What Is Management

CHAPTER 1
Management by Objectives (MBO)
Definition: Management by Objectives (MBO) or otherwise called as

Management by Results (MBR) is management philosophy which was first
propounded by Peter F. Drunker in the year 1954, in his book“ Practice of
Management”.
Management by objectives is a planning and controlling system, in which the

superior and subordinates work together in order to define business
objectives and establish targets that are to be achieved by the subordinates,
and also determine each individual’s key area of responsibility as regards the
results expected. Further, these measures are considered as yardstick to run
the unit and also assess the contribution of each individual.
Assumption of Management by Objectives
MBO relies on the premise that people tend to perform better when they are
known about what is expected from them and when they can associate their
personal goals with that of the objectives of the organization. In addition to
this, it also proposes that people have interest in establishing goals and
comparing the performance against the set target.
Process of Management by Objectives

Goal Setting:
First and foremost, the long term goals of the organization are defined, such
as its strategic intent, vision, mission and goals. Once these are formulated,
the management then decides specific objectives to be attained within the
given time frame.
Action Plan:
Action plan refers to the way through which the objectives are achieved. It
provides direction regarding how the objectives can be achieved, as in what is
to be done, what steps are to be followed, etc.
Performance Appraisal:
Last but not the least, at this stage, a comparison is made between actual and
predetermine standards. These objectives acts as a basis for reviewing the
progress.
MBO, is directed towards raising the performance level of the organization by

conspicuous identifying the measurable goals and end results, which are
agreed to the management as well as employees of the organization.
Thereafter, the employees participate in formulating the action plan and
strategy for the attainment of the goals.
Benefits of Management by Objectives
 It facilitates the employees to understand their tasks and duties in a better

way.
 It is helpful in designing Key Result Area (KRA) for each employee,

according to their interest, specialization, experience and competency.
 It eliminates overlapping and confusions in the tasks and duties.
 Every employee contributes towards the achievement of the objectives by

successfully completing the tasks and duties assigned to them by the
superior.
 It creates an open communication environment in the organization.
 In a nutshell, Management by objectives is nothing but a process wherein

the goals, plans and control system of the organization are defined by the
management and employees jointly.
https://businessjargons.com/management-by-objectives-mbo.html
WHAT IS MANAGEMENT?
1. The organization and coordination of the activities of a business in order to

achieve defined objectives.
Management is often included as a factor of production along with?

machines, materials, and money. According to the management guru Peter
Drucker (1909-2005), the basic task of management includes both marketing
and innovation. Practice of modern management originates from the 16th
century study of low-efficiency and failures of certain enterprises, conducted
by the English statesman Sir Thomas More (1478-1535). Management consists
of the interlocking functions of creating corporate policy and organizing,
planning, controlling, and directing an organization's resources in order to
achieve the objectives of that policy.
2. The directors and managers who have the power and responsibility to
make decisions and oversee an enterprise.
The size of management can range from one person in a small organization
to hundreds or thousands of managers in multinational companies.
In large organizations, the board of directors defines the policy which is then
carried out by the chief executive officer, or CEO. Some people agree that in
order to evaluate a company's current and future worth, the most important
factors are the quality and experience of the managers.
http://www.businessdictionary.com/definition/management.html
What is 'Management By Objectives - MBO'
Management by objectives (MBO) is a management model that aims to

improve the performance of an organization by clearly defining objectives
that are agreed to by both management and employees. According to the
theory, having a say in goal setting and action plans encourages participation
and commitment among employees, as well as aligning objectives across the
organization. The term was first outlined by management guru Peter Drucker
in his 1954 book, The Practice of Management.
BREAKING DOWN 'Management By Objectives - MBO'
Management by objectives (MBO) is the establishment of a management

information system to compare actual performance and achievements to the
defined objectives. Practitioners claim that the major benefits of MBO are that
it improves employee motivation and commitment, and allows for better
communication between management and employees. However, a cited
weakness is that MBO unduly emphasizes the setting of goals to attain
objectives, rather than working on a systematic plan to do so.
Basic Principles
Peter Drucker set forth several principles. Objectives are laid out with the help
of employees and are meant to be challenging, but achievable. There is daily
feedback, and the focus is on rewards rather than punishment. Personal
growth and development are emphasized, rather than negativity for failing to
reach the objectives.
Drucker believed MBO was not a cure-all, but a tool to be utilized. It gives
organizations a process, with many practitioners claiming that the success of
MBO is dependent on the support from top management, clearly outlined
objectives, and trained managers who can implement it.
Putting Management by Objectives Into Practice
MBO calls for five steps that organizations should use to put the management
technique into practice.
 The first step is to either determine or revise organizational objectives for

the entire company. This broad overview should be derived from the
firm's mission and vision.
 The second step is to translate the organizational objectives to employees.

Drucker used the acronym SMART (Specific, Measurable, Acceptable,
Realistic, Time-bound) to express the concept.
 Step three is stimulating the participation of employees in setting

objectives. After the organization's objectives are shared with employees,
from the top to the bottom, employees should be encouraged to help set
their own objectives to achieve these goals. This gives employees greater
motivation since they have greater empowerment.
 Step four involves monitoring the progress. Back in step two, a key
component of the objectives was that they are measurable in order for
employees and managers to determine how well these were met.

 The fifth step is to evaluate and reward progress. This step includes
honest feedback on what went well and what did not.
https://www.investopedia.com/terms/m/management-by-objectives.asp
Meaning of Management
According to Theo Heimann, management has three different meanings, viz.,
Management as a Noun : refers to a Group of Managers.
Management as a Process : refers to the Functions of Management i.e.

Planning, Organizing, Directing, Controlling, etc.
Management as a Discipline : refers to the Subject of Management.
Management is an individual or a group of individuals that accept

responsibilities to run an organisation. They Plan, Organise, Direct and Control
all the essential activities of the organisation. Management does not do the
work themselves. They motivate others to do the work and co-ordinate (i.e.
bring together) all the work for achieving the objectives of the organisation.
Management brings together all Six Ms i.e. Men and Women, Money,
Machines, Materials, Methods and Markets. They use these resources for
achieving the objectives of the organisation such as high sales, maximum
profits, business expansion, etc.
Following image depicts fourteen important features of management.
Features of management
The nature, main characteristics or features of management:
1. Continuous and never ending process.
2. Getting things done through people.
3. Result oriented science and art.
4. Multidisciplinary in nature.
5. A group and not an individual activity.
6. Follows established principles or rules.

7. Aided but not replaced by computers.
8. Situational in nature.
9. Need not be an ownership.
10. Both an art and science.
11. Management is all pervasive.
12. Management is intangible.
13. Uses a professional approach in work.
14. Dynamic in nature.
15. Now let's briefly discuss each feature of management.
1. Continuous and never ending process
Management is a Process. It includes four main functions, viz., Planning,

Organizing, Directing and Controlling. The manager has to Plan and Organize
all the activities. He had to give proper Directions to his subordinates. He also
has to Control all the activities. The manager has to perform these functions
continuously. Therefore, management is a continuous and never ending
process.
2. Getting things done through people
The managers do not do the work themselves. They get the work done
through the workers. The workers should not be treated like slaves. They
should not be tricked, threatened or forced to do the work. A favourable work
environment should be created and maintained.
3. Result oriented science and art
Management is result oriented because it gives a lot of importance to

"Results". Examples of Results like, increase in market share, increase in profits,
etc. Management always wants to get the best results at all times.
4. Multidisciplinary in nature
Management has to get the work done through people. It has to manage
people. This is a very difficult job because different people have different
emotions, feelings, aspirations, etc. Similarly, the same person may have
different emotions at different times. So, management is a very complex job.
Therefore,
management uses knowledge from many different subjects such as

Economics, Information Technology, Psychology, Sociology, etc. Therefore, it is
multidisciplinary in nature.
5. A group and not an individual activity
Management is not an individual activity. It is a group activity. It uses group

(employees) efforts to achieve group (owners) objectives. It tries to satisfy the
needs and wants of a group (consumers). Nowadays, importance is given to
the team (group) and not to individuals.
6. Follows established principles or rules
Management follows established principles, such as division of work,

discipline, unity of command, etc. These principles help to prevent and solve
the problems in the organization.
7. Aided but not replaced by computers
Now-a-days, all managers use computers. Computers help the managers to

take accurate decisions. However, computers can only help management.
Computers cannot replace management. This is because management takes
the final responsibility. Thus Management is aided (helped) but not replaced
by computers.
8. Situational in nature
Management makes plans, policies and decisions according to the situation. It

changes its style according to the situation. It uses different plans, policies,
decisions and styles for different situations.
The manager first studies the full present situation. Then he draws conclusions
about the situation. Then he makes plans, decisions, etc., which are best for
the present situation. This is called Situational Management.
9. Need not be an ownership
In small organization, management and ownership are one and the same.
However, in large organization, management is separate from ownership. The
managers are highly qualified professionals who are hired from outside. The
owners are the shareholders of the company.
10. Both an art and science
Management is result-oriented. Therefore, it is an Art. Management conducts

continuous research. Thus, it is also a Science.
11. Management is all pervasive
Management is necessary for running a business. It is also essential for

running business, educational, charitable and religious institutions.
Management is a must for all activities, and therefore, it is all pervasive.
12. Management is intangible
Management is intangible, i.e. it cannot be seen and touched, but it can be

felt and realized by its results. The success or failure of management can be
judged only by its results. If there is good discipline, good productivity, good
profits, etc., then the management is successful and vice-versa.
13. Uses a professional approach in work
Managers use a professional approach for getting the work done from their
subordinates. They delegate (i.e. give) authority to their subordinates. They
ask their subordinates to give suggestions for improving their work. They also
encourage subordinates to take the initiative. Initiative means to do the right
thing at the right time without being guided or helped by the superior.
14. Dynamic in nature

15. Management is dynamic in nature.
That is, management is creative and innovative. An organisation will survive

and succeed only if it is dynamic. It must continuously bring in new and
creative ideas, new products, new product features, new ads, new marketing
techniques, etc.
Three Levels of Management
Generally, there are Three Levels of Management, viz.,
1. Administrative or Top Level of Management.
2. Executive or Middle Level of Management.
3. Supervisory or Lower Level of Management.
At each level, individual manager has to carry out different roles and functions
1. Top Level of Management
The Top Level Management consists of the Board of Directors (BOD) and the
Chief Executive Officer (CEO). The Chief Executive Officer is also called General
Manager (GM) or Managing Director (MD) or President. The Board of
Directors are the representatives of the Shareholders, i.e. they are selected by
the Shareholders of the company. Similarly, the Chief Executive Officer is
selected by the Board of Directors of an organisation.
The main role of the top level management is summarized as follows :-
The top level management determines the objectives, policies and plans of
the organisation.
They mobilizes (assemble and bring together) available resources.
The top level management does mostly the work of thinking, planning and
deciding. Therefore, they are also called as the Administrators and the Brain
of the organization.
They spend more time in planning and organizing.

They prepare long-term plans of the organization which are generally made
for 5 to 20 years.
The top level management has maximum authority and responsibility. They
are the top or final authority in the organization. They are directly responsible
to the Shareholders, Government and the General Public. The success or
failure of the organization largely depends on their efficiency and decision
making.
They require more conceptual skills and less technical Skills.
2. Square Middle Level of Management
The Middle Level Management consists of the Departmental Heads (HOD),

Branch Managers, and the Junior Executives. The Departmental heads are
Finance Managers, Purchase Managers, etc. The Branch Managers are the
head of a branch or local unit. The Junior Executives are Assistant Finance
Managers, Assistant Purchase Managers, etc. The Middle level Management is
selected by the Top Level Management.
The middle level management emphasize more on following tasks :-
Middle level management gives recommendations (advice) to the top level

management.
It executes (implements) the policies and plans which are made by the top
level management.
It co-ordinate the activities of all the departments.
They also have to communicate with the top level Management and the lower
level management.
They spend more time in coordinating and communicating.
They prepare short-term plans of their departments which are generally made
for 1 to 5 years.
The middle Level Management has limited authority and responsibility. They
are intermediary between top and lower management. They are directly
responsible to the chief executive officer and board of directors.
Require more managerial and technical skills and less conceptual skills.
3. Square Lower Level of Management
The lower level management consists of the Foremen and the Supervisors.
They are selected by the middle level management. It is also called
Operative / Supervisory level or First Line of Management.
The lower level management performs following activities :-
Lower level management directs the workers / employees.
They develops morale in the workers.
It maintains a link between workers and the middle level management.
The lower level management informs the workers about the decisions which
are taken by the management. They also inform the management about the
performance, difficulties, feelings, demands, etc., of the workers.
They spend more time in directing and controlling.
The lower level managers make daily, weekly and monthly plans.
They have limited authority but important responsibility of getting the work
done from the workers. They regularly report and are directly responsible to
the middle level management.
Along with the experience and basic management skills, they also require
more technical and communication skills.
http://kalyan-city.blogspot.com/2011/04/what-is-management-
definitions-meaning.html
Effectiveness and Efficiency: A basic Requirements
When companies are looking to expand their productivity in business, they

will typically talk about both increasing their business effectiveness and their
business efficiency as though they are interchangeable terms. However, this is
simply not the case. Effectiveness and efficiency refer to different aspects of
business, even though they appear and sound similar at first glance. While an
effective employee is able to produce results on a more meaningful or impact
level, an efficient employee is able to produce results quickly given the
circumstances of the business. In essence, companies need to combine
effectiveness and efficiency in their business practices in order to be
successful.
Effectiveness in Business
In business, effectiveness refers to the quality of results that are derived from
tasks completed by both employees and their managers. To create
effectiveness in the workplace, an employee or manager needs to deliver
consistent results. For example, if someone is a marketing manager and their
marketing campaigns deliver consistent leads, they would then be thought of
as an effective marketing manager. If however, the marketing manager is not
able to draw any leads from any of his or her campaigns, then he or she
would be ineffective. To improve effectiveness in a company, a business needs
to conduct regular performance reviews of both their employees and
managers to determine if their methods and techniques are effective and
producing results. Ineffective results could easily impact the quality of a
company’s services or products, so it’s important for any business to make
sure that all of their employees and managers are filling their roles effectively.
Efficiency in Business
Efficiency in a business refers to how long it takes for a task to get
completed, not at how effective the task was completed. In other words, an
employee may be effective at completing a task to a high level, but may take
way longer than needed to complete the task. A good example of this is a
manager who sends emails to all employees vs. a manager who writes
handwritten letters to each individual employee. While both are effective in
conveying a message, an email in the modern workplace is obviously more
efficient than a letter, especially at a larger company.
Improving Both Effectiveness and Efficiency in Business
Businesses and employees that are effective are not always efficient, and
businesses and employees that are efficient are not always effective. In fact,
the terms should not be looked at as mutually exclusive, especially when it
comes to running a business. While efficiency can increase productivity and
save time and money, it won’t ultimately get results if the effectiveness of
your employees is low. To increase both effectiveness and efficiency,
businesses need to provide resources, training and constructive criticism to
employees and managers so that they can improve their performance and be
energized to work at your business.
https://jgamarketing.com/difference-effectiveness-efficiency-business/
We’ve long recognized effectiveness as a prime driver of business success,

particularly since Peter Drucker formulated the rules and required “habits of
thought” in 1967’s The Effective Executive.
Despite its relative brevity, his book has had an enormous impact on business
— proof positive that visionaries can present million-dollar ideas in small
packages. According to Drucker, doing the right things is key to effectiveness.
Drucker helped clarify the “why” of effectiveness in a way no one before him
had. But the “how” he left for leaders to define on our own.
The trouble with effectiveness

Effectiveness, on it’s own, sets no time limits. In the era when business could
afford to be leisurely, largely due to limitations of distance and technology,
projects could take many months. Something that should have taken four
months could take fourteen. That won’t fly anymore.
Software manufacturer 3D Realms wasted 12 years working on the Duke

Nukem Forever sequel before going belly-up. Similarly, many other companies
have developed groundbreaking technologies in a leisurely way, only to have
their competitors beat them to market.
Long-term strategies, even those of a year or less, have proven too rigid for
survival. The business world moves too fast now, due to increased
competition brought on by technological advances and global competition, as
well as the flexibility and agility forced on most organizations by relatively
recent economic shocks, such as the Great Recession.
The trouble with efficiency
On the flip side, efficiency unrestrained by effectiveness can prove

catastrophic. In 2013, a demolition crew in Fort Worth, Texas, did an excellent
and very effective job of demolishing a house. The only misstep was that it
was the wrong house. The code enforcer had put the wrong address on their
forms and no one was home to rectify the mistake.
That may be the best example of efficiency unrestrained by effectiveness I’ve

ever heard. In short, they did the wrong thing right. And the kicker? They did
the exact same thing again the very next day. Apparently they learned to
effectively check and recheck their work orders only after their second foul-
up.
The need for efficient effectiveness in leadership
We now have to make our effectiveness, well, more effective. The best way to
do that is to combine it with efficiency, producing a hybrid I define in my new
book Doing the Right Things Right. You must practice the adage of efficient
effectiveness right now in order to maintain your place in the market.
We’ve already lost many large companies to merger, outright purchase,

complacency, management issues, out-competition, and a few spectacular
suicides (see the Enron/Arthur Andersen debacle).
The new business mantra
“Doing the right things right” must become a mantra for any remaining
organizations that want to survive. Doing the right things isn’t enough
anymore. Nor is just doing things right.
Efficiency mustn’t just meet effectiveness; the two have to join forces and
work side by side daily — hitched together as an efficient, effective team. And
leaders must ensure that they make doing the right things right not just a
mantra, but a habit controlled by regular oversight.
The current change tsunami roaring through the business world will only
continue to grow. Welding effectiveness and efficiency together is a crucial
survival tactic and possibly the most crucial one any organization can wield
going forward.
“Doing the right things isn’t enough anymore. Nor is just doing things right.”
https://www.salesforce.com/quotable/articles/effectiveness-efficiency-
sales-leaders/
The terms effectiveness and efficiency have a lot to do with a business entity.
Every business stands to attain its predefined goals and objectives while
particularly stressing on its ability of maintaining its survival and profitability
constantly. In doing so, the effectiveness and efficiency counts greatly. On the
one hand on the basis of these two terms a business goes to heighten its
level immensely, on the other hand it bears losses in the absence of the
results being associated with effectiveness and efficiency.
As regards effectiveness, it is important to note that in each and every

decision making process, the effectiveness plays a crucial role. Effectiveness
means producing desired results. In this way, so long as a business manager
makes effective planning which brings the results in a way that is wanted, the
business will remain in the money. Since it involves making right decisions at
the right time, it is essential for a business manger to do so. Though the term
is useful to managerial positions to a greater extent, it is also applicable to
the employees as well.
Similarly, being efficient is important to both managers and the employees.

Efficiency indicates using fewer inputs, but producing more outputs. It also
means performing the assigned duties without making mistakes, because the
potential mistakes not only spoil the reputation of a business, but also hinder
the progress of a business. What in brief may be construed is that
effectiveness is attained by doing right things, whereas the efficiency is
maintained by doing things in the right manner. It would thus be of great
value to maintain both to increase the value of a business
.https://www.linkedin.com/pulse/20140829162438-59817714-
effectiveness-and-efficiency-why-are-they-important-to-a-business-entity
WHAT IS MANAGER?
What is a manager? Definition and meaning
A manager is a person who is responsible for a part of a company, i.e., they

‘manage‘ the company. Managers may be in charge of a department and the
people who work in it. In some cases, the manager is in charge of the whole
business. For example, a ‘restaurant manager’ is in charge of the whole
restaurant.
A manager is a person who exercises managerial functions primarily. They

should have the power to hire, fire, discipline, do performance appraisals, and
monitor attendance. They should also have the power to approve overtime,
and authorize vacations. He or she is the boss.
The Manager’s duties also include managing employees or a section of the

company on a day-to-day basis.
Different types of managers
There are many different types of managers across the whole spectrum of a
company’s or entity’s hierarchy.
Levels of management spread from right at the top of a company down to
supervisors of small teams.
In this article, when I use the word ‘company,’ I am also including

‘organization.’
Top Managers are in charge of a company’s strategy. In other words, they are

the stewards of an organization’s vision and mission.
Functional Managers are responsible for the effectiveness and efficiency of

specific areas of a company, such as marketing. They are also in charge of
personnel and accounts.
Team Managers or Supervisory Managers are in charge of subgroups of a

particular function. They may also be in charge of a group of members from
different parts of the company.
Line Managers are in charge of the output of certain products or services.
They hold authority in a vertical chain of command, or over a particular
product line.
For example, in a vehicle-making company, the Line Manager might be in

charge of the ‘small cars’ or ‘light truck’ division. Also, even more specifically,
they may be in charge of the ‘small cars marketing line.’
General Managers
General Managers are responsible for managing a revenue-producing unit,

such as a product line, business unit, or a store.
The General manager has to make decisions across different functions within
that unit. General managers typically get a bonus or commission when the
unit does well.
General Managers report to their top executives and take directions from
them. The top executives explain what the company’s overall plan is. The
General Manager subsequently sets specific goals for the unit to fit in with
the plan.
Senior management refers to the top managers of a company, i.e., its

directors. If I say, Harvard Business Review is widely read by senior
management, I mean company directors.
Qualities of a good manager
According to the Young Entrepreneur Council (YEC), a good manager should

have the following qualities:
Accountability - Character - Cultural affinity - Prioritization - Warmth Patience

- Honesty - Decisiveness - Empathy - Positive attitude - Competence -
Flexibility
Product Managers vs. Brand Managers

Product Managers in for example technology companies are typically the CEO
of a product. They are also responsible for its strategy, road map, and
everything regarding its production. Storage and sales are also the General
Manager’s responsibility.
The position usually includes marketing, forecasting, and profit and loss
responsibilities.
The Brand Manager aims to enhance, maintain, and encourage interest in the
brand. There is a strong emphasis on marketing and the company’s overall
image. Brand managers inspire feeling, reactions, and loyalty.
Brand management is common in consumer product companies. Product

management, on the other hand, is common in software firms.
This is because consumer product businesses need a top-of-the-mind recall of

their products and brands because they mass market them.
According to Management Study Guide:
“Brand management is associated with consumer product companies whereas

product management is associated with software companies. This is because
consumer product companies need a top of the mind recall for their products
and brands since they mass market them.”
https://marketbusinessnews.com/financial-glossary/manager-definition-
meaning/
The Role and Responsibilities of a Manager
In two related articles, “What Does a Manager Do?" and “Why It’s Time to
Change Our Views on Management and the Job of the Manager,” we explore
this changing and important role in-depth. In this article, we take a step back
and focus on the fundamentals of the job of manager and why it is both
critical to success in today’s organizations and why it represents a viable
career option.
The Manager’s Role Inside the Organization
Organizations are hierarchies of titles. The organizational chart or the

structure of the company and the relationships of the jobs and
responsibilities, from the top down, maybe CEO, Vice President, Director, then
Manager, each of whom perform separate and critical functions, enabling the
organization to function, meet its obligations and turn a profit.
The higher you climb in the organization’s ranks, the further away you move
from the day-to-day operations and work of the firm’s employees. While the
CEO and Vice-Presidents focus more of their efforts on issues of strategy,
investment, and overall coordination, managers are directly involved with the
individuals serving customers, producing and selling the firm’s goods or
services, and providing internal support to other groups.
Additionally, the manager acts as a bridge between senior management for
translating higher-level strategies and goals into operating plans that drive
the business. The challenging role of the manager is accountable to senior
executives for performance and to front-line employees for guidance,
motivation, and support. It is common for managers to feel as if they are
pulled between the demands of top leaders and the needs of the individuals
performing the work of the firm.
The Work of the Manager
Have you ever witnessed the "plate spinner" at the circus? This is the
individual who places a breakable dinner plate on a stick and starts it
spinning. The entertainer repeats this task a dozen or more times, and then
runs around and striving to keep all of the plates spinning without letting any
crash to the floor. On many occasions, the role of manager feels a great deal
like this "plate spinner."
The manager’s functions are many and varied, including:
 Hiring and staffing.
 Training new employees.
 Coaching and developing existing employees.
 Dealing with performance problems and terminations.
 Supporting problem resolution and decision-making.
 Conducting timely performance evaluations.
 Translating corporate goals into functional and individual goals.
 Monitoring performance and initiating action to strengthen results.
 Monitoring and controlling expenses and budgets.
 Tracking and reporting scorecard results to senior management.
 Planning and goal-setting for future periods.

The daily work of the manager is filled with one-on-one or group interactions
focused on operations. Many managers use early mornings or later evenings
to complete their reports, catch-up on e-mail and update their task lists.
There is never a dull moment much less time for quiet contemplation in the
lives of most managers.
Types of Managers
Managers are most often responsible for a particular function or department

within the organization. From accounting to marketing, to sales, customer
support, engineering, quality, and all other groups, a manager either lead a
team directly or leads a group of supervisors who lead the teams.
In addition to the traditional role of departmental or functional manager,

there are also product and project managers who are responsible for a set of
activities or initiatives, often without any people reporting to them. These
informal managers work across functions and recruit team members from the
various groups for temporary and unique initiatives.
Span of Control
The phrase “span of control” relates to the number of individuals who report
directly to any particular manager. One of the trends of recent years has been
to reduce the number of managers in an organization and increase the
number of direct reports working for remaining managers.
A manager optimally has no more than six to eight direct reports, although
many have ten or even twenty individuals they are responsible for on a daily
basis. A smaller span of control enables increased support for training,
coaching, and development. The larger span reduces the manager’s
effectiveness for supporting her direct reports.
Authority of the Manager
A manager may have the power to hire or fire employees or to promote

them. In larger companies, a manager may only recommend such action to
the next level of management. The manager has the authority to change the
work assignments of team members.
Essential Skills of the Manager
Managers need to develop and hone the following skills:
 Leadership—You’ve got to be able to set priorities and motivate your

team members. This involves self-awareness, self-management, social
awareness and relationship management. Be a source of energy, empathy,
and trust. And remember that effective leaders work daily to develop
team members through positive feedback, constructive feedback, and
coaching.
 Communication—Become a student of effective communication in all its

applications, including one-on-one, small group, large group, email and
social media. Realize that the most important aspect of communicating is
listening.
 Collaboration—Serve as a role model for working together. Support

cross-functional efforts and model collaborative behaviors to set the
example for your team members.
 Critical Thinking—Strive to understand where and how your projects fit

into the bigger picture to enhance your effectiveness. Review priorities in
light of larger goals. Translate this understanding into meaningful goals
and objectives for your team members.
 Finance—Learn the language of numbers. Managers must strive to

understand how company funds are invested and to ensure that these
investments earn a good return for the firm. While you do not need to be
an accountant to be a manager, it is imperative that you learn and apply
the basics.
 Project Management—Everything that we do that is new in an

organization is created in the form of projects. Today’s managers
understand and leverage formal project management practices to ensure
timely completion and proper control of initiatives. The Bottom Line—A
Career in Management
The work of management is divided into the activities around planning,
leading, organizing and controlling, and the work of a manager encompasses
all of these areas. Anyone aspiring to move into management as a career
should develop and display strong technical and functional skills—become an
expert in your discipline, and have a strong liking of interacting with,
supporting and guiding others.
The best managers understand their role is about their team and their team’s
performance and not about themselves. They work hard to develop the skills
identified above and they take great satisfaction in the successes of their
team members. Do this effectively at a lower level and others will recognize
your value and abilities and strive to increase your responsibilities over time.
Management as a career is simultaneously challenging and exciting.
https://www.thebalancecareers.com/what-is-a-manager-2276096
MANAGEMNT SKILLS
What are management skills and why are they important?
UNDERSTANDING AND DISPLAYING GOOD MANAGEMENT SKILLS WILL HELP

TO POSITION YOU FOR A SUCCESSFUL CAREER NO MATTER WHAT LEVEL
YOU'RE STARTING AT. LEARN THE ESSENTIAL ROLE THAT GOOD
MANAGEMENT SKILLS PLAY IN THE WORKPLACE.
Management skills are something that you hear a lot about in the abstract;
yet you may find you're at a loss to define what the term really means. In the
broadest sense, management skillscan be nearly anything that enables you to
manage others effectively. While some skills will vary based on your industry,
there are several that are universal across nearly every work environment.
Motivation
Managers who can motivate their employees are true assets to their company.
This type of interaction not only increases productivity and employee
satisfaction, but it sets a good example as well. Hiring managers look for
leaders who can spot employees' strengths and encourage them to develop
their skill sets. The best managers have a keen eye for areas that could be
improved and know how to approach these issues diplomatically so workers
feel encouraged to make productive changes, rather than discouraged by
their shortcomings.
 Important skills in this area include:
 Empowering employees to take ownership of projects
 Creating an energetic and highly motivated workplace
 Showing proper appreciation for employee accomplishments
 Supporting coworkers who are under stress
 Providing rewards and incentives for outstanding performance
 Problem Solving
The right skill set empowers managers to identify, face, and overcome various
problems that might arise in the workplace. This first requires
outstanding attention to detail. Top managers can spot emerging problems
before they're apparent to everyone in the company and identify the root of
the trouble. Analytical skills are also important in management. You should
know what data is most relevant to your industry, how to gather it, and what
the resulting numbers mean.
 Highlight these problem-solving skills on your resume:

 Demonstrating resourcefulness in the face of a problem
 Anticipating potential issues before they arise
 Identifying factors contributing to problems
 Interpreting critical industry data
 Troubleshooting quickly and efficiently
Professionalism
Good managers hold themselves to the highest standards so that their

employees will have a clear example of what they should strive
for. Integrity, honesty, and professionalism are crucial skills for strong
managers. As a leader, it's better to show rather than tell when it comes to
work ethic and demeanor. Hiring managers look for job applicants who
adhere to a strict moral code and set the right example for others.
 Qualities that exude professionalism on a resume include:
 Providing exceptional customer service with a professional attitude
 Identifying diplomatic solutions to workplace issues
 Exhibiting strong moral values
 Showing initiative
 Attending professional development seminars
Communication
One of the most important responsibilities that managers have is

communicating effectively, both with the employees who work under them
and with other managers throughout the company. They're part of an
intricate web and must act as a strong connection point that bridges the gaps
between lower level employees and top brass or between sales, marketing,
and production departments.
People skills are crucial. You should be able to communicate effectively in
both verbal and written form. Typo-riddled memos or rushed, confusing
meetings won't do. The best managers are always able to send a clear
message and share valuable, understandable information that will help get the
job done.
 Include these types of communication and people skills on your resume:
 Drafting clear and concise training materials
 Maintaining open lines of communication with co-workers
 Negotiating successfully to resolve employee disputes
 Encouraging communication among reticent employees
 Leading efficient meetings that are both productive and sensitive to time
constraints
Technical Skills
Technical skills are more important for low-level managers than for those at
the top of the chain. If you're angling for your first managerial spot, it's crucial
that you demonstrate a keen understanding of the business as a whole. Many
companies promote their managers from within for this very purpose. You
can't oversee a team of IT professionals if you're lost when it comes to
navigating your company's programming systems. No sales manager can be
effective if he doesn't know how to close a sale.
Your industry knowledge and experience should guide all those whom you

oversee, helping them to achieve higher levels of success. Managers are often
called upon to provide training and coaching for their employees. You should
be able to impart useful wisdom and handy trade secrets that will help your
team excel.
 Providing customer support Handling data security
 Generating reports and drafting presentations with Microsoft Office

 Managing website content, social media accounts, or marketing
campaigns
 Offering technical support to employees and/or customers
Innovation
Innovation is a keyword for nearly every company. Your competitors are

always striving to develop the best new products and services ahead of you.
Businesses that innovate well stay at the top of the pack, netting new
customers with their fresh offerings and keeping existing clients happy with a
continuous selection of upgrades. Hiring managers have a keen eye for new
hires who will bring different perspectives and new ideas to the company.
 Developing innovative solutions for customers' needs
 Identifying key shortcomings in manufacturing and drafting solutions to

boost production
 Constructing research models to test new product ideas
 Generating fresh ideas for timely marketing campaigns
 Redesigning systems for increased productivity or functionality
Including any of the above-mentioned skills on your resume will position you

for success in management. This applies both to those who are
actively pursuing a managerial position as well as those who are applying for
lower level jobs. Highlight all your applicable management skills on your
resume no matter what job you're after. Having the solid qualities of a good
manager will position you for success at any level of the company.
Management skills are important for many reasons. They position you to act
as an effective leader and problem-solver in so many situations. Work on
honing these skills and watch how they can impact your job performance and
opportunities.
https://www.careerbuilder.com/advice/what-are-management-skills-and-
why-are-they-important
Management Skills List and Examples
List of Management Skills for Resumes, Cover Letters and Interviews
Business management is more than simply telling employees what to do.

Managers must understand business organization, finance, and
communication, as well as have a thorough understanding of their particular
market and relevant technologies and policies. While managers are not
necessarily the most important people in the organization, their work is critical
to helping everyone else work together seamlessly.
Management vs. Leadership Skills
Management skills overlap with leadership skills, as both involve problem-

solving, decision-making, planning, delegation, communication, and time
management. Good managers are often good leaders. And yet the two roles
are distinct.
In general, management is about organization. There may be something

mechanical about it, not in the negative sense of a “mechanical performance,”
but rather in its focus on the technical “how” of accomplishing tasks. Leaders,
in contrast, focus on the “why,” motivating and inspiring their subordinates.
Leadership is about people. Not all leaders have the skill set to be managers,
and not all managers have the skills to be leaders.
The critical role of a manager is to ensure that a company’s many moving

parts are all working properly together. Without this integration, problems can
arise and issues can “fall through the cracks.”
How to Use Skills Lists
Management skills are important for many different positions, at many levels
of a company, from the top leadership to intermediate supervisors.
As you conduct a career search, position descriptions may or may not use the
words “Manager” or “Management” in their job titles. It will be up to you to
read the job description carefully to determine which skills your prospective
employer is actually looking for.
Researching the company carefully is also important, to find out what

management style the business typically uses - and perhaps what kind of new
skills the company might need.
Once you know what the organization is looking for, you can showcase these
skills in your application materials and during your interview.
Prepare examples of how you've embodied each of these management skills

so you can answer interview questions smoothly.
Although companies vary in what they’re looking for and what they require,
you can use the following information to get a sense of what skills you might
need to have. It’s possible you have more of these sought-after competencies
than you thought you did.
Examples of Management Skills
Most management skills are related to five basic, fundamental functions:

planning, organizing, coordinating, directing, and oversight.
Planning
Individual managers may or may not be personally involved in drafting
company policy and strategy, but even those who aren’t still must be able to
plan. You might be given certain objectives and then be responsible for
developing ways to meet those objectives. You may need to adjust someone
else’s plan to new circumstances. In either case, you’ll have to understand
what your resources are, develop time tables and budgets, and assign tasks
and areas of responsibility.
Relevant Skills: Analyzing Business Problems, Analyzing Expenditures, Critical

Thinking, Devising Plans for New Business, Development, Entrepreneurialism,
Identifying the Interests and Preferences of Stakeholders, Microsoft Office,
Proposing Solutions to Business Problems, Research, Qualitative
Skills, Strategic Planning, Strategic Thinking, Tapping Information Technology
to Facilitate Decision Making, Writing Proposals for Business Initiatives or
Projects, Vision.
Organizing
Organizing generally means creating structures to support or accomplish a
plan. This might involve creating a new system of who reports to whom,
designing a new layout for the office, or building strategy and planning
around how to move through a project, how to move toward deadlines, and
how to measure milestones.
Aspects of organization could also mean helping leaders under your guidance
manage their subordinates well. Organization is about planning and foresight,
and requires an ability to comprehend the big picture.
Relevant Skills: Accuracy, Administrative, Analytical Ability, Assessing Factors

Impacting Productivity, Business Storytelling, Framing Communication Toward
Specific Audiences, Innovation, Logical Thinking, Logistics, Negotiating,
Networking, Persuasion, Presentation, Public Speaking, Suggesting Ways to
Enhance Productivity, Technical Knowledge, Technology.
Coordinating
Managers must know what is happening, what needs to happen, and who
and what are available to accomplish assigned tasks. If someone is
miscommunicating, if someone needs help, if a problem is being overlooked
or a resource underutilized, a manager needs to notice and correct the issue.
Coordinating is the skill that lets the organization act as a unified whole.
Relevant Skills: Adaptability, Adapting to Changing Business Conditions,
Building Productive Relationships, Collaboration, Communication, Drawing
Consensus, Diplomacy, Emotional Intelligence, Empathy, Facilitating Group
Discussions, Flexibility, Honesty, Influencing, Listening, Nonverbal
Communication, Patience, Punctuality, Relationship Building, Scheduling,
Screening Applicants for Jobs, Staffing, Tactfulness, Teaching, Team Building,
Team Manager, Team Player, Teamwork, Time Management.
Directing
Directing is the part where you take charge and tell people what to do,
otherwise known as delegating, giving orders, and making decisions.
Someone has to do it, and that someone could be you.
Relevant Skills: Assertiveness, Conflict Management, Conflict

Resolution, Decision Making, Delegation, Delivering Presentations, Division of
Work, Empowerment, Engagement, Execution, Focus, Goal Orientation, Goal
Setting, Interacting with Individuals from Diverse
Backgrounds, Interpersonal, Leadership, Motivation, Obstacle Removal,
Productivity, Problem Solving, Professionalism, Providing Constructive
Criticism, Recommending Cost Cutting Measures, Recommending Process
Improvements, Responding Favorably to Criticism, Responsibility, Sales
Direction, Uncertainty Removal, Verbal Communication.
Oversight
Oversight means keeping track of what’s going on and setting right anything
that gets out of place. It might include anything from reviewing business
models and checking for inefficiencies to checking to make sure a project is
on time and on budget. Oversight is the maintenance phase of management.
Relevant Skills: Achieving Goals, Assessing Progress Towards Departmental

Goals, Budget Management, Business Management, Creating Budgets for
Business Units, Creating Financial Reports, Evaluating Job Candidates,
Evaluating Employee Performance, Financial Management, Generating
Financial Reports, Hiring, Interpreting Financial Data, Interpreting Legal
Statutes that Apply to Business, Interviewing Candidates for Jobs, Product
Management, Project Management, Process Management, Recruiting Talent,
Success, Training Employees, Writing Reports on Business Activity,
Understanding Financial Statements.
Management positions include some of the best-paid, most prestigious jobs
in the country. For that reason, management, good or bad, can have a huge
influence on many lives. Your skills really matter.
https://www.thebalancecareers.com/management-skills-list-2062427
The 8 Essential Management Skills You Need to Lead a Successful Team
1. You make your people feel safe at work.
Major Winters was an easy leader to follow because he always trekked into
danger first, fought for his men, and did everything he could to protect them.
He absorbed most of the risk so his men had a better chance of survival. And
they respected and revered him for it.
Great leaders are always willing to protect their people, even if it means
sacrificing their own interests, comfort, and a good metric or two. They want
their people to feel safe at work. They want them to always know that they
won’t get chewed out or lose their job if they fail. Their people know they can
grow from these failures. And this results in a higher level of trust and
cooperation.
When a leader risks and sacrifices herself to protect and improve her people,
they’re willing to move mountains for her. Why? Because they know she’s
already doing the same for them.
2. You can change your mind.

Even the smartest people get things wrong. But what separates a good leader
from a great one is the ability to admit that they’re wrong and change course
in light of new information. Unfortunately, a lot of leaders won’t change their
minds, even if it’s the right choice, because they don’t want to seem weak.
Others have too much pride to admit that they’ve made a mistake. They’d
rather pull rank and remind their subordinates that they’re in charge.
But admitting you were wrong requires a lot more strength than sticking to
something that hurts your team or company, just because you've invested a
lot of time and effort into it. For instance, Jim White Hurst, CEO of Red Hat, a
company that provides open-source software products, decided to go to
market without integrating a newly acquired product into one of their new
technologies in 2008. He didn’t want to spend three months rewriting code
and making it open source. But he soon discovered that he had made a huge
mistake: Red Hat's associates and customers didn’t like using the product.
And the only move the company could make was to rewrite the code. It
would push them a year behind schedule.
The delay angered and frustrated his employees, and most of them thought
Whitehurst wasn't competent enough to run the business. But instead of
blaming the issue on external factors, Whitehurst blamed himself. He owned
up to his mistake and told the company why he made his decision. They then
understood the rationale behind his decision. Not long after, many of his
employees told him how much they appreciated his honesty and that he
changed his mind about their go-to-market strategy. And that’s what
ultimately earned him back their trust and support.
3. You understand the importance of team bonding.
Sometimes, team outings can feel like a forced way to bond -- kind of like
the annual Christmas get-together with your cousins growing up -- but after
a slightly awkward beginning of the night, you’re having a great time. And by
the end of the night, you don’t really want to go home.
Solving an escape room or participating in a scavenger hunt can contribute to

this fun, but most of it stems from bonding with your team on a personal
level and learning about each others’ personal stories.
Sharing stories and having positive social experiences is the best way for a
leader to develop trust with their team. Both of these things trigger the
release of Oxycontin, the hormone that helps us empathize with people, and
it prompts us to help, relate, and care about others in the same way we do
for our families. In other words, it's the best way connect.
Having genuine conversations about what you and your team are passionate
about, your lifestyle, and career motivations will break down barriers and build
your team’s trust with each other and you, their leader. And this personal
trust is what you need from your team to passionately support your overall
mission and purpose.
4. You’re empathetic.
Every good leader should be able to be empathetic, right? Well, according to

two Canadian euro scientists, the higher you climb the corporate ladder, the
harder it is to feel empathetic.
The part of your brain that triggers empathy is the mirror system. And
whenever you see a person do something, it activates the thoughts and
intentions that spark when you do the same exact thing. This helps you
understand what motivates that person’s actions. But when you hold power
over others, like in most leadership roles, the mirror system isn’t very
stimulated, making it harder to place yourself inside other people’s shoes.
To stay on the same level as your team, consider trying a management

technique called perspective-taking. If your colleague says something that
frustrates you, take a step back and ask yourself why they took that position.
How do they feel? Where is this perspective coming from? If you were in their
role before, try to remember what it was like doing their job. Think back to
your biggest fears and challenges. What made you feel threatened or
insecure? Ultimately, perspective-taking will allow you to understand the root
cause of your team’s problems and help solve for them.
5. You challenge your team.
During the 1988-89 NHL hockey season, Brett Hull led the St. Louis Blues with
41 goals scored. And after the season ended, he walked into his exit meeting
with his head coach, Brian Sutter, expecting nothing but praise. But Coach
Sutter didn’t give him any praise at all. In fact, he told Hull he needed to get
better. Hull had the potential to be one of the greatest hockey players to ever
live, but he could only be a Hall of Famer if he improved his work ethic. The
next season, Hull arrived to St. Louis in the best shape of his life. And he
almost doubled the number of goals he scored, with 72. The season after that
he scored 86 goals. Hull was eventually inducted into the NHL Hall of Fame,
and it’s all thanks to a coach who pushed him to train and perform at his
best.
Like Brett Hull, everyone on your team can level up. Even your top performers.
And to help them enhance their work ethic and skill set, push them to reach
their potential and let them handle their own projects. They’ll be grateful for
your guidance at the end of the day.
6. You don’t let your emotions influence your decision making.
Great leaders do what’s right, even if it causes a great deal of emotional pain.
If they need to let someone go, even if they personally like them, they let
them go. When they need to give constructive criticism to someone, even if
they don’t want to hurt their feelings, they tell them what they need to
improve on. The easy way out never pays off in the long term, and great
leaders can blast through any anxiety or discomfort to do what’s best for their
team.
7. You’re transparent.
Great leaders trust their people, especially with information. They know their
team can sense problems in the organization. And since humans have a
psychological bias that makes them more scared of ambiguity than risk, they
make sure to provide as much information as possible about the issue and
clearly communicate that they’re doing everything they can to resolve it.
Keeping things under wraps will only make their team feel anxious and unsafe
-- if they know something’s wrong, and they know their leader hasn’t
disclosed all the information, they’ll ruminate about the worst possible
outcome. And this is likely to scare the leader’s team and make them lose
trust in him.
8. You acknowledge and appreciate your top performers.

As a leader, you must know how to make your team feel valued. It’s one of
the most important emotional needs to meet. If you don’t, your team will feel
unhappy at work -- failing to recognize employees is one of the most
common causes of employee dissatisfaction. To make them feel important to
the team, happier, and incentive them to keep improving, recognize and
reward your employees for their accomplishments. You can does this in front
of their peers, one on one, or even on Slack. This is also a way to inspire
other members of your team to improve and earn recognition too.
https://blog.hubspot.com/marketing/management-skills
What is an organization?
An ‘organization’ is a group of individuals working together to achieve one or

more objectives. Although organizations have been defined differently by
different theorists, virtually all definitions refer to five common features:
 they are composed of individuals and groups of individuals
 they are oriented towards achieving collective goals
 they consist of different functions
 the functions need to be coordinated
 they exist independently of individual members who may come and go.
http://www.open.edu/openlearn/money-management/organisations-and-
management-accounting/content-section-1
Mintzberg’s five components of organization
Mintzberg (1979, p. 24) suggested that all organisations consist of five

components, as shown in Figure 1.
Figure 1 Mintzberg’s five parts of the organisation
Long description
At the top of the organization is a Strategic apex the purpose of which is to

ensure the organization follows its mission and manages its relationship with
its environment. The individuals comprising the apex, for example, the Chief
Executive Officer (CEO), are responsible to owners, government agencies,
unions, communities and so on.
Below the apex is the Middle line, a group of managers who are concerned
with converting the objectives and broad plans of the Strategic apex into
operational plans that can be carried out by the workers.
As organizations grow and become more complex, they usually develop a

separate group of people who are concerned with the best way of doing a
job, specifying output criteria (e.g., quality standards) and ensuring that
personnel have appropriate skills (e.g., by organizing training programme).
Finally, at the bottom of the organisation, is the Operating core. These are the
people who do the basic work of producing the products or delivering the
services.
Mintzberg’s generic organizational model also illustrates an important

principle of organization structure: the separation of direction and
management, whereby those people who decide the mission and general
direction of the organization are different (other than in a very small
organization) from those who handle the implementation of plans and
subsequent controlling of operations to ensure that objectives are met.
management-accounting/content-section-1.1
Why do organizations exist?
Organizations exist because groups of people working together can achieve

more than the sum of the achievements which the individuals in the
organization could produce when working separately. For example, one
person might struggle all day to carry a piano upstairs, whereas a team of
four people, each taking one corner, may need to put in much less than a
quarter of the effort of one person to complete the task (Coates et al., 1996,
p. 19). Although such cooperation is beneficial, if individuals pull in different
directions, the result is counter-productive. Thus coordination is necessary and
this is a fundamental role of management, as will be discussed in a later
section of this session.
It can also be argued that organizations exist as a result of the impact

of transaction costs, because they can arrange transactions between their
different parts at a lower total cost than that available in the open market. In
crude terms, it may be cheaper to make or do something ‘in house’ because
this cut out the time-consuming process of negotiating terms – and
renegotiating them every time your requirements change. Before the
Industrial Age, it was common for artisans/craftsmen to work individually from
home, producing various products, which merchants would purchase from
these individuals and sell to consumers. All transactions were conducted
through market exchange without the need for formal organizations. As
economic development gained pace, however, it became clear that it was
more efficient to organize production internally within a firm rather than
undertake each transaction externally through the market.
What types of organization are there?
Organizations can be classified in different ways. One way is according to

their over-arching purpose, or primary objective. Broadly, organizations may
be classified as ‘for-profit’ (i.e., commercial) or ‘not-for-profit’ entities. ‘For-
profit’ (commercial) organizations may have several different objectives. For a
very long time, it was generally accepted that maximizing the wealth of the
owners and continuing in existence were the primary objectives of profit
seeking organizations. However, as organizations also aim, for example, to
provide goods and services to customers and employment to employees, it is
perhaps more reasonable to suggest that increasing, rather than maximizing
the wealth of owners, is a more fitting objective. ‘Not-for–profit’
organizations comprise a large variety of organizations including charities,
clubs, cooperative firms/social enterprises and public sector organizations.
Public sector organizations are owned, funded and run by central or local
government. They include:
 public hospitals
 the armed forces (military)
 most schools and universities

 government departments.
These organizations exist to provide services which, for various reasons, it is

considered impractical or undesirable for the commercial sector to provide.
Whereas commercial organizations, charities and social enterprises must

generate sufficient funds from their activities to sustain themselves on a
continuing basis, public sector organizations are funded by government.
Nevertheless, constraints on government expenditure mean that resources are
limited. Consequently, economic scarcity requires that virtually all
organizations be run effectively and efficiently. As a result, many of the
management principles employed by the commercial sector are also
employed in the not-for-profit sector, requiring extensive use of management
accounting in all sectors.
A traditional view of differences between sectors is illustrated in Figure 2.

However, these distinctions are becoming blurred, as indicated by the
overlapping circles. Commercial organisations are increasingly pursuing social
responsibility objectives, while not-for-profit organisations are increasingly
adopting commercial criteria to ensure the sound financial management of
scarce resources.
Maximization of shareholder value has long been the publicly stated objective
of most business enterprises. It is likely, however, partly as a result of the
global financial crises that began in 2008, that the publicly stated objectives
will be expanded to embrace more stakeholders, such as employees and the
local community.
What is organizational structure?

The term organizational structure refers to the relationships between the
various functions and positions in an organization. Structure determines
authority and responsibility for particular tasks/activities. It also specifies the
routes of communication between different parts of the organization.
Organizational structure therefore has important implications for the design of
management accounting systems. For example, some organizations are highly
decentralized, with decision making authority delegated to relatively junior
managers at lower levels in the organizational hierarchy. In this case, a major
role of the organizations management accounting system will be to monitor
the outcomes and provide feedback to senior managers about the
performance of those who have the decision-making authority. Such a role
will not be necessary in a highly centralized organization, where senior
managers make all the important decisions.
Theories of organizational structure
With the emergence of large industrial enterprises in the nineteenth century,

management theorists began to consider how organizations should be
designed and managed. As you will read later in this session, early
organizational theorists such as Henri Fayol (1949) attempted to derive
universal prescriptions for the optimal design of organizations. More recently,
theorists have emphasized the contingent nature of optimal organizational
design – depending on variables such as size, production technology, degree
of stability in the organization’s business environment, nature of competition
in the industry and so on. These factors are assumed to influence, for
example, whether organizations are ‘tall’ or ‘flat’, centralized or decentralized
in terms of decision making and so on. (These terms are discussed later.)
Ultimately, organizational structure is a means of influencing and controlling

the behavior of the individuals who work in the organization. Structure is used
to assign authority and responsibility to individuals and hold them
accountable for the achievement of specific tasks or objectives (Emmanuel et
al., 1990, p. 38). Management accounting is an important part of this process
as it provides managers with the information to carry out the various activities
for which they are responsible. It also measures and monitors their
performance to ensure that the organization achieves its objectives.
A good example of a management accounting technique employed widely for
organizational planning and control purposes is budgeting.
The sort of information managers need to undertake various activities and the
way their performance is measured/monitored will depend on the way in
which the organization is structured.
management-accounting/content-section-2
Principles of organizational structure
Certain principles are basic to the operation of any organization:
Specialization
The work of the organization is divided up into separate activities or tasks and
particular individuals concentrate on specific tasks or activities. This enables
the application of specialized knowledge and so improves organizational
efficiency and effectiveness.
Coordination
If some organizations activities are to be separated into different areas or

operations, it will be necessary to ensure that the various actions are
coordinated, that is, consistent with each other and working towards the same
organizational objectives. This is a very important task of management. The
management hierarchy or ‘chain of command’ facilitates the coordination of
various departments and their activities.
Management principles of the hierarchy of authority
Management theorists (notably Henri Fayol, 1949) have, over the years,
developed several principles relating to the hierarchy of authority for
coordinating activities. Some of the most important are:
Unity of Command. Every person should receive orders and be accountable to

one and only one superior. If people receive orders from more than one
superior, conflict and confusion may well result.
The Scalar Chain. There should be a clear line of authority from top to
bottom, linking all managers at all levels.
The Responsibility and Authority Principle. If an organizational member is

allocated responsibility, then that person should also be given the necessary
authority to carry out the tasks necessary – including the right to ask other
people to undertake particular tasks. A manager should not be given
responsibility without the necessary authority, but conversely delegation of
authority implies responsibility and the need for accountability.
Span of control refers to the number of subordinates directly reporting to a

manager or supervisor.
Span of Control. There is a limit to the number of activities or people that can
be supervised effectively by one person. What constitutes an effective span of
control will be determined by a number of factors, including:
the similarity of tasks/functions undertaken (the more similar, the greater the
potential effective span of control)
the proximity of the tasks to each other and to the supervisor (the closer the
proximity, the greater the potential effective span of control)
the complexity of the tasks (the more complex, the smaller the potential
effective span of control)
the direction and control needed by subordinates (the more direction and
control needed, the smaller the potential effective span of control).
Henri fayols 14 principles of management – With examples and application
Henri fayol’s 14 principles of management are remembered even today for

their simplicity and genius. The thing is, whenever you are managing
something or running a business, you cannot pinpoint what is going wrong.
The principles of management suggested 14 such steps which you can

compare to your business, and find out where you are missing out in proper
implementation of the principles. This was especially useful in the times when
computers and modern software were not available. Today, there are so many
time tracking devices as well as management techniques available, that you
might think you don’t need the 14 principles of management. But these
principles are applicable in today’s work environment as well.
Here are the 14 principles of management by Henri fayol and how you can
implement these 14 principles of management in your organization.
1) Division of work
Applicable for firms which have many employees as well as few employees,
the principle of division of work says, that the work should be divided
between all people who are capable of doing it and should not be overloaded
to a concentrated few. It should not be diluted by giving the same work to
many people. This ensures proper utilization of labour and keeps them
focused and productive.
In the long term, this same targeted division of work helps the labor in
specializing in the work they are doing, thereby ensuring there are far fewer
mistakes. In a factory, the problem solver is always someone who has worked
on the machinery for years on end. Here is how you can apply this principle
of management in your case
Are you dividing the work equally between employees of your organization?
Are people specializing in the work they are doing?
Do you need to restructure the division of labour in your organization?
Above are some questions which can guide you in improving your
organization’s management and labour division.
2) Authority
The power and responsibility to give orders should reside with only a few

people and should not be diluted. One of the common errors of large
companies is that the management comprises of too many people, thereby
creating conflicts. When a few hand selected people have the power to vote,
then this authority is carried down the chain and the process gets
implemented.
With such authority comes responsibility. Imagine if you were the marketing
head of a company, and you took a call with regards to marketing a particular
product, in the end if the product fails, you have to take ownership of the
failure. You cannot pass the buck. Thus, when the person takes responsibility,
he also takes wise decisions. Hence, authority and responsibility go hand in
hand and form an important part of Henri fayol’s 14 principles of
management.
Are you giving the authority of decision making to too many people?
Are the people in authority not ready to take responsibility?
3) Discipline
It goes without saying, that management is responsible for the way discipline
is maintained in an organization. And this discipline percolates down the line,
to the end of the employee chain as well.
A best example will be ad agencies, who encourage informal meetings and

conversations so as to build better relationships with the customers. However,
even these ad agencies are known to maintain discipline in the way the ad
executive interacts with the customers or the way they carry out their work.
Discipline is a part of the mission and values of the organization itself.
Are your employees disciplined? If not, what can you do to bring discipline in
them?
Are you and your managers disciplined with regards to usage of time and
space?
4) Unity of command
When we discussed authority in the above point, we said that authority

should lie with only certain people. Similarly, the authority flows down the
chain only when there are a limited number of people associated with the
authoritative person. If all the people in a political party were directly
reporting to the prime minister, he will soon be admitted in the hospital due
to stress.
So to maintain command, there is a hierarchy. One person should report only

to one leader and not to 3-4 people. Hence the standard hierarchy of national
manager, regional manager, group manager, team leader is kept in most
organizations. This ensures that at all times, the managers and the executives
know who they are reporting to, and they know their responsibilities as well
as the performance expected from them.
Is there unity of command in your company?
Are there too much conflicts at the managerial level with regards to who is
reporting to whom?
5) Unity of direction
Once unity of command is achieved and you have a complete hierarchy,

where everyone knows who they are reporting to, and they are ready to do
the leaders bidding, then it is time to implement unity of direction.
It is like the famous saying “United we stand, divided we fall”.
The company, from the CEO level to the executive level should be moving
towards one direction. If growth is the direction you are moving to, then a
single executive to the CEO of the company should be performing in a
manner which brings growth for the company. And this executive should be
trained and managed accordingly by his managers.
This is one of the 14 principles of management applicable to all firms,

irrespective of their size.
Unity of direction is important to give one vision to all the employees of your

company
United we stand, divided we fall
6) Subordinate interests
To control people, you have to understand their interests first. And in the end,
you have to ensure that the interest of the company lies above the interest of
the individual. Many a time, a person is removed from the company when he
is moon lighting or doing his own sideline jobs. This is because the
company wants to ensure, that the person who is working in the company is
giving his 100% to the company.
The focus of the organization is on individuals who are giving their all to the
company. The interests of the company should be placed above the interests
of the individual.
Do you have employees or managers who are placing personal interest above
company’s interests?
How would you change or tackle these sub ordinate interests?
7) Remuneration
Now, naturally when you are expecting your employees to be disciplined, you
want unity of direction and command, then you have to remunerate the
employees so that they are less likely to shift to the competition and more
likely to concentrate on the jobs they have in hand.
As per Henri fayol’s 14 principles of management, employees should be

remunerated fairly to keep their motivation levels high. This remuneration
may be monetary or non monetary. The monetary compensation includes
incentives, bonus or other financial compensation. The non monetary
compensation may include rewards or recognition.
Are your employees happy with the monetary remuneration and is it as per
industry standards?
Are offering non monetary remuneration from time to time to keep

employees motivated?
8) Centralization
Centralization is the amount of control that is lying with people in an

organization. If there are select group of people who have control (for
example – in large corporates), then this is known as centralization. On the
other hand, if there are a higher percentage of people in the organization
having control (for example – in small businesses), then this is known as
decentralization.
Organizations have to balance centralization and decentralization both. Most

top companies have strategic business units which are also a form of
decentralization. These SBU’s are given their own decision making power.
Similarly, most small businesses will share authority in a decentralized manner
to get the work done faster. However, it completely depends on the business
and the sector in question on whether to use centralization or not.
Is your organization centralized or decentralized?
Which of the centralization tactics will help you?
9) Scalar chain
Scalar chain is confusing for many people, but let me break it down simply for
you. When mentioning the unity of command, i said that one person should
report to a single manager higher up the chain only. So an executive should
report to a team manager, who should report to the regional manager who
will report to the national manager, so on and so forth.
Scalar chain says that there should be a clear line of authority in the company
so that when you have to “Escalate things” then you know the line of
authority. When you are facing emergencies or calamities, you should know
who to go to, if your immediate boss doesn’t resolve your queries.
Popular companies like Samsung and others have the scalar chain set to a

dot. In such companies, for customer service, if your complaint is not resolved
in 3 days, it goes to the local manager, if not resolve in 5 days, it goes to
regional head, and if not resolved in 7 days it goes to national heads. So this
is how a scalar chain looks like. It looks like the wireframe of a company, with
complete architecture and hierarchy of the company shown in the wireframe.
Does your company implement Scalar chain and does each employee know
the chain of command?
10) Order
This order does not mean that someone sitting on top is ordering the people.
It is the order of “Order vs chaos”. Simply said, if an organization does not
work in an orderly manner, there will be chaos. So to work in an orderly
manner, employees need the right equipment and the right procedure to
ensure order is maintained at all times.
Hence, most large companies have specific ways that they calculate the
attendance of their labour. Specific time is given when the labour can go to
lunch as per their work stations. Maintenance officers are placed for any
problems in the equipment. Overall, everything works in a well oiled, smooth
and orderly manner. The maintenance of order is an important principle in
Henri fayol’s 14 principles of management.
What measures have you taken to ensure that your employees are working in
an orderly manner?
Bringing order to chaos ensures clear thinking of mind and more productivity.
11) Equity
Everyone should be treated equally and no preference should be given in an

organization. Many a times, the most common complaint of employees is that
a different employee was preferred over them for promotion or better
remuneration.
However, a fair organization is the one which maintains equity amongst

everyone. For this, having the right culture in the organization is absolutely
important. If the company is ethical, equity will automatically be maintained.
12) Stability of tenure
One of the critical things in Henri fayol’s 14 principles of management was

stability of tenure, or attrition of employees. In essence, Henri fayol said that
an organization has a better chance to grow faster if its employees are stable.
Naturally, if there is high attrition in the organization, then there will be a lot
of time wasted in training and development, costs will go up and stability of
tenure will not be observed.
If you look at most large companies, they take attrition and employee
turnover very seriously. There are various procedures set to ensure that
employees do not leave the company, and even if they do, then the
management should know why they are leaving. Similarly, there are other
tactics which can be employed such as job rotation to combat boredom,
incentives to motivate aggression, and various such tactics can be used to
ensure stability of tenure.
Simply said, the more the stability of tenure, the more the profit
High attrition means a lot of cost towards training and development
If tenure is stable, means your employees are happy and the company will
develop faster as you have trained employees handling the work.
13) Initiative
It sounds too good when we think that a company has innovated and
brought a new product to the market. But many a times, we question, why
companies are not regularly innovating. If you look at it, the most innovative
companies are the ones which encourage young and old talent to bring out
their own ideas. They also show interest and involvement to encourage such
professionals.
https://www.marketing91.com/henri-fayols-14-principles-management/
Educating Managers to Lead Community Enterprises
Abstract
The increased interest in social and community enterprises, and their role in
social and economic regeneration, has been underlined by the publication, on
July 23, 2002, of the Social Enterprise Strategy by the UK Government.[1DTI,
2002, Social Enterprise: A Strategy for Success. retrieved
05.08.02www.dti.gov.uk/social enterprise [Google Scholar]] Alongside the
growth in the sector, the need for education and training to both improve
performance and support those employed within the sector has been
recognized. The DTI Strategy emphasizes the importance of education and
training as a tool for capacity building, sharing knowledge, and
communicating best practice throughout the sector. This paper focuses on
education, training, and learning in the social and community enterprise
sector, concentrating in particular on those who are who are leading their
organizations or at least aspiring to these positions.
The scope of education and training within the social and community
enterprise sector is reviewed. This reveals a distinct gap in provision of
rigorous evidence-based learning that is nevertheless firmly rooted in practice
for leaders at senior management level. For this group, issues concerning
time, cost, method, content, availability, and effectiveness of management
education and training, including implementation of learning, are particularly
important. These issues are discussed in the paper and the way in which they
informed the development of the part-time Masters program in Community
Enterprise offered by the Judge Institute of Management, University of
Cambridge, are outlined.
Data on the value the students have obtained from the course has been
collected regularly from students and this shows five key benefits arising from
the course:
 implementation of organizational learning;
 learning new developments;
 gaining a more strategic perspective;
 networking opportunities; and
 personal development.
The teaching philosophy and the students’ responses in these areas are
analyzed and conclusions are drawn on the educational needs of leaders in
the sector and how they can best be addressed.
In conclusion, given the increasing importance of social and community

enterprises, there is potentially a large market for management education for
chief executives and senior personnel who lead these organizations. These
students need tailor-made programs to ensure that the material they are
taught is relevant to their immediate needs as well as being of longer-term
benefit. They need considerable support to ensure they can cope with the
demands of part-time academic study while also running demanding and
often fragile organizations. However, if this can be managed the immediate
benefits to the participants are real and have, in many of our students’ cases,
transferred into direct gains in winning additional resources, and/or in
managing the resources they have more efficiently and effectively.
Such high-quality courses are, however, expensive and unlikely to be

affordable by many of those most able to benefit from the degree. Bursaries
to enable leaders from the sector to join such courses are urgently required.
Governments, local authorities, and charities supporting these organizations
need to recognize the benefit of encouraging the organizations that they
support to take part in such training and to include resources for this in their
budgets.
https://www.tandfonline.com/doi/abs/10.1081/PAD-200067384
HOW TO EDUCATE MANAGERS TO SUPPORT KNOWLEDGE SHARING IN
THEIR COMPANIES?
Managers need to be educated in many fields. Last years the managerial

practice shows how it is important when managers know how to create the
knowledge sharing culture in their companies. But in reality, not many space
is devoted to this in managerial courses or study programs for managers or
students of management and leadership. The aim of this article is to bring the
answer to the research question: How to educate managers to support
knowledge sharing culture in organisations? The results published in this
article are based on empirical study, a primary research among 204 managers
acting in the Czech Republic, mostly managers from industrial enterprises and
commercial companies. 62 respondents were members of top management;
the rest were middle line managers. The average length of their duties in
managerial work was 9 years. This empirical study shows what is the current
situation among the Czech managers and this paper presents particular
results only. It is said that the best way how to educate someone is to be a
role-model for him/her, walk the talk. That is why one of the particular
research questions focused on this fact: "Are managers in the Czech Republic
the role-models of knowledge sharing for their employees?" The results show
that more than 60 percent of respondents share their knowledge with the
others so we can say they are a role-models for their employees. This number
is not very high if we realize that every manager can influence many people in
the company. Another interesting fact was proved that role-models are more
frequent on the top management position, than the middle management
position. Maybe the top managers experienced better education or top
managers much more realize that it is good for the whole company to be the
role-model and share their knowledge. When educating managers to be a
role-model of knowledge sharing could be significant also the fact, if the
managers themselves had experienced personal benefit from knowledge
sharing. This lead us to the second particular research question: Can personal
experience with having a mentor (or any other person behaving as the
mentor) help managers to create the knowledge sharing culture? The results
proved that managers, who had not any mentor, are less wilful to transmit
their knowledge to further generation in comparison with managers who
experienced having a mentor. So personal experience with having a mentor
helps managers to be the role-models of knowledge sharing for their
employees. When speaking about education of managers to support
knowledge sharing in companies, the paper also discusses that managers can
be motivated by presentation of research findings which shows how the
corporations can benefit from knowledge sharing. The second part of the
article brings the answer to the question: "What can the managers do to
support the knowledge sharing in a company?" It is the content of such
education of managers. Mostly it is about creating the knowledge sharing
culture in corporations. Because there is really big space for improvements,
the article brings practical recommendations to the top managers, the HR
managers, and first line managers that can be applied by them to support
knowledge sharing in the company. The social context of knowledge sharing
is discussed, as well as the question: “How to build the mutual trust among
employees?”
https://library.iated.org/view/BENYAHYA2017HOW
How To Train Your Managers -- Leadership Training For Employees
In many small companies, there is no formal manager training. People do

well, they get promoted. Small companies can’t afford to have an internal
University or to send all aspiring managers to external training. If something
needs to be done, it often needs to be done immediately, so your motivated
employees will jump in to fill the breach and the next thing you know they
are managing a small team or project.
Some people thrive when thrown into the mix like this, others might tread
water frantically, while still others flounder about badly. In my current
company, we have definitely been guilty in the past of throwing people into
the breech and expecting them to suddenly develop manager skills without
any formal training. However as we’ve grown over the years we’ve found that
there is no escaping the need for a more formal approach to training our
managers.
Luckily for us, we have internal resources that most companies don’t have.
Over 60% of our employees are former military, with varying degrees of
leadership training and skills. In addition, several of our employees (Tom
Lang, Russ Novak, RADM (ret) Ham Tallent) are former “TOPGUN” (the Navy
Fighter Weapons School) instructors, one of the most rigorous schools in
terms of instructor training. As a company we perform training across a
variety of areas from information security to ethics training. In short we have
the resources to train our people in the skills they need to succeed.
One training program developed by former Top Gun instructor Tom Lang we
have run is a one-day course intended to teach college students or others
without any U.S. military background how to speak the language of the
military and military procurement programs so that they can add value much
more quickly with our Department of Defense customers. The program is
called “DoD 101” (for Department of Defense 101). That course is designed
to help a young, smart person straight from their degree program or from
civilian industry to understand the acronyms, the service organizational and
rank structures, and some of the complexities of the customers’ programs
much more quickly than they would by simply being thrown into the job. The
course helps to eliminate many of the uncertainties and anxieties confronting
those new hires that have not been exposed to DoD practices.
We also run an internal training program on information security skills

whereby some of our cyber-ninjas pick a particular topic and conduct tailored
training for the other members of the team. This is an effective method of
ensuring that perishable skills are kept current, and that the most recent cyber
exploitation events are broken down for our information security team
members. Externally, we run a program to teach government employees and
other defense contractors the ins and outs of DIACAP – the process by which
the Do helps to secure its information systems against cyber attacks.
Another training program under development is “Leadership 101”. This

program is designed for those employees who aspire to a management role.
This course leverages many leadership best-practices from the military and
industry. This course breaks down management skills and practices into three
basic types: personal skills, the ability to look at oneself; team-focused skills
that enhance a manager’s ability to effectively employ small groups; and
corporate focused skills or those needed to make your company more
successful. Through this course, leaders will develop both day-to-day
management skills (time cards, tracking costs, hiring/firing) as well as the
classic leadership skills (motivating your people, planting the seeds of a vision,
etc.) needed to establish and maintain a corporate culture of excellence.
Cyber Security Federated Model (Photo credit: Argonne National Laboratory)
This program is going to be rolled out in the next few months, to a waiting
group of smart future (and some current) managers. I’m hoping and
expecting that this training will help ensure that even as the company grows
there will be a consistency of leadership throughout the ranks which will
create a stable platform for future growth.
https://www.forbes.com/sites/ericbasu/2012/08/23/how-to-train-your-
managers-leadership-training-for-employees/#241cbb053596
CHAPTER 2
BUSINESS AND ITS ENVIRONMENT
This topic area is concerned with understanding the nature and purpose of
business activity and identifying the structures, functions, cultures and
objectives of different business organisations. Central to an understanding of
business and its internal and external environments is a recognition that the
world in which businesses operate is in a constant state of change. The
impact of political, economic, social, technological, legal, environmental and
ethical factors and how these might influence business activity is considered.
The extent to which businesses can respond and adapt to such change is
likely to determine their success.
The Cambridge International AS Level material has its emphasis on an

understanding of business concepts and their application to business
situations, although some analysis of some issues is expected together with
some evaluation. Emphasis should be on the importance of enterprise,
business objectives/ structure/size and stakeholders. All sizes of businesses
should be considered (including multinationals).
Let us make in-depth study of the meaning of business, its environment and
factors of total environment.
Business:
In common sense, the term business refers to buying and selling of goods.
But in modern times, business covers a wide and complex field of industry
and commerce involving complex activities related to both production and
distribution. All these activities satisfy the diverse needs of the society and
also help generate profit of business firms or units.
Thus by the term business we mean organized efforts of different enterprises

for supplying various goods and services to the ultimate consumers for a
profit. Business, in nutshell, includes diverse activities related to production,
marketing, transport, trade, finance, banking, insurance, advertising and some
other activities connected with industry and commerce.
One thing is common, i.e., all these activities are conducted as well as
motivated by profits. Moreover, all these activities must be conducted within
the existing legal framework. Violations of which must be excluded from
business activity.
In modern times, the purpose of business goes beyond earning profit. It is

thus an important institution in society, may be within public or private sector,
which supplies goods and services, generate job opportunities, offer better
quality of life, contribute the economic growth of the economy and can put it
in the global map by joining the international trade. Thus business has a very
important role to play with every segments of the society.
Environment:
The term environment includes all external forces which have an important
bearing of the functioning of the business. According to Barry M. Richman
and Melvyn Copen, “Environment factors or constraints tire largely if not
totally, external and beyond the control of individual industrial enterprises and
their managements. These are essentially the ‘givers’ within which firms and
their managements must operate in a specific country and they vary, often
greatly from country to country.”
The business environment usually offers immense opportunities for exploiting

potential market and also poses threats to the firm itself. On this aspect,
William F. Glueck and Lawrence R. Jauch observed, “The environment includes
factors outside the firm which can lead to opportunities for or threats to the
firm. Although there are many factors, the most important of the sectors are
socioeconomic, technological, supplier, competitors and government.”
Thus this definition shows that environment includes different factors like
socio-economic, technological, supplier, competitor and the government.
Besides, there are two other factors, viz., physical or natural environment and
global environment. Thus total environment of business is consisting of six
factors, viz., political-legal, economic, social-cultural, technological, global and
natural.
It would be better to give a brief description of these factors:
1. Economic Environment:
Economic environment includes all those forces which have an economic
impact on business. Accordingly, total economic environment is consisting of
agriculture, industrial production, infrastructure, planning, basic economic
philosophy, stages of economic development, trade cycles, national income,
per capita income, savings, money supply, price level and population. Business
and economic environment is closely related. Business usually collects all its
required inputs from the economic environment available and also absorbs
the output of business units.
2. Politico-legal Environment:
It includes the activities of three political institutions, viz., legislature, executive

and judiciary which usually play useful role in shaping, directing, developing
and controlling business activities. The legislature takes decision on a
particular course of action, the executive implements those decisions through
government agencies and the judiciary serves as a watch-dog for ensuring
public interest in all the activities of legislature and executive. In order to
attain a meaningful business growth a stable and dynamic politico-legal
environment is very important.
3. Technological Environment:
Technological environment is exercising considerable influence on business.

Technology implies systematic application of scientific or other organized
knowledge to practical tasks or activities. Business makes it possible for the
technology to reach the people in proper format. As the technology is
changing fast thus businessmen should keep a close look on those
technological changes for its adaptation in their business activities.
4. Global or International Environment:
Global environment is also playing an important role in shaping the business

activity. With the liberalization and globalization of the economy, business
environment of an economy has become totally different when it has to bear
all shocks and benefits arising out of global environment.
5. Natural:
Natural environment also influences business in a diverse way. Business of
modern times is also dictated by nature. Natural calamities like floods,
droughts, earthquake etc. affect the business activities in a worst manner.
6. Social-Cultural:
Finally, social and cultural environment is also influencing the business

environment indirectly. These includes people’s attitude to work and wealth,
ethical issues, role of family, marriage, religion and education and also social
responsiveness of business.
Firstly, there is symbiotic relationship (see Fig. 1.1) between business and its
environment and also among the environmental factors. Secondly, these
environmental factors are quite dynamic in nature. Thirdly, a number of
business firms will be in a position to bring necessary changes in its
environment, which a particular firm individually may not do so.
http://www.yourarticlelibrary.com/business-environment/business-and-its-
environment-meaning-and-factors/62808
Top 7 Components of Business Environment
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Let us make in-depth study of the seven components of business

environment in India.
Business environment has some important components. The major

components of business environment include capital flow, required
infrastructural facilities, suitable endowments, investment friendly conditions,
wide size of market, suitable industrial relations, adequate manpower and
entrepreneurial ability, suitable law and order conditions, political stability,
legal support, cultural set up, suitable natural environment etc. The aforesaid
components are very important for maintaining a sound business
environment in the country.
The following are some of the important components of business

environment available in India:
(i) Endowment Component:
The endowment component of business environment in India is quite

conducive as the country possesses adequate reserve of natural resources.
These resources include land, water, minerals, forest resources, manpower
resources etc.
(ii) Infrastructural Component:
The infrastructural component of business environment in India is not at all

suitable and adequate from the very beginning. This infrastructural
component include transportation and communication facilities, generation
and distribution of power, irrigation facilities, banking and insurance, health
and educational set up etc.
(iii) Technological Component:
The technological component of business environment in India is also not

adequate. Rather, India is a technology deficient country. The country has not
yet been able to update its indigenous technology of production related to
both agriculture and industry, resulting in low productivity and competitive
threat for these sectors.
(iv) Industrial Relations Component:
Industrial relations component is an important determinant of business

environment in a country like India. Peaceful relations between labourers and
employers are an important aspect of business environment. Positive trade
union activities enhance the quality of business environment. In recent years,
the industrial relations in India has improved a lot leading to improvement in
the quality of business environment in India.
(v) Law and Order Conditions:
The law and order conditions of the country are an important component of
business environment. Maintenance of law and order in a proper manner also
helps the country to attain economic development at a quicker pace along-
with maintenance of sound business environment within the country.
(vi) Natural Support:
Another important component determining business environment in the

country is the natural support which includes suitable climate, balanced
weather, suitable natural environment, i.e., free from flood and draught etc.
(vii) Other Components:
The other components determining business environment in India includes

political stability, politico legal environment, legal support, cultural set up etc.
These other components are also quite important for maintaining a sound
business environment in the country.
http://www.yourarticlelibrary.com/business-environment/top-7-
components-of-business-environment/62815
The Interface between Business and Various Types of Business Environment
The important points that explains the interface between business and various
types of environment are as follows:
Both the environment and business are interrelated and interdependent on

each other for its survival and growth. Both cannot- exist without each other.
Business to run successfully has to adjust with the changing environment.
Both business and environment are closely related concepts.
The interface between business and various types of environment can be

briefly explained with the following points:
1. Business and Demographic Environment:

Demography is the study of human population with reference to their age,
gender, status, occupation, income, education etc. The demographic
environment differs from country to country and has significant implications
on business.
On the other hand business firm also affect the demographic pattern of a
country. Due to diversified demographic environment, a business is compelled
to adopt different functional and marketing strategies.
For example:
Business undertakes various social welfare program like health camps,

awareness, and literacy program etc. In the same way rise in the income level
of consumers helps in rise in demand for products.
The business undertakes research activities to turn the potential customers

into final customers with reference to their age, gender, income, status,
qualification etc. for undertaking production, marketing and promotional
activities. The business firm has to adjust with the changing demographic
pattern of the country.
2. Business and Economic Environment:
The economic environment of a country comprises of the structure of the

economy, economic resources, level of income, economic policies etc. Any
change in the economic policy can have a positive or negative impact on the
working of the business.
Business organisation has to consider the various economies prevailing in the

country like import policy, industrial policy, taxation policy etc. which can have
a great impact on the business.
Economic policies like liberalization, privatization, and globalization had a

considerable impact on the business-.
Changes in the economic policy ultimately affect the business. For example:
change in the income structure of the consumers will ultimately affect their
purchasing power and sale of the organisation.
Increase in the income well result into growth of organisational sale and vice
versa. Favourable economic environment helps in rise in the national income
and increase in the standard of living.
Favourable economic environment also facilitates increase in foreign direct

investment and growth of industrial sector resulting into growth of economy
as a whole.
The business should study the economic environment to understand the

market conditions, international events, to analyse investment policies,
competitor’s policies, economic policies of government etc.
3. Business and Technological Environment:
Technology refers to the set of process in an organisation to transform raw

material of resources into finished goods and services. Technology includes
tools- both machine (hard technology) and way of thinking (soft technology).
It includes not only the knowledge and method but also the entrepreneurial
expertise that enhances the competitiveness of a nation. Technology can
greatly influence business decisions. It helps in minimizing cost, reducing
wastage and brings higher efficiency in the production process. Information
technology has brought about revolutionary changes in the world of business
environment.
On the other hand business is responsible for technological up gradation as a

huge amount is spent on Research and Development to introduce new
products and concepts in the business. This technological revolution became
a compelling reason for inter-nationalization and Globalization. Quick
adoption of latest technology will help the business to gain competitive
advantage and facilitates overall industrial efficiency.
4. Business and Natural Environment:
Both natural environment and business are closely related and have influence
over each other. Natural environment is also termed as physical environment
Business depends on the nature for supply of resources like raw material,
water etc.
The business has to adjust with the environment to ensure its survival.
Ecological factors have recently assumed great importance. The excessive use
of these resources, environmental pollution and the disturbance of ecological
balance has caused great concern. One cannot take the environment granted.
The business should give due consideration for the conservation of natural
resources. Similarly geographical factors affect the location of industries.
Availability of natural resources is the fundamental factor in the development
of industries.
Weather and climatic conditions affect the demand pattern. Manufacturing

the most important aspect of business depends upon physical environment.
Thus natural environment has a great influence on the economic activities.
Similarly environment is also depended upon the business. Business should
produce pollution free products and service to keep the environment
pollution free and maintain the ecological balance.
5. Business and Cultural Environment:
Culture refers to values, attitude, belief, morals, customs and traditions.

Culture is a critical component of business environment. Proper understanding
of cultural dimension is very important for product development, promotion,
human resource management etc.
Business and culture are closely associated with each other. Culture is the
powerful element to shape the business. The business should come up with
various cultural events, thereby promoting and preserving the rich culture of a
country.
Business should be well versed with the culture, language, traditions shared
by different community to meet their wants. Understanding of culture is very
essential in the formulation of business strategies. As culture influence
business activities, business also should influence our culture by promoting
festivals and cultural events in the country.
http://www.yourarticlelibrary.com/business-environment/the-interface-
between-business-and-various-types-of-business-environment/7498
“Business Environment encompasses the -climate’ or set of conditions,
economic, social, political or institutional in which business operations are
Conducted.”—Arthur M. Weimer
“Environment contains the external factors that create opportunities and

threats to the business. This includes socio-economic conditions, technology
and political conditions.” – William Gluck and Jauch
‘‘Business environment is the aggregate of all conditions, events and

influences that surround and affect it.”—Keith Davis
“The environment of business consists of all those external things to which it

is exposed and by which it may be influenced directly or indirectly”. —
Reinecke and Scholl.
“The total of all things external to firms and industries that affect the function
of the organization is called business environment.”—Wheeler
“Civilizations require challenges to survive. Thus, environment also contains
hostilities and dangers that may be overcome by individuals and
organizations.”—Arnold J. Toynbee
On the basis of the above definitions, it is very clear that the business
environment is a mixture of complex, dynamic and uncontrollable external
factors within which a business is to be operated.
Nature of Business Environment:
The nature of Business Environment is simply and better explained by the

following approaches:
(i) System Approach:
In original, business is a system by which it produces goods and services for

the satisfaction of wants, by using several inputs, such as, raw material, capital,
labour etc. from the environment.
(ii) Social Responsibility Approach:

In this approach business should fulfill its responsibility towards several
categories of the society such as consumers, stockholders, employees,
government etc.
(iii) Creative Approach:
As per this approach, business gives shape to the environment by facing the
challenges and availing the opportunities in time. The business brings about
changes in the society by giving attention to the needs of the people.
Significance of Business Environment:
Business Environment refers to the “Sum total of conditions which surround

man at a given point in space and time. In the past, the environment of man
consisted of only the physical aspects of the planet Earth (air, water and land)
and the biotic communities. But in due course of time and advancement of
society, man extended his environment through his social, economic and
political function.”
In a globalized economy, the business environment plays an important role in

almost all business enterprises. The significance of business environment is
explained with the help of the following points:
(i) Help to understand internal Environment:
It is very much important for business enterprise to understand its internal

environment, such as business policy, organisation structure etc. In such case
an effective management information system will help to predict the business
environmental changes.
(ii) Help to Understand Economic System:
The different kinds of economic systems influence the business in different

ways. It is essential for a businessman and business firm to know about the
role of capitalists, socialist and mixed economy.
(iii) Help to Understand Economic Policy:

Economic policy has its own importance in business environment and it has
an important place in business. The business environment helps to
understand government policies such as, export-import policy, price policy;
monetary policy, foreign exchange policy, industrial policy etc. have much
effect on business.
(iv) Help to Understand Market Conditions:
It is necessary for an enterprise to have the knowledge of market structure

and changes taking place in it. The knowledge about increase and decrease in
demand, supply, monopolistic practices, government participation in business
etc., is necessary for an enterprise.
http://www.yourarticlelibrary.com/business/business-environment-nature-
and-significances-of-business-environment/23367
7 Important Characteristics of Business Environment
Following are the chief characteristics of the business environment:
(1) Totality of External Forces:
Business environment is the sum totals of all those factors/forces which are
available outside the business and over which the business has no control. It
is the group of many such forces that is why, its nature is of totality.
(2) Specific and General Forces:
The forces present outside the business can be divided into two parts –
specific and general.
(i) Specific:
These forces affect the firms of an industry separately, e.g., customers,

suppliers, competitive firms, investors, etc.
(ii) General:
These forces affect all the firms of an industry equally, e.g., social, political,
legal and technical situations.
(3) Inter relatedness:
The different factors of business environment are co-related. For example, let
us suppose that there is a change in the import-export policy with the coming
of a new government.
In this case, the coming of new government to power and change in the
import-export policy are political and economic changes respectively. Thus, a
change in one factor affects the other factor.
(4) Dynamic Nature:
As is clear that environment is a mixture of many factors and changes in

some or the other factors continue to take place. Therefore, it is said that
business environment is dynamic.
(5) Uncertainty:
Nothing can be said with any amount of certainty about the factors of the
business environment because they continue to change quickly. The
professional people who determine the business strategy take into
consideration the likely changes beforehand.
But this is a risky job. For example, technical changes are very rapid. Nobody
can anticipate the possibility of these swift technical changes. Anything can
happen, anytime. The same is the situation of fashion.
(6) Complexity:
Environment comprises of many factors. All these factors are related to each
other. Therefore, their individual effect on the business cannot be recognised.
This is perhaps the reason which makes it difficult for the business to face
them.
(7) Relativity:
Business environment is related to the local conditions and this is the reason
as to why the business environment happens to be different in different
countries and different even in the same country at different places.
http://www.yourarticlelibrary.com/management/7-important-
characteristics-of-business-environment/891
CHAPTER 3
ABSTRACT
Ethics are our belief about what is right and wrong. Although these beliefs
may vary from one individual to another or one company to another, ethics
and business responsibility are an important part to any company's marketing
department. The goals of the marketing department are to target an
audience, appeal to that audience, and get the audience to purchase that
particular product or service. In doing this, a company must make sure that
they are first abiding by all laws and regulations, but they should also strive
to be sure that they are acting ethically and honestly. One interpretation of
morality may vary greatly among individuals, but it still exists.
While the necessity for ethics in business and marketing has been pointed out
in numerous sources, many have contended that a good deal of consumer
concern is with marketing and its related activities. Within companies, trade
organizations, governmental organizations, and professions, one can observe
a shift in the way of thinking about codes of ethics. The moral resistance of
an organization is referred to as the degree in which the organization can
resist the influencing factors, which exercise a downward pressure on the
moral content of the organization. The moral content of the organization is
the degree in which that organization makes an effort to fulfill its
responsibilities with respect to its stakeholders.
https://www.tandfonline.com/doi/abs/10.1300/J090v20n01_05?
Ethics and Social Responsibility
*Dr. Vipin K Sharma Abstract: ‘Ethics and Social Responsibility’ is a growing

and developing discipline. Lately it has come into focus ever since the former
Prime Minister Atal Bihari Vajpayee pleaded for “zero tolerance for corruption”
in order to restore ethics. He rightly pointed out that it cannot become a
reality unless we work with the foundation of human values.1 The recent
scams perpetrated by Messrs Raja & Kalmadi in 2G Spectrum, Commonwealth
Games and the latest Citi Bank scam etc have already considerably
undermined this foundation. Presently professional education is equally
callous towards human values and ethics. The educated leaders and
business entrepreneurs have forgotten Vivekanand, Gandhi,Tagore,
Aurobindo andseveral other towering personalities for their valuable
contributions in building this foundation. Ethics and social responsibilities
have an international dimension that should not be ignored. The field of
business ethics has traditionally been the domain of all intellectuals. The
literature on ethics today, is not ready to handle the practical needs of
managers – the persons, mainly responsible for adhering to ethics in the
workplace. The values that were rigidly followed are now strongly questioned.
There are no clear moral and ethical values to navigate managers through
complex dilemmas about what is right or wrong. This article mainly deals with
the understanding of business ethics and social responsibility and its
implementation at grass root level arising out by virtue of one’s position in an
organization especially during this dynamic scenario mainly because of
emergence of affluent society and LPG i.e. Liberalization, Privatization and
Globalization.
Key words: Ethics, values, liberalization, privatization and globalization
Introduction: Ethics and social responsibility are two concepts many

individuals believe go hand in hand for organizations in the business
environment. Business ethics represents the moral principles an organization
uses to ensure all employees act in an acceptable manner when completing
business functions. Social responsibility is typically an ideological theory
governments and the general public hold, believing that businesses should
not conduct themselves in a manner counter to cultural or societal norms. The
blending of business ethics and social responsibility bears when organizations
implement a written code of ethics to prove that the organization only acts in
its best interest so long as it does not damage the organization’s social
responsibility.
Ethics: When man first evolved himself from the primeval existence, his
behavior and thinking were not different from those of animals. He largely
depended on instincts for his existence and survival. But gradually, his rational
faculty began to develop and he grew from the stage of an animal guided by
the instincts to that of a rational animal.
Every individual in this world wants to lead an ideal and luxurious life, where
he tries to find out the norms, ideals and standards of the particular society
and this can be achieved through three ideals of human life, i.e. truth, beauty
and goodness. They refer to three aspects of our experiences- ‘thinking’;
‘feeling’ and ‘willing’. These all refer to the Ethics.
Ethics is a set of moral principles, which guide the code of conduct and
behavior of a human being in his life and in society. It is a person’s own
positive attitude and desirable behavior and it differs from one another
among individuals.
The concept of ethics comes from the Greek word, “Ethos” that means both
an individual’s character and a community’s culture. Generally it is believed
that business ethics involves adhering to legal, professional, regulatory and
company standards, keeping promises and commitments and abiding by
general principles like truth, fairness, honesty and respect. The Institute of
Global Ethics defines ethics as ‘obedience to the unenforceable’.2
This is a well-known fact that Ethics is a complex area where no universal set
of ethical principles exists and what is right and what is wrong often depends
on circumstances. Due to global competition and rapidly developing
technology change has become inevitable. The increasing realization of this
has led to a change in thinking about the effective approaches to getting
firms and their employees to behave ethically. Initial approaches were heavily
based on “compliance’, the creation of rules and systems that people and
company had to follow. But rules are hard to draft and can quickly become
obsolete while systems can tie people up in bureaucracy and hamper business
efficiency. This has led to the evolution of the belief that although some level
of compliance will always be necessary, it is more important to instill ethical
“values” into the corporate body and the employees that inhibit it. To do this
successfully, businesses must have a vision about why they exist and that
ought to be shared by everyone connected with the organization. They must
have also shared beliefs about acceptable standards of behavior.
It may be called an American subject in the sense that most recent work on
the subject has been carried out in United States. The ethics movement has
grown most strongly in United States because the risk of being penalized by
the courts for unethical behavior is greatest there. Business values and
business ethics have a world wide dimension that must be looked after in an
appropriate manner. Many people remain unconvinced by the business ethics
movement. Business ethics matters because there is plenty of evidence that
unethical behavior can cost a company its reputation and hard cash and
reduce its stock price. Moreover companies that are perceived as ethical are
more likely to build trust among their employees, customers, shareholders
and the wider community and this surely is good for business.
Some entrepreneurs focus on specific ways to exhibit integrity and respect in

daily business interactions with clients, suppliers, and other designers, while
others address much broader issues and present fundamental ethical
principles. Some fundamental of these practices are:
Ethics ’not I, but thou,’ with motto: ‘not self, but non-self’3
•Always respect your competitors in fair and open competition
Be honest when you are describing your professional experience and

competencies
Avoid any type of conflict of interest
Acquaint yourself with each client’s business and provide honest and impartial
advice
Maintain the confidentiality of all client information
Eliminate any form of hidden compensation or kickback
Maintain commitment to the development of innovative work of the highest

quality
Never compromise on any forms of plagiarism ethics and social responsibility
Acknowledge contribution of others who have collaborated unconditionally

with you in creating a niche in your field.
Some of the scandals in the business world had their origin in little regard
being shown to morality. The scandals convince that maxims such as
“business is business: or principles like ‘caveat emptor’ (let the buyer beware)
fall far short of public expectation.4 Businesses are under pressure to define
their standards and codes of practice. Henry Thomas, a cellular technician for
Southern Bell, who was asked to randomly terminate five employees as a
disciplinary measure. He refused to do so based on his moral code, and was
then terminated. He decided to go into business for himself and dedicate his
business to God. He states that, “The Bible tells us that God’s eyes are looking
to and fro throughout the earth for those whose hearts are wholly committed
to Him. Every day, I pray that God would give us wisdom and that He would
find us usable so that we can continue our mission to help others and to
show God how much we love Him.”5
Another very important area for ethics to be apparent is in the field of

education. The public often hears of student ragging resulting suicide in
reputed colleges. These instances scare people and lead to mistrust. It is
essential that college authorities maintain ethical standards so that they can
maintain the trust that we need to place in them as customers.
The interest in business ethics has increased by recent trend towards Total
Quality Management. TQM has two consequences for business ethics. First, it
means that the consumer’s interests cannot be ignored. Second, management
should define procedures and codify them for the introduction of code
practice. The codification of procedures involves duties which impart a value
judgment.
Social Responsibilities: In the heyday of laissez-faire capitalism of Europe, the

maxim was maximizing profit. Social responsibility had no place in this
scheme of things. The business of business is business. So long as man made
money was kept out of the crunches of society he felt no particular obligation
and acknowledged no responsibility to the community. ‘The public be
damned.’ Social welfare was not his concern.
Business is an organ of society and it operates in a socio- economic

environment. Every business depends on the society for the needed inputs life
money, men and skills. A business also should strive to enhance local
community service and also facilitate better living conditions for its employers.
By training members of staff, wherever possible, anyone in an organization
can lead to the employees who feel empowered for working harder as well as
make good decisions. Having concerned of well-being of employees may lead
to the healthier and thus happier workforce. This should be ensured by
carrying out a comprehensive introspection of every decision made in relation
to profitability as well as long term value and social responsibility. A business
can only justify its existence by fulfilling its obligation to the society.
There is lot of money poured into advertising of a product which can be

saved and utilized for people only when we put real policies in place that take
care of the employees and as well the local community. It would automatically
bring about enhancement of business brand. This ultimately, will culminate
into higher profitability. It is also essential to offer training to staff members
besides facilitating promotions from within the organization. This will
ultimately lead to employees that feel empowered, which will in turn lead to
hard working staffs that have the capability of making better decisions. There
are lots of methods to do this includes education, sports as well as
environment.
It has become a routine for many businesses to indulge in serving their

community by either supporting local charities or offering sponsorship to the
local people, which in turn ensures better living conditions for the local
people. Many ways to achieve this include education, as well as sports and
environment. Such ethical actions usually bare fruits in the long term as they
serve in enhancement of the brand of the business, which ultimately will bring
about profitability over the long term. You need to have little patience and
wait, unless you get success for your actions. Auckerman in his Micro-level
model of social responsibility advising that the managers should “act early in
the life cycle of any social issue in order to enjoy the largest amount of
managerial discretion over the outcome.” 6
While good ethical practices in business are one of the biggest keys to any
companies’ success, social responsibility is another factor that is often
forgotten as well. Businesses have an obligation to their communities as well,
and philanthropy on the part of businesses of any size is the key to staying in
the good graces of not only consumers, but also the cities and states in which
the business operates.
One of the biggest advantages of a company social responsibility policy and

corporate philanthropy is not only improved public image, but also an
improved local economy that is promulgated by the businesses that support it
I feel proud to mention here the mission of a company Hindustan Lever

Limited (HLL) which states that- “Hindustan Lever’s commitment to national
priorities has ensured that the company is part of people’s lives at the grass
root level making a difference to Indian and to Indians – in depth, in width
and in size. Hindustan Lever has always identified itself with the nation’s
priorities: employment generation, development of backward area, agricultural
linkages, exports, contribution to exchequer etc.”7 Besides this, the other
example in this aspect is of TISCO which affirms ‘its faith in democratic values
and in the importance of success of individuals, collectives and corporate
enterprise for the economic emancipation and prosperity of the country’
invests a lot to gain long term profits, but can’t cling to it, and LIUN is the
example which gained short term profits with no social responsibility with
regard to quality, quantity and price of the product. Other examples are who
have public and brand image in the market because they fulfilled the needs
of the society are: Reliance, Sony, IBM etc. It is noteworthy that an estimated
four hundred crores rupee is spent per annum by corporate organizations on
corporate philanthropy in India.
While business ethics certainly play an important role in the business

environment, it is possible for governments and individuals to demand too
much social responsibility from companies. While companies should not
abuse or misuse natural and economic resources, companies cannot pay for
all the needs or wants of individuals. Some governments, individuals, or
special interest groups can focus on business ethics and social responsibility
and try to force companies into paying more money to improve society than
the company can afford. This can result in lower business profits and the
inability to pay for future, more reasonable and responsible social items.
In conclusion, Ethics and Social Responsibility are very important for modern
businesses to possess to function productively and profitably. In a world that
has been rocked by multiple corporate scandals and environmental disasters
consistently, it is essential that companies put forth the effort to regain and
maintain the trust of their customers and the public in general. Hopefully the
efforts of organizations like Bainbridge Graduate Institute, and people like
Henry Thomas will help to regain some of the footing that has been lost over
the years. With a little effort and responsibility, perhaps the organizations of
today can leave the world in a better shape for our children and the
generations to come.
https://www.nina.no/english/About-NINA/Ethics
CHAPTER 4
Forms of Business Ownership
One of the first decisions that you will have to make as a business owner is
how the company should be structured. This decision will have long-term
implications, so consult with an accountant and attorney to help you select
the form of ownership that is right for you. In making a choice, you will want
to take into account the following:
 Your vision regarding the size and nature of your business.
 The level of control you wish to have.
 The level of “structure” you are willing to deal with.
 The business’s vulnerability to lawsuits.
 Tax implications of the different ownership structures.
 Expected profit (or loss) of the business.
 Whether or not you need to re-invest earnings into the business.
 Your need for access to cash out of the business for yourself.
Sole Proprietorship
The vast majority of small business start out as sole proprietorship. These
firms are owned by one person, usually the individual who has day-to-day
responsibility for running the business. Sole proprietors own all the assets of
the business and the profits generated by it. They also assume complete
responsibility for any of its liabilities or debts. In the eyes of the law and the
public, you are one in the same with the business.
Advantages of a Sole Proprietorship
Easiest and least expensive form of ownership to organize.

Sole proprietors are in complete control, and within the parameters of the
law, may make decisions as they see fit.
Sole proprietors receive all income generated by the business to keep or

reinvest.
Profits from the business flow-through directly to the owner’s personal tax
return.
The business is easy to dissolve, if desired.
Disadvantages of a Sole Proprietorship
Sole proprietors have unlimited liability and are legally responsible for all
debts against the business. Their business and personal assets are at risk.
May be at a disadvantage in raising funds and are often limited to using

funds from personal savings or consumer loans.
May have a hard time attracting high-caliber employees, or those that are
motivated by the opportunity to own a part of the business.
Some employee benefits such as owner’s medical insurance premiums are not
directly deductible from business income (only partially deductible as an
adjustment to income).
Partnerships
In a Partnership, two or more people share ownership of a single business.

Like proprietorships, the law does not distinguish between the business and
its owners. The Partners should have a legal agreement that sets forth how
decisions will be made, profits will be shared, disputes will be resolved, how
future partners will be admitted to the partnership, how partners can be
bought out, or what steps will be taken to dissolve the partnership when
needed;Yes, its hard to think about a “break-up” when the business is just
getting started, but many partnerships split up at crisis times and unless there
is a defined process, there will be even greater problems. They also must
decide up front how much time and capital each will contribute, etc.
Advantages of a Partnership
Partnerships are relatively easy to establish; however time should be invested

in developing the partnership agreement.
With more than one owner, the ability to raise funds may be increased.
The profits from the business flow directly through to the partners’ personal
tax returns.
Prospective employees may be attracted to the business if given the incentive

to become a partner.
The business usually will benefit from partners who have complementary skills.
Disadvantages of a Partnership
Partners are jointly and individually liable for the actions of the other partners.
Profits must be shared with others.
Since decisions are shared, disagreements can occur.
Some employee benefits are not deductible from business income on tax
returns.
The partnership may have a limited life; it may end upon the withdrawal or
death of a partner.
Types of Partnerships that should be considered:
General Partnership
Partners divide responsibility for management and liability, as well as the
shares of profit or loss according to their internal agreement. Equal shares are
assumed unless there is a written agreement that states differently.
Limited Partnership and Partnership with Limited Liability
“Limited” means that most of the partners have limited liability (to the extent
of their investment) as well as limited input regarding management decisions,
which generally encourages investors for short term projects, or for investing
in capital assets. This form of ownership is not often used for operating retail
or service businesses. Forming a limited partnership is more complex and
formal than that of a general partnership.
Joint Venture
Acts like a general partnership, but is clearly for a limited period of time or a
single project. If the partners in a joint venture repeat the activity, they will be
recognized as an ongoing partnership and will have to file as such, and
distribute accumulated partnership assets upon dissolution of the entity.
Corporations
A corporation, chartered by the state in which it is headquartered, is

considered by law to be a unique entity, separate and apart from those who
own it. A corporation can be taxed; it can be sued; it can enter into
contractual agreements. The owners of a corporation are its shareholders. The
shareholders elect a board of directors to oversee the major policies and
decisions. The corporation has a life of its own and does not dissolve when
ownership changes.
Advantages of a Corporation
Shareholders have limited liability for the corporation’s debts or judgments

against the corporations.
Generally, shareholders can only be held accountable for their investment in

stock of the company. (Note however, that officers can be held personally
liable for their actions, such as the failure to withhold and pay employment
taxes.)
Corporations can raise additional funds through the sale of stock.
A corporation may deduct the cost of benefits it provides to officers and

employees.
Can elect S corporation status if certain requirements are met. This election
enables company to be taxed similar to a partnership.
Disadvantages of a Corporation
The process of incorporation requires more time and money than other forms
of organization.
Corporations are monitored by federal, state and some local agencies, and as
a result may have more paperwork to comply with regulations.
Incorporating may result in higher overall taxes. Dividends paid to

shareholders are not deductible form business income, thus this income can
be taxed twice.
Other forms as needed for capital gains, sale of assets, alternative minimum
tax, etc.
Sub chapter S Corporations
A tax election only; this election enables the shareholder to treat the earnings
and profits as distributions, and have them pass thru directly to their personal
tax return. The catch here is that the shareholder, if working for the company,
and if there is a profit, must pay herself wages, and it must meet standards of
“reasonable compensation”. This can vary by geographical region as well as
occupation, but the basic rule is to pay yourself what you would have to pay
someone to do your job, as long as there is enough profit. If you do not do
this, the IRS can reclassify all of the earnings and profit as wages, and you will
be liable for all of the payroll taxes on the total amount.
No single form of ownership will give you everything you desire. You’ll have
to make some trade-offs. Because each option has both advantages and
disadvantages, your job is to decide which one offers the features that are
most important to you. In the following sections we’ll compare three
ownership options (sole proprietorship, partnership, corporation) on these
eight dimensions.
Sole Proprietorship and its Advantages
In a sole proprietorship, as the owner, you have complete control over your
business. You make all important decisions and are generally responsible for
all day-to-day activities. In exchange for assuming all this responsibility, you
get all the income earned by the business.
Profits earned are taxed as personal income, so you don’t have to pay any
special federal and state income taxes.
Disadvantages of Sole Proprietorships
For many people, however, the sole proprietorship is not suitable. The flip
side of enjoying complete control is having to supply all the different talents
that may be necessary to make the business a success. And when you’re
gone, the business dissolves. You also have to rely on your own resources for
financing: in effect, you are the business and any money borrowed by the
business is loaned to you personally. Even more important, the sole proprietor
bears unlimited liability for any losses incurred by the business. The principle
of unlimited personal liability means that if the business incurs a debt or
suffers a catastrophe (say, getting sued for causing an injury to someone), the
owner is personally liable. As a sole proprietor, you put your personal assets
(your bank account, your car, maybe even your home) at risk for the sake of
your business. You can lessen your risk with insurance, yet your liability
exposure can still be substantial. Given that Ben and Jerry decided to start
their ice cream business together (and therefore the business was not owned
by only one person), they could not set their company up as a sole
proprietorship.
Partnership
A partnership (or general partnership) is a business owned jointly by two or
more people. About 10 percent of U.S. businesses are partnerships2 and
though the vast majority are small, some are quite large. For example, the big
four public accounting firms are partnerships. Setting up a partnership is more
complex than setting up a sole proprietorship, but it’s still relatively easy and
inexpensive. The cost varies according to size and complexity. It’s possible to
form a simple partnership without the help of a lawyer or an accountant,
though it’s usually a good idea to get professional advice.
Professionals can help you identify and resolve issues that may later create
disputes among partners.
The Partnership Agreement
The impact of disputes can be lessened if the partners have executed a well-
planned partnership agreement that specifies everyone’s rights and
responsibilities. The agreement might provide such details as the following:
Amount of cash and other contributions to be made by each partner
Division of partnership income (or loss)
Partner responsibilities—who does what
Conditions under which a partner can sell an interest in the company
Conditions for dissolving the partnership
Conditions for settling disputes
Unlimited Liability and the Partnership
A major problem with partnerships, as with sole proprietorships, is unlimited

liability: in this case, each partner is personally liable not only for his or her
own actions but also for the actions of all the partners. If your partner in an
architectural firm makes a mistake that causes a structure to collapse, the loss
your business incurs impacts you just as much as it would him or her. And
here’s the really bad news: if the business doesn’t have the cash or other
assets to cover losses, you can be personally sued for the amount owed. In
other words, the party who suffered a loss because of the error can sue you
for your personal assets. Many people are understandably reluctant to enter
into partnerships because of unlimited liability. Certain forms of businesses
allow owners to limit their liability. These include limited partnerships and
corporations.
Limited Partnerships
The law permits business owners to form a limited partnership which has two
types of partners: a single general partner who runs the business and is
responsible for its liabilities, and any number of limited partners who have
limited involvement in the business and whose losses are limited to the
amount of their investment.
Advantages and Disadvantages of Partnerships
The partnership has several advantages over the sole proprietorship. First, it
brings together a diverse group of talented individuals who share
responsibility for running the
business. Second, it makes financing easier: the business can draw on the
financial resources of a number of individuals. The partners not only
contribute funds to the business but can also use personal resources to
secure bank loans. Finally, continuity needn’t be an issue because partners can
agree legally to allow the partnership to survive if one or more partners die.
Still, there are some negatives. First, as discussed earlier, partners are subject
to unlimited liability. Second, being a partner means that you have to share
decision making, and many people aren’t comfortable with that situation. Not
surprisingly, partners often have differences of opinion on how to run a
business, and disagreements can escalate to the point of jeopardizing the
continuance of the business. Third, in addition to sharing ideas, partners also
share profits. This arrangement can work as long as all partners feel that
they’re being rewarded according to their efforts and accomplishments, but
that isn’t always the case. While the partnership form of ownership is viewed
negatively by some, it was particularly appealing to Ben Cohen and Jerry
Greenfield. Starting their ice cream business as a partnership was inexpensive
and let them combine their limited financial resources and use their diverse
skills and talents. As friends they trusted each other and welcomed shared
decision making and profit sharing. They were also not reluctant to be held
personally liable for each other’s actions.
Corporation
A corporation (sometimes called a regular or C-corporation) differs from a

sole proprietorship and a partnership because it’s a legal entity that is entirely
separate from the parties who own it. It can enter into binding contracts, buy
and sell property, sue and be sued, be held responsible for its actions, and be
taxed. Once businesses reach any substantial size, it is advantageous to
organize as a corporation so that its owners can limit their liability.
Corporations, then, tend to be far larger, on average, than businesses using
other forms of ownership. As Figure 5.2 shows, corporations account for 18
percent of all U.S. businesses but generate almost 82 percent of the
revenues.3 Most large well-known businesses are corporations, but so are
many of the smaller firms with which likely you do business.
Ownership and Stock
Corporations are owned by shareholders who invest money in the business by

buying shares of stock. The portion of the corporation they own depends on
the percentage of stock they hold. For example, if a corporation has issued
100 shares of stock, and you own 30 shares, you own 30 percent of the
company. The shareholders elect a board of directors, a group of people
(primarily from outside the corporation) who are legally responsible for
governing the corporation. The board oversees the major policies and
decisions made by the corporation, sets goals and holds management
accountable for achieving them, and hires and evaluates the top executive,
generally called the CEO (chief executive officer). The board also approves the
distribution of income to shareholders in the form of cash payments called
dividends.
Benefits of Incorporation
The corporate form of organization offers several advantages, including

limited liability for shareholders, greater access to financial resources,
specialized management, and continuity.
Limited Liability
The most important benefit of incorporation is the limited liability to which

shareholders are exposed: they are not responsible for the obligations of the
corporation, and they can lose no more than the amount that they have
personally invested in the company. Limited liability
would have been a big plus for the unfortunate individual whose business
partner burned down their dry cleaning establishment. Had they been
incorporated, the corporation would have been liable for the debts incurred
by the fire. If the corporation didn’t have enough money to pay the debt, the
individual shareholders would not have been obligated to pay anything. They
would have lost all the money that they’d invested in the business, but no
more.
Financial Resources
Incorporation also makes it possible for businesses to raise funds by selling

stock. This is a big advantage as a company grows and needs more funds to
operate and compete. Depending on its size and financial strength, the
corporation also has an advantage over other forms of business in getting
bank loans. An established corporation can borrow its own funds, but when a
small business needs a loan, the bank usually requires that it be guaranteed
by its owners.
Specialized Management
Because of their size and ability to pay high sales commissions and benefits,
corporations are generally able to attract more skilled and talented employees
than are proprietorships and partnerships.
Continuity and Transferability
Another advantage of incorporation is continuity. Because the corporation has

a legal life separate from the lives of its owners, it can (at least in theory) exist
forever.
Transferring ownership of a corporation is easy: shareholders simply sell their

stock to others. Some founders, however, want to restrict the transferability of
their stock and so choose to operate as a privately-held corporation. The
stock in these corporations is held by only a few individuals, who are not
allowed to sell it to the general public.
Companies with no such restrictions on stock sales are called public

corporations; stock is available for sale to the general public.
Drawbacks to Incorporation
Like sole proprietorships and partnerships, corporations have both positive

and negative aspects. In sole proprietorships and partnerships, for instance,
the individuals who own and
manage a business are the same people. Corporate managers, however, don’t
necessarily own stock, and shareholders don’t necessarily work for the
company. This situation can be troublesome if the goals of the two groups
differ significantly.
Managers, for example, are often more interested in career advancement than
the overall profitability of the company. Stockholders might care more about
profits without regard for the well-being of employees. This situation is known
as the agency problem, a conflict of interest inherent in a relationship in
which one party is supposed to act in the best interest of the other. It is often
quite difficult to prevent self-interest from entering into these situations.
Another drawback to incorporation—one that often discourages small
businesses from incorporating—is the fact that corporations are more costly
to set up. When you combine filing and licensing fees with accounting and
attorney fees, incorporating a business could set you back by $1,000 to
$6,000 or more depending on the size and scope of your business.4
Additionally, corporations are subject to levels of regulation and governmental
oversight that can place a burden on small businesses. Finally, corporations
are subject to what’s generally called “double taxation.” Corporations are
taxed by the federal and state governments on their earnings. When these
earnings are distributed as dividends, the shareholders pay taxes on these
dividends. Corporate profits are thus taxed twice—the corporation pays the
taxes the first time and the shareholders pay the taxes the second time.
Five years after starting their ice cream business, Ben Cohen and Jerry
Greenfield evaluated the pros and cons of the corporate form of ownership,
and the “pros” won. The primary motivator was the need to raise funds to
build a $2 million manufacturing facility. Not only did Ben and Jerry decide to
switch from a partnership to a corporation, but they also decided to sell
shares of stock to the public (and thus become a public corporation). Their
sale of stock to the public was a bit unusual: Ben and Jerry wanted the
community to own the company, so instead of offering the stock to anyone
interested in buying a share, they offered stock to residents of Vermont only.
Ben believed that “business has a responsibility to give back to the
community from which it draws its support.”5 He wanted the company to be
owned by those who lined up in the gas station to buy cones. The stock was
so popular that one in every hundred Vermont families bought stock in the
company.6 Eventually, as the company continued to expand, the stock was
sold on a national level.
Other Types of Business Ownership
In addition to the three commonly adopted forms of business organization—

sole proprietorship, partnership, and regular corporations—some business
owners select other forms of organization to meet their particular needs. We’ll
look at several of these options:
Limited-liability companies
Cooperatives
Not-for-profit corporations
Limited-Liability Companies
How would you like a legal form of organization that provides the attractive
features of the three common forms of organization (corporation, sole
proprietorship and partnership) and avoids the unattractive features of these
three organization forms? The limited-liability company (LLC) accomplishes
exactly that. This form provides business owners with limited liability (a key
advantage of corporations) and no “double taxation” (a key advantage of sole
proprietorships and partnerships). Let’s look at the LLC in more detail.
In 1977, Wyoming became the first state to allow businesses to operate as

limited-liability companies. Twenty years later, in 1997, Hawaii became the last
state to give its approval to the new organization form. Since then, the
limited-liability company has increased in popularity. Its rapid growth was
fueled in part by changes in state statutes that permit a limited-liability
company to have just one member. The trend to LLCs can be witnessed by
reading company names on the side of trucks or on storefronts in your city. It
is common to see names such as Jim Evans Tree Care, LLC, and For-Cats-Only
Veterinary Clinic, LLC. But LLCs are not limited to small businesses. Companies
such as Crayola, Domino’s Pizza, Ritz-Carlton Hotel Company, and iSold It
(which helps people sell their unwanted belongings on eBay) are operating
under the limited-liability form of organization.
In a limited-liability company, owners (called members rather than

shareholders) are not personally liable for debts of the company, and its
earnings are taxed only once, at the personal level (thereby eliminating
double taxation).
We have touted the benefits of limited liability protection for an LLC. We now
need to point out some circumstances under which an LLC member (or a
shareholder in a corporation) might be held personally liable for the debts of
his or her company. A business owner can be held personally liable if he or
she:
Personally guarantees a business debt or bank loan which the company
fails to pay.
Fails to pay employment taxes to the government.
Engages in fraudulent or illegal behavior that harms the company or

someone else.
Does not treat the company as a separate legal entity, for example, uses
company assets for personal uses.
Cooperatives
A cooperative (also known as a co-op) is a business owned and controlled by

those who use its services. Individuals and firms who belong to the
cooperative join together to market products, purchase supplies, and provide
services for its members. If run correctly, cooperatives increase profits for its
producer-members and lower costs for its consumer-members. Cooperatives
are fairly common in the agricultural community. For example, some 750
cranberry and grapefruit member growers market their cranberry sauce, fruit
juices, and dried cranberries through the Ocean Spray Cooperative.7 More
than three hundred thousand farmers obtain products they need for
production—feed, seed, fertilizer, farm supplies, fuel—through the Southern
States Cooperative.8 Co-ops also exist outside agriculture. For example, REI
(Recreational Equipment Incorporated), which sells quality outdoor gear, is the
largest consumer cooperative in the United States, with more than three
million active members. The company shares its financial success each year
with its members, who get a refund each year based on their eligible
purchases.9
Not-for-Profit Corporations
A not-for-profit corporation (sometimes called a nonprofit) is an organization

formed to serve some public purpose rather than for financial gain. As long as
the organization’s activity is for charitable, religious, educational, scientific, or
literary purposes, it can be exempt from paying income taxes. Additionally,
individuals and other organizations that contribute to the not-for-profit
corporation can take a tax deduction for those contributions. The types of
groups that normally apply for nonprofit status vary widely and include
churches, synagogues, mosques, and other places of worship; museums;
universities; and conservation groups.
There are more than 1.5 million not-for-profit organizations in the United
States.10 Some are extremely well funded, such as the Bill and Melinda Gates
Foundation, which has an endowment of approximately $40 billion and has
given away $36.7 billion since its inception.11 Others are nationally
recognized, such as United Way, Goodwill Industries, Habitat for Humanity,
and the Red Cross. Yet the vast majority is neither rich nor famous, but
nevertheless makes significant contributions to society.
Mergers and Acquisitions
The headline read, “Wanted: More than 2,000 in Google Hiring Spree.”12 The
largest Web search engine in the world was disclosing its plans to grow
internally and increase its workforce by more than 2,000 people, with half of
the hires coming from the United States and the other half coming from
other countries. The added employees will help the company expand into new
markets and battle for global talent in the competitive Internet information
providers industry. When properly executed, internal growth benefits the firm.
An alternative approach to growth is to merge with or acquire another

company. The rationale behind growth through merger or acquisition is that 1
+ 1 = 3: the combined company is more valuable than the sum of the two
separate companies. This rationale is attractive to companies facing
competitive pressures. To grab a bigger share of the market and improve
profitability, companies will want to become more cost efficient by combining
with other companies.
Mergers and Acquisitions
Though they are often used as if they’re synonymous, the terms merger and
acquisition mean slightly different things. A merger occurs when two
companies combine to form a new Key Take-Aways:
A sole proprietorship, a business owned by only one person, accounts for

72% of all U.S. businesses.
Advantages include: complete control for the owner, easy and inexpensive to
form, and owner gets to keep all of the profits.
Disadvantages include: unlimited liability for the owner, complete

responsibility for talent and financing, and business dissolves if the owner
dies.
A general partnership is a business owned jointly by two or more people, and

accounts for about 10% of all U.S. businesses.
Advantages include: more resources and talents come with an increase in

partners, and the business can continue even after the death of a partner.
Disadvantages include: partnership disputes, unlimited liability, and shared

profits.
A limited partnership has a single general partner who runs the business and
is responsible for its liabilities, plus any number of limited partners who have
limited involvement in the business and whose losses are limited to the
amount of their investment.
A corporation is a legal entity that’s separate from the parties who own it, the
shareholders who invest by buying shares of stock. Corporations are governed
by a Board of Directors, elected by the shareholders.
Advantages include: limited liability, easier access to financing, and unlimited

life for the corporation.
Disadvantages include: the agency problem, double taxation, and

incorporation expenses and regulations.
CHAPTER 5
DECISION MAKING
3 Conditions for Decision Making
Decision Making face three particular conditions they are; uncertainty,

certainty, and risk. These conditions determine the probability of an error
in decision making.
In this post, we will look at the there decision-making conditions.
Certainty
Under conditions of certainty, the manager has enough information to

know the outcome of the decision before it is made.
For example, the managing director of a company has just put aside a
fund of $100,000 to cover the renovation of all executive offices. This
money is kept in a savings account at a local Bank that pays 7.50 percent
interest.
Half of the money will be drawn out next month and the rest when the job
is completed in 90 days.
Can the managing director determine today how much interest will be
earned on the money over the next 90 days?
Given the fact that the managing director knows how much is being
invested, the length of investment time, and the interest rate, the answer is
yes.
Investment of the funds in a local Bank branch is a decision made under

conditions of certainty. The ultimate outcome in terms of interest is known
today.
Risk
Most managerial decisions are made under conditions of risk. Risks exist
when the individual has some information regarding the outcome of the
decision but does not know everything when making decisions under
conditions of risk, the manager may find it helpful to use probabilities.
To the degree that probability assignment is accurate; he or she can make

a good decision.
Let us consider the case of a company that has four contract proposals it
is interested in bidding on. If the firm obtains any one of these contracts, it
will make a profit on the undertaking.
However,
because only a limited number of personnel can devote their time to

putting bids together, the firm has decided to bid on one proposal only—
one that offers the best combination of profit and probability that the bid
will be successful. This combination is known as the expected value.
The profit associated with each of these four contract proposals, as

presented in Table 1, varies from Tk. 100,000 to Tk. 400,000. Notice that
the contract offering Tk. 400,000 is the least likely to be awarded to the
company, but it offers the smallest profit of the four.
On which of the proposals should the firm bid?
As the table shows, the answer is number three. It offers the greatest
expected value.
If we reversed the probabilities so that proposal no.1 had a 20 percent
success factor and proposal no. 4 had a 60 percent success factor, the
manager would opt for the latter proposal.
The effective manager must investigate each alternative in order to be as

accurate as possible in making probability assignments.
Uncertainty
Uncertainty exists when the probabilities of the various results are not
known. The manager feels unable to assign estimates to any of the
alternatives.
While the situation may seem hopeless, mathematical techniques have

been developed to help decision makers’ deal with uncertainty.
Some of these are heavily quantitative in nature and are outside the scope
of our present consideration.
Some non-mathematical approaches have been developed to supplement

these techniques, however, and they do warrant brief discussion.
One is simply to avoid situations of uncertainty. A second is to assume that

the future will be like the past and assign probabilities based on previous
experiences.
A third is to gather as much information as possible on each of the

alternatives, assuming the fact that the decision-making condition is one of
risk, and assign probabilities accordingly.
Using these approaches actually requires side-stepping the uncertainty

factor. It is assumed not to exist, and this can be a wise philosophy. After
all, by definition, uncertainty throws a monkey wrench into decision-
making.
The manager’s best approach is to withdraw from this condition either by

gathering data on the alternatives or by making assumptions that allow
the decision to be made under the condition of risk.
Although many managers are perfectly comfortable in making decisions

under conditions of risk or uncertainty, they should always try to reduce
the uncertainty surrounding their decisions.
They can do so by conducting comprehensive and systematic research.
The research can tell them more about their alternatives, give them a
firmer basis for estimating possible outcome arid help them look at the
best and worst alternatives.
Think of manager Mr. Vin Diesel who is considering whether to finance a

new building by taking a fixed interest rate loan of 10 percent or a variable
rate of loan that begins at 9 percent but could increase by 4 percent.
Mr. Vin Diesel might consider that for the variable rate loan the best case
rate is 9 percent. The worst case rate is 13 percent.
By taking this approach, he can at least reduce some uncertainty and get
firmer support for his decision.
https://iedunote.com/decision-making-3-conditions
CHAPTER 6
PLANNING
Planning
Definition: Planing is the fundamental management function, which

involves deciding beforehand, what is to be done, when is it to be done,
how it is to be done and who is going to do it. It is an intellectual
process which lays down organizations objectives and develops various
courses of action, by which the organisation can achieve those objectives.
It chalks out exactly, how to attain a specific goal.
Planning is nothing but thinking before the action takes place. It helps us

to take a peep into the future and decide in advance the way to deal with
the situations, which we are going to encounter in future. It involves logical
thinking and rational decision making.
Characteristics of Planning
First and foremost managerial function: Planning provides the base for
other functions of the management, i.e. Organizing, staffing, directing and
controlling, as they are performed within the periphery of the plans made.
Goal oriented: It focuses on defining the goals of the organisation,
identifying alternative courses of action and deciding the appropriate
action plan, which is to be undertaken for reaching the goals.
Pervasive: It is pervasive in the sense that it is present in all the segments

and is required at all the levels of the organisation. Although the scope of
planning varies at different levels and departments.
Continuous Process: Plans are made for a specific term, say for a month,
quarter, year and so on. Once that period is over, new plans are drawn,
considering organization’s present and future requirements and conditions.
Therefore, it is an ongoing process, as the plans are framed, executed and
followed by another plan.
Intellectual Process: It is a mental exercise at it involves the application of

mind, to think, forecast, imagine intelligently and innovate etc.
Futuristic: In the process of planning we take a sneak peek of future. It

encompasses looking into future, to analyze and predict it, so that the
organization can face the future challenges effectively.
Decision making: Decisions are made regarding the choice of alternative

courses of action that can be undertaken to reach the goal. The alternative
chosen should be best among all, with least number of negative and
highest number of positive outcomes.
Planning is concerned with setting objectives, targets, and formulating plan

to accomplish them. The activity helps managers analyses the present
condition to identify the ways of attaining the desired position in future. It
is both, the need of the organization and the responsibility of managers.
Importance of Planning
It helps managers to improve future performance, by establishing

objectives and selecting a course of action, for the benefit of the
organization.
It minimize risk and uncertainty, by looking ahead into future.
It facilitates coordination of activities. Thus, reduces overlapping among

activities and eliminates unproductive work.
It states in advance, what should be done in future, so it provides direction
for action.
It uncovers and identifies future opportunities and threats.
It sets out standards for controlling. It compares actual performance with

the standard performance and efforts are made to correct the same.
Planning is present in all types of organisations, households, sectors,

economies, etc. We need to plan because future is highly uncertain and no
one can predict future with 100% accuracy, as the conditions can change
anytime. Hence, planning is the basic requirement of any organization for
the survival, growth and success.
Steps involved in Planning
CHAPTER 7
ORGANIZING BUSINESS ACTIVITIES
How to Organize a Business: Business Organization Tips
Good business organization can keep your operations running smoothly.

Follow these 7 tips to on how to organize a business so your company
runs like a well-oiled machine.
1. Define your business goals and plans
Write down your business goals and how you plan to achieve them in a

clear and precise way and stick to it. Keep this plan visible to remind
yourself of your plan from day to day. Buy an organizer or use software to
do this.
By studying and sticking to your plan, you can evaluate your position as to
where you stand and make any necessary adjustments to get back on
track.
2. Keep yourself and your employees motivated
When you and your employees are happy at work, it shows – and
customers notice it immediately. It also improves efficiency and that shows
your customers that you and your team are well- organized.
Keep rewarding your employees with any method that you feel works, so

as to keep their morale high.
3. Plan according to business organization needs
There are some things that need to be planned daily, weekly, monthly and
yearly. Make a list of these items and schedule them accordingly. Daily
planning should be done in the early morning or in the late evening the
previous day. Before you go to bed (or even earlier, perhaps before you
leave your office), make a list of the top 5 things you want to accomplish
the next day.
Tools like Wunderlist, Google’s Tasks, and Apple’s To Do list can make your
life easier. And with new products like Google’s Home Mini and Amazon’s
Echo Dot, you can have a voice-activated personal assistant to create lists
and remind you of meetings.
For other parts of your business, use accounting and product management
tools to plan your stock, increase product rotation, and manage your
expenses – thereby increasing your cash flow and profit margin.
4. Organize your office items
Clutter affects business organization. Keep your office or store as neat as

possible. Store items that you require everyday in the same place so that
you do not have to hunt for them every time you need them. Tidy filing
systems will make your life so much easier.
Here’s a little tip on how to organize a business that will take you a very
long way: when you reduce the visual clutter around you, you will reduce
your mental clutter automatically. That frees your mind to come up with
creative ideas to get customers and build your company. We
take imagination days regularly.
Clear out items that you do not need or have not used in a long time. This
will prevent lost time, helping you to concentrate on important issues
instead of trivial things.
5. Adhere to your commitments
Keep your promises to customers, suppliers and employees. Making

payments on time to your suppliers indicates a well-organized business.
Making deliveries at the agreed upon time to your customers will win their
trust and will help you in getting repeat orders, as well generate word-of-
mouth advertising.
6. Keep in touch with clients and prospects
Keeping in touch with your customers indicates that you care about them
and value their business. Send regular notes or emails about new products
and services that you offer.
Even better, send educational material that shows off your expertise. This is
different than sales material. Educational content marketing provides
insight into industry trends and alerts. This positions your company as a
trusted resource, making it very hard for your competitors to steal your
clients.
7. Use that computer
A computer is like having an extra brain. Use it as much as possible. Do

your accounting, inventory, delivery scheduling, and even your letter
writing on it. It will save you a lot of time and effort – much more than
doing these tasks manually.
With newer and faster applications, it is now possible to have a paperless,

uncluttered office. Having access to data at your fingertips indicates good
business organization. Just don’t forget to make a regular backup of your
data.
The more organized your small business is, the easier it will be to operate
day-to-day, leaving you more time to concentrate on increasing your
profits.
https://www.morebusiness.com/7-tips-organized/
CHAPTER 8
STAFFING
Definition: Staffing is a managerial function which involves obtaining,

utilising and retaining, qualified and competent personnel to fill all
positions of an organisation, from top to operative echelon. In finer terms,
staffing is placing the right person at the right job.
It aims at employing, deploying and monitoring a competent and

contented staff, i.e. daily wage earners, contract employees, consultants,
regular employees, etc., to undertake various managerial and non-
managerial activities in an organisation.
Importance of Staffing
It helps in the finding out efficient and effective workforce, to fill different

posts in the organisation.
It improves organizations performance and productivity by appointing the

right person at the right job.
It facilitates in identifying the staffing requirements of the organisation in
future.
It ensures continuous survival and growth of the organisation, by way of

succession planning for executives.
It develops personnel to take up top managerial positions of the

organisation.
It ensures training and development of the people working in the

organisation.
It assists the organisation in making the optimum use of human resources.
Therefore, staffing increases employee morale and job satisfaction. Further,

it helps the top management in ascertaining the manpower requirement
resulting from a promotion, transfer, employee turnover, retirement, etc. of
the existing employees.
Process of Staffing
Staffing process stresses on equipping the organisation with an exact

number of people, and that too at the right time and place, which will help
the organisation to attain its objectives effectively. The staffing process
involves a series of steps, discussed as under:
Manpower Planning: Popularly known as human resource planning, it is the

process of forecasting the firm’s demand for and supply of competent
workforce, in the adequate number in future.
Recruitment: It entails seeking, stimulating and obtaining, as many

applications as possible from the eligible and competent candidates.
Selection: It is the decisive step of the staffing process, which involves

differentiating between applicants, so as to identify and choose the
candidate who best fulfills the qualifications and requirements of the
vacant position.
Placement: The allocation of rank and responsibility to selected candidate,

is known as Placement.
Orientation and Induction: After the placement, the next step is to provide
the new employee with the information they require for functioning
comfortably and efficiently in an organisation. Induction is the process of
introducing the new joinees to the job and the organisation as well.
Training and Development: In this step, the new joinees undergo training
to acquire specific skills. Development implies learning opportunities,
designed by the organisation, to ensure the growth of employees.
Performance Appraisal: A rational assessment and evaluation of employee’s

performance against clear-cut benchmarks.
Career Management: Career Management is a process in which the

individual understand and learns new skills and interests and use them for
the betterment of the organization and self.
Compensation: Compensation refers to the consideration which an

individual gain, in return for his/her contribution to the organization.
Staffing process recognized the significance of each person employed by

the organization, as the work of every individual, keeps the organization
going. So, acquiring a good staff is a tough task, because the success of
the organization depends on it and so, the process should be performed
attentively.
Further, the top executives of the organization should be aware of the

national labor laws, which applies to the organization. Moreover, the
organization should be clear on how many employees, it is going to
recruit, for carrying out various activities of the organization.
Staffing refers to the continuous process of finding, selecting evaluating

and developing a working relationship with current or future employees.
The main goal of staffing is to fill the various roles within the company
with suitable candidates.
Staffing can be done within the company or by contractors at various

levels of the staffing process.
Staffing activities
• Profiling the job position

• Selecting employees
• Establishing performance standards
• Evaluating performance
• Training and development
https://www.talentlyft.com/en/resources/what-is-staffing
Staffing: Meaning, Features and Importance
Meaning of Staffing:
Staffing is the traditional management function of attraction and selection
of the best people and putting them on job where their talents and skills
can be best utilized, and retention of these people through incentives, job
training and job enrichment programme, in order to achieve both
individual and organisational objectives. This emphasizes managing human
and not material or financial resources.
Staffing is the function of human relationship in the organisational

structure with competent staff. Staffing in that part of the management
function which is concerned with people at work and with their
relationship within the organization.
Staffing may be defined as “that function of management, which is

concerned with selecting, developing, maintaining and utilizing the
manpower such that the objectives of the organization are achieved
economically and effectively. The objectives of individual employees of the
organization are accomplished to the highest degree possible, serving in
the process the objectives of the community at large.”
In simple words, staffing function relates to:
(a) Manpower planning.
(b) Recruitment, selection and placement of employees at the right places

and at the right time, doing things which result in the organization,
individual employees and the society at large receiving maximum long-run
benefits.
(c) Training and development through counselling and performance

evaluation.
(d) Employee welfare, including safety and health;
(e) Maintaining healthy labor relations;
(f) Framing suitable compensation policies;
(g) Maintaining effective discipline and control mechanism.
Generally, the staffing function is handled by Personnel Department or

Human Resource Department. The personnel policies are formulated by
the personnel department to achieve the maximum usage from personnel
in the organization.
These personnel policies and decisions are constantly changing due to the
following considerations:
1. The social and legal pressure is high to increase the proportion of

minority workers.
2. Affirmative action: Some organizations are obliged to give special

considerations to minorities including women workers in order to
compensate for past discrimination against them. This has been a result of
special upheaval against a male-dominated society and business where
women and minorities were not treated at equal level.
This affirmative action may require more per-assigned jobs for minorities
and women.
3. The workers are shifting their idea of success.
4. The number of people who prefer to work only part- time is increasing.
Even the full-time workers are trying to get fewer work week hours so that
they can have more leisure time.
5. Education level of the total work-force is rising.
6. There is a shift towards more skilled jobs. Due to advent of

mechanization and specialization and technological innovations, the
number of unskilled jobs has been steadily decreasing giving rise to more
skilled jobs requiring training and adoption.
7. Labor unions are becoming stronger and highly protective of the work-
force and thereby personnel management policies are affected by union’s
objectives and goals.
8. There are continuous social and technological changes.
Since a number of factors affect the formulation and execution of

personnel policies, it is important that these policies be based upon sound
principles which would ensure that equity and justice are accorded to all
employees, “a fair day’s pay for a fair day’s work is adopted and
opportunities are offered to all employees for job satisfaction and job
enrichment.”
Features of Staffing:
The following are the features or nature or characteristics of the staffing

function:
1. It is a universal function. It is the responsibility of every manager.
2. It is a continuous function performed by every manager to ensure

successful functioning of his department and to develop his successors.
Since staffing is a continuous function, it will be effective in realizing its
goals.
3. It is a dynamic and never-ending process. With changes in the size and

environment of the organization, changes take place in personnel.
4. Human resources expects and deserves dignity. So the success of the

staffing function lies in involving every individual in the organization in the
task of achieving organisational goals.
5. It is a difficult function with problems of social, philosophical and

psychological nature.
6. Staffing is a management function.
7. It in an integral part of management process.
8. Staffing is the pervasive function of management.
9. Staffing is concerned with the optimum utilization of human resources.
Importance of Staffing:
1. Staffing function help in discovering of qualified and obtaining

competent personnel for various jobs in the organization.
2. Since the right person is recruited for the right jobs, it leads for
maximum productivity and higher performance.
3. It promotes optimum utilization of human resources.

4. It increases job satisfaction and morale of the workers through adequate
remuneration for each job.
5. Since the staffing helps to ensure maximum utilization of human

resources exist the labor costs per unit or production will be reduced.
6. It ensures the continuity and growth of the organization, through

development managers.
7. It help, business activities are not disrupted at any time due to shortage
of competent workers or excess of workers. Because it forecasts the correct
staff requirements for the present and for the long-term.
8. It leads to efficient functioning of the organization due to systematic

program for the selection, training and appraisal of employees are required
by proper staffing function.
9. The use of latest technology can be achieved by the right person,

selected in the organization.
10. Employees now recognize the dignity of labor, there is awareness of

the role of performing the staffing function well; management can show
the significance it attaches to the human resource development.
Principles of Staffing:
The principles, which relate to the nature and purpose of staffing, selection,
training and development and appraisal of managers, are given below:
(1) Principle of Staffing Objective:
The objective of staffing is to bring people with required skills into the
organization and develop them into valuable organizational resource. The
implementation of this principle will help in the undertaking of
responsibilities of management by competent people and, thus ensure the
long-term success of the enterprise.
(2) Principle of Staffing Responsibility:
The responsibility of the efficient planning and execution of the staffing

function rests upon every manager at all levels of the organization. To be
effective, specialized services of the personnel, department should be
utilized to carry out the staffing responsibility.
(3) Principle of Human Resources Planning:
In today’s complex and dynamic environment, human resources planning

ensures that the organization has adequate supplies of managers. Planning
for manpower is necessary both when managerial talent is in abundance or
in scarcity.
(4) Principle of Recruiting Personnel:
To achieve the staffing objective, both internal and external sources of

recruitment should be judiciously utilized. The more an enterprise is
committed to the assurance of quality management, the more it will
encourage open competition among all candidates for management
positions.
(5) Principle of Training Objectives:
The more precisely and carefully the training aims are stated, the more
likely are the changes of accomplishing them. The training needs should
be stated for different categories of personnel. This will ensure the
measurement of the effectiveness of training efforts.
(6) Principles of Managerial Appraisal:
The more clearly verifiable objectives and required managerial activities are
identified, the more precise is the appraisal of managers against these
standards. This principle suggests that managerial performance appraisal
should be based both on the criteria of verifiable objectives and evaluation
of managers as managers.
Essentials of Good Staffing Policy:
1. It should take into account the interests of both employer and

employee.
2. It should be consistent with the basic overall policies of the unit.
3. It should be complete in every respect.
4. It should be simple and precise.

5. It should be reasonably stable and permanent.
6. It should be flexible, in relation to changes in environment.
7. It should be responsive to prevailing trends in industry and society.
8. It should take into account variations in the capabilities, interests and

attitudes of employees.
9. It should be uniformly applicable to all members of the organization.
10. It should be properly communicated to those for whom it is intended.
11. It should be acceptable to the employees.
The Process of Staffing:
The procedure or steps which are adopted in the managerial function of

staffing process.
It consists of the following sequential steps:
1. Analyze the job by preparing job description, job specification and job
analysis.
2. Estimation of manpower requirement,
3. Actual Recruitment:
This will assess all the internal and external sources from where the
required personnel can be recruited.
4. Employee Selection:
This crucial step involves using such techniques as would identify and
isolate the suitable people -who would eventually be selected.
5. Retention when the right people have been hired, they must be retained
so that they stay with the organization for a long time. This step discusses
such factors that are influential in maintaining the workforce.
6. Training and Development:

It consists of all such programme that assists in the continuous growth and
development of employees.
7. Performance Appraisal and Career Development:
This step involves devising methods that would judge an employee’s

performance over a period of time and providing opportunities to
employees to develop their careers and managerial talents. This can be
shown in diagram 1.
8. Promotion and Transfer:
Each of these steps is important for the maintenance, performance and

growth of the organization, each step involves attending to the human
assets and improving upon its quality.
http://www.businessmanagementideas.com/staffing/staffing-meaning-
features-and-importance/3508
Staffing: It’s Meaning, Nature and Importance | Business Management
Staffing: It’s Meaning, Nature and Importance!
Meaning of Staffing:
The term ‘Staffing’ relates to the recruitment, selection, development,

training and compensation of the managerial personnel. Staffing, like all
other managerial functions, is the duty which the apex management
performs at all times. In a newly created enterprise, the staffing would
come as a. third step—next to planning and organizing—but in a going
enterprise the staffing process is continuous.
In order to define and clarify the group of employees included in the
staffing concept, it must be stated that the staffing function is concerned
with the placement, growth and development of all of those members of
the organization whose function it is to get things done through one effort
of other individuals.
This definition includes all levels of management because those who will
occupy positions in the top two or three levels of management fifteen or
twenty years from now are likely to be found in the lower levels today.
“The managerial function of staffing involves manning the organisational

structure through effective and proper selection, appraisal, and
development of personnel to fill the roles designed into the structure.” —
Koontz and O’Donnell
Nature of Staffing:
Staffing is an integral part of human resource management. It facilitates

procurement and placement of right people on the right jobs.
The nature of staffing function is discussed below:
1. People Centered:
Staffing is people centered and is relevant in all types of organizations. It is

concerned with all categories of personnel from top to bottom of the
organization.
The broad classification of personnel may be as follows:
(i) Blue collar workers (i.e., those working on the machines and engaged in
loading, unloading etc.) and white-collar workers (i.e., clerical employees).
(ii) Managerial and non-managerial personnel.
(iii) Professionals (such as Chartered Accountant, Company Secretary,

Lawyer, etc.).
2. Responsibility of Every Manager:
Staffing is a basic function of management. Every manager is continuously

engaged in performing the staffing function. He is actively associated with
recruitment, selection, training and appraisal of his subordinates. These
activities are performed by the chief executive, departmental managers and
foremen in relation to their subordinates. Thus, staffing is a pervasive
function of management and is performed by the managers at all levels.
It is the duty of every manager to perform the staffing activities such as

selection, training, performance appraisal and counseling of employees. In
many enterprises. Personnel Department is created to perform these
activities.
But it does not mean that the managers at different levels are relieved of
the responsibility concerned with staffing. The Personnel Department is
established to provide assistance to the managers in performing their
staffing function. Thus, every manager has to share the responsibility of
staffing.
4. Human Skills:
Staffing function is concerned with training and development of human

resources. Every manager should use human relations skill in providing
guidance and training to the subordinates. Human relations skills are also
required in performance appraisal, transfer and promotion of subordinates.
If the staffing function is performed properly, the human relations in the
organization will be cordial.
5. Continuous Function:
Staffing function is to be performed continuously. It is equally important in

the established organizations and the new organizations. In a new
organization, there has to be recruitment, selection and training of
personnel. In a running organization, every manager is engaged in various
staffing activities. He is to guide and train the workers and also evaluate
their performance on a continuous basis.
Importance of Staffing:
It is of utmost importance for the organization that right kinds of people

are employed. They should be given adequate training so that wastage is
minimum. They must also be induced to show higher productivity and
quality by offering them incentives.
In fact, effective performance of the staff function is necessary to realize

the following benefits:
1. Efficient Performance of Other Functions:
Staffing is the key to the efficient performance of other functions of

management. If an organization does not have competent personnel, it
can’t perform planning, organization and control functions properly.
2. Effective Use of Technology and Other Resources:
It is the human factor that is instrumental in the effective utilisation of

latest technology, capital, material, etc. the management can ensure right
kinds of personnel by performing the staffing function.
3. Optimum Utilisation of Human Resources:
The wage bill of big concerns is quite high. They also spend money on
recruitment, selection, training and development of employees. In order to
get the optimum output from the personnel, the staffing function should
be performed in an efficient manner.
4. Development of Human Capital:
The management is required to determine the manpower requirements

well in advance. It has also to train and develop the existing personnel for
career advancement. This will meet the requirements of the company in
future.
5. Motivation of Human Resources:
The behaviour of individuals is shaped by many factors such as education

level, needs, socio-cultural factors, etc. that is why, the human aspect of
organisation has become very important. The workers can be motivated
through financial and non-financial incentives.
6. Building Higher Morale:
Right type of climate should be created for the workers to contribute to

the achievement of the organisational objectives. By performing the
staffing function effectively, management can show the significance it
attaches to the personnel working in the enterprise. This will increase the
morale of the employees.
http://www.yourarticlelibrary.com/business-management/staffing-its-
meaning-nature-and-importance-business-management/27912
Staffing Function of Management
There are certain things that you need for your business to succeed and
the first among that list in all kinds of businesses is human capital or
human resources. A business cannot be isolated from its workforce. This is
because of the fact that the workforce of the business is its life force. Thus
it becomes imperative that a business has the right amount and right kind
of people working in it.
This requirement of a business is met by a simple yet intricate function

known as Staffing. It involves the process of filling up the various positions
in the organisational structure with the right kind of people who are skilled
and competent to discharge the duties the position carries and implies. It
is a multi step process that commences with determining the number and
type of people you want in the workforce (workforce planning), recruiting,
selecting, training and developing, promoting, compensating, and
appraising the performance of the workforce.
The managerial function of staffing is managing the organization

manpower by means of suitable and active choice, assessment and
progression of the employees who fill the desired roles and positions.
According to Theo Haimann, “Staffing pertains to recruitment, selection,

development and compensation of subordinates.”
Features of Staffing Function
Critical managerial function – Staffing function is the amongst the most

critical managerial function along with planning, organizing, directing and
controlling. The success of all these managerial functions depend on the
workforce which is organized by staffing function.
Recurring activity – Staffing function is the responsibility of all the

managers working in all capacities and in all departments of the business.
Continuous function – Starting with recruitment to training and

development to managing employee expectations to important transfers
and promotions, staffing continues throughout the lifecycle and is thus a
continued function.
Based on efficient management of personnel – Human resources are

managed through a system of staffing functions, which should be fair,
dynamic and efficient in order to sustain in the long-term.
Hiring right people – This is done through rigorous recruitment process

and selecting the most appropriate candidate for the suitable job positions.
Also, promotions should be well thought through and in the direction of
long-term vision of the organization.
Importance of Staffing Function
Staffing is important to a business in multiple ways and some of them are

as follows :
Workforce is Life Force
As elaborated upon above the workforce of a business is its life force.

Without the requisite human involvement working in a motivated fashion
for the betterment and benefit of the business organisation, the business
will always be far from success.
Ensures Competency and Efficiency
Staffing as a process is not just about finding a person for the job, it is
about finding the right person for the job. Staffing involves identifying
competent and skilled people who will be able to fit directly into the
position and perform the functions it entails in an efficient and successful
manner. Staffing is not about making a layman a CEO, it is about making a
CEO a CEO.
Optimum Utilization of Resources
Resources are scarce in today’s world and all the resources including
human resources need to be optimally utilized. Staffing as a process
ensures that only the right amount of people are staffed in the business
and are functioning in it. This allows for clearing a huge amount of money
being wasted on unnecessary employees and also provides such
employees the opportunity to fare better in other businesses or initiatives
that actually need their services. Moreover an employee especially in the
higher levels of management are tasked with the function of managing all
resources of the business. If staffing is unable to put a competent person
in that position these resources could be wastefully used costing the
business and also the world a lot.
Training and Development of Employees
Staffing is also not just about finding the right person and putting him in a
position, but is also about helping him through the process of training and
development to adapt to the changing needs and requirements of that
position. It involves the process of improving the skill of the employee to
allow him to discharge the functions now and also in developing his
overall ability to facilitate him to discharge more complicated functions in
the future. Thus staffing involves preparing for the future as well as
allowing for the achievement of business goals now.
Motivation
By allowing for Training and Development staffing also creates a system of

motivation. The training provided by the business helps in boosting the
confidence level of the employees and is usually provided in order to teach
them efficient ways of discharging their functions. When the employees
understand that the business is willing to take such effort for improving
their skills for now and for the future, they will be motivated in working
harder for the business.
Improves Employee Satisfaction and Morale
The process of staffing also involves appraising the work done by the
employees and rewarding the employees for their hard work. Such
appreciation of the work so performed by the employees apart from being
a important source of motivation also plays huge role in satisfying them
and boosting their morale. This thereby ensures that the business does not
see huge labor shortages or the employees wanting to go to another
enterprise.
Steps Involved in Staffing Function of Management

Following is a brief discussion over important steps of staffing:
Manpower Planning
Manpower planning or in simple terms estimation of workforce

requirement is the first step in the process of staffing. As always, every
step starts off with the process of planning and identifying what is
required. This step involves outlining the various positions of the
organization and determining what category of people will be suitable for
it. For instance, if I am making an Engineering company, I would want
someone who has prior management experience and great understanding
of the discipline to be the CEO, so the qualification could be the person
being a veteran or a person with dual MBA and Engineering degree.
Recruiting
Once the positions are determined and the qualifications outlined there
arises the need to identify people meeting the conditions. This is done
through a process known as recruiting. This process could be done
through a multiplicity of ways like campus recruitment, On the Job
recruitment etc. In my engineering company me informing and them
accepting to be interviewed for the position will be recruiting.
Selection
Selection is a process that comes either prior to recruiting or not at all.

Recruiting nowadays is a combination of selection and recruiting. Selection
as a distinct process involves sifting through the recruits to understand
who can do the job better. The steps involved could be practical tests,
interviews, theory tests etc, all depending on the time, convenience and
policy of a company. In my company it would be about pitching the
veteran against the dual degree holder in a practical test environment
probably a crisis simulation and deciding who does better.
Workforce Orientation
Workforce orientation is a process by which a new employee recently

selected is made familiar to a work place. Being a new employee, he/she
might be unaware of the company’s policies, objectives, rules etc and will
require time getting familiar to. This is hastened by giving orientations to
make the employee to step into his position comfortably and with
complete commitment and awareness. Being a new company, my company
won’t require this but when the tenure of this CEO ends and a new one is
selected from outside the company then it may be necessary.
Training and Development
Picasso probably wasn’t so good at what he does when he first did it.
Practice makes one better at what he does. So does training. Even the
most efficient of employees sometimes need a hand or two to get better
at what they do and this is the underlying concept in providing training
and ensuring development. Training and Development are two different
concepts. Training is more concerned with making the employee at what
he does now. For instance helping an accountant to be a better
accountant. However development is concerned with improving the
faculties and abilities of the employee in such a manner so as to allow him
to discharge more complicated functions in the future. For instance, it
would be helping an branch accountant to be the regional chief
accountant.
Performance Appraisal
Mere employment and training of employees is not the end of staffing

function it also involves the function of appraising the level of performance
of each employee. In my engineering company, it would be understanding
how well the CEO, I selected is running the company.
Compensation
An employee will not work nothing. He needs to be compensated for the

work and effort he puts into the company. The total amount and nature of
compensation depends upon the nature of the work and the position of
the employee. A CEO gets a salary along with other benefits such as
Shares etc whereas a layoff would get only daily wages. Compensation
may also include bonuses and the like depending upon the performance
of the employee.
Promotion
Promotion is the elevation of rank and status of an employee. It is distinct
from the mere change of position of an employee and requires the two
mentioned elements. Staffing is also concerned with promotions as it is to
be done in context to the entire organisational structure of employees.
Promotions are granted to people who show promise and are committed
and even though a constituent element of the broader functioning of
staffing has a huge role to play in the company’s success.
https://www.managementstudyhq.com/features-importance-steps-
involved-staffing-function-management.html
CHAPTER 9
COMMUNICATING
Communicating with Impact: Ten Elements Of Effective Messaging

We’ve all heard the phrase, “Don’t judge a book by its cover.” If only that
were true in business. Carefully-designed “covers “are essential to enticing
potential buyers to commit to purchasing products and services.
Covers in business are not just on books. They include everything that acts
as an impression – websites, social media, newsletters, presentation and
marketing materials, e-mails, business cards, networking, and sales
conversations. Poorly-presented covers cripple and destroy businesses
every day.
The most effective stories communicate through a powerful combination

of visual, verbal, literal, and visceral content that articulates a focused and
compelling multi-purpose message. How one appears conveys just as
much as what one says.
Below are ten fundamental dos and don’ts that will empower you
to communicate with impact.
1) Be aware of your audience.
Successful storytelling relies on resonating with target audiences. Make

sure you know exactly who they are and what makes them tick. Have a
customized approach to each audience – individual or group – that speaks
directly to them, not at them. Don't speak to everyone in the exact same
way.
2) Be relevant.
Respect your audience by preemptively answering pertinent questions and

telling your specific story. Don't be generic, superficial, or waste people's
time.
3) Be focused.
Time is valuable and attention spans are short. Prioritize your primary
intention. Edit your message and break text apart into intuitive, easily-
digestible pieces.
Design with a hierarchy that adds contrast and layers your content. Don’t
ramble or present your copy as giant blocks of text.
4) Be compelling.
Make a meaningful connection that attracts your ideal audience. Provide

an intriguing entry point that will entice them to want to learn more. Don’t
be boring or chase the wrong audience.
5) Be distinctive.
Stand out from the crowd and be memorable. Don’t look, sound, feel, or
present yourself like everyone else.
6) Be authentic.
Honesty is the best policy, and is the key to positive and profitable
relationships. It’s not just what you say, it’s how you say it. Inject your
personality and point of view in order to resonate and be relatable.
Don’t appear disingenuous or pretend to be something you are not. That

breaks trust, which is the foundation of all relationships.
7) Be consistent.
Continually prove your value while being true to your core values. Create
and maintain a relationship with your audience that is built on trust and
reliability. Don’t present yourself in a way that is out of alignment with
your values, products, and services.
8) Be visual.
“A picture is worth a thousand words.” That phrase gained ubiquity for a

reason. Be thoughtful with your design choices, presenting imagery, colors,
fonts, style, and wardrobe to enhance your message.
Integrate your visual and verbal content into a singular voice to both show
and tell your story. Don’t rely exclusively on text or be haphazard with your
presentation.
9) Be both literal and visceral.

To reach the full spectrum of left-brain and right-brain interpretations,
share knowledge with emotional resonance by combining facts and figures
with personal stories and conceptual metaphors. Don't dominate your
communications with dry statistics or shiny objects.
10) Be open to other influences.
Show content to others, request honest feedback, and consider all

comments. Confirm that what you intend to say is being heard. Don’t
create in an isolated bubble.
Remember, quality presentation implies quality products and services and

justifies high-quality rates. Don’t underestimate the catastrophic damage
that sloppy presentation can inflict on your business.
Communicating Up: How to Talk to High-Level Management
Course Description:
The main objective of this session is to help you communicate effectively

with your boss and senior management. By the time the session is over,
you should be able to:
Communicate effectively with management so that your needs, views, and

concerns are heard;
Identify the needs and goals of your boss and senior management;
Provide management with the information and advice it needs to make

good decisions and solve problems;
Plan your communications so that they are timely and well received; and
Position yourself as a partner with your boss and senior management.
Course Duration: 35 Minutes
Why “Communicating Up: How to Talk to High-Level Management”

Matters:
Your relationships with your boss and other senior managers are extremely
important. And those relationships are based on effective communication.
Learning how to communicate up the organizational ladder effectively,
therefore, will help you maintain a successful partnership with higher-level
management and assist you in fulfilling your work duties.
Key Points:
Communicating information upward is an important part of your job.
You must be able to effectively communicate your needs and concerns.
You must also be able to communicate information that addresses the

needs and concerns of your boss and senior management.
Communicating up effectively positions you as a partner with higher-level

management.
Your success as a supervisor depends on effective two-way communication

with management.
http://trainingtoday.blr.com/course/communicating-up-how-to-talk-to-
high-level-management/
CHAPTER 10
MOTIVATING
Motivation is one of the basic psychological processes. Motivation is an

inner motive that encourages human behavior. Motivation can be activated
by various stimuli (stimulating or motivating factors). Motivation is closely
related to human performance.
Motivation is one of the basic psychological processes. Motivation is an

inner motive that encourages human behavior. Motivation can be activated
by various stimuli (stimulating or motivating factors). Motivation is closely
related to human performance.
Motivating is the effort of a individual or individuals to create within

another individual (other individuals) motivation for the desired behavior
and in practice, it is a necessary part of management, and it is based on
that person in terms of its natural motives of not wanting to work unless
he has a motivation.
Self-motivating is an effort of a human individual to motivate himself.
Motivation in practice: The aim of motivating is activation of a person,

stimulation of internal driving forces and direct their behavior to reach
an objective. For the organization motivating of individuals is one of
the key success factors. Using motivation in the organizations is created
and encouraged the inner interest in the people, willingness and their to
engage in fulfilling their tasks and goals of the organization. Motivation is
simply related to achievement of specific goal and satisfaction of achieving
it. The key is to achieve a genuine internal commitment.
Basic division of motivation factors is:
Positive motivation - is based on reward for better performance:
 Material participation factor
 Moral value factor

 Self-realization factor
 Negative motivation - is based on the power factors:
 Factor of existence
 Fear factor (fear of work or job loss)
https://managementmania.com/en/motivation--motivating
Motivating an Organization
The Importance of Motivation
Motivating employees can lead to increased productivity and allow an

organization to achieve higher levels of output.
LEARNING OBJECTIVES
Identify the importance of generating high levels of motivation in

employees within an organizational behavior framework
Motivation is generally what energizes, maintains, and controls behavior.
The role of motivation in the workplace is straightforward theoretically but

is difficult to actually measure.
Salary is often enough motivation to keep employees working for an

organization, but it’s not always enough to push them to fulfill their full
potential.
Motivated employees will retain a high level of innovation while producing

higher- quality work at a higher level of efficiency.
The opportunity cost in motivating employees is essentially zero.
productivity: The rate at which products and services are generated relative
to a particular workforce.
Opportunity cost: The value of investing in the next best alternative; the
value forfeited by taking a particular route.
innovation: The introduction of something new; the development of an
original idea.
Motivation in the Workplace
Generally speaking, motivation is what energizes, maintains, and controls

behavior. As such, it is clear why it plays an important role in the
workplace. But empirically measuring that role is another matter; it is
challenging to capture an individual’s drive in quantitative metrics in order
to ascertain the degree to which higher motivation is responsible for
higher productivity. However, it is widely accepted that motivated
employees generate higher value and lead to more substantial levels of
achievement. The management of motivation is therefore a critical element
of success in any business; with an increase in productivity, an organization
can achieve higher levels of output.
Research has shown that motivated employees will:
Always look for a “better” way to complete a task
Be more quality-oriented
Work with higher productivity and efficiency
In summary, motivated employees will retain a high level of innovation

while producing higher-quality work more efficiently. There is no downside
—i.e., the opportunity cost of motivating employees is essentially zero,
assuming it does not require additional capital to coach managers to act
as effective motivators.
Internal and External Motivation
Salary is often enough to keep employees working for an organization, but

it’s not always necessarily enough to push them to fulfill their full potential.
Herzberg’s theory emphasizes that while salary is enough to avoid
dissatisfaction, it is not necessarily enough to propel employees to increase
their productivity and achievement. In fact, the output of employees whose
motivation comes solely from salary and benefits tends to decline over
time. To increase employees’ efficiency and work quality, managers must
turn to understanding and responding to individuals’ internal and external
motivations. External motives include work environment (e.g., cramped
cubicle vs. airy, open office); internal motivations include thoughts and
emotions (e.g., boredom with performing the same task over and over vs.
excitement at being given a wide variety of project types).
Internal and external motives: There are four sources of motivation. The
three internal motives are needs, cognitions, and emotions. The fourth
source consists of external motives.
Perspectives on Motivation
Motivation in the workplace is primarily concerned with improving

employees’ focus through the use of incentives.
Compare and contrast the organizational behavior theories regarding

analyzing and improving motivation in the workplace
Generally, motivation in the workplace can be thought of through one of

four specific theoretical frameworks: needs-oriented, cognition-oriented,
behavior -oriented, and job-oriented.
In needs-oriented theories, motivation is achieved through fulfilling a

particular employee’s needs, with anything from salary to a sense of
fulfillment.
In cognition-oriented theories, motivation is achieved through fulfilling
employees’ rational expectation that they be compensated based directly
on the amount of value they provide.
In behavior-oriented theories, motivation is achieved through conditioning

(reinforcement and punishment). Conditioning is the implementation of
positive incentives to promote desirable behaviors and negative
consequences to discourage undesirable behaviors.
In job-oriented theories, motivation is achieved when employees feel

fulfilled and interested in their work; financial compensation is only enough
to avoid dissatisfaction.
conditioning: A technique of behavior modification, developed by B.F.

Skinner, that utilizes positive and negative reinforcement and positive and
negative punishment to alter behavior.
incentive: A reward used to motivate employees to perform better.
From a managerial perspective, very few ideas are more important than the
dynamics of motivation. Understanding what moves employees toward
efficiency and fulfillment is at the core of any manager’s responsibilities.
Motivation in the workplace is primarily concerned with improving
employees’ focus, often through pursuing positive incentives and avoiding
negative ones.
Theories of motivation are of course rooted in psychology. An individual

must direct their attention toward a task, generate the necessary effort to
achieve that task, and persist in working toward it despite potential
distractions. Various theories have attempted to identify the factors that
contribute to effective employee motivation, most of which are easily
divided into four broad categories:
 Needs-oriented theories
 Cognition-oriented theories
 Behavior-oriented theories
 Job-oriented theories
 Needs-Oriented Theories
At its most basic, motivation can be defined as the fulfillment of various
human needs. These needs can encompass a range of human desires, from
basic, tangible needs of survival to complex, emotional needs surrounding
an individual’s psychological well-being.
Hierarchy of Needs
The most well-known example of a needs-oriented theory of motivation is

Maslow’s Hierarchy of Needs. Maslow postulated that needs should be
fulfilled in a particular scaffolded order, with food, water, and shelter in the
bottom, most fundamental two tiers and intangible needs such as
fulfillment, self-esteem, and a sense of belonging in the upper three tiers.
While this framework makes a certain amount of logical sense, critics have
noted that there have been minimal data that suggest employees strive to
satisfy needs in the workplace in accordance with this hierarchical
framework. But the fundamental idea behind Maslow’s model is that
individuals have various tangible and intangible desires that can be
leveraged in the use of motivational incentives.
Maslow’s Hierarchy of Needs: Maslow’s Hierarchy of Needs postulates that

need must be fulfilled in a hierarchical order, from basic needs such as
food and water to more intangible needs such as self-esteem and a sense
of belonging.
Need for Achievement Theory
Atkinson and McClellan proposed the Need for Achievement Theory, which
highlights three particular needs in the context of the workplace:
achievement, authority, and affiliation. Atkinson and McClellan
hypothesized that every individual has a need for all three of these
intangible segments of fulfillment but that most individuals lean more
toward one of the three. For example, a salesman with a quota to fulfill
would be best paired with an achievement-oriented manager, as such a
goal-oriented approach toward, for example, a specific number of sales
would be highly motivating.
Cognition-Oriented Theories
Cognition-oriented theories generally revolve around expectations and
deriving equitable compensation for a given effort or outcome. There are
two main cognition-oriented theories: equity theory and expectancy theory.
Equity Theory
Equity Theory is based on the basic concept of exchange. It values the

culmination of employee experience, skills, and performance against their
respective compensation and advancement opportunities.
Expectancy Theory
Expectancy Theory is similarly derived, but it states this relationship

through an equation: Motivation = Expectation (Σ Instrumentality ×
Valence ). Instrumentality simply refers to the belief that a level of
performance will result in a level of outcome; valence refers to the value of
that outcome.
Essentially, Expectation Theory and Equity Theory demonstrate the value of

rewarding an employee’s investment of time and effort with appropriate
compensation.
Behavior-Oriented Theories
The underlying concept of behavioral approaches to motivation is rooted

in theories of “conditioning,” particularly the work of psychologist B.F.
Skinner. Behaviorism stipulates that an employer should promote positive
behavior and deter negative behavior, generally through a basic rewards
system. Variable compensation, as found in many sales jobs, is a prime
example of this concept. When an employee makes a sale, the employer
provides a certain portion of income to the employee that executed that
sale. This positive reinforcement serves as a behavior modifier, motivating
the employee to repeat this behavior and make more sales.
Job-Oriented Theories
Job-oriented theories adhere to the view that employees are motivated to

complete tasks effectively because of an innate desire to be fulfilled or to
contribute and that compensation and other forms of incentives are less
important to them.
Two-Factor Theory
Frederick Herzberg’s Two-Factor Theory is the most well-known of the job-
oriented theories, despite the fact that it has not been supported by
empirical evidence. Herzberg states that salary, benefits, status, and other
tangible benefits for employees can only reduce dissatisfaction and that
intangibles—such as autonomy, natural interest, recognition, and the
responsibility of the work itself—are the true basis of motivation.
Work Engagement Theory
Other theories, such as Work Engagement Theory, similarly propose that

intellectually fulfilling and emotionally immersive work is the foundation of
a motivated workforce.
Clearly, our understanding of workplace motivation could benefit from

further research and empirical analysis. But the variety of theories also
highlights the fact that people can be motivated by different things in
different circumstances. Effective organizational management requires an
understanding of these theories as well as of their possible limitations.
Employee Needs and Motivation
Maslow’s Hierarchy of Needs
Maslow’s Hierarchy of Needs helps managers understand employees’

needs in order to further employees’ motivation.
Diagram Maslow’s Hierarchy of Needs in the context of organizational

motivation and employee behaviors
Maslow is best known for his theory, the Hierarchy of Needs. Depicted in a
pyramid, the theory explains the different levels and importance