of living, availability of personnel, financial position of the
organization and economic conditions in general, in order to
arrive at fair rate of remuneration of personnel.
 8) Centralization-

Fayol argued that everything that increases the importance

of subordinates ‘ role is decentralization and that which
reduces it is centralization. To what extent a manager can
centralize the authority depends on his intelligence
experience, decision making ability etc. In case he laks in
these abilities he will mostly depend on his colleagues and
subordinates and prefer to give general directions only.
Fayol held that the question of centralization or
decentralization is a simple question of proportion and it is a
matter of finding optimum degree for a particular
organization. the ultimate aim is to maximise the output per
employee in the organization.

9) Scalar Chain

Fayol defined Scalar Chain as the chain of superiors ranging

from the ultimate authority to the lowest ranks. The line of
authority is the route followed via every link in the chain, by
all types of communications, which start from or go to the
ultimate authority. The principle of scaler chain suggests that
each communication going up or down must flow through
each position in the line of authority. In case of exceptional
circumstances like emergency the chain may be short
circuited through “GANG PLANK” The concept of Gang plan
may be explained as follows.
A

Suppose that the scalar chain in an organization is represent

B- - L ed by double ladder GAQ.

C -- --M In the figure A is the top boss having immediate subordinates

B and L . In turn B has immediate subordinate C and L has
D--- -- N M and this chain continues till G & Q.

E-- --O Ordinarily communication must flow from A to B to C to D till

it reaches to G and from A to L to M to N till it reaches to Q.
F - ----------------------P In case of any communication between F to P, It must flow
from F to E to D till it reaches to A and then come down to L
G-- -- Q

then to M to N ill it reaches to P. Fayol suggested that this system is

time consuming hence under special circumstances it may be
substituted by gang plank (dotted line), only when F and P are
authorized to deal with directly after informing their immediate
superiors about the action to be taken. This may be necessary to
avoid delay and lot of paper work. Fayol advises use of gang plank
to inspire subordinates to give up the fear of responsibility. The use
of gang plank may result into management development significantly.

10) Order -

The Principle of order is related to the arrangement of materials and

persons, which states that” a place for every thing and everything in
its place"”means material order and "“ place for everyone and every
one in his place"” means the social order . thus social order aims at
having "“he right man at the right place.
11) Equity-

Equity means a combination of fairness kindliness and justice.

Employees can put their best only when they are given kind, fair and
just treatment, However the application of equity requires good
sense, experience and good nature for soliciting loyalty and devotion
from subordinates. It is the duty of the chief executive himself to
ensure that managers at all levels apply the principle of equity while
dealing with their subordinates.

12) Stability of Tenure of Personnel-

According to Fayol, stability of tenure is essential to get an employee

accustomed to new work and be successful in doing it well. When
the employees are shifted over the jobs frequently, bot the employee
and the organization do not gain, because an employee is not given
opportunity of specialization and rendering useful service and the
work in question would never be done properly. Unnecessary
turnover is both the cause and effect of bad management.

13) Initiative-

Initiative is concerned with thinking out and implementation of a plan.

Initiative tends to increase zeal and energy of the employees.
Managers should aim at securing maximum initiative from their
subordinates. It has been observed that those managers who induce
their subordinates to think and act on their own are always more
efficient and more successful than the others, who do not promote
initiative.

14. Esprit De Corps

It means the spirit of loyalty and devotion which unites the members
of a group or society. It also means regard for the honour of the
enterprise to which a person belongs. The principle implies “Union
is strength” as it has been noticed that when people are united they
do wonders which otherwise are not posible. Gayol is against the
practice of management of “divide and rule” as in the long run it may
ruin the organization . Fayol emphasizes proper communication
plays a key role in promoting the spirit of union among employees.
He prefers verbal communication. In place of written one, as fair as
possible, to clear misunderstanding and getting fee back quickly.

Critical Evaluation of Fayol’s Contribution-

Fayol has made outstanding contribution to management thought by

presenting three revolutionary aspects relating to the development of
management.

1. The concept that management as a separate body of knowledge is

applicable to all forms of group activities i.e. universality of
management.

2. A first complete and comprehensive theory of management which

could be applied to all endeavors.
3. The concept based on the belief than managers are not born but can
be developed which promoted teaching and preparing curricular in
management institutions and universities.

Fayol also emphasized role of human factor in management of any enterprise

by placing workers above all other factors of production.

His principles of management are practiced at most every where.

Criticism –

Fayol’s theory of management has been criticized on following grounds –

i) It is much too formal—

Fayol has made his theory of management too much formal as he

has divided all business activities into six categories and its
management into five functions and developed fourteen principles.
But fact is that management is a complex and dynamic process
hence it cannot be clearly divided into different parts or functions

ii) Fayol has not paid adequate attention to workers-

Fayol takes a broad view of the management process and has not
emphasised on positive attitude towards workers nor paying workers
fair wages and incentives. Workers are treated as biological
machines.

iii) Inconsistent theory –

Most of the elements of his administrative theory are not supported

by empirical evidence & the theory has not been verified under
controlled, repeatable scientific situations. It is full of inconsistencies.

iv) Vague in nature –

Some of the terms and concepts have not been properly explained.
For example, there is no clear distinction between the structure and
process of organization. The principle of specialization does not tell
about how tasks should be divided.

v) Pro management bias-

His theory is more concerned with what managers should know and
do, rather than more understanding about managerial behaviour.
theory fails to explain when the principles must be applied, which
principle should take precedence over the other when they are being
applied.

vi) Universality of principles—

His principles of management were based on personal experience

and limited observation. In the absence of scientific bias these
principles tend to be proverbs, folklore and folk wisdom. Some
principles are too vague and general that they are difficult to apply to
specific organizational problems. The principle of specialization is in
compatible with the unity of command principle.
 In spite of these criticisms, functional approach is playing dominant
role in influencing practice and teaching of management the world
over.

5) Human Relations & Behaviour sciences movement--

A) Human Relations or Neo Classical Theory—

During 1920s and 1930s observers of business management started

feeling about incompleteness and shortsightedness in the scientific
and administrative management movements. The Scientific
management movement analyzed the activities of workers while
administrative management writers focussed on the activities of
management. But the importance of individual behind machines and
the importance of individuals and the group relationships in the work
place were not recognized.

Elton Mayo and others argued that workers should not be treated as
factor of production but be treated as human beings. Workers
“attitudes, needs and feelings are more important on the job, Haw
thorne Experiments were carried out at the Hawthorne Plant of
Western Electric co during 1924 to 1932.

These experiments included the following

Phase I Illumination Experiments.

Phase II Relay Assembly Test Group
Phase III Interviewing programme
Phase Iv The Bank wiring observation Room Experiments.

These experiments indicated that employees were not only economic

beings but are also social and psychological beings.

According to Keith Davis,” Human relations is motivating people in

organizations in order to develop team work which effectively fulfills
their needs and achieves organizational goals. The main features of
human relations are as follows:

i) Human relations strive to create a positive work environment

in which people can simultaneously fulfil their own needs
along with organizational needs . The goals of productivity
and employee satisfaction are interrelated.

ii) The Focus is on people. When management stimulates

people to do more and better work, it results in proofing
sound human relations in the organization

iii) The goal of creating sound human relations is to help

workers becoming more productive & not just happier.
Human relations are mainly concerned with maintaining and
motivating people to achieve maximum performance.
 iv) Human relations aim at building human co-operation towards
organizational goals effectively through minimum inputs in
relation to outputs. thus it is mainly actin oriented process.

Basic concepts in Human Relations—

Human relations thinkers consider organization as a social system having

social and economic dimensions the work environment should be designed to
restore man’s dignity sound human relations encourage people to work
together productively. It is determined by the interaction the leader, the work
environment, work and work group.

Human Relations in action

Work Work Environment

Workgroup Leader

1) Individual -- The behaviour of an individual is affected by feelings,

sentiments and attitudes. Individual is motivated not only by economic factors
but also by multiple social and psychological factors. Workers should be
treated as whole persons, with their traits and skills and motivated by multible
needs.

2) Model - The human relations model assumes that –

a) The organization is a system designed to produce and supply

products and services at reasonable prices.

b) The organization is a social system through which individuals try to

find expression of their hopes and aspirations and to satisfy their
economic needs. A manager should build up morale and maintain
social interactions in a satisfactory way. Employee participation and
job satisfaction increase productivity.

3) Work Group -- The work group plays an important role in determining the
attitudes and performance of workers. Work is social experience and
workers find satisfaction in membership in social groups, In order to improve
human relations this aspect need to be realized.

4) The organization and work environment - The business organization is

techno economical and also a social system, hence it is necessary consider
formal and informal aspects of organizational behaviour. Managers should
acquire technical and social skills to manage organizations. When employee
needs are satisfied the work environment is said to be positive, where goals
are clearly stated , incentives are used to improve performance, feedback is
obtained about performance and decisions are participative and timely takes,
rule are minimum, conflict is openly confronted and work is interesting and
growth oriented.

5) The leader - It is the responsibility of the leader to see that everything is

done properly through maximum utilization of organizational resources for
achieving organizational goals. He must be able to adjust various
personalities and situations and behave in a way that generates respect. He
has to provide free happy and pleasant work environment and members be
 allowed to participate in decision making and democratic values, instruction
and coaching be adopted for handling people.

Evaluation of Human Relations Movement—

The movement has been criticised as manipulative, insincere, ignoring the reality of
economic variables. During 1950s human relations movement was heavily criticized
on the following grounds.

1) Lacking in scientific validity –

The critics pointed out that human relations studies have clinical bias as they
neglected theory and most of these conclusions are not supported by
adequate scientific evidence.

2) Shortsighted in Nature –

Human relations approach lacks in adequate focus on work, it concentrates

on interpersonal relations and informal group. It over emphasizes
psychological aspects at the cost of structural and technical aspects. It also
neglects economic dimension of work satisfaction although economic
motivation is extremely strong and provides basis for explaining human
behaviour . On the basis of human relations studies managerial behaviours
cannot be outlined.

3) Over concern with happiness-- Studies have failed to show a constant

relationship between happiness and productivity. It is possible to have a lot
of happy but unproductive workers.

4) Misunderstanding of participation- The supporters of human relations viewed

participation asalubricant of reducing resistance to formal authority and to
ensure support of workers for organizational goals. Recent studies indicate
that employees want to be treated well and they want to be utilized properly.

5) Dominance of Group Decision-- Human religionists maintain that group

decisions dominate individual decisions dominate individual can live fruitfully
only through a complete identify with a group.

6) Neglect of Role of conflict- Human religionists have failed to recognize the

role of conflict as a creative force in the society. They believed that conflict is
always bad and hence be minimised. The emphasis was on achieving peace
and co-operation. They neglected that, life without conflict becomes
meaningless and intolerable.

7) Anti-individual- The human relations movement is anti-individualist.

Here the discipline is the boss, which forces individuals to sacrifice
their personal values and attitudes to have conformity with group
standards. There is no guarantee that groups will always be
instrumental in distributing satisfactions to its members. Groups may
be manipulated by autocrats & may use group to satisfy their own
selfish goals.

Thus human relations movement failed to have its impact on

development of management thought. The movement ultimately
degenerated into more slogans. The tonic effects of human relations
or ventilation therapy have been exaggerated, hence it lost its
significance.
 B) Behavioral Sciences movement—

The Hawthorne experiments revealed the work organizations as a

social system and pointed to the need for detailed examination of
psychological and social aspects of organizational behavior. Later
researchers came to be known as “Behavioral scientists” rather than
human relationists. Behavioural scientists like McGregor, Maslow,
Herzberg, Argyris, Likert etc belieed that inplace of the concept social
man, the concept of self actualizing man is more appropriate to
explain human motivations. They emphasized the value of more
domocratic , less authoritarian, less hierarchically structured
organizations. They developed the human Resource approach
which assumes the job or task itself as the primary source of
satisfaction and motivation to employees. Thus behavioural
movement movement emphasises

1) Involvement of an individual in the decisions made in the

organization.
2) People do not dislike work if they have helped establish
objectives they will want to achieve them.
3) Most people exercise self-direction, self-control and creativity
than are required in their current jobs.
4) The manager’s basic job is to use the untapped human
potential in the service of the organization.
5) The manager should create healthy environment where all
the subordinates can contribute to the best of their
capacities.
6) The manager should provide self direction by the sub-
ordinates and they must be encouraged to participate fully in
all important matters.
7) Promoting expansion of sub-ordinate influence self-direction
and self control will lead to direct improvements in operating
efficiency.
8) Work satisfaction may improve as a by product of sub-
ordinate’s making full use of their potential.

Thus the contribution of behavioural science to management practice

consists mainly or producing new in-sights rather than new
techniques. It has developed a useful way of thinking about the role
of the manager, the nature of organizations and the behaviour of
individuals within organizations.

6) MODERN THINKERS -

In recent times several thinkers have contributed towards development of

management thought some of these may be discussed as follows

A) Chester Bernard’s social systems theory-

Bernarc adopted social systems approach to understand and

analysis of the functions of executives he analyzed the nature of co-
operative social systems as he found that non logical factors also
influence organizational behaviour. His contribution may be
summarized as follows –
1) Concept of organization-

Bernard defined organization as “a system of consciously co-

ordinated activities of two or more persons where 1) The
persons are able to communicate, 2) they are willing to
 contribute to the action and 3) There is a common
purpose.

2) Formal and informal organization

Organizations are composed of formal and informal

organizations. The formal organization has consciously co-
ordinated interactions that have a deliberate and common
purpose. Informal organizations refer to those social
interactions which do not have common and consciously
coordinated joint purpose.

3) Elements of organization-

Every formal organization must have the following elements

1) A system of functionalization so that people can

specialise 2) A system of effective and efficient incentives
that will induce people to contribute to group action. 3) A
system of authority which will lead group members to accept
the decisions of executives 4) A system of logical decision
making.

4) Functions of Executives –

Informal organizations executives have following functions

1) The maintenance of organizational communication

through system of organization
2) Securing essential services from individuals in the
organization
3) Formulation and definition of purpose.

5) According to Bernard a person will accept communication as

authoritative only when four conditions are satisfied.

i) he can understand the communication.

ii) he believes that it is not inconsistent with
organizational purpose
iii) He believes that it is compatible with his own
personal interest as a whole
iv) He is mentally and physically able to comply with it.
Thus Bernard defines authority which is known as
acceptance theory of authority.

6) Executive Effectiveness--

To make executive effective, a high order of leadership is

necessary. He stated that, co-ordination not leadership, is
the creative process, but leadership is the indispensable
fulmination of its forces. Leadership is the test of executive
responsibility because for successful accomplishment , it
requires element of conviction that means identification of
personal codes and organization codes for the future leader.

7) Motivation-

Bernard held that monetary rewards are not sufficient for

motivation but factors like opportunity for distinction and
power, pride of workman ship, pleasant organization,
 participation, mutual supporting, personal attitudes & feeling
of belongingness are more effective as motivators.

8) Organizational Equilibrium-

The Organizational equilibrium is dynamic as it has to cope

up with the dynamic situation. The equilibrium of the
organization depends upon the individuals working within it,
other organizations and society as a whole. The equilibrium
can be perceived through logical appraisal, analysis and
intuition.

9) Interaction between formal and informal organizations-

In every formal organization informal organizations also exist

in order to overcome the limitations of the formal
organization. Bernard emphasised that executives must
develop informal organizations to serve as a means of
communication, to bring cohesion in the organization and to
protect the individuals from dominance and on slaught of the
organization. Both the formal and informal organizations
depend upon each other and there is continuous reaction
between two organizations.

Thus Bernard’s contribution to management thought is

considered to be very important. he hoped that the functions
would guide social scientists to more realistic studies of
organization and management.

B) Douglas Mc Gregor’s Theory X and Theory Y

For the purpose of understanding human behaviour McGregor made

certain assumptions which were classified into two categories, known
as Theory X and Theory Y.

Theory X—

It is a traditional theory of human behaviour it is based on the

following assumptions about human nature.

1) Management is responsible for organizing the elements of

productive enterprises - Money , material equipments, people
– in the interest of economic ends.

2) With reference to people it is the process of directing their

efforts, motivating them, controlling their actions, modifying
their behaviour in order to be in conformity with the needs of
the organization.

3) Without this active intervention by management people

would be passive or even resistant to the needs of the
organization. Hence they must be persuaded, rewarded,
punished and properly directed. It is the task of
management.

4) Average human being has an inherent dislike of work and will

avoid it if he can.

5) He lacks ambition, dislikes responsibility and prefers to be

led by others.
6) He is inherently self centered, indifferent to organizational
needs.

7) He is by nature resistant to change.

8) He is gullible or can be easily persuaded, not very bright, the

ready dupe (can be easily decived) of Charlaton (a person
pretending to be knowledgeable) and demagogue (Political
agitator)

Out of these eight assumption, the first three relate to

managerial actions and the remaining five deal with human
nature. Mc gregor believed that these assumptions about
human nature have not changed drastically although there is
considerable change in the patern of their behaviour.

Theory X helds that, efficiency in the organization will be high

when authority in the organization is clear an flows from
superior to subordinates, without any resevation. According
to the theory X an individual should be given the task for
which he is best fitted and there has to be very close
supervision of his work. Theory X assumes that
subordinates can be hired and fired, used and discarded like
any other comodity, by the management. Thus it represents
autocratic style of manager. The management adopted the
carrot and stick technique for motivation of human beings.

The leadership practices recommended by the followers of

Scientific Management is based on theory x. Those who
believe in theory X consider management as a highly
directive behaviour. They argue that a manager must take
effective steps to direct behaviour of his subordinates.

THEORY Y-

Mc Gregor made following assumptions for theory Y

1) Work is as natural as play as rest, when the conditions are

favourable. The average human being does not inherently
dislike work when work is meaningful it can be a source of
satisfaction and can be voluntarily performed.

2) Auhtoritarican methods are not the only methods for getting

things done. External control and threat of punishment are
not the only means for bringing about efforts towards
organizational objectives. Man can exercise self control and
self direction in the service of objectives to which he is
committed.

3) Commitment to objectives is a result of the rewards

associated with their achievement . The most important
reward is the satisfaction of ego and self development needs
which can be direct results of efforts directed towards
organizational objectives. People select goals for
themselves when they see the possibility of some kind of
reward that may be material or psychological. One they
have selected their goal they will pursue it even without close
supervision and control.
 4) The average human beings, under proper conditions, do not
avoid responsibility but learn not only to accept responsibility
but also try to seek it.

5) The capacity to exercise a high degree of imagination,

ingenuity (Clever at invention) and creativity in the solution of
organizational problems is widely distributed in the
population.

6) Under conditions of modern industrial life, the intellectual

potentialities of people are only partially and women have
unlimited potential.

According to theory Y, if subordinates are treated like adults and

allowed to exercise self control over their activities, it will satisfy their
ago and social needs and their basic requirements. Theory y
emphasizes that management is not merely a direction of things but
it is an act of making men and creating opportunities. Management
is basically a process of actuating men for greater and better work. It
is the process of realizing potential, removing obstacles, encouraging
growth and providing guidance. The main task of management is to
arrange organizational conditions and methods of operation so that
people may achieve their own goals best by directing their own
efforts towards organizational objectives. Theory Y advocates the
decentralization of authority and job enrichment should be the aim in
structuring the organization. Theory Y emphasizes participate and
consultative management as it is more successful and effective
than a highly directive management.

Comparison of Theory X and Theory Y

1. Theory X assumes that human 1. Theory Y assumes that work is

beings are inherently distasteful
towards work
2. It emphasizes that people do not
have ambitions and they try to
avoid responsibility
3. It assumes that generally people
have little capacity for creativity
4) It assumes that people lack self
motivation and require to be
controlled and closely supervised
to get maximum output from
them.
5) It emphasizes on centralization of
authority
as natural as play or rest.
2. It assumes that, if work is
meaningful then it becomes
source of their satisfaction, so
they voluntarily perform it.
3) It assumes that capacity for
innovation and creativity is widely
distributed in the population.
4) It assumes that people are self
directed creative and prefer self
control.
5) It emphasizes decentralization of
authority and greater participation
subordinates in decision making.

Theory Z--

Urwick criticized both the Theories X and Y and proposed a new theory called theory
Z. He argued that, the primary task of a manager is to produce goods and services at
fair prices which consumers are able and willing to pay with this objective in view,
manger must direct his effort of those associated with him. It would be possible
under two conditions –

1) Every member of the organization must know the organizational goals

precisely and the contribution which his attempts are making towards the
realization of goals and

2) All the members of the organization should be confident that the realizations
of organizational goals is going to affect their need satisfaction positively.
Thus theory Z takes into consideration the organizational variables shaping
the behaviour of individuals. The supporters of the theory believe that a
particular individual is likely to behave differently in different organizational
conditions. The theory presents more realistic picture of human behaviour in
the organization without making assumptions about human behaviour. The
success of an organizations depends on the morale of all the people of the
organization. If the management develops appropriate organization which
will satisfy both, the needs of the people and the needs of job then it will lead
to maximum motivation and productivity. However the theory Z could not
get much popularity because such propositions have been given in one form
or the other by different theories

D) Contribution of Peter Drucker

Peter Drucker an international management consultant has made an

outstanding contribution towards development of management thought. His
major contributions may be presented as follows—

1) Nature of management –

Drucker emphasizes creative and innovative management, as basic

objective of management is to lead towards innovation. He defines
innovation is wider sense so as to include development of new ideas,
combining old and new ideas, adaptation of ideas from other fields or
even to act as a catalyst and encourage others o carry out
innovation. He treats management as profession and discipline. As
a discipline management has its own skills, tools and techniques and
approaches. However management is a practice rather than a
science. Management as a profession is independent of ownership.
Management professionals must be held responsible for
performance management only authority is performance. Managers
should be equipped with skill tools and techniques and they must be
good practitioners so that they can understand the cultural and social
requirements of various organizations and countries.

2) Management Functions-

Management is the organ of its institution hence management is

seen through tasks According to Drucker, there are three basic
functions of a manager which he has to perform to enable the
organization to contribute towards 1) The specific purpose and
mission of the organization. 2) Making work productive and the
worker achieving 3) Managing social impacts and social
responsibilities. These functions are to be performed simultaneously.
A manager has to act as administrator where he has to improve
existing things. He has to act as an entrepreneur in making
resources more productive. The most important function of manager
is setting of objectives in eight important areas. There are market
standing innovation, productivity, physical and financial resources,
 profitability, managerial performance and development worker
performance and attitude and public responsibility.

3) Organization Structure –

According to Drucker, three structural requirements of an enterprise

are-

i) It must be organized for business performance.

ii) It should contain least possible number of management
levels.
iii) It must make possible the training and testing of tomorrow’s
managers by giving responsibility to young managers.

In the context organizing three important aspects include 1)Activity

analysis 2) Decision Analysis 3) Analysis of relations. Activity
analysis which has remained neglected, must show what work is to
be performed, what kinds of works belong together and the emphasis
given to each activity in the organization structure.

Decision analysis is second important aspect of organizing. The

nature of business decision is determined by 1) The degree of
futurity in the decision ii) The impact of decision over the other
function iii) The number of qualitative factors entering into it and
iv) Whether decisions are recurrent or rare. The decision analysis
will determine at which levels these can be made. The third aspect
of organization is relation analysis which helps in defining structure of
organization and also provides guidance in manning the structure.

4) Federalism --

Drucker has advocated federal decentralization that goes beyond

delegation. It creates a new constitution and new ordering principle.
Federalism is essential because

i) It sets the top management free to devote itself to its proper

functions.
ii) It defines functions and responsibilities of the operating
people.
iii) It creates yard stick to measure their success and
effectiveness in operating jobs.
iv) It helps to resolve the problem of continuity through giving
the managers education in top management problems and
function while in operating position.

5) Management By Objectives (MBO)

The concept of Management By Objectives is regarded as his major

contribution to the field of management.

He developed the concept of Management By Objectives is 1954,

which is regarded as an important method for an organization to
become modern one. Management by Objectives is the technique
and philosophy of management It is a process by where superiors
and and subordinates jointly identify the common objectives, set the
results that could be achieved by the subordinates, assess the
contribution of each individual and integrates individuals with
organizations so as to make best use of organizational resources .
 The concept of Management by objectives has revolutionalised the
whole management process.

6) Futurity –

Drucker is mainly concerned with futurity. He bases his forecasts on

present actions and decisions. His main concern is how the
technological development may be absorbed by the society without
negative consequences He states that it is not possible to foresee
the shape of things to come in view of the complexity and
profoundness of the revolutionary changes occurring in the society at
a faster rate. People should develop philosophy of life which can
cope with the changes by taking change as challenge and try to cope
with it to make a better society.

His contribution is praised by socialist countries also, although he

tried to strengthen the position of capitalism without fearing about
participation of workers in management. His MBO , control by self
control and organizational federalism will be remembered and
practiced by management.

*************

Q.3 Critically evaluate various approaches to management—

There are various approaches or schools of management thought of which

main approaches are as follows—

1) Scientific Management School.

2) Management process School /Approach
3) Empirical school
4) Human relations (Behaviour) school
5) Social systems school
6) Decision theory school
7) Mathematical (quantitave) Management school
8) Systems Management school.
9) Contingency or Situational Approach

Let us discuss these approaches briefly—

1) Scientific Management School/Approach—

Taylor adopted scientific approach to study management practices. His

scientific management approach aimed at studying and analyzing existing
management practices for standardization and improvement and bring
expertise to planning and supervision. On human side Taylor sought
individual development and reward through fatigue reduction scientific
selection to match individuals abilities to their jobs and wage incentives.
Taylor’s basic philosophy may be summarized in the following principles.

a) The development and use of the scientific method in the practice of

management

b) Scientific approaches to select employees who are best suited to

perform a given task.
 c) Providing the employee with scientific education, training and
development.

d) Encouraging harmonious relationships between management and

employees.

The scientific management is a philosophy rather than mechanism. He

believed in the utility of systematic planning and study of processes. He was
more concerned with the efficiency of workers and managers at actual work.
Hence scientific management is more relevant to mechanization and
automation or technical aspect of efficiency than to the broader aspects of
management of organization.

2) Management Process or Operational school –

This approach to management considers management as a process of

getting things done through and with the people operating in formally
organized groups. Henry Fayol is known as the Father of Modern
Administration who believed that management can best be studied in terms
of the process involved in it.

Main features of operational Approach –

1) Management can be better understood by the study and analysis of

functions of management
2) The functions of management are universal as they occur in any type
of organization.
3) The conceptual model of management can be developed through an
analysis of the process of management and identification of
principles.
4) The functions of management such as planning organizing , staffing
directing and controlling are the core of management.

Uses of Operational Approach-

1) It provides through knowledge about function or process of

management for making any person expert in the field of
management.
2) It recognizes management as a distinct discipline. It is easy to
understand & Practice.
3) It believes that management is universal irrespective of any type or
levels of organization.
4) It integrates the knowledge of different discipline or subjects to
improve management.
5) It helps in promotion of professionalization of management.
6) It provides flexibility, provides scope for innovation, creativity,
research and development.
7) It recognizes that management is both, science and art
8) It provides helpful & purposeful philosophy of management.
9) It involves the performance of functions by managers aiming at
proper and systematic utilization of resources.

Limitation—

1) There is no agreement about functions of management

2) There is lack of unanimity about various terms used by operational
theorists.
 3) The universality of management principles may not always stand the
test of empirical scrutiny.
4) Organization functions under dynamic environment hence searching
for universal principles may not always be successful exercise.

In spite of these limitations this approach provides a conceptual framework

which may be utilized for further researches to development management
thought.

3) Empirical Approach or Management by Customs School

This approach concentrates on the study the practices and experiences of

managers and tries to generalize on the basis of their analysis, so as to
transfer the knowledge of management to practitioners and students. The
adopt case study method or decision making process study. This approach
aims at learning through the experiences of successful and mistakes of
unsuccessful managers. American Management Association and authors
like Urwick, Mooney and Reiley prefer this approach to study management.

This approach is useful for developing the diagnostic and analytical skills
among the students. The main limitation of the approach is that, basing
generalization on cases and past experiences has not contributed
significantly towards development of management as a separate discipline.
Secondly , as managers have to function under dynamic environment,
successful techniques of the past period may not be successful in present or
in future.
4) Human Relations (Behaviour) Approach—

This school originated on account of thoughts expressed by behavioural

scientists, who consider organization as people based entity. According to
interpersonal behaviour approach, the study of management should be
centered on interpersonal relations as a manager has to get work done
through others. Hence there is emphasis on application of individual
psychology. According to group behaviour approach, emphasis is on the
study of group behaviour pattern, or organizational behaviour.

Main features—

a) This approach makes extensive use of concepts from psychology

and sociology.

b) As managers have to get things done through others they should

understand human relations.

c) Emphasis is placed on improving productivity through motivation and

good human relations.

d) Motivation, leadership, communication, participative management

and group dynamics is the core of this approach.

This approach has suggested many new ideas in managing organization.

However the approach deals with organizational behaviour in vague terms. It
has developed tendency towards treating management as equivalent to
human behaviour but it is like cardiology the study of human body. The
approach reduces scope of management unnecessarily.

5) Social systems Approach/School.

This approach considers management as a social systm or a system of
cultural interrelations ships An organization is basically a cultural system
composed of people working together in co-operation to achieve
organizational goals.

Main Features –

i) Management is a social system, a system of cultural relationship.

ii) Relationships exist among the external and internal environment of
the organization.
iii) Formal organization represent cultural relationships of the social
groups working within the organization.
iv) Co-operation and team spirit among group members is necessary for
the achievement of organizational goals.
v) Attempts should be made for establishing harmony between the
goals of organization and the goals of the groups.

Uses – This approach is useful to practising managers the managers operate

in the social system and organization is likely to prosper most if the
social demands of society in which it operates are fully recognized.

The main limitation of this approach is that, the organizational

decisions should not be based on the desires of one group alone but
should reflect the interest of all the parties. This approach is broader
than management and its practice . It also overlooks many
management concepts, principles and techniques that are important
to practicing managers.
6) Decision Theory School/Approach--

This approach concentrates on rational decision i.e. selection of

proper course of action systematically, from various possible
alternatives. The steps involved in decision making process are 1)
Defining the problem ii) Collecting relevant information iii)
Identifying alternatives iv) Evaluating the alternatives v)
Selecting the best alternative under present conditions vi)
Implementing selected solution vii) Evaluate the result of action.

Main Features –

i) Management is essentially decision making.

ii) Members of the organization are decision makers and problem
solvers.
iii) Decision making is the control point in management
iv) In order to increase efficiency of the organization the quality of
decisions is the prime factor.
v) Management information system and the process and technique of
decision making form the subject matter of the study of management.

Uses and Limitations –

This approach contributes towards the sharpening of managerial tools

especially for decision making carrying out managerial functions efficiently &
effectively. But it fails to take total view of management as decision making
is one of the aspects of management.
7) Mathematical (Quantitative) Management Approach-

This school considers management as a logical entity, the action of it can be

expressed in terms of mathematical symbols, relationships and measurable
data.

Main Features –

1) It regards management as the problem solving mechanism with the

help of mathematical tools and techniques.

2) Management problems can be described in mathematical symbols

and data.

3) Various variables in management can be quantified and related to

equation which can be solved.

4) It includes decision making, system analysis and partly human

behaviour.

5) Its methodologies include operations research mathematical tools,

simulation, models etc.

Uses and Limitations-

The use of mathematics and quantitative techniques are being increasingly

used in management for promoting orderly thinking, and introducing
exactness in management discipline. But mathematical models cannot be
considered as a substitute for sound judgement, but they can be treated
merely as techniques of managerial analysis. There are certain phases of
management which cannot be expressed in mathematical terms.

8) Systems Management School --

This approach is recent in origin it was developed around 1960s. It is an

integrating approach, which considers the management in totality based on
empirical data. It emphasizes that attention should be paid to the overall
effectiveness of the system rather than that of a subsystem in isolation. It
concentrates on the interdependence and interrelatedness of the various
subsystems from the point of view of the effectiveness of the system as a
whole.

Main features –

1) A management is a social system as it possesses all the

characteristics of a social system. It has subsystems that are
integrated to unify as a whole.

2) Management is a open system as it has to interact with the

environment continuously.

3) Management is a dynamic system as the equilibrium in organization

is continuously changing.

4) Management is probabilistic in nature, hence it points out only the

probability and never the certainty of performance.
 5) Management is multidimensional, complex and multilevel in
character.

6) Management is multivariable as there is no single cause-effect

phenomenon, as the event may the result of many variables that are
interrelated and interdependent.

7) Management is adaptive system as it has to survive and grow under

dynamic environment

8) Management is multidisciplinary system as it borrows ideas,

concepts and models from several disciplines such as sociology,
psychology, economics statistics, mathematics etc.

Thus systems approach possesses conceptual frame-work of much higher

order as compared to other approaches. It aims at integrating best aspects
of various approaches to expand the scope and effectiveness of
management.

Kenneth, Boulding etc. authors have used the systems approach to study
new types of organizations such as project management organization. The
main problems with the systems approach is that its method tends to be
complex especially when it is applied to study large complex and dynamic
organizations.

9) Contigency or Situational Approach

This approach to management emphasizes that management is a highly

dynamic, complex practice oriented and action packed discipline. Managerial
decisions and actions are mainly based on judgement, progmatism and not
principles. The environment of organizations and managers are very
complex, uncertain, ever-changing and diverse in nature. It is the basic
function of management to analyze and understand the environmental
variables under which they function before taking decision about techniques
processes and practices. The choice of approaches and their effectiveness
depends on the behaviour and dynamics of situational variables. Hence
there is no universally valid one best way of doing things. Management
theory and principles are deterministic while the pace, pattern and behaviour
of events are not deterministic. Thus what is valid and good in one situation
may not be valid and good for some other situation.

The contingency approach tends to widen the scope of management beyond

its theory. It helps them to take a broad based approach. It makes them
more sensitive, alert and adaptive to situation behavioural variables while
deciding about approaches and styles. Contingency thinking enlarges area
of freedom of operation of managers. They can think of innovating new
approaches, which is essential for managers to be effective under rapidly
changing world environment.

*************
Q. 4 a) Define Planning. Explain the nature objectives, advantages and
disadvantages of planning.
b) Explain different types of plans.
c) What are the steps involved in the planning process ?

2.1 Introduction-

Planning is the primary function of management. Planning concentrates on

setting and achieving objectives through optimum use of available resources.
 Planning is necessary for any organization for its survival growth and
prosperity under competitive and dynamic environment. Planning is a
continuous process to keep organization as a successful going concern,

2.2 Definitions –

1. Terry - “Planning is the selecting and relating of factors and the

making and using assumptions regarding the future in the
visualization and formulation of proposed activities believed
necessary to achieve desired results.”

2. Allen – “ Management planning involves the development of

forecasts, objectives, policies programmes, procedures, schedules
and budgets.”

3. Theo Haimann - “ Planning is deciding in advance what is to be

done. When a manager plans, he projects a course of action for the
future. Attempting to achieve a consistent, co-ordinate structure of
operations aimed at the desired results.”

4. Koontz and O’Donnel – “ Planning is deciding in advance, what to

do, how to do it, when to do it, and who is to do it. It bridges the gap
from where we are to where we want to go.”

5. Haynes and Massie - Planning is a decision making process of a

special kine. It is an intellectual process in which cretive thinking and
imagination is essential.”

6. Allen – Planning is a trap laid to capture the future.

7. Alfred and Beatty - “ Planning is the thinking process, the organized

foresight, the vision based on fact and experience that is required for
intelligent action.

2.3 Characteristics or nature of planning –

On the basis of various definitions of planning the following characteristics of

planning may be identified.

1. Planning is mainly concerned with looking ahead in the future.

Forecasting provides the necessary base for the purpose of planning.

2. Planning deals with setting objectives and achieving them.

3. Planning is a decision making. It involves the selection of the best

alternative under present conditions.

4. Planning is required at all the levels of management. Its scope and

importance increases at successively higher levels.

5. Planning is flexible in nature as it is based on future expected

conditions which are dynamic.

6. Planning is a continuous and never ending process.

7. Planning affects survival, growth and prosperity of the organization.

8. Planning integrates various activities of organization.

 9. Planning is done for specific period.

10. Planning is an interdependent process which coordinates the

different activities of business.

2.4 Objectives of Planning-

Planning in an organization is essential for achieving the following objectives.

1. To reduce uncertainty about future conditions.

2. To promote co-ordination and co-operation among various activities

of the organization.

3. to achieve economy in operation through making optimum use of

available resources.

4. To achieve predetermined objectives efficiently and effectively.

5. To enable the organization to survive and grow under competitive

and dynamic environment.

2.5 Advantages or importance of planning

Planning is an important function of management as it provides several

advantages as stated below-

1) Planning enables the management to achieve organizational goals

efficiently and effectively.

2) Planning helps in making optimum use of available resources in the

most economical manner.

3) Planning is necessary for minimizing future uncertainties relating to

dynamic environment.

4) Planning enables the organization to increase its competitive

strength.

5) Planning provides a basis for effective controlling.

6) Planning motivates the employees in maximizing their contribution

towards achievement of organizational goals.

7) Planning promotes co-ordination and co-operation in the

organization.

8) Planning is useful in promoting growth and development of the

organization and employees working for the organization.

9) Planning is based on systematic thinking, hence it promotes

rationality among the executives.

10) Planning tends to reduce red tapism or delay in decision making so

that time energy and money may be saved significantly.

11) Planning helps in encouraging creative thinking and innovative

techniques to achieve organizational goals.
 12) Planning helps in increasing ability of managers to cope with
changes which are inevitable and desirable to some extent.

13) Planning also provides opportunities to develop new and more

efficient methods and procedures of action.

14) Planning is necessary for facilitating effective delegation of authority

which may result into executive development.

15) Planning encourages involvement and team spirit among the

employees.

16) Success of all the activities in the organization depends on planning

so planning has to be done systematically and carefully.

2.6 Disadvantages or limittions of planning-

Although Planning has several advantages, still it has certain limitations.

1. Planning is criticized as a time consuming and costly process.

Planning involves time, money and energy and also risk about
achieving organizational goals . What is the guarantee that planning
will always be successful ?

2. Planning promotes rigidity in the organization as all the activities are

strictly undertaken according to plans, hence flexibility is significantly
reduced.

3. Planning tends to encourage a false sense of security against risks

and uncertainty.

4. On account of dynamic complex and competitive environment, to

anticipate future conditions is extremely difficult hence planning is not
suitable under such conditions.

5. Planning is a mental or thinking process. It needs high level of

imagination, analytical ability, conceptual skills, creativity and
efficiency in selecting the best alternative course of action. As such
talents are very rare, to formulate effective plans and maintain high
quality of planning is a difficult task to achieve in practice.

6. In modern times trade unions tend to exert their impact on

managerial decisions. On account of increasing interference of trade
union activities management may find it difficult to implement
planning effectively and efficiently.

B) TYPES OF PLANS -

In the process of planning, different types of specific plans are

prepared to make the whole process of planning effective and
efficient. These plans may broadly be classified into two categories.
 PLANS

STANDING PLANS SINGLE USE PLANS

1. Mission 1. Programmes
2. Objectives 2. Projects
3. Policies 3. Schedules
4. Procedures 4. Budgets
5. Rules and Methods 5. Standards.
6. Strategies

Standing Plans-

There are the plans which are used repeatedly over large period as and
when required.

1. Mission—It is the central guiding concept which describes the

fundamental reason for the existence of the organization. It explains
what need of the society the organization is going to serve and what
line of business it is going to adopt. It also reflects the
philosophy of management, and gives clear idea about the basic long
run commitment of the organization.

2. Objectives -- Objectives are open ended attributes and indicate end point of
planning. As Mc farlnd has pointed out objectives are goals, aims or
purposes that organizations wish to achieve over various periods of time”
Thus objectives are expressed in broad terms like “ Our aim is to improve the
image of the organization.” Objectives decide where the organization wants
to go, what it wants to achieve and what is its destination. As objectives are
end points and giving direction to the planning, without objectives planning
cannot be undertaken.

3. Policies – Policies are guidelines for action, which helps in achieving

objectives of the organization policies, are general statements or
understandings , which guide or channel thinking in decision making
of subordinates. Thus policies provide broad ways in which the
objectives can be realized. Most of the organizations provide policy
manual to make policies easily available for reference and guidance
of the subordinates.

4. Procedure - Procedure refer to a specific administrative directive

prescribing in-sequential manner in which a repetitive activity is to be
initiated, carried forward and completed in goal oriented manner.
Procedures are laid down to standardize and routines the pattern and
pace of work flow at the operational level. As terry has pointed out”
A procedure is a series of related tasks that make up the
chronological sequence and established way of performing the work
to be accomplished.

5. Rules and Methods - The term rule may be defined as a prescriptive,

directive to the people on their conduct and action. Rules are like
commandments aiming at maintaining discipline, structure and
restrain behaviour and task performance of people in formal
organizational settings. A rule is definite and rigid and hence any
breach of rule is followed by penalty.

A method is a prescribed process in which a particular operation or

task is to be performed. It specifies one best way of performing each
 step in a task. Thus it defines the technology of individual operations
in a work situation.

6) Strategies - Strategy is the complex plan for bringing the organization from a
given position to a desired position in a future period of time. The main
purpose of strategy is to overcome the competitive forces and achieving
organizational objectives the strategy is formulated by the top management
for the purpose of interpreting and shaping the meaning of other policies.

B) Single Use plans -

Single use plans are prepared to meet the demands of particular situation.
These plans are used only for specific periods.

1) Programmes - A programmes is a single use comprehensive plan

designed to implement the policies and accomplish the objectives. It
deals with step by step approach to guide the action necessary to
reach the predetermined goals. It is a combination of policies,
prodedures, rules, budgets , task assignments etc for the specific
purpose for carrying out a given course of action. a programme is a
single use plan for example, expansion programme of a factory.

2) Projects- Project may be defined as any scheme or part of major

scheme for investing resources, which can be analyzed and
evaluated as an independent unit. It is basically a proposal of
investment which can be separately appraised with the help of cost
benefit analysis.

3) Schedules - Scheduling is a process of establishing a time sequence

for the work to be done it is an essential part of an action plan. It
prescribes exact time for the beginning and finishing each step.
Scheduling is useful for saving time and energy of the employees.

4) Budgets—Budgets are single use plans expressed in quantitative

terms, so they are called as Numerised plan. A budget is a plan
which is a statement of expected results expressed in numerical
terms. Budgets are prepared in terms of time, money, material , and
other units required to perform work and accomplish specified
results. The preparation of budget is nothing but planning as it calls
for compilation of all relevant fats and figures like other plans.

5) Standards - A standards is a norm or criteria used for evaluation or

comparison of performance. A company sets standards expressing
anticipated results of the plans. Generally for each area of business,
qualitative and quantitative standards are established like physical
standards, quality standards, personnel standards, performance
standards etc. In practice financial ratios such as liquidity ratios,
current ratios etc are used as standards in the field of financial
management for evaluating economic performance of the
organization.

There are the various types of plas which are used by management
to achieve the organizational goals through optimum use of available
resources.

C) Steps of Planning Process –

 Although it is difficult to prescribe fixed steps involved in the process
of planning for all types of organizations and for all types of plans,
saxena has suggested the following major steps involved in the
process of planning, These steps are

1) Analysis of External Environment

2) Analysis of Internal Environment
3) Define the Enterprise Mission.
4) Determination of objectives
5) Forecasting planning premises
6) Determining alternative courses of actin
7) Evaluation of alternative courses.
8) Selecting the bet alternative or developing strategies.
9) Establishing the sequence of activities.
10) Formulation of long term or strategic plan for organization.
11) Formulation of functional or Tactical plans
12) Formulation of action programme.
13) Reviewing and recycling the Planning process.

Let us discuss these steps briefly as follows –

1. Analysis of External Environment –

As organizations are open system working under dynamic external

environment, it is necessary to study and analyze it prevailing in the
country. External environment is composed of economic, socio-
cultural, political, legal, natural international etc forces. These factors
are beyond the control of management and they are unpredictable,
still organizations have to function under such a complex
environment. Hence before any planning is undertakes these factors
have to be taken into account so as to find out opportunities and
threats likely to arise on account of changes in environmental
conditions. Organization may plan to exploit the opportunities for the
benefit of the organization an protect it from the threats as and when
they arise.

2) Analysis of Internal Environment --

Management has to study the internal environment for identifying

organizational strengths and weaknesses, so as to make maximum
use of its strengths for achieving organizational objectives. A
resource audit may be conducted to get the idea about availability of
the resources. The plans have to be based on the availability of the
resources to the organization, to make them effective and efficient.

3) Define the Enterprise Mission-

For the purpose of planning mission of the organization has to clearly

defined by the top management. Mission describes the fundamental
reasons for the existence of the organization through serving the
specific need of the society. Thus statement of mission provides
necessary foundation and the climate for successful business
planning.

4) Determination of Objectives-

It is necessary to determine and make a statement of objectives to

be achieved by the organization. These objectives are generally
spelled out for key areas of operations which could be divided
 according to the departments or sections of the enterprise the
objectives should be clearly stated and be measurable so that their
achievement can be easily calculated. These objectives should be
communicated to the members of the organization so as to enable to
know them what will be their role in achieving these objectives.
Objectives give direction to all the activities of all the members in the
organization. Thus objectives indicate what needs to be done with
the primary emphasis is placed on accomplishment through the
network of policies procedures, rules , budgets, programmes and
strategies.

5) Forecasting Planning Premises -

As planning is done for the future, the management has to make

assumptions about future conditions for predicting future events.
According to Gayol, the entire plan of an enterprise is made up of a
series of separate plans called “ Forecasts.” Although the
management has to forecast for all the major areas of its operations,
still there are three fundamental areas affecting business for which
forecasts are important. These are 1) General Business Forecasts
2) Sales forecast and 3) Capital forecasts. Forecasting is a
systematic attempt to probe into future on the basis of known facts
relating to the past and the present. Planning premises are basically
assumptions and predictions about the future conditions. They
provide basis for planning the Process of forecasting includes 1)
Developing the basis through systematic investigation of the
economy, products and industry 2) Estimation of future
business operations 3) Regulation of forecasts which implies
comparing. Actual operations with the forecasts prepared for finding
out reasons of any deviations from the forecasts and iv) Review of
the forecasting process.

6) Determining Alternative Course of Action-

The management should try to find out various alternatives and

examine them carefully in the light of planning premises.

7) Evaluating Alternative Courses

Once various alternatives are clearly identified then it is necessary to

evaluate them by weighing various factors in the light of planning
premises and goals. A number of methods in operations Research
have been developed to evaluate various alternatives, but generally
cost-benefit analysis is adopted for the purpose of evaluation of each
alternative. Those alternative courses of action which have total
benefits more than total costs are considered for the purpose of
selection.

8) Selecting the Best Course Or Developing Strategies-

After evaluating various alternatives, one of them is selected as the

best alternatives, one of them is selected as the best alternative.
Finding the best way to go there. Where we want to be is called
strategy development.” Sometimes the evaluation process may
suggest more than one alternative as equally good. In such a case
an attempt may be made to combine them in action . The strategy
determination adopts rational decision making process as 1)
Alternative opportunities to achieve organizational objectives are
 listed 2) These are compared and evaluated on the basis of
cost benefit analysis. 3) Top management selects two or more
strategies in priority. Thus corporate strategies are developed.

9) Establishing sequence of Activities-

Once the best alternative is selected then it is worked out in details

and detailed steps are taken in sequence, which may be subdivided
for each department or section, for each product and for each week
or month etc. Thus finally a manager prepares a final plan of action
in concrete terms.

10) Formulation of long term/strategic plan-

Under long term or strategic plan, all the important areas of business
activities are covered so as to include profits, capital expenditure for
growth and diversification, organization structure managerial
philosophy, pricing, leadership in the market, finance, personnel,
advertising, industrial relations, know-how capabilities, product
planning etc.

11) Formulation of Tactical Plan -

Tactical plan are to be prepared relating to each area of production

i.e. purchase, production, finance, personnel, marketing research
and develoopment etc. These department then formulate their goals
in confirmity with the organizational objectives.

12) Formulation of Action Programmes.

An action plan has three constituents These are 1) time limit of

performance 2) The allocation of tasks to individual employees 3)
The schedule or timetable of the work so that the functional
objectives can be achieved within the predetermined period.

13) Reviewing and recycling the planning process-

Planning (deciding what to do), Action (doing it) and control

(comparing the actual with the planned) are closely related
management function and hence these phases cannot be separated
in practice. The systems approach emphasizes that through control
mechanism these phases should be properly integrated. The
mechanism of feed back is useful to achieve that, which is planned
originally. so it is necessary to compare actual performance with
planned performance and if any deviation is observed then take
necessary action so that actual performance will be on the lines of
planned performance (see figure)

Effective communication of plans

In order, order to be effective it is necessary that the plans should be clearly

communicated to all the subordinates concerned. If they have participated in
planning then they are aware of it. It is the responsibility of the top
management to see that the plans are properly communicated to all the
managers in the organization.

If a manager is not informed about plans then he cannot be effective

manager. In order to achieve organizational goals through plans all the
concerned managers must know about it so that they can take necessary
action accordingly.
DATA INPUTS
PLANNING ACTION CONTROL

Corrective
Action
PLAN OPERATING
RESULTS

FEED BACK MECHANISM

Making Planning successful

In order to make planning function effective. It is necessary to create climate for

planning. In this context the following points may be taken into consideration.

1) Planning should be participate—

All the senior managers should remove any type of obstacles to planning and
try to develop climate in which their subordinates will be motivated to
participate in the process of planning.

2) Planning should originate from the top management who are in charge of
preparing strategic or long term plan, and other plans can be based upon it.

3) Planning must be organized - An ideal organizational structure through

appropriate grouping of activities and clear delegation of authority, are
necessary to establish suitable environment for planned performance.

4) A long range plan must be integrate with short term plans, for achieving pre-
determined goals.

5) Flexible organizations

The managers should build organization in such away that it will be willing
and ready to accept challenges of change. It should be able to predict
changes and be ready to welcome changes. Development of pro change
attitude is highly desirable for growth of organization.

*************

Q.5 a) Define Organization and explain its importance as a function of

management.

b) What are the different forms or types of organizations?

c) Distinguish between line and staff managers.

5.1 INTRODUCTION--

Organization is described as a foundation on which the structure of

management is built. It is said to be the back bone of management. Without
organizing management cannot function as managers.

The term organization means a mechanism which enables people to live

together . In a static sense, organization is a structure manned by group of
people working together for achieving common goals. In a dynamic sense an
organization is a process of creating a framework of positions, that can be
used as a tool by the management to achieve predetermined goals.

5.2 DEFINITIONS --

1) Allen – “ An organization 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.”

2) Mooney and Reily – “ Organization is the form of every human

association for the attainment of a common purpose.”

3) Terry – “ Organizing is the establishing of effective behavioural

relationships among persons so that they may work together
effectively and gain personal satisfaction in doing selected tasks
under given environmental conditions for the purpose of achieving
some goal or objective.”

4) Theo Haimann – “ Organizing is the process of defining and grouping

the activities of the enterprise and establishing the authority
relationships among them. In performing the organizing function, the
manager defines, departmentalizes and assigns activities so that
they can be most effectively executed.

5) Koontz & O’Donnel – Organizing involves the establishment of an

intentional structure of roles through determination and enumeration
of the activities required to achieve the goals of an enterprise and
each part f it, the grouping of these activities, the assignment of such
groups of activities to manager, the delegation of authority to carry
them out and provision for co-ordination of authority and
informational relationships, horizontally and vertically in the
organization structure.

Thus organizing function of management includes

1) Division of work 2) Grouping of activities

3) Asignment of duties 4) delegation of authority and
5) Defining relationships.

5.3 Nature or characteristics of organization -

On the basis of definition we may identify the characteristics of organization

as follows –

1) Division of Labour – Every organization is characterized by the

division of work. The total efforts of the group are divided into
different functions and eah function is assigned the function for which
he is observed to be suited best.
 2) Co-ordination - As different persona are assigned different functions
and all these functions aim at achieving organizational goals, hence
necessary relationships are established between them so as to co-
ordinate all the activities of all the people of the organization.

3) Objectives - Organizations exist to achieve objectives , without

objectives organizations cannot exist for a long period.

4) Authority – Responsibility structure - In an organization the positions

are so ranked that each of them is subordinate to the one above it
and is superior to the one below it. Each position is delegated
necessary authority and responsibility so as to enable it function
effectively.

5) Communication - Every organization has its own channels or

methods of communication. Effective communication is vital for
success of management

5.4 Importance of Organization -

Organizing is the fundamental activity of management. It is necessary for

management to mobilize men machinery money and materials or resources
for achieving organizational objectives. Organizing provides basis for other
functions of management, hence scientifically designed organization helps
manager to function efficiently and effectively. The importance of
organization may be explained as follows –

1) Efficiency of Management –

A Good organization helps in making optimum use of available

resources for achieving organizational objectives, increasing
efficiency of management.

2) Facilities Administration –

A properly designed and balanced organization facilitates both

management and operation of the enterprise.

3) Facilitates growth and diversification-

On account of sound organizational structure growth and

diversification can be successfully achieved for improving competitive
strength of the organization.

4) Facilitates Technological progress-

Sound organizational structure is useful for coping with technological

changes which have become inevitable under modern conditions.

5) Encourages healthy human relations—

Scientific and balanced organizational structure when manned by

right type of people tends to motivate people through job satisfaction
that promotes healthy human relations in the organization. It helps
maintaining morale at a higher level.

6) Stimulates initiative and creativity-

 Sound organization stimulates creative thinking and initiative by
providing opportunities to experiment with new ideas for developing
new ways of doing things.

7) Reduction in work load of top management

Sound organization stimulates creative thinking and initiative by

providing opportunities to experiment with new ideas for developing
new ways of doing things.

8) Smooth direction

In sound organization right men are placed at right place hence

direction tends to become smooth and effective.

9) Easy communication
10) Integration of individual efforts to achieve organizational goals.
11) Effective control over employees
12) Continuity and certainty of work performance.

B) FORMS OR TYPES OF ORGANIZATION

Organizing function is basically concerned with the allocation of tasks and

delegation of authority. On account of different practices of distributing
authority and responsibility among the members of the enterprise several
types of organizational structures have been evolved along with formal
organizations non formal organizations also emerge spontaneously and
naturally. Such non-formal arrangement is psychologically and socially
oriented. When all the needs of the employees are not satisfied by the formal
organization, non-formal organizations tend to develop in the organization.

ORGANIZATION

Formal Informal

1) Line Organization
2) Functional Organization
3) Line and staff organization
4) Matrix organization
5) Committee Organization

A) FORMAL ORGANIZATION—

The main features of formal organization are as follows-

1) Formal organization is deliberately created.

2) It is impersonal in nature
3) It is properly planned.
4) It is based on delegated authority
5) The responsibility and accountability at all levels of organization are
clearly defined.
6) Organizational charts can be drawn
7) Unity of command is normally maintained.
8) It provides division of labour and specialization.

Advantages of Formal Organization

1) As definite duties and responsibilities of each employee is

clearly fixed, it tends to reduce conflicts among employees.
2) Over lapping of authority and responsibility is avoided.
3) Entire organization is systematically controlled.
4) Standards of performance are specified for all the workers which
tends to motivate the employees.
5) On account of classification of tasks, right person in place at a right
place, hence job satisfaction and security is experienced by the
employees.
6) For the purpose of evaluation and placement there are no chances
for bias, nepotism, favoritism etc.
7) It makes organization less dependent on one man.

Disadvantages of Formal Organization—

1) In certain cases, formal organization may reduce the spirit of

initiative, and dependence on superiors tends to increase.
2) Authority may be used, sometimes for sake of convenience of the
employees without considering the need for using the authority.
3) As size and activities of formal organization increases, problems of
co-ordination and control become difficult.
4) It tends to neglect sentiments and values of the employees in the
organization.
5) It may reduce speed of informal communication.

1) LINE ORGANIZATION –

It is also known as Military, Traditional, Scalar or hierarchical form of

organization. In this type of organization authority descends from top
management to the lowest level through delegation of authority.
Under this type of organization every subordinate is accountable to
his immediate superior. All major decisions are taken at the top level
and orders are made by the top executive and are handed down to
their immediate subordinates who in turn break up the orders into
specific instructions for execution by the subordinates of various
departments. Thus a direct relationship is established between
superior and subordinates. The superior exercises direct authority
over his subordinates who is entirely responsible for their
performance.
 General Manager

Sales Manager Works Manager Personnel Manager

Assistant works manager

Foreman

Workers Workers Workers Workers

Usually a general manager has three or four managers who have assistant managers
of similar number and so on up to lower level of foreman.

The task of each individual is well defined, hence there are no chances of duplication
overlapping.

Advantages –

1) The relation ship between the superior and the subordinate is quite clear
because the authority and responsibility of each person working at different
level are well defined.

2) Due to direct flow authority and responsibility there no confusion about work
done and responsibility.

3) Since the person has ultimate authority to decide and act, he can take quick
decisions.

4) It is a simple and stable form of organization.

5) It is most economical and effective.

6) It promotes high level of discipline in the organization.

Disadvantages

1) Line organization is rigid and in flexible.

2) It is autocratic in nature and gives rise to one way communication which is

defective.

3) Top executive is overburdened.

4) Lack of specialization, as services of experts are not used.

5) Co-ordination and teamwork becomes difficult.

6) There is no opportunity for subordinates for training.

7) There is a scope for favoritism

In spite of these limitations, the line organization is suitable for 1) Small scale units
2) Where automatic machinery is used 3) In case of continuous process 4)
Where number of subordinates is small.

2) FUNCTIONAL ORGANIZATION--

Taylor, the Father of scientific management suggested that the direction of

work must be decided by functions and not by authority so he introduced the
functional organization, by separating planning from doing and appointing
eight specialists.

General Manger

Factory Manger

Production Manager

Planning Department Shop Floor

Route Introduction Time & Disciplinarian

Clerk Card clerk cost clerk

Gang Speed Repair Inspector

Boss Boss Boss

under this type of organization workers receive instruction from the

specialists, who have line authority over the subordinates. The workers is
responsible for all the experts for their respective areas of specialization.

Advantages –

1) Functional organization provides scope for specialists to

function efficiently

2) Advantage of expert knowledge of specialists can be taken.

3) Supervisory staff is well qualified.

4) It provides higher standard f effectiveness of supervision.

 5) It enables to undertake mass production.
6) It provides scope for expansion without disturbance.

7) There is scope for functional improvement.

8) Burden of operating details on top executives is reduced so

that they can concentrate on long term strategic planning.

9) There is democratic control.

10) It facilitates standardization of methods, equipment’s and

operations

Disadvantages—

1) There is violation of the principle of unity of command i.e one

man one boss.

2) There is overlapping of authority and divided responsibility.

3) It may result in poor discipline and confusion.

4) There will be obstacles to efficient administration.

5) Difficulty in achieving co-ordination and term spirit.

6) There is delay in decision making.

7) It is uneconomical and complex because of employment of

many specialists.

8) There is lack of executive development.

9) It is not suitable for non-manufacturing organizations.

10) There is possibility of increase in conflicts in the organization.

3) LINE AND STAFF ORGANIZATION--

In order to take advantages of line and functional organizations, Line and

staff organization came into existence. Here “Line refers to those positions
and elements of the organization which have the responsibility and authority
and are accountable for the accomplishment of primary objectives, staff
elements are those which have responsibility and authority for providing
advice and service to the line in the attainment of objectives” It is an
attempts to combine advantages of specialization and unity of command.

(Staff) Managing Director (Staff)

Line

Personnel -------- Production Manager ----------- Finance

Manger Manager

Chief -------------- Plant Superientendent ----------- Quality

Engineer Inspector

Forman Machine Forman Assmbly

 Shop Shop
Advantages –

1) There is planned specialization

2) It promotes balanced & expert decisions
3) There is high level of discipline
4) There is undivided responsibility
5) It is flexible in nature
6) It promotes executive development
7) There is bifurcation of conceptual and executive functions
8) It promotes organizational growth.

Disadvantages

1) There may be lack of co-ordination

2) There may arise staff and line conflicts.
3) Staff may be ineffective due to absence of authority
4) It is costly and expensive affair.
5) Lack of creativity due to excessive dependence of line
managers on staff for advice and guidance.
6) Lethargic staff due to the absence of responsibility
7) Staff and Line executives may try to dominate each other
and interfere in Line-functions and may blame each other for failure.

In practice line and staff structure has become most popular in large
organizations. Generally an enterprise begins with line structure and late on
becomes line and staff organizations. However it is not suitable for small
scale organizations.

4) PROJECT OR MATRIX ORGANIZATION--

In organizations like management consultancy or Research Laboratories,

there are a number of functions and members may be assigned to special
projects. As a result individuals may be accountable to the two superiors,
one is the functional head on a continuos basis for overall performance in his
particular functions.

matrix organization is basically a set up for purpose of completing a project,

hence it is known as a project organization under the control of project
manager. Once project is over, the organization is dissolved. The members
of the team are taken from the functional departments of the organization and
place under the direction of a project manager, who has the complete
responsibility of completing the project in time. Matrix organization is
developed to meet the needs of large and complex organizations handling
several projects at the same time, To provide flexibility. Project managers’
authority flows horizontally while functional managers ‘authority flows
horizontally while functional managers’ authority flows vertically.

Advantages

1) It helps to focus attention, talents and resources on a single project

which is essential for better planning and control.

2) It is more flexible than the traditional functional structure as it can

easily responds to the changes in market conditions.

3) It provides opportunity for professionals to test their competence for

making maximum contribution.
 4) It provides motivation to the project staff as they can concentrate on
completing the project in time.

5) Each project is assigned required staff and resources so that

unnecessary duplication is avoided.

6) It helps in achieving better balance between time, cost and

performance.

Disadvantages -

1) It violates the principle of unity of command as each employee has

two bosses, the functional boss as well as the project manger.

2) The scalar principle is also violated, as there is definite authority.

Project managers and functional managers are distinct and have no
scalar relationship. their balance of power is not clear.

3) Conflicts may arise on account of heterogeneity of team members.

4) Organizational relationship, under matrix organization, tends to

become very complex, especially informal relationships may create
problem of co-ordination.

5) As the success or failure of the functional group depends upon its

performance in the project, it may make one group to emphasize its
own function even at the cost of the overall project. So conflicts may
arise among the functional groups.

6) Matrix organization is not a compact and homogenous group which

may tend to reduce organizational efficiency.

7) Switching over to a matrix organization is a time consuming process

as it requires major organizational changes which may generate
several problems.

8) Constant deputation of specialists from functional departments to

projects may make it difficult for the functional heads to appraise
employee performance, especially when the job requirements in
project are different.

Despite of these limitations matrix organizations are common among large

sized multi-project organizations.

Matrix organizations are useful in public institutions, educational and

research institutions etc.

5) COMMITTEE FORM OF ORGANIZATION

According to Davis a committee is a “Group of individuals who meet for the

purpose of effecting an integration of ideas concerning solution for some
problem” As hicks has pointed out, “ a committee “ is a group of people who
meet to plan, to discuss or to make a decision for a particular subject.”
Features /Characteristics

a) A committee consists of two or more persons.

b) A committee has clear jurisdiction. It is required to deal with specific

problems.

c) A committee may discuss the issues and make recommendations, or

it may be given an authority to take a final decision.

e) A committee acts as a collective group by holding meetings.

Individual members do not have final authority. He can exercise one
vote on a resolution.

f) A committee may be constituted at any level of the organization. and

its members may be drawn from different levels of authority.

Advantages

1) Pooling of knowledge are experience leas to a better quality of

decision.

2) There is improved communication

3) It facilitates co-ordination, teamwork and co-operation.

4) It provides better motivations and morale to employees by providing

them opportunity to participate in the process of decision making
through free discussions.

5) It also leads to executive development.

6) It promotes democratic management

7) It provides opportunity to give representation to various interest

groups, which is necessary to secure commitment and co-operation
of people.

8) Committee of different managers having splintered authority may

consolidate the authority, so that the decision can be taken without
reference to higher authority.

9) Committee may be used to postpone or avoid action to cool off

agitation and temper of the employee.

Disadvantages

1) It takes longer time to take decision or action as members of

the committee indulge in lengthy discussions.

2) It takes time and lot of money to call meetings and committee work is
also time consuming.

3) Committee decisions are often compromises between conflicting

view points so that the ultimate decision may not reflect the opinion
of anybody.
 4) As no member can be held individually responsible for wrong
decision taken by the committee, there exists diffused responsibility.

5) Committees have a tendency to survive or perpetuate themselves

even after the purpose is severed.

6) There is possibility that a few aggressive and vocal members may

dominate committee’s discussions. And committee may turn out to
be a battlefield.

7) It is also difficult to maintain secrecy regarding decisions or actions

taken by the committee.

On account of these weakness and misuse, a committee is described as a

“Group of inflicts engaged by the unwilling to do the unnecessary.” A
committee meeting may be held to do nothing except fixing the date for next
meeting.

B) INFORMAL ORGANIZATION –

Man is a social animal and wants social interaction. Formal organizations are
jointed by people to satisfy their needs but these organizations cannot satisfy
all the needs of people because of their nature. Hence informal organization
spontaneously emerge in all the formal organizations.

According to Davis informal organizations is” that net work of personal and
social relations which is not established or required by formal organization. It
is a shadow organization. Informal organization is natural or spontaneous
network of personal and social relationships between individuals formed on
the basis of personal attitudes values emotions, friendships prejudices,
interests likes and dislikes, regional affinity, common work place etc.
Informal organization is all pervasive and is found at all levels of
management. It consists of small informal groups with their own behavioral
patterns, status systems, beliefs and goals. Informal groups may overlap
because an individual may be a member of more than one informal groups.
Informal organization has its own goals, authority structure, code of conduct,
communication system and system of reward and punishment. Authority is
personal and communication much faster but less accurate, than formal
commination. Informal leadership is based on age, seniority technical
competence etc. Informal group leader is considered as an ideal person by
the members who is able to satisfy group goals. The informal leader may
initiate action and creates consensus among group members and serves as
a link between the group and outside world.

Causes of Emergence of informal Groups

1) To satisfy social needs which are not satisfied by formal

organizations.

2) To enjoy sense of belonging ness and identification.

3) To get knowledge of approved behaviour determined by the informal

organization.

4) To get outlet of employees’ frustration.

5) To achieve objectives which is not possible in formal organizations.

6) To get opportunities for influence and creativity.

7) To perpetuate cultural values.

8) To promote communication and obtain information.

Advantages of Informal Organizations –

1) Informal group gives social satisfaction to the employees.

2) It promotes sense of belonging ness.

3) It provides safety valve for emotional problems of the employees

4) It provides social control.

5) It helps developing communication channels in the organization

6) It provides help on the job to the employees during illness, accidents

etc.

7) It serves as a check on authority of a manager.

8) It provides fertile ground for future leaders

9) it supports in achieving organizational goals

10) It reduces supervision.

11) It may help manager to overcome their natural limitations of ability.

Disadvantages

1) Informal groups generally resist change.

2) Interest of formal and informal groups may clash with each other.

3) As informal groups set their own norms about quote of work to be

done hence productivity remain below optimum (maximum) level.

4) Members of informal organization may adopt group think philosophy

by way of assuming that group decision is the only right decision.

5) Informal group ends to promote rumors, grapevine which spreads at

a much faster rate and hence harmful to the organization.

Mangers should not resist formation of in formal groups but try to convince it
to contribute to organizational goals.
 ORGANIZATION

FORMAL INFORMAL
1. Structure—
It is official, so it has prescribed It is in unofficial or natural having no
structure of roles and relationships . specific structure. It arises
It is planned and deliberately spontaneously without official sanction
created by management by management
2. Base –
It is based on delegation of It arises through social interactions
authority & may grow to very big between employees. It usually remains
size. It is mechanistic and brings small is size. It is humanistic and gives
order in the organizations. satisfaction to employees.
3. Nature –
It is deliberately created impersonal It is personal with emphasis on people
with emphasis on authority, and their intricate relationships,
functions, status differentials and informal rankings and multidimensional
down ward communications communications.

4. Shape –
It is hierachial and pyramid shaped It has no definite shape, and no division
and with because style of of work. It is structural less and ill
leadership defined . It is psychosocial system.
5 Orientation
Its tasks, goals and values are Its tasks goals and values are socio-
economic oriented towards psychological centering around
efficiency, productivity profitability individual and group satisfaction
and growth. affiliation co-friendship esteem etc.

6 Charts and manuals it can be It finds no place on organization charts

shown in the form of charges and
manuals of the organization
7) Roles & Relationships it has written
roles and procedures, authority and
responsibility is clearly defined.
There are well defined roles and
relationships.
8) Authority
Formal authority is institutional, it
attaches to a position and a person
exercises it by virtue of his position.
Formal authority flows downwards
as it is delegated.
9) Behaviour—
It has prescribed system of
behaviour .Rewards and
punishments are given on the basis
of desired behaviour rewards can
be both monetary and non
monetary.
10. Stability—
It is rational and created to meet
organizational goals. It is stable,
permanent and predictable
11. Membership—
Group membership is rigidly
defined, evry employee belongs to
one workgroup only
and manuals.
It has unwritten conventions and norms
there are no written rules or
procedures.
Informal authority attaches to a person
and it flows upwards or horizontally as
it has to be earned there is informal
leader and has strong influence.
It is unwritten norms of behaviour,
enforced through mutual consent
rewards include social esteem,
satisfaction group leadership while
punishments are censure isolation,
boycott etc.
It arises to satisfy man’s quest for
social satisfaction It is relatively fickle
and unpredictable.
One person can be member of several
informal groups of his choice. He may
be a leader in one group and a follower
in the other.
 *************
Q.6 a) What is meant by Departmentation ?

b) Discuss the basis used for departmentation

c) What are the key factors used for departmentation.

A department is a distinct organizational unit over which a manager has

authority for the performance of specified activities, It is a workgroup
performing similar activities.

According to Koontz and O’Donnell , A Departmentation is a process of

dividing a large monolithic functional organization into small and flexible
administrative units. Thus departmentation refers to the classification of
activities of operations of an undertaking into functional categories. such
horizontal differentiation of tasks or activities is design for the purpose of
specialization, manageability and accountability. The process of
departmentation can take place at any level in the organization. At the top
level, break up of functions into basic activities is called “Primary
departmentation” while grouping of activities into separate units at the lower
levels is known as secondary departmentation. The main objective of
departmentation is to group activities in the manner which will best contribute
to achieving organizational objectives.

The process of departmentation includes

1. Grouping of operating tasks into jobs.

2. combining jobs into effective work groups.

3. Combining of groups into divisions called departments

Need /importance of departmentation

Departmentation is necessary to achieve following purposes.

1) To take advantage of specialization

2) To fix responsibility

3) To promote feeling of autonomy.

4) To facilitate performance appraisal

5) To promote executive development

6) To improve organizational performance.

BASIS/TYPES OF DEPARTMENTATION—

1) Departmentation By function—

Under functional departmentation each major function of the

enterprise is grouped into a separate department. The major or
organic functions are those that are necessary for the survival of the
organization. In an industrial enterprise production marketing and
finance are basic functions. There primary functional departments
 may further be divided into secondary or minor departments. For
example, the marketing department may be divided into sales,
marketing research and advertising departments.

Managing Director

Production Manager Marketing Manager Finance Manager

Marketing Research Sales Manager Advertising Manager

Manager

The process of functional differentiation may continue through successive levels in

the hierarchy till sound basis is available for further differentiation. Such
departmentation depends on the size of the organization. The head of the every
department is responsible for all the activities of his department. Functional basis for
departmentation is most widely used for grouping of the activities. It is observed in
most of the organizations.

Some functions are useful to the basic functions, so they are called service or staff
functions. In the diagram, sales are the basic function while marketing research and
advertising are staff functions.

Advantages

1) It is most logical rational and traditional method of departmentation.

2) It promotes occupational sepcialization.

3) It ensures performance of all the activities essential for achieving

organizational goals.

4) In helps in improved planning and control of key functions.

5) It provides economy of operation as there is only one department for a

particular function

6) If facilitates intradepartmental co-ordination as all the related activities are

grouped together.

7) It provides better scope for expansion.

8) It facilitates fixing responsibility for results.

9) It is useful for delegation of authority.

10) It promotes excellence in performance in specialized areas.

Disadvantages

1) It may lead to excessive centralization.

2) There is poor co-ordination and ineffective control.

3) It becomes too difficult to set up specific accountability and profit centers
within functional departments, and hence performance may not be accurately
measurable.

4) It may hinder human development.

5) It may fail to develop an overall view of the organization and its problems,.

6) The decision making process may be delayed.

7) Functional specialization does not give scope for overall development of a

manager.

Thus functional departmentation is a convenient method for grouping

activities for small organization that offer limited products. But it fails to
ensure balanced and satisfactory handling of diversified product lines.

2) Departmentation By Products

Under product departmentation each product or a group of relatd products is

organized as a separate division with its production, selling and financing
functions, Each product division. becomes integrated, self contained and
semi autonomous unit. For complex products this type of organization
structure is suitable. It is also useful for diversifying companies. Such
departmentation is known as (Divisionalisation)

M.D

Car Division Truck Division Light Commercial Bus Division

vehical division

Production Marketing Finance Personnel

Advantages

1) Product departmentation facilitates effective co-ordination

between different functional groups related to a particular product
line.

2) Every product manager is motivated for expansion,improvement and

diversification of product line.

3) It enables to evaluate and compare the performance of different

products.

4) It facilitates specialization of talents and physical facilities.

5) It helps in training development of executives.

6) Top management is relived of operating task responsibility so that

they can pay more attention towards planning and control.
 7) It is most suitable form for large multi-product enterprise where each
product needs more attention

8) Marketing strategy tends to be more effective.

Disadvantages –

1) It may result in duplication of staff and physical facilities. So

cost of management increases.

2) It may create problems of co-ordination and control.

3) It makes organization to adapt itself to the changes in

technology, demand etc.

4) It is not suitable for small scale and medium sized organization.

3) Departmentation by Territory--

Territorial or geographical departmentation is adopted when the production

and marketing activities of on organization are widely depressed over several
regions, as in case of pharmaceuticals consumer good, banking,
transportation etc. The market is divided into sales territories an a
responsible executive is appointed in charge of each territory and sales men
in his region report to him. When similar operations are undertaken are
different regions this form of departmentation is aopted by big firms.

Head Office

Eastern Southern Central Northern Western

Zone Zone Zone Zone Zone

New Delhi Division Chandigarh Division Ajmer Division Jalandhar Division

Branch Branch Branch Branch

1 2 3 4

Advantages

1) It can take advantages of local resources which is more economical.

2) It helps in paying full attention to local customer groups which helps

in raising image and goodwill of the organization.

3) A regional division can achieve better control and co-ordination.

4) It also facilitates expansion of business to other regions.

5) It helps in executive development as regional manager gains broad

knowledge and experience.
 6) As accounts are maintained areaways, the profitability of each area
can be easily worked out.

Disadvantages

1) It may be costly on account of duplication of personnel and physical

facilities.

2) It creates problems of communication and coordination.

3) The control of head office tends to be less effective.

4) It may be difficult to provide efficient centralized services to various

departments located in different regions.

5) Various regional units may concentrate on short-term goals through

competition among themselves and overall organization long-term
interests of the organization as a whole may be neglected.

4) Departmentation by customers/Markets

Under this type of departmentation, an organization is divided into number of

departments on the basis of customer or markets it serves, For example a
commercial bank may have different departments to look after general public,
businessmen farmers etc. Thus customers are treated as a key to classify
and regroup the activities of the organization. Thus each department can
serve different needs of a particular class of customers.

Managing Director

Marketing Manager

Consumer Sales Industrial Buyers Govt. Sales Exports

Advantages –

1) It enables to give specialized attention and service to every

customer group, so that customer satisfaction can be maximized.

2) It helps in improving good and maximizing sales,

3) It can enjoy benefits of specialization staff.

4) The out of fashion products may be discontinued.

Disadvantages

1) There may be duplication confusion and underutilization of facilities

and resources.

2) It may create problems of co-ordination among different customer

departments.

3) It may be difficult to organize production activities.

5) Departmentation by Process or Equipment

A manufacturing organization can group its activities into department on the

basis of processes or technologies used for the purpose of production. For
example in case of textile will ginning, spinning, weaving, dyeing are often
organized in different departments. Similarly in printing presses
departmentation is based on processes like typing, proof reading, printing
binding etc departments.

Process departmentation is most suitable where machines and equipments

used are costly are require special skill to operate them.

GENERAL MANAGER

Process I Process II Process III

Advantages—

1) It provides economy and higher efficiency in operations.

2) It helps in avoiding duplication of costly machinery and equipment..

3) It enables to make maximum use of special equipment and physical

facilities and skilled manpower.

4) Machines or processes are arranged in such a way that the series of

operations on materials can be systematically carried out.

5) It enables to take advantages of specialization in respect of

equipment becomes easy.

6) It simplifies supervision and plant layout.

7) It helps top management to have effective performance control.

8) It is more suitable to as organization where a large number of

processes are involved.

Disadvantages

1) There may arise difficulties in co-ordinating the activities of different

departments.

2) On account of specialized skills, employee mobility and turnover is

reduced.

3) Extraction specialization tends to reduce flexibility of operations.

4) It may become difficult to compare the performance of different

processes.

5) It does not provide opportunity for training and development

of management talent.
 6) Conflicts may arise among managers of different processes
especially when they concentrate departmental goals at the cost of
organizational objectives.

7) In effuential process, dependent departments may pass on inferior

work to their successive departments.

5) Departmentation is also possible on the basis of –

i) Time – Public utilizes and restaurants may adopt “rush hours” and
“off hours” classification. There may be day and right shift
departments in factories.

ii) Numerical basis – In the army soldiers are sometimes grouped into
squads on the basis of numbers.

iii) Alphabetical departmentation may be used in Telephone companies,

for accounts receivables etc.

iv) Marketing channels may be used for departmentation.

v) Combined base – Sometimes several bases of departmentation may

be used simultaneously of functional departmentation at the top level,
sales department on the basis of products and each product division
may be divided on the basis of territories & each territorial
department on the basis of customers this mixed departmentation is
called composite departmentation key factors used for
departmentation.

There are several basis of departmentation each one having its own
advantages and disadvantages . The base to be used in a particular case
depends on the requirements of the situation. However the following factors
are taken into consideration while selecting a suitable base for
departmentation.

1) Economy – Cost of departmentation should be less than the benefits.

Every new department should be evaluated on the basis of costs and
benefits and only beneficial department may be adopted. Duplication
of staff and facilities need to be avoided and attempts should be
made towards achieving optimum utilization of available resources.

2) specialization – Activities should be grouped into departments on the

basis of specialization of skills and efforts. Although specialization is
benefitical to an organization still it is necessary to avoid extreme
specialization as it reduces motivation, initiative and creativity among
employees.

3) Co-ordination - The basis of departmentation should help in

achieving co-ordination among different groups of activities which is
necessary to achieve organizational goals efficiently and effectively.

4) Control – Departmentation should enable the managers to measure

performance and to hold employees accountable for results.

5) Adequate attention—Departmentation should enable to give proper

attention to the various activities of the organization so that each
necessary activity is performed efficiently and duplication of work is
avoided. Special attention has to be given to the key areas on which
the survival and growth of the organization depends.
 6) Local conditions –While forming departments attention should paid to
make maximum use of local resources and provide customers
services in satisfactory in the locality and else where.

7) Human considerations—Departmentation should take into account

human aspects of work especially existence of informal groups,
cultural patterns, value systems , attitude of personnel etc which
have deep impact on organizational efficiency and effectiveness. If
clear channles communication are established and workers
participation at desired levels are promoted functioning of the
organization becomes successful.

Thus there no single ideal pattern of departmentation to suit for all

the organizations under all the situations. Hence a suitable pattern of
departmentation should be carefully selected because to change it is
costly and time-consuming process. In order to achieve
organizational objectives a suitable combination of different patterns
of departmentation may be selected and used effectively.

*************
Q.7 a) Define the concepts of Authority, Responsibility and
Accountability.

b) What is delegation of Authority? Discuss the advantages and

disadvantages of delegation of authority.

a) Concept of Authority—

Authority is the legitimate right of the superior to command and

require his subordinates to perform certain activities. It is the
legitimate right to give orders obeyed. Thus an exercise of authority
involves superior subordinate relationship.

Definition—

i) Henry Fayol – Authority is the right to give orders and power

to exact obedience.

ii) Allen- Authority is the sum of powers and rights entrusted to

make possible the performance of the work delegated.

iii) Simon – Authority is the power to make decisions which

guide the actions of another.

iv) Koontz and O’Donnell- Authority is the power to command

others to act or not to act in a manner deemed by the
possessor of the authority to further enterprises or
departmental purposes.

v) Daris-- Authority is the right of decision and command.

On the basis of these definitions the nature or characteristics of

authority are as follows –
 Characteristics of Authority –

1) Authority of a manager is his right given to him by his

superior. A manager exercises this right by virtue of his
formal position in the organization.

2) This right enables a manager to take decisions and regulate

behaviour of his subordinates. The right helps him to decide
and command.

3) On account of this right a manager is in a position to issue

orders and ensure their compliance from the subordinates.

4) The right to command is legitimate in a sense that it is

socially and ethically acceptable to all concerned.

5) The authority of a person is not absolute as it is limited by

several internal and external factors including willingness of
subordinates to accept the rights of the manager.

6) Authority is objective but its use is subjective. The use of

authority is determined by the personality factors of the
person and people over whom it is exercised.

7) The purpose of use of authority is to influence the behaviour

of the subordinates in the right direction.

8) Authority is the key to the manager’s job as it enables him to

carry out his functions like planning organizing etc efficiently
and effectively.

Authority V Power

Both , authority and power seek to influence behaviour of others but there is
a difference between these two terms.

1 Authority is legitimized by certain rules, laws regulations and

practices, but in case of power there is no such legitimization.

2 Authority is institutional and originates because of structural

relationships. Power emerges on account of personal factors and
various with the individuals.

3. Authority is the central element in the management of an

organization and systematic communication. But power indicates
political realities within the organization and is related to internal
patterns of actions and interactions that take place.

4 Authority exists in the context of organizational relationships in the

form of superior subordinate relationships, where as power
relationships may exist between any two persons for which
organizational relationship is not necessary.

5 Authority is delegated to an individual but power is earned by him.

6. The location of authority can be known from the formal organization

chart but the location of power is not so fixed and it may be noticed in
unexpected places. However in practice authority and power get
mixed together.
Sources of Authority

There are three theories dealing with the sources of authority, which may be stated
as follows

1) Classical or formal Authority Theory—

According to this theory all authority originates at the top in the formal
structure of an organization and it flows downwards to subordinates through
the process of delegation. The ultimate authority in a company rests with the
real owners, the shareholders who delegate their authority to the board of
directors which in turn is delegated to the chief executive and so on. Formal
Authority is the authority which a manager possesses by virtue of his position
in the organization. It is hierarchical in the nature, so it is called top down
authority. Formal authority is conferred by law and useful for a manager to
carry out his functions effectively.

1) Acceptance Theory –

According to Bernard, the degree of effectiveness authority

possessed by a manager can be measured in terms of the
willingness of subordinates to accept the orders and command of the
superior. An individual will accept an exercise of authority only when
it is advantageous to him. Subordinates will accept an order when
they 1) Understand it well 2) Believe that it is consistent with the
organizational objectives and 3) Is compatible with their own
interests and iv) It is within their mental and physical abilities.

According to acceptance theory, authority flows upward from

subordinates to superiors of bottom up authority. The acceptance
theory emphasizes interpersonal relationships and sanctions, which
can be used by managers. It pays attention to legal and social basis
of authority. But it neglects the influence of social institutions such as
trade unions. Acceptance theory interprets authority as leadership
which is the ability to pursued others to work well to accomplish
group goals. But authority is more comprehensive than leadership,
as management has to deal with trade unions, raising resources
including capital , purchase inputs etc. Thus acceptance theory has
its own limitations.

2) Competence Theory—

According to this theory authority is generated by the personal

qualities or technical competence of the manager. People accept
the order of the person because of his specialized knowledge and
skills. People respect him irrespective of his position in the
organization or managerial hierarchy. A person may not have formal
authority but people willingly submit to his commands due to his
competence and charismatic personality.

Thus the authority of a manager originates from different sources.

To be effective a manager needs acceptance authority and
competence authority also.

Limits of Authority

Authority of a manager is neither absolute nor unlimited but it is has

social, political, legal etc. Limitations.
 1. Level of organization-

The quantum of authority tends to decrease at successively

lower levels in the management hierarchy. When every an
authority is delegated by a manager, he places certain
limitations on the authority of his subordinates. People at
higher level enjoy more authority than those at the lower
levels.

2) Legal Restriction--

The authority of a manager is to be exercised within the

framework of law such as the companies act, the MRTP act,
etc. In addition the Memorandum of Association are Articles
of Association Company Policies, rules, regulation are
Articles of Association company politics, rules, regulations,
resolutions, agreements ethical practices etc also limit the
authority of a manager significantly.

3) Biological and Technological limits--

Biological Technological conditions also put the limits on

authority. The physical and mental capacity of a manger is
limited , climate , topography, market factors, technology etc.
also tend to serve as limits of authority. Even the span of
management also works as an important limitation of
authority.

RESPONSIBILITY

According to Mc Farland, “responsibility is the duties and activities assigned

to a position or to an executive. As Haimann has pointed out, responsibility is
the obligation of a subordinate to perform the duty as required by the
superior. responsibility is the obligation to perform the assigned duties
sincerely and honestly while duty is merely a task or function to be
performed. The responsibility is basically an obligation of a subordinate to
whom a duty has been assigned to perform the job, to perform certain
functions and achieve desired results. According to Hurley responsibility is
the duty to which a person is bound by reason of his status or tasks. Such
responsibility implies compliance with directives of the person making the
initial delegation.

The main features of responsibility are –

1) The essence of responsibility is obligation to perform the assigned

duty, task or function.

2) Responsibility arises from superior subordinate relationship. As a

superior assigns some work to a subordinate, then he becomes
responsible to perform to task.

3) Responsibility is related to a person as a machine or an animal

cannot accept responsibility.

4) Responsibility may be continuous obligation or a specific obligation.

for example responsibility of a sales man is continuous is nature
while responsibility of a consultant is specific in nature and it ends
when the assignment is over
 5) Responsibility is a personal characteristic hence it cannot be
delegated. Whether an individual exercises authority or delegates to
others, ultimately he remains responsibility to his own superior.

6) Authority and responsibility should be equal Authority without

responsibility is likely to be misused while responsibility without
authority has no meaning as it cannot be effective.

Thus authority is the right of superior to issue orders to subordinates

while responsibility is the obligation of a subordinate while
responsibility is the obligation of a subordinate to obey these orders
Authority flows downwards while responsibility is exacted upwards.

ACCOUNTABILITY

Accountability refers to the obligation of an individual to report formally to his

superior for the proper discharge of his responsibility, It is the answer ability
of a subordinate to render an account of his activities to h is superior. Any
person who accepts responsibility is accountable for the performance of the
assigned duties. As peterson has stated, to be accountable is to be
answerable for one’s conduct in respect to obligation fulfilled or unfulfilled.
Thus accountability is the obligation of an individual to keep his superior
informed of his use of authority and accomplishment of assigned tasks.
Accountability grows out of responsibility and both go together.

Responsibility is described as derivative of authority and accountability is the

derivative of responsibility. Responsibility is the obligation to perform
assigned task or duty while is the reporting of performance. Accountability
makes responsibility more meaningful and completes the process of
delegation. Responsibility is stated in terms of work to be done, but
accountability is stated in terms of performance. Thus authority is delegated,
responsibility is created and accountability is exacted. Authority flows
downwards while accountability for performance flows upward. However the
concept of comprehensive responsibility includes the concept of
accountability also. In that case the concept of accountability is used to
indicate the duty of an executive to keep records and to protect public
property.

As Robbins has pointed out, authority is the right to act, responsibility the
obligation to carry out delegated authority and accountability establishes
reliability for the proper discharge of the duties, delegated to the subordinate,
Responsibility and accountability may seem similar but they are different.”
Subordinates are responsible for the completion of tasks assigned to them
and are accountable to their superiors for the satisfactory performance of the
assigned work.

C) DELEGATION OF AUTHORITY—

A manager in an organization cannot do all the work necessary for the

achievement of organizational objectives, so he has to assign some part of
his work to his subordinates and give them necessary authority. This
process of granting authority to subordinates and exacting responsibility from
them is known as delegation of authority.
Definitions—

1) McFarland – “Delegation of authority is the formal mechanism by

which the net work of authority relationship is established.

2) Terry -- “conferring authority from the executive on the

organizational unit to another in order to accomplish particular
assignments.”

3) Allen -- “ Delegation is the dynamics of management it is the

process a manager follows in dividing the work assigned to him so
that he performs that part only he, because of his unique
organizational placement, can perform effectively so that he can get
other to help them with what remains.”

4) Johnson -- Delegation is a process where by a superior divides his

total work assignment between himself and subordinate managers or
operative personnel in order to achieve both operative and
management specialization

5) Basil -- “Delegation consists of granting authority or the right to

decision making in certain defined areas and charging the
subordinate with responsibility for carrying through an assigned task.”

6) Hiner -- Delegation takes place when one person gives another the
right to perform work on his behalf and in his name and the second
person accepts the corresponding duty or obligation to do what is
required of him” thus delegation takes place when enterprise
discretion is vested in a subordinate by a superior.

On the basis of these definitions the main features of delegation of

authority are as follows –

Characteristics of Delegation of Authority—

1) Delegation involves sharing of authority as a manager never

delegates his entire authority to subordinates. Generally,
authority to take routine decisions and to administer policies
is delegated while authority for policy decisions and overall
control is retained by the manager.

2) A manager cannot delegate the authority which he himself

does not possess.

3) Delegation may be general or specific under specific

delegation the course of action is specified while under
general delegation only objectives are specified. Delegation
may be written or implied.

4) Delegation defines limits within which subordinates can act

independently subordinates have to exercises delegated
authority according to the policies and rules of the
organization.

5) Delegation has dual characteristics through delegation

subordinate receives authority from his superior, but at the
same time, his superior still retains the authority. Terry
describe it as “ It is something like imparting knowledge. You
share with others who then possesses the knowledge but
you still retain the knowledge too.”
6) Authority once delegated can be enhanced, reduced or
withdrawn depending on the situation and requirement. For
example , changes in the internal and external environment,
such as changes in organization structure, policy, procedure,
methods etc. may require change in the degre of delegation
of authority.

7) Delegation of authority is always to the position created

through the process of organizing. An individual occupying
position exercises the authority so long he holds the position.
But when he moves from that position, the authority rests
with the position and does not move with the person.

8) Delegation is an art and hence it can be improved by way of

regular practice.

Importance of Delegation.

Delegation is the dynamics of management. One a person’s job

grows beyond his personal capacity, then his success depends upon
his ability to multiply himself through other right type of people. The
important advantages of delegation may be stated as follows.

1) Delegation relieves the manager for his heavy work load so

that he can concentrate on important functions like planning
and control.

2) Delegation leads to better decisions as the decisions are

taken by subordinates who have a better knowledge about
the situation.

3) Delegation also speeds up the process of decision making as

the subordinates, are authorized to take decisions on the
spot, hence valuable time is saved.

4) Delegation tends to improve the motivation and morale of the

subordinates, because delegation satisfies the needs of
recognition, ego and responsibility of the employees

5) Delegation creates a formal organization structure through

superior subordinate relationships. Delegation provides
means of typing together various positions in the
organization.

6) Delegation facilitates training of subordinates by giving them

opportunity to exercise judgements and gain self-
confidence.

Steps in delegation—

1) Determination of results expected

2) Assignment of duties
3) Authorization of actions
4) Creation of obligation.
 Principles of Delegation—

1) Delegation by Results Expected—

Delegation should be based on results.

Expected from position in the organization.

2) Functional Definition—

The functions and goals of every position and its relationship

wit other positions should be clearly defined.

3) Parity of Authority and responsibility—

Authority should be co-extensive and co-terminus with the

responsibility of the subordinate.

4) Unity of Command—

Every person should receive orders from and be accountable

to one superior only.

5) Clarity of Delegation—

The limits of authority delegated to subordinates must be

clearly defined.

6) Authority Level Principle –

Subordinates should be permitted to exercise discretion and

judgement within the limits of delegated authority.

7) Absoluteness of Responsibility –

Responsibility is absolute in nature and hence it cannot be

delegated.

8) Completeness of Delegation –

All the necessary tasks in the enterprise should be assigned

to achieve better performance.

Difficulties in Delegation

Delegation of authority is not an easy process because, in practice several

psychological and organizational obstacles have to be faced in effective
delegation of authority these barriers may arise due to superior and
subordinates.

A) Attitudes of Superiors –

A manager may fail to delegate effectively on account of the following

reasons.

1) Love for Authority -- A manager may like to dominate in

decision making at every step so as to feel his existence
everywhere an autocrat manager, for love of authority and
fear of loss of power may not be willing to delegate authority.
 2) Lack of Receptiveness - Some managers feel that they are
the best persons to take decisions and hence they do not
give chance subordinates to take decision by giving them
authority. They do not welcome ideas from others, nor
encourage them to do so but they want to perform all tasks
by themselves.

3) Lack of confidence in subordinates-

A manager may nor have confidence in the competence and

capacity of subordinates, so he may not be ready to delegate
and take risks so he tries to play safe by avoiding delegation.
He does not permit subordinates to learn through trial and
error.

4) Lack of ability to direct—

A manager who cannot guide and supervise his subordinates

effectively, may not like to delegate authority.

5) Fear of competition –

A manager may fear that his subordinates may excel in their

work and become more efficient them him. His fear of being
exposed obstructs delegation of authority.

6) Absence of controls—

When a manager does not have controls to ensure that the

authority is being properly used, he may hesitate to delegate
authority. A superior requires continuous feed back about
the performance of his subordinates and have signals to
indicate misuse of authority. In the absence of effective
control system a manager may not be willing to delegate
authority. In this context M B O technique may be used for
delegating authority.

B) Attitude of subordinates –

Subordinates may be reluctant to accept delegation of authority on

account of the following reasons.

1) Lack of Self confidence –

A subordinates may hesitate to accept responsibility of

delegation when he does not have confidence in his own
capacity and initiative.

2) Lack of information and Resources--

A subordinates may hesitate to accept a new responsibility

when he feels that adequate information, assistance and
resources may not be available to help him in discharging his
duties effectively. Sometimes subordinates may be already
overburdened with heavy work
 3) Lack of positive incentives --

When there are no chances of personal gains, subordinates

may be unwilling to accept extra responsibility. Positive
incentives may be financial like rise in pay or non financial
such as recognition, praise promotion etc.

4) Fear of criticism—

When a subordinate is afraid of committing mistake and

cannot tolerate criticism for mistakes, he tries to avoid
accepting delegation. He will like to be safe. He may fear
that, if he fails in making proper use of authority, he will be
demoted or fired.

5) Dependence on Boss

Some subordinates prefer to depend on their boss for

decisions. They feel that it is better to ask the boss and then
do the job, so they tend to avoid responsibility of independent
decision making.

6) Other obstacles –

In adequate planning, defective organizational structure, in

efficient communication system, Unfavourable organizational
climate etc are other obstacles in the process of delegation
of authority.

Guide lines for effective delegation—

It is desirable on the part of a manager to make delegation effective in the

organization to exploit the advantages of delegation. The following are some
of the guidelines is securing effective delegation of authority.

1) Define assignments and delegate an authority to achieve results

expected.

2) Put right man at a right job.

3) Develop open lines of communication and provide necessary

information and resources to subordinates to enable them to take
proper decisions and implement them effectively.

4) Establish proper control to assure that the authority delegated is

properly used.

5) Provide appropriate incentives to reward subordinates for successful

assumption of authority. A work climate free from fear and frustration
should be created.

6) Adhere to the principles of delegation while delegating the authority.

7) Adopt policy of non interference.

8) Promote teamwork through the atmosphere of mutual trust,

confidence , healthy interpersonal relations before delegating
authority to subordinates.
*************
Q.8 a) What is meant by Centralization and decentralization? Discuss their
advantages and disadvantages.

b) Distinguish between decentralization and delegation of authority.

A) CENTRALISATION –

Centralization of authority means concentration of decision making

power at the top level, in few hands, of the organization. According
to Allen” Centralization is systematic and consistent reservation of
authority at central points in an organization.” Under centralization,
all the actions at lower levels are subject to the approval of higher
levels of authority.

Advantages of centralization

In an organization reservation of authority at the top level may be

necessary on account of the following reasons.

1) To facilitate personal leadership—

The success and survival of a small scale and young

enterprise depends on aggressiveness singleness of
purpose and flexibility of a dynamic and talented leader. It is
useful in taking quick decisions and taking imaginative
action. So authority may be centralized for giving full scope
to the development of personal leadership.

2) To maintain uniformity in policy and action—

Where uniformity of policies , actions and procedures is

necessary, authority needs to be centralized at the top. In
case of purchasing , finance and accounting centralization
tends to be high, as it ensures consistency in operation and
effective control.

3) To provide integration—

Centralization is the best technique to achieve integration in

the organization so that all parts of it can move harmoniously
towards achievement of common goals centralization also
permits greater control over the operating units.

4) To handle emergencies—

When emergency decision affecting the organization as a

whole are to be taken, then centralization becomes
necessary. The degree of centralization tends to be higher in
organizations operating under uncertain conditions. When
emergencies threaten very existence of an organization
centralized control becomes essential.

5) To reduce the cost of operations—

Centralization is useful for achieving greater flexibility in the

use of resources. Duplication of facilities and services can be
avoided and top managers having rich experience and
 training can take quick decisions to protect interests of the
organization as a whole.

6) To take advantage of recent developments-

Recent development in the means of transportation and

communication, sophisticated data processing and storing
techniques, computerized information systems and
increasing use of staff services at higher levels etc. have
generated tendency towards centralization of authority—

Limitations of Centralization—

i) Centralization tends to increase the burden of routine

work on top executives so they cannot concentrate
on more important functions such as planning,
control etc.

ii) It hampers the development of lower level managers

as the cannot get an opportunity to exercise initiative
and judgement.

iii) Excessive centralization results in higher costs and

delay in decision making on account of
overburdened top managers.

iv) Centralization creates problems of communication.

v) Centralization fails to provide scope for specialization

as the person has to look after many aspects of the
organizations.

On accounts of these limitations of centralization most of the

firms prefer decentralization as they grow, although some
part of authority is always reserved at the higher level. So
Fayol observes “centralization is not a system of
management, good or bad of itself, capable of being adopted
or discarded at the whim of managers or of circumstances, it
is always present to a greater or less extent.”

B) DECENTRALIZATION—

According to Allen,” Decentralization implies consistent and

systematic efforts to delegate to the lowest levels all authority except
that which can only be exercised at Central points.” Koontz and
O’Donnell have stated that, “Authority delegations may be extensive
or limited. Much authority delegated through the echelons of an
orgnization is referred to decentralization of authority, where as
authority is said to be centralized wherever a manager delegates little
of it.”

Thus decentralization implies delegation of formal authority, the

pushing of decision making down the chain of command.
Decentralization is the tendency to delegate formal authority to the
lower organizational units while centralization is exactly opposite of it.
Hence it may be stated that,” everything that goes to increase the
importance of the role of a subordinate is decentralization, and
everything that goes to reduce it is centralization.
Advantages of Decentralization –

The main advantages of decentralization are as discussed below –

1) It reduces the burden of top management so that he can concentrate

on other important functions like planning control etc.

2) It makes growth and diversification easy. Under decentralization

each product line is treated as a separate division, hence it can
respond quickly to the changes in demands of its special market.

3) It enables the organization to survive and grow under the conditions

of keen competition.

4) It helps in promoting development of executives. Decentralization

provides opportunity to subordinate managers to take decision and
take initiative so as to acquire leadership qualities. Decentralization
tends to promote autonomy, initiative and creativity on the part of
subordinates. It helps the organization to maintain stability and
continuity effectively.

5) It improves motivation and morale of subordinates. As opportunity to

take decisions is given to them, it helps in developing belonging ness
and satisfies the need of power, prestige, status and independence.
When motivation and morale improves, productivity increases and
healthy working relationship also develops. It helps in maximum
utilization of talents of lower levels in the organization.

6) It results in effective supervision because lower level managers are

given complete authority to make changes in work assignment, to
take disciplinary action, to recommend promotions and even to
change production schedule.

7) Decentralization is useful in promoting effective control through

comparative evaluation of performance and clear-cut accountability
of results.

8) It promotes democratic management and flexibility of operations.

Necessary changes can be quickly made without disturbing the
organizational structure.

9) It helps in saving time as all the paper work relating to the basic
operations of business can be significantly reduced, work can be
completed early without wasting time.

Disadvantages of Decentralization—

The main weaknesses of decentralization are as discussed below—

1) Decentralization may create problems of co-ordination among

different departments in the organization. Semi autonomus division
may concentrate on their own goals at the cost of the organizational
objectives. There may be loss effective control and it may lead to
disintegration of the organization.

2) There may be lack of uniformity as all the decentralized units may not
follow uniform policies and procedures. Thus inconsistencies may
arise in the activities of the organization.
3) Decentralization may result into heavy overheads on account of
higher administrative expenses, duplication of staff and facilities
trained persons may not be fully utilized.

4) It is not suitable for small scale units as decentralization needs broad

product lines which are not available in small scale units.

5) Decentralization may restrict timely action during emergencies.

6) Some of the organizational activities cannot be decentralized such as

handling government authorities, trade union negotiations etc.

7) Decentralization may not be possible due to external constraints,

such as increase in competition, growing power of trade unions,
government interventions, development of computerized information
system, rising cost of executives etc tend to reduce decentralization
in several cases.

Factors Determining Degree of Decentralization

The following factors tend to affect the degree of decentralization in an

organization.

1) Size and complexity of organization—

The firms with diverse product lines tend to be more decentralized

than small firms with a single product line. With growth in the size of
the firm decentralization becomes necessary to have speed and
accuracy in decision making and flexibility in operations.

2) History and philosophy of the organization—

A firm which has grown under a personal leadership tends to have

very centralized organizational structure, while those firms which
have grown by acquisitions and mergers tend to have decentralized
structure. The philosophy of some growing organization is to have
maximum centralization as far as possible.

3) Approach of top management also affects the extent of

decentralization because the attitude and temperament of top
executives in such that they want to take all the decisions by
themselves as hey are autocratic and they do not believe in
decentralization, Hence they adopt and maintain centralized
structure. Other type of top executives prefer decentralization to
achieve its advantages.

Generally , professionally managed organizations tend to be

decentralized than owner managed enterprises.

4) The competence and abilities of subordinates also affect the

extended of decentralization. Decentralization is possible only when
lower level staff is capable of handling responsibilities. Hence before
decentralization, training and developing the staff is necessary. Thus
adequate development of managers is a key to decentralization.

5) Geographical dispersion of operations of an organizations results in

greater decentralization of authority because it helps in taking quick
decisions on the spot quickly.
6) When there is a greater need of uniform policy or action, then there
are less chances for decentralization. Higher degree of
standardization facilities centralization as events can be predicted
and controlled effectively.

7) When effective control system is available then the degree of

decentralization tends to be higher. Top executives prefer
decentralization when they have means to know deviations from
standards quickly.

8) Those organizations facing uncertain markets, have less dynamic

production technology, and stable competitive relationships, prefer
centralization.

9) Environmental factors such as government policies, trade unions,

taxation, legal provisions etc also affect degree of decentralization
Excessive centralization of economic power may invite government
control hence management may adopt decentralization to avoid such
control. When price of the product is regulated by the government,
sales managers cannot be given the authority to fix prices. Similarly
local executives cannot determine wage rates and working conditions
where injury level or national unions are involved.

Thus there not a universal rule for the degree of decentralization to

be adopted in practice. Every organization has to decide on its own,
the extent of decentralization taking into consideration internal and
external environment. An ideal policy is to achieve appropriate
combination of centralization and decentralization be adopted for
structuring the organization.

Making Decentralization Effective –

The main problems with decentralization are those of lack of uniformity of

action and difficulties in co-ordination and control, Hence in order to make it
effective, following measures may be suggested.

1) Development of sound planning through clear statement of

objectives, policies and strategies. Responsibility and authority of
every position should also be defined precisely.

2) Centralized policy making helps in ensuring uniformity of action and

integration of different units into a unitary whole. So decentralization
must be combined with selective centralization in vital areas of
business policy. As Koontz and O’Donnell have pointed out,” The
key to effective decentralization is the proper balance between
centralization and decentralization.”

3) Executive Development and may be given top priority because

decentralization needs competent executives at lower levels. An
atmosphere of self confidence, mutual trust and creativity should be
created in the organization.

4) To promote healthy competition within departments may motivate

executives at operating level to contribute towards organizational
goals through demanding higher responsibility to achieve better
performance. It may make decentralization more acceptable to the
employees.
5) The spirit of decentralization should be explained to the lower level
executives, So that they will be convinced that decentralization is not
autonomy but it also implies guiding decision making along desired
lines. A feeling of independence may be created through forceful
leadership and job security.

6) Appropriate and co-ordinated control techniques may be used to

ensure that all the units in the organization are progressing in the
right direction. The operational autonomy of the divisions should be
combined with co-ordinated control. Thus centralized decentralization
where authority is decentralized considerably but major planning and
control are centralized to ensure uniformity of policy and co-operation
is desirable for making decentralization successful. This philosophy
is known as “Centralized Control” with decentralized responsibilities “
or “Decentralized operations and responsibilities with co-ordinate
control. It is said to be the key factor to the success of General
Motors Corporation, U.S.A.

B) DELEGATION V DECENTRALIZATION

Both are the closely related terms as both refer to the location of
authority, but there is considerable difference between these two
terms. Gupta has explained it as follows—

1) Delegation is the process of devolution or delegation of

authority while decentralization is the end result of it. The
amount of delegation determines the degree of
decentralization in an organization.

2) Delegation takes place between a superior and a

subordinate and is a complete process But decentralization
involves dispersal of authority throughout the organization.
Thus delegation is individualistic while decentralization is
organization wide. Decentralization is the sum total of a
pattern of delegations.

3) Under delegation, control tests entirely with the superior but

under decentralization operating control rests with the
subordinates and the superior exercises only overall control.

4) Delegation is vital and most essential for carrying out the

process of management, where sufficient authority is
delegated to subordinates to get things done. But
decentralization is optional philosophy or approach to
management while delegation is compulsory technique of
management. An organization can exist without
decentralization but it cannot survive without delegation of
authority.

Thus Decentralization is much wider in scope and consequence than

delegation. Decentralization is not possible without delegation but
there can be delegation without decentralization. As Koontz and
O’Donnell observe,” Although Closely related to delegation of
authority, Decentralization is more; it is a philosophy of organization
and management, implying both selective dispersal and
concentration of authority. It requires for more than simply handing
 over authority to subordinates.” Decentralization is an extension of
delegation. To the extent authority is not delegated, It is centralized.

*************
Q.9 a) What is staffing? Explain its importance to management.

b) What is Manpower planning ? Explain the steps involved in the

process of Manpower planning.

A) STAFFING

Human resources are the most important resources of an organization.

Without competent and talented people at the operational and the managerial
levels, an organization cannot achieve its goals and objectives efficiently and
effectively.

Definition-

1) McFarland – Staffing is the function by which managers build an

organization through the recruitment, selection, development of
individuals as capable employees.

2) Koontz and O’Donnell- Staffing is the executive function which

involves the recruitment, selection, compensating, training, promotion
and retirement of subordinate managers.’

3) Theo Haimann - Staffing is concerned with the placement, growth,

development of all those members of the organization whose
function is to get things done through the efforts of other individuals.

4) Urwick – Staffing is the whole personnel function of bringing in and

training the staff and maintaining favourable conditions of work.

Nature of staffing –

1) Staffing is not a temporary exercise but it is an on going activity.

2) Staffing is ill-understood function of management as it is understood

as merely hiring the people. But staffing is more that merely
acquiring the people. It also includes maintaining and developing
executives and workers and providing fair and equitable
compensation.

3) Staffing is a complex process as it is affected by a large number of

factors, hence personnel function must be a joint effort of all
managers within the organization.

4) Staffing is a logical exercise as it starts with the estimation of

organizational requirements and proceeds towards searching for
talented personnel to fill up the positions in an organization. Staffing
follows logical sequences, identifying manpower requirements,
recruitment, selection induction, training, development and
maintenance of personnel.

5) Staffing deals with present and future requirements of personnel of

the organization.
 6) Staffing involves people so it is difficult to perform effectively.

7) Staffing involves development of future managers.

8) Staffing is not a new function but treatment to human resources has

significantly changed Now people are held as assets rather than
slaves.

Scope of Staffing –

Staffing is an important managerial function. it involves job person matching

in organization. Staffing includes the following aspects.

1) Job analysis including job description and job specification to get

information about the job contents, job duties and managerial
qualifications for the job.

2) Recruitment, selection, induction, and the placement for placing right

person at the right job at right time.

3) Appraisal and counseling which provides the basis for management

development.

4) Manager , manpower Inventory- It is useful for selecting managers

for developing programs.

5) Management development and training on the basis of performance

appraisal management development programs are worked out to
meet the organizational needs.

B) Manpower/Human Resource planning-

The technique of manpower planning has been given serious thought since
the end of world war II. Manpower planning is directly related to the quality of
the product, the market demand for it and the type and skill necessary to
produce a quality product required by the consumers.

Definition—

1) Velter - “ Manpower is the process by which management

determines how the organization should move from its current
manpower position to its desired manpower position. Through
planning management strives to have right number of and right time,
doing things which result in both the organization. and the individual
receiving maximum long term benefits.”

2) Geislar – “Manpower planning is the process including forecasting,

developing and controlling by which a firm ensures that it has the
right number of people at the right place at the right time doing work
for which they are economically more useful.

3) Lynch- “Manpower planning is the integration of manpower policies,

practices and procedures so as to achieve the right numbers of the
right people in the right jobs at the right time.

Thus manpower planning may be defined as a strategy for the acquisition,

utilization, improvement and preservation of human resources of he
enterprise it is the activity of the management which aims at coordinating the
requirements for and the availability of different types of employees. It
involves ensuring that the firm has enough of the right kind of people at the
right time and adjusting the requirements to the available supply.

Scope of Manpower planning-

Manpower planning includes the following aspects—

1) Forecasting future requirements base on future plans of the

company.

2) Inventorying present manpower resources and analyzing the degree

to which these resources can be used optimally.

3) Anticipating Manpower problems by projecting present resources into

the future and comparing them with the forecast of requirements to
determine their adequacy both, quantitatively and qualitatively.

4) Planning the necessary programs of recruitment selection training

development motivating and compensation so those future
manpower requirements will be met.

Objectives of Manpower planning

1) To ensure optimum use of human resources employed at present.

2) To assess or forecast future skill requirements.

3) To provide control measures to ensure that necessary resources are

available as and when required.

Importance of Manpower Planning—

Manpower planning plays an important role in personnel or human resource

management because it helps in –

1) Determining recruitment levels—

2) Linking manpower planning with organizational planning.

3) Anticipating redundancies.

4) Estimating optimum training levels.

5) Providing basis for management development programs.

6) Translating manpower needs into skill and talent requirements.

7) Providing sound promotion and career opportunities to the

employees to maintain them in the organization.

8) Studying various causes of manpower problems and to find out their

solutions.
Steps of Manpower/Human Resource Planning –

The main steps involved in the process of planning are as follows –

1) Determining organizational objectives—

2) Determining skills and expertise required achieving the

organizational and departmental objectives.

3) Estimating requirements of additional human resources taking into

consideration the organizational present resources.

4) Developing action plans to meet anticipated resource requirements.

Let us discuss there steps briefly

1) Determining Organizational objectives –

Based on Long term on strategic objectives the short-term

performance objectives have to be specified. The divisional and
departmental objectives are derived from company’s short-term
objectives. This is known as cascadale approach to objective
setting. The basic idea is to involve all levels of management in the
process of planning so that downward and upward flow of information
will take place, during the planning stage. It also helps in
communicating and co-ordinating objectives throughout the
organization. The human resource development manager identifies
the strengths and shortcomings of the organizational personnel and
provides this information to the top management.

2) Determining skills and expertise Required—

Once the organizational , divisional departmental and individual unit

objectives are specified, it is the responsibility of the operating
managers to determine the skills and expertise required to meet the
respective objectives. The needs skills and abilities are then
translated into types and number of employees required.

3) Estimating Requirements of additional human resources-

Once types and numbers of employees required to achieve

organizational objectives are determined then the personnel or
human resource manager has to analyze the requirement in the light
of current and anticipated human resources of the organization. This
required a through analysis of the presently employed personnel and
forecasting the changes in employment taking into consideration the
future development plans of the organization. a more detailed skill
inventory has to be prepared.

Skill Inventory

It is also called as personnel register. It is prepared to determine

additional requirements of human resource. The skill inventory
contains the following information.

1) Personal data - name, age, sex, marital status, etc.

2) Skills – Educational qualifications, skills, job experience
training etc.
 3) Special qualifications-- Membership in professional groups,
special achievements.
4) Salary and job history – past and present job, salary date of
increment, various positions held in previously prior to the
current employment.
5) Company data - Benefit plan date, retirement information
seniority etc.
6) Capacity of individual - Test scores on psychological and
other tests, information about health etc.
7) Special preferences of individuals - Type of job, geogrphic
location etc.

In addition to skills inventory, management inventory is also

prepared, containing, biographical data, brief assessment summaries
of manager’s performance, strengths & weaknesses potential for
advancement etc.

Future changes in human resources –

Managers must take into account the future changes along with
appraising the present human resources through skills inventory.
Some changes may have to be estimated while other changes like
retirements can be forecasted while transfer and promotions can be
estimated on the basis of ages of individuals in specific jobs, and the
retirements of organization.

It is easy to identify the individuals with potential for promotions and

development, but other factors such as death resignations and
discharge one difficult to predict. So to predict these factors
management has to rely on past records. While evaluating
anticipated changes, planned training and development experiences
need to be considered. By way of combining forecast of skills needed
with the information from the skills inventory and from anticipated
changes, reasonable prediction of net human resource requirements
of the organization for a certain specific time can be made.

IV) DEVELOPING ACTION PLANS—

After determining net requirements of human resource, next action

plans have to be developed to achieve the desired results. If net
requirements indicate need for additional employees, plans should
be made to recruit, select induct and train new personnel. If
reduction impersonal is required then plans must be made to make
necessary adjustments through layoffs, or discharges. The action
plans must be made to make necessary adjustments through layoffs,
or discharges. The action plans should utilize the skills of the
present and newly recruited personnel to the maximum possible
extent.
 STEPS IN HUMAN RESOURCE PLANNING

Determine the impact of organizational

Objectives on specific organizational units

Determine the skills and expertise required to

meet objectives

Determine additional resource requirements in

the light of current human resources

Develop action plans to meet the anticipated

human resource needs of the organization

Advantages of Manpower planning—

The main advantages of manpower planning are as follows –

1) It gives an overall picture at the corporate level for identification of surpluses

or shortages of personnel.

2) Surpluses can be re deployed and shortages can be met only if the

manpower planning is carried out

3) Manpower inventory provides valuable information for deciding about

promotion of various personnel in the organization.

4) Under utilization of over employment results in high labour costs and low
profit margin. Hence it should be avoided through systematic manpower
planning and execution.

5) It helps managers to achieve balance between long term supply and demand
conditions.

Hence modern large organizations insist on making extensive use of

manpower planning in order to make efficient and effective use of the human
resources.

*************
Q.10 What do you understand by Recruitment Discuss various sources and
methods of recruitment?

Recruitment refers to the process of discovering and developing the sources

of required personnel so as to make sufficient number of candidates available
for employment in the organization. It involves identifying and attracting
candidates having required abilities, attitudes, skills and motivation so as to
meet the organizational requirements of the manpower.

Definitions –

1) Flippo – “Recruitment is the process of searching prospective

employees and stimulating them to apply for the jobs in the
organization”

2) McFarland- “ The term recruitment applies to the process of

attracting potential employees of the company.”

3) Dale Yoder - Recruitment is “the process of discovering the sources

of manpower to meet the requirements of staffing schedule and to
employ effective measures for attracting that manpower in adequate
numbers to facilitate efective selection of an efficient working force”

4) Recruitment may be defined as a process of identifying the

prospective employees, stimulating and motivating them to apply for
the jobs in the organization.”

Thus recruitment may be considered as a positive action as it involves

attracting the people towards organization. The main purpose is to have a
rich inventory of eligible persons from amongst whom the most suitable
candidates can be selected for employment in the organization.

Preparation for Recruitment –

Before inviting people to apply for the jobs in the organization it is necessary
to decide what types of persons are to be invited and what should be their
characteristics. This calls for 1) Job analysis 2) Job description and
3) Job specification.

1) Job Analysis --

Job analysis is the process of collecting analyzing and recording

information about jobs. The main purpose of job analysis is to
determine duties and responsibilities of the jobs and the
qualifications of persons are required to perform these jobs efficiently
and effectively. Job analysis deals with determining and reporting
relevant information about the nature of a specified job it involves
determination of tasks which constitute the job and of the skills,
knowledge, experience, abilities and responsibilities required for the
purpose for performing the job effectively.

The tasks related to be listed and skills personality characteristics,

educational qualifications training and other requirements of the
person for performing the job need to be carefully determined.
 The result of the job analysis are presented in the form of job
description and job specification.
2) Job description –

It is a written statement of the duties and responsibilities of a job. It

explains the nature of the job and the duties and responsibilities,
general working conditions etc. It designates the job title, to whom
the person has to report, and the duties of the job. It communicates
the persons when is expected of them in performing their duties. The
statement is called job description at the operational level while it is
known as “Position description” at the managerial level.

3) Job Specification—

It concentrates on the characteristics needed by the employees to

perform the job.

It describes the qualifications required for the candidates to perform

the job satisfactorily. These qualifications include educational
qualification and training, experience, physical and mental
capabilities required for the job. Emotional and social specifications
include characteristics that tend to affect his working with others, like
personal appearance, manners, emotional stability aggressiveness
or submissiveness, extroversion or introversion, leadership, co-
operativeness initiative and drive, skill in dealing with others, social
adaptability etc. Behavioral specifications are also to be taken into
consideration during the process of recruitment selection etc.

Sources of Recruitment --

The sources of recruitment may be classified into internal sources and

External Sources.

A) Internal Sources –

Internal sources are considered to be more important and reliable

sources. It includes the employees of the organization , the
employed who had left the organization but desire to join the
organization again, or those to whom the company may like to rehire
as they had left voluntarily or those on production lay off.

Advantages –

1) Internal recruitment tends to improve the morale of the employees

because they realize that they are preferred over outsiders when
there are vacancies in the organization.

2) It is easier to evaluate those who are already employed than outside

persons. Because the company keeps a record of the progress,
experience training, service etc of all its employees.

3) It also promotes loyalty among the employees as it gives them a

sense of job security and opportunities for career development.

4) The persons employed by the company are fully aware and well
acquainted with its policies procedures etc. So they require little
training and their chances to remain with the organization are
relatively higher them those of outsiders.
5) They are tried and hence reliable people recruitment of internal of
cheaper and time saving.

Disadvantages

Internal sources of recruitment have certain disadvantages as follows—

1) Recruitment of internals leads to inbreeding and discourages new

blood with new ideas from entering into the organization.

2) It is possible that internal sources ultimately dry up and hence it may

be difficult to find suitable persons from within the organization.

3) In case of certain jobs such as advertising, style, designing, basic

research etc recruitment from within is not desirable.

4) In many organizations promotion is based on seniority and there is a

danger that right type of man may not be chosen.

5) Likes and dislikes of management may affect the process of

selection of persons.

Generally for middle level managers internal source is rarely used, however
for promoting blue collar workers to white collar jobs internal source is more
desirable.

B) External Sources -

These are sources, which lie outside the organization. These

sources include-

1) New entrants in the labour force especially young energetic

inexperienced potential employees like college students.

2) The unemployed having different types of skills and abilities.

3) Retired experienced personnel like mechanics machinists,

welders, accountants, salesman etc.

4) Others not in the labour force but desire to join organization

such as married women persons of minority groups.

Advantages

1 External sources provide huge scope for selecting required type of

personnel for the organization, having necessary skill, abilities,
education, training upto required standard.

2. Since few people are to be selected from very large market, it

becomes possible to select best persons irrespective of caste, sex,
religion etc.

3. In the long run to external sources are more economical because

potential employees may not need extra training for their jobs.

Disadvantages
1. Loyalty of an external person tends to be doubtful.
2. It may result into brain drain when other organization are ready to
take experienced persons on attractive terms.

3. They may leave the organization at a short notice.

Methods of Recruitment--

According to Dunn and Stephens possible recruitment methods can be

classified into three categories like, direct, indirect and third party.

A) Direct Methods

1) These methods include travelling visitors to educational and

professional institutions, employee’s contacts with public,
and manned exhibits and waiting lists. The most popular
methods is that of sending recruiters to colleges and
technical schools where their placement offices are ready to
cooperate by providing necessary facilities for interviewing
and selecting their students for suitable jobs. For
managerial, professional jobs university departments and
specialized institutions like Indian institute Technology,
Indian Institute of management and other business schools
are used. These institutions have a placement officer to look
after campus interview programs. These institutions take
care to attract employers, arranging interviews, providing
space and other facilities and also provide student resumes.
Many companies keep a list of such institutions and keep in
touch with them, send their brochures indicating job opening
future prospects etc. this information is useful for the
institutions for sending their candidates for interviewing for
the posts available.

2) Employees contact with the public—The employees of the

organization are told about the vacancies in the organization
which information they can communicate to their friends
relatives and acquaintances.

3) Manned Exhibits-- Many organizations send their recruiters

to conventions and seminars or may set up exhibits at fairs
and during conferences and may use their mobile offices to
visit suitable centers in search of people acquired for the
organization.

4) Waiting Lists – Some companies rely on their own

application files where list of candidates who had applied
earlier for certain posts, indicating their interest in certain
jobs. Some candidates visit the employment offices of
various organizations or make inquiries by phone or mail, the
record of which is maintained by these organizations. Such
record becomes a useful source for recruitment.

B) Indirect Method—

These methods include advertising in newspapers, radio, in trade

and professional journals, technical journals, brochures etc. When
experienced and qualified persons are not available from other
sources then advertising in newspapers and professional and
technical journals turns out to be the most suitable source. All types
 of advertisements can be made through newspapers and magazines
but professional and technical journals are used for advertising
technical and professional jobs.

A systematic and planned advertisement for an appointment helps in

reducing number of applications from unqualified persons. It is
desirable that the advertisement should be clear and specific, so that
the candidates can assess their abilities and suitability for the
position and only those having necessary qualifications will apply.

C) Third Party Methods—

These include the use of commercial and private employment

agencies state agencies, placement offices of the colleges and
universities, and professional associations recruiting firms,
management consultant firms seminars, conferences workshops for
college professors and management and engineering students ,
friends, relatives etc.

1) Private employment agencies generally specialize in specific

occupations like clerks, steno grappler’s salesmen, technical
workers accountants, computer staff, engineers, executive’s
etc. These agencies serve as intermediaries in bringing
together the employers and prospective candidates available
for jobs. On account of their specialization they can select
right type of persons suitable for the jobs.

2) State and Public Employment Agencies, known as

employment or labour exchanges are the main sources for
public employment. These agencies also provide several
services like counseling assistance in getting jobs,
information about labour market, wage rates etc.

3) Executive search Agencies also maintain record about

employed executives and recommended persons of high
caliber for managerial marketing and production engineer’s
posts. These agencies are described as “head hunters”
“raiders” and “Pirates”

4) Seminars and conferences— These are arranged to discuss

the problems of companies to which professional export are
invited, including college professors, So that later on they
can provide information to aspiring persons about the
company and help it in getting required personnel.

5) Friends and Relatives of Existing Employees, which is the

best source to get suitable employees. But it may promote
nepotism, corruption etc and may create problems for the
company.

6) Trade Unions are usually called on by the employers to

supply additional employees required which tends to promote
cooperation and goodwill in the organization.

7) Professional societies also help in recommending right type

of candidates to fill up the vacancies in the organization
especially at the technical and managerial positions.
 8) Temporary help agencies employ their own labour force
both, full time and part time which is made available on
temporary basis to their client organizations, whenever
required.

9) Casual Labour is also an important source which presents

itself at the factory gate or employment office. Some
industrial organizations make use of this source although it is
a quite uncertain of all sources.

10) Deputation—Persons possessing certain special abilities

useful to other organization are sometimes deputed to it for a
specified period of time. Although their rich experience is
much useful to the organization, such employees cannot
become a part of the organization.

11) Computer Data Banks –When a company needs a particular

type of employee, job specifications and requirements are
fed to a computer for matching against the resume data
stored in the computer. The output is a set of resumes of
individuals who meet the requirements. This methods is
useful for identifying candidates for rare positions which
require special combination of skills.

Which particular source to be used depends on the policy of the

organization, the position of labour supply, Government regulations
agreement with labour unions etc. However all these sources may
be noted and the most suitable source may be tapped whenever
required. The ideal management policy regarding recruitment should
be to look first within the organization and when it fails then only
external source of recruitment may be utilized.

As Flippo has observed, present tendency of business firms is to

”home grow” their executive leaders. Koontx and O’Donnell also
state that the policy should be to “raise” talent rather than” raid “for it.

*************
Q.11 What is selection? discuss Its importance . Explain the selection
procedure followed by modern organizations.

A) SELECTION

As a result of successful recruitment program an adequate pool of

qualified candidates becomes available. Then the next step is to
identify the best candidates, out of these applicants.

Selection is the process of securing relevant information about an

applicant to evaluate his qualifications, experience and other qualities
for matching these with the requirements of a job. It is basically a
process of selecting the most suitable persons for the organization.

B) IMPORTANCE OF SELECTION-

Selection of right type of employees is very important aspect of the

personnel management because of the following reasons.
 1) Selection involves certain behavioral aspects of individuals
hence it must be according to the behavioural specifications
of the organization.

2) A good selection is beneficial on account of continuous

contribution made by it. So It is said that investment in good
people produce a high rate return.

3) High level of employment and added economic security have

made labour market a sellers’ markets hence potential
candidates have become more selective about their choices
of employment and placements.

4) Managers to day find themselves in the complex web of

laws, rules, regulations and procedures which are more
favourable to labour and their unions.

5) Management is aware of the complexities of selection and

the inherent limitations of various selection techniques. So
they have become cautious about selection.

6) The abilities and talents of the workforce of the organization

ultimately determine its strengths and affect its performance.
Human resources are considered as assets of the
organizations.

7) The costs of induction and training have increased

significantly so care has to be taken to minimize it.

8) Under modern conditions, it is very difficult to terminate the

services of an employee once he has been confirmed on the
job.

9) If the right type of persons are not selected, the employer

has to suffer heavy loss in terms of quantity and quality of
work and it may result into heavy costs in the long run.

10) Proper selection and placement of employees helps in

building up stable work force and eventually reducing labour
costs, absenteeism, turnover.

11) It is desirable to fit ”Square pegs in square holes”

C) SELECTION PROCEDURE—

Selection procedure is concerned with securing relevant information

about an applicant. This information is secured through number of
steps. The main objective of selection process is to determine
whether an applicant meets the essential qualifications for a specific
job and to select the applicant who is best suited for the job, so as to
perform well on the job.

The selection procedure consists of a series of steps or stages by

which additional information is secured about the applicant at every
successive stage. The selection procedure consists of several
hurdles or barriers which an applicant has to cross. These barriers
are like screens and they are designed to eliminate an unqualified
 applicant at any stage in the process. So it is described as
“Successive Hurdles technique.

An effective selection programme is non-random process because

those selected are chosen assuming that they are more likely to be
better employees than those who have been rejected.

STEPS IN SELECTION PROCESS—

Yoder describes the selection process as go-nogo” gauges. Those who

qualify a hurdle go to the next stage while those who fail to qualify are
dropped out. The complexity of the process increases with the level and
responsibility of the position to be filled. These hurdles may not be placed in
the same order as described below and their sequence may differ from
organization to organization. The stages involved in the process are as
follows –

1) Preliminary interview or Initial Screening—

During this stage all the applications or offers received are

scrutinized to get the necessary information from candidates about
their education, experience, skill, salary expected etc. If the
candidates are observed to be suitable for the posts advertised then
they are selected for further process, and if not, they are eliminated.

This is the crude screening which may be done at the reception

counter by receptionists or junior officers in personnel department of
the organization in order to save time of the higher executives. A
great care should be taken to see that suitable candidates are not
eliminated in a hurry. At this stage personal contact is possible for
individuals with the company, the interviewer should be kind,
receptive and informal. Those candidates, who are found suitable,
an application form is given to them to fill in detailed information and
submit it to the organization.

2) Application Scrutiny Or Application Blank--

The applicants are asked to give details about their age, marital
status, educational qualifications, work experience and references.
The organization may use different types of application forms for
different types of employees. The forms for lower level employees
are simple, general and easily answerable, while for higher posts
these forms are in more detail complex. Information’s about
nationality, race, caste religion, place of birth etc are regarded as
evidence of discriminatory attitudes and hence should be avoided.
An application form should be designed to serve as a highly effective
preliminary screening device. These applications are then
scrutinized to find out if they are lacking in educational standards,
experience or some other relevant qualifications and traits etc.
Those applicants found to be suitable for the post are subjected to
further tests.

3) Selection Tests-

A test is conducted as a sample of an aspect of an individual’s

behaviour, performance or attitude and it may be a systematic
procedure for comparing the behaviour or two or more persons.
The selection tests are based on the assumption that individuals
differ in their job related abilities and skills and these skills can be
accurately and systematically measured. These tests are useful for
eliminating bias or prejudice on the part of interviewer or supervisor
and only potential abilities will be tested for taking decisions. These
tests also help in detecting qualifications and talents that may not be
noticed during interviews

Types of Tests.

There are several tests which are generally used during the process
of selection. These tests may be classified into four categories.

a) Achievement or intelligence Tests.

b) Aptitude or potential ability tests.

c) Personality tests and

d) Interest Tests.

These tests may be discussed as follows –

a) Achievement of Intelligence Tests—

These are also known as “Proficiency Tests.” These tests measure

the skill and knowledge, which is acquired as a result of training
program and on the job experience. These tests measure what the
applicant can do. These are of two types.

i) Test for measuring job knowledge or trade tests— These

tests are used to determine knowledge of typing, shorthand,
operating calculators, dictating and transcribing machines,
simple mechanical equipment etc. These are mostly oral
tests, taken by asking questions which are answered
satisfactorily by those who know and clearly understand the
trade or occupation. Sometimes written tests or performance
tests are also conducted to supplement oral tests.

ii) Work Sample Tests – These tests are used to measure

efficiency of handling equipments by the candidates. A piece
of work is given to a candidate to find out how efficiently he
does it. For example, a typing test provides information
about time taken and mistakes committed by the candidate
while typing the material given to him.

b) Aptitude or Potential Ability Tests –

These tests are used to measure the latent ability of a

candidate to learn a new job or skill. These tests are useful
in detecting defects in a person’s sensory or intellectual
capacity. These tests concentrate on particular type of talent
like learning, reasoning, mechanical, musical aptitude. There
are three types of such tests.

1) Mental Tests – these measure intellectual ability or

intelligence quotient (I.Q) of a candidate to know
whether he has necessary mental capacity to deal
with new problems. These help in determining
 employees fluency in language memory induction
reasoning, perception, spatial visualization etc.

2) Mechanical Aptitude Test --- These tests measure

the capacity of a candidate to learn a particular type
of mechanical work. These tests are used for
selecting machinists mechanics, maintenance
workers, technicians etc.

3) Psychomotor or Skill Tests – These tests are used to

measure ability of a candidate to do a specific job.
These also help in determining mental dexterity or
motor ability and similar attributes where muscular
movements, control and co-ordination are involved.
These tests are applied while selecting workers for
performing semiskilled ,repetitive jobs like packing,
testing, inspection, assembly work etc

C) Personality Tests--

These tests are conducted to get information about

individual’s value system, emotional reactions, maturity,
mood etc. These tests are useful for assessing a candidate’s
motivation, ability to adjust himself to stresses and strains of
daily life and his capacity of interpersonal relations and for
projecting an impressive image of himself. These tests help
in predicting potential performance and success for
supervisory and managerial jobs.

The personality tests are of three types.

i) Objective Tests – These are used to measure

neurotic tendencies, self sufficiency, dominance,
submission and self confidence.

ii) Projective Tests – While administering these tests a

candidate is asked to project his own interpretation
about certain stimuli. His response to this stimuli
depends on his own values, motives and personality.

Situation Tests - These tests measure the reaction of a

candidate when he is placed in a peculiar situation, his ability
to bear stress and his demonstration of ingenuity under
pressure. These tests are related to a leaderless group
situation where some problems are presented to a group and
its members are asked to arrive at conclusions without help
of a leader.

D) Interest Tests --

These tests are used to discover the candidate’s areas of

interest and to identify kind of work that will give him
satisfaction. These tests are used for vocational guidance
and a questionnaire is used to get candidate’s responses, for
the purpose of assessment.

Limitations of Selection Tests –

 1) These tests are useful when the number of applicants is vary
large

2) These tests need to be properly constructed, selected or

administered.

3) Candidates scoring above the predetermined cut off points

are assumed to be more successful than those who have
scored below the cut off point.

4) Individual’s personality is complex and behaviour is so

unpredictable that even though he is successful in all these
tests there is no guarantee that he will be definitely
successful on his job.

4) Employment Interview

Those candidates who are successful in selection tests are called for
employment interview. This interview is the most popular test in the
process of selection. It involves a brief personal contact with the
candidate with a view to judging his suitability for the job. It is useful
for various reasons.

1) This interview provides additional information about the

candidate.

2) During the interview there is face-to-face conversation that

helps in judging total individuality of the candidate, or
personality attitudes, motivation, expectations etc.

3) Interview also serves as a check on the information obtained

earlier through application blank and tests.

4) During the interview it is possible to give detailed information

about the company, the job and the personnel policies.

5) Personal meeting between a candidate and the members of

interview board can be useful for exploring the candidate’s
aptitude and capabilities. Some of the personality traits such
as manners, poise, look conversation, understanding others
etc can be judged only through such interview.

6) Interview provides opportunity for establishing friendly

relationship between the employer and the applicant and
motivates the applicant to work for the company.

In practice it turns out to be a one sided affair. It helps in obtaining

additional information about the candidate but giving information
about the organization and motivating him to work for the
organizations is given much less importance.

5) Physical/Medical Examination -

Physical examination or medical test of a candidate is an important

step in the process of selection. Some organizations ask for a
certificate of physical fitness from a medical expert while others insist
on a through medical examination of the candidate by their own
panel of doctors. Sometimes medical examination may be an early
step in the process of selection so as to avoid the wastage of time
and expenditure in the screening of medically unfit candidates.
 Physical examination fulfils four objectives

1) It serves to ascertain physical fitness of the candidate to

perform the job.

2) It helps in preventing communicable diseases entering in the

organization.

3) It provides health record of the candidate.

4) It protects the organization against unwarranted claims under

the workmen compensation Act.

A proper medical examination ensures high standards of health and

physical fitness of employees and helps in reducing the rates of
accidents, absenteeism and labour turnover.

6) Reference Checks--

The applicant is asked to mention in his application the names and

addresses of, usually, three such persons who know him well. They
may be his previous employers, friends or professional colleagues.
They are approached by telephone or mail and are requested to
provide their frank opinion about the candidate on specified points or
general. They are assured that all information supplied would be
kept confidential. Background investigation helps in verifying the
accuracy of the application and in getting the proper rating of the
candidate’s skills and abilities.

Reference check and background investigation is based on the

assumption that past performance is a sound base for predicting
future performance . However the refers may not give an unbiased
and frank opinion and may mention only the positive qualities of the
candidate.

7) Final Approval -

Candidates who have crossed all the hurdles in the selection

procedures are recommended for appointment by the personnel
department. The line executives give the final approval. After
approval a job offer is made to the candidates. If a candidate
accepts the offer he is formally appointed by issuing an appointment
letter or by entering into service agreement with him. The
appointment letter contains the terms and conditions of employment.
Before putting the candidate on a permanent post, he is taken on
probation for a period of 6 months to one year. If necessary the
period may be extended. This is necessary because no screening
device gives a complete picture of the candidate’s qualities. Hence
it becomes necessary to observe the candidate at work for
determining his suitability accurately. after the completion of the
probationary period successfully the selected candidate is confirmed
in the job. Those candidates who are found unsuitable during the
probationary period, are either transferred to some other jobs or they
may be given time and training to improve their performance. If this
is not possible then they may be sacked.

The steps discussed above may not be strictly followed, as

organizations may follow a sequence of their choice.
 Placement –

Selected candidates are then posted at appropriate posts, or on the right

jobs. This is known as placement. It involves assigning specific jobs and
work places to the selected candidates. Placement is the assignment of
employees to jobs for which they are qualified on the basis of selection
procedure. Correct placement of employees tends to increase job
satisfaction and productivity and tends to reduce labour turnover and
absenteeism. When employees are placed on specific jobs the requirements
of both, the employees and the organization should be taken into
consideration. However human judgement in placement may be incorrect,
hence follow up measures may be required in the form of transfers
promotions or demotions.

Induction or Orientation—

When a newly appointed candidate reports for work, he has to be made

familiar with the work environment and his fellow employees. This process is
known as induction or orientation. The new employee has to be oriented to
the new organization and its policies, philosophy, rules and regulations etc.
Induction is described as a process of socializing through which the
organization aims at making the individual its agent for achieving the
organizational objectives. While an individual may make the organization an
agency to achieve his personal goals. Without formal induction program the
new employee may form a wrong impression about the organization. The
orientation process ensures that the work group accepts him as its member
so as to make him feel at home, and help him in adjusting to the new
environment. thus the new employee is integrated with the organization.

In order to make orientation program more effective, the new employee may
be taken around the factory and its offices and be introduced to the key
persons with whom he may have to contact in future. In order to provide
sufficient necessary information lectures and discussions may be arranged.
Handbooks, manuals and pamphlets may be supplied for the orientation of
the new employees.

*************
Q.12 a) What is performance Appraisal? Explain it’s significant.

b) What are the different methods of performance appraisal?

1) Introduction –

When the employees are selected, trained and motivated, then it is

necessary to appraise them for their performance. Performance appraisal is
a process where the management tries to find out its effectiveness in
selecting and placing the employees.

2) Definitions—

i) Spriegel -- “A performance appraisal is a process of evaluating an

employee’s performance of a job in terms of its requirements.”
 ii) Heyel - “A performanceappraisal is a process of evaluating the
performance and qualification of the employees in terms of the
requirements of the job for which he is employed, for purposes of
administration including placement, selection for promotions,
providing financial rewards and other actions which require
differential treatment among the members of a group as
distinguished from actions affecting all members equally.”

iii) Sikula - Performance appraisal is a process of estimating and

judging the vale, excellence, qualities or status of some object,
person or thing.”

iv) Dale Yoder – “ Performance appraisal consists of all formal

procedures used in working organizations to evaluate personalities
and contributions and potentials of group members.

v) Shubin - Performance appraisal is a systematic appraisal of the

employee’s personality traits and performance on the job and is
designed to determine his contribution and relative worth to the firm.

Thus performance appraisal implies systematic or formal evolution of the

employee with respect to his performance on the job and his potential for
development. It is a rational and continuous process of evaluating
performance of employees on a particular job in terms of job requirements.

3) Objectives of Performance Appraisal –

1) To judge whether employees are performing at the acceptable levels.

2) To provide a record of each employee’s performance for the purpose

of promotion, incentives rewards etc.

3) To identify misplaced employees in order to take suitable remedial

action.

4) To enable the employee to know about his performance so that he

may be motivated to develop himself through improved performance.

5) To recognize individual achievements in the context of organizational

effectiveness.

6) To identify strengths and weakness of employees for taking steps in

time to improve the quality of the personnel , etc.

4) Advantages of Performance Appraisal –

The main advantages of performance appraisal are as follows –

a) Performance appraisal is useful in testing effectiveness of selection,

placement and induction programs, It helps in identifying misfits who
may be trained or transferred to the right job.

b) It provides a continuous record of performance efficiency and

potential of employees. It helps in minimizing favoritism and arbitrary
judgement in the selection, promotion and transfer of employees.
 c) It serves as a scientific basis for sound personnel policies such as
merit based promotions and transfers.

d) Performance measurement of an employee, in terms of quality and

quantity provides a scientific basis for wage differentials and
incentive plans of wage payment.

e) It also helps in training and developing employees as every

employees knows about his performance so he may be motivated to
improve self performance.

f) It helps in identifying deficiencies training needs of the employees.

g) It puts psychological pressure on employees to improve their job

performance.

h) It indicates management’s interest in the progress of employees.

i) It automatically acts as a control device.

j) It helps in developing cordial relations between management and

employees & helps in avoiding industrial disputes in the organization
on account of objective evaluation rewarding better performance.

k) It is useful in increasing confidence and morale of employees when

they are aware about objective evaluation and rewards.

5) Disadvantages of Performance Appraisal—

Performance appraisal is a valuable tool of personnel management although

it suffers from the following limitations.

1) All the qualities reflecting the performance and potential of an

employee cannot be quantified accurately, hence rating may be
doubtful.

2) Rating may be affected by “ Hallo Effect”, which means one factor in

rating may affect rating of other qualities.

3) Performance appraisal is also subject to the bias and judgement of

raters, especially when the rater is not able to get full information or
co-operation of employees.

4) Different raters may apply different standards in judgement and

hence their judgement may differ and rating may become in
comparable.

5) In order to make the appraisal more objectives complicated

procedures are used for ratings. As the employees find it difficult to
understand the view the procedure of performance with suspicion.

6) It may create defensiveness among employees.

In order to minimize limitations it is necessary to train the managers in the

techniques of objective appraisal of performance.
6) The evaluation Process--

The evaluation of performance consists of the following steps.

a) Establishment of performance standards.

At the time of designing a job and formulating a job description,

performance standards are developed for each position. The
standards should be discussed with the supervisors to find out
different factors to be covered and weights and points to be given to
each factors and these should be indicated on the Appraisal Form
and be used for the purpose of appraisal of performance of
employees.

b) Communication of the standards—

The standards established are to be communicated and explained

clearly to the employees. To make communication effective, feed
back techniques may be used.

c) Measurement of Performance –

For the purpose of actual measurement of performance, four sources

of information are used, which include 1) Observation 2)
Statistical reports 3) Oral reports and 4) Written Reports.

d) Comparision of Actual performance with standards –

The employee is then appraised and judged of his potential for

growth and advancement. The deviations are noted between actual
and standard performance

e) Result of Appraisal—

The result of appraisal are discussed periodically with the employees

by the superiors and suggestions are given for its improvement.

f) Initial of corrective Action if necessary-

Whenever necessary the corrective action may be taken

immediately. The corrective action may be of two types.

a) To deal with the symptoms immediately.

b) To deal with the causes which is basic action to adjust the
difference permanently.
c) To deal with the causes which is basic action to adjust the
difference permanently.

There actions include –

1) Coaching, counseling may be done

2) Special assignments and projects may be set.
3) Persona may be deputed for formal training courses.
4) Decision making responsibilities and authority may be
delegated to the subordinates.
 5) Salary increase or promotion may be given if it is desirable.

7) Methods or Techniques of performance Appraisal.

There are several methods of performance appraisal developed by the

experts. These methods may be classified into two categories like traditional
methods and Modern methods.

Methods of performance Appraisal

Traditional Modern Methods

1. Straight Ranking Method 1. Assessment Center Method
2. Person to person comparison method 2. MBO
3. Grading 3. Human Asset Accounting Method
4. Graphic Rating Scale 4. Behaviorally Anchored Rating Scales
(BARS)
5. Forced Distribution Method
6. Check Lists
7. free Form Essay Method
8. Critical Incidents Method
9. Group Appraisal
10. Field Review Method

Let us discuss these methods briefly.

A) Traditional Methods—

1) Straight Ranking Method—

It is old and simple method. Under this method, ranking of a worker

in the work group is done against that of the other. Thus the relative
position of each person is tested in terms of numerical rank, from the
best to the poorest in order of merit.

Ranking is the oldest and simplest technique of appraisal but ratings

are subject to the judgement and bias of the rater. Second, this
method does not tell about the amount of difference between the
employees with consecutive ranks. Third, in a large group, it is
difficult to compare several people simultaneously.

A refined version of this method is known as “Paired Comparisons

Method.” Under this method every employee is compared with all
other employees in the group. Pairs of employees are formed to
compared and determine which one is better worker in each pair.
The score of pairwise comparisons are then tabulated and a rank is
assigned to every employee on the basis of number of times a
person is considered superior on these scores.

This method gives more realistic rating than the simple ranking
method. But the plan becomes more complicated when the number
of employees in the group is very large. Second it does not indicate
the degree of differences in the ratings of employees. It may be
useful for small organizations.

2) Person to Person comparison Method-

 By this method certain factors are selected for analysis, such as
leadership, dependability and initiative and a scale is designed by the
rater for each factor. A scale of man is also created for each
selected factor. Then the each person to be rated is compared with
the man in the scale and certain scores of each factor are awarded to
him. Thus instead of comparing a whole man, persons are
compared with the key man for one factor at a time. The method is
also known as factor comparison method.

For the purpose of performance appraisal it is not much useful

because of difficulty of the designing the scales.

3) Grading Method

Under this method the rater considers certain features and marks
them according to a scale. The selected features may be co-
operatives, analytical ability, dependability, self-expression, job
knowledge leadership, judgement, organizing ability etc. Then they
are graded like A indicates outstanding B) Very good C) Good ,
D) Fair E) Poor V) B as very poor.

performance is given grade is These grades are defined and the

actual performance is given grade as is done in semester
examinations.

4) Graphic Rating Scale--

It is the oldest and popular method of appraisal. A graphic rating

scale is a chart or a graph indicating different degrees or grades of
various qualities on which the employees are to be appraised. The
Qualities included are workmanship, knowledge of the job, initiative,
potential for development, leadership dependability etc. The degrees
or grades of a quality are described on the continuum by phrases like
poor, below average, average, above average, excellent or by
number 1,2,3,4,5 . Every employee is given scores according to the
degree to which he possesses a particular trait. The rater estimates
the degree of a trait by observing the behaviour of the employee on
the job. The total score indicates the overall merit of the employee.

This method is more reliable because it measures the traits of an

employee. The scale indicates the merit in terms of both
performance and potential in analytical form. It provides some scale
for measuring absolute differences between individuals But the main
limitation of the technique is that the rater’s bias may affect the
accuracy of the ratings in practice ratings tend to cluster on the
middle or higher end of the scale.

5) Forced Distribution Method -

This method assumes that it is possible and desirable to rate only

two factors, job performance and promotability. A five point
performance scale is used. Employees are placed between the two
extremes of good or bad job performances, so that at the top end of
the scale 10% are placed and is given superior or outstanding merit.
20% are given good rating (above average)
40% satisfactory (or average)
20% fair and 10% unsatisfactory (or below average or poor)
In addition to job performance employees are also rated for
promotability on three point scale as, 1)Very likely 2) May or may
not be 3) Very unlikely to be promotional material.
 By way of forcing the distribution the problem of different appraisers
using different parts of scale is avoided second, it reduces bias, third
it is simple and easy to apply. But its use in wage administration
leads to low morale and low productivity.

6) Check-list Method -

In this method a list of statements is prepared, These statements

describe different types of behaviour for a particular job. The rater,
for every employee tick marks those statements which describe his
behaviour exactly. Each statement is given certain weight. The
rating of a particular employee can be found by adding up the
weights of various statements ticked.

Under this method the rater reports the facts and he has not to
consider various traits. However it is a time consuming and
expensive method. It is also difficult to construct a good check list
for every job.

The modified method is known as “Forced Choice Method.” Under it

five statements describing certain traits are given. Two of these
statements are favourable, other two are unfavourable and one
statement is neutral. The rates are asked to mark their assessment
of the employees against each one of these statements. The
makings are divided into two categories. 1) most appropriate
and 2) least appropriate. The sum of the scores on different
statements gives the total rating for an employee.

This method is more reliable as there is little chance for personal bias
of the rates.

7) Free form Essay Method --

Under this method the supervisor makes a free form, open ended
appraisal of an employee in his own words and writes his views
about the employee. The factors to be taken into consideration are
relations with fellow supervisors and his subordinates, general
organization and planning ability , job knowledge and potential,
employee characteristics and attitudes production quality and cost
control, physical conditions etc.

The description is factual and concrete and attempt is not made to

evaluate an employee in quantitative terms. The method provides lot
of information but it mainly consists of subjective evaluation and the
supervisor has to devote more time and needs to have skill of writing
relevant facts. Rate bias may be easily introduced while evaluating
the employee

8) Critical Incidents --

The exceptional events or occasions are known as critical incidents.

Each incident represents a critical situation in the course of work and
the reaction of an employee during it reflects his success or failure.
Rates are to record the reactions of an employee during the critical
situation. The strengths and weaknesses reflected in the reaction
are given scores or ratings.

This methods avoids the subjective judgement and bias of supervisor

as ratings are based on concrete evidence in the form of behaviour
 of employees. The reactions reflect judgement presence of mind,
initiative, dependability etc traits of individual. the main limitation of
this method is that the critical incidents arise very rarely hence it
becomes difficult to evaluate the performance of an employee. It is
also difficult to decide about the critical or exceptional incidents.

9) Group Appraisal Method—

Under this method a group of raters consisting of three or four

supervisors having knowledge about the job is the appointed for the
purpose of rating the employees. The group discusses about the
standards of performance for that job, actual performance of the
employee and the causes of their level of performance and offers
suggestions for improvement is future, if necessary.

10) Field Review Method –

Under this method, a junior officer of the personnel Department

interviews line supervisors to evaluate their respective subordinates.
The Supervisor answer the questions and give their opinion about
the progress of their subordinates, the level of performance of each
subordinate, his weaknesses and strengths, abilities and
promotionability and plans of action for improving their performance if
necessary. The appraiser notes these answers and supervisors
approve them and are placed in the employees personal folder.

This method is useful for large organizations and it does not suffer
from the weaknesses like of other methods. The overall ratings are
obtained under three categories such as outstanding, satisfactory
and unsatisfactory. Under this method the supervisors are relieved
from filling up of evaluation forms. The main limitation of this
method is that it keeps management representatives busy in the
process of evaluation of employees.

Limitations of Traditional Methods –

1) Most of the managers are not experts in assessing personality traits,

nor are they trained for this purpose, as a result their evaluation may
not be satisfactory.

2) Some mangers overemphasize short coming and tend to neglect

good points. Others try to avoid criticisms. As a result real purpose
of evaluation is not served.

3) The evaluation some raters of harsh temperament give low ratings

while others are lenient and give good ratings for everyone. Some
raters tend to become victims of Hallow effect.

4) The relative status of raters in the organization also affects the

importance of the validity of performance appraisal.

5) The trait approach to appraisal is based on the assumption that an

individual having personal traits give better performance. But there is
constant positive correlation between the possession of personal
traits and job performance.

6) Trait approach tends to neglect the role of training and development

of employees, but it concentrates on the present ability and
performance of the personal. There is no free discussion between
the subordinate and superior to identify weaknesses of the
 employees and the measures to overcome these weaknesses. The
subordinates have to accept the result of appraisal . Thus it may
retard personal growth of the employees.

In order to remove these limitations of the traditional methods of performance

appraisal several new methods have been developed. It may be noted that
the traditional methods either concentrate on task or the workers personality
during the process of an appraisal, but it is necessary to have the balance
between these two aspects which modern methods have been developed.

B) Modern Methods of Performance Appraisal—

1) Assessment Center Method –

The main objective of this method is to test the candidates in a social

situation, using a number of assessors and procedures, with focus on
job related simulations.

Under this method a group of evaluators judge employee

performance in several situations using different criteria. It is used to
select the first level supervisors. Assessment is done to determine
employee potential for promotion. The assessment is done with the
help of few other employees and it involves a paper and pencil test,
interviews and situational exercises.

The Assessment centers generally measure interpersonal skills and

other related aspects like organizing and planning. Interpersonal
competence, quality of thinking, resistance to stress, motivation to
work, dependence on others, creativity etc.

An assessment Center Approach suffers from certain limitations

1) Good performers in day to day operations suddenly become

nervous in simulated situations.

2) Those employees who are not selected to participate in the

exercise feel disappointed

3) The cost of assessment of an individual by this method is

costly and time consuming.

4) Employees receiving poor report from the center may react

negatively and it may demoralize an employee who was an
asset.

In order to make this method effective it is necessary to have 1)Clear

statement of goals 2) Obtaining top management commitment, 3)
Job analysis 4) Assessor training 5) Program audit and evaluation.

2) Appraisal By Results or MBO

Peter Drucker has developed this method known as management by

objectives (MBO) for having effective performance appraisal. It aims
at minimizing external controls and maximizing Internal motivation
through join goal setting by the manager and his subordinates, with
an aim to increase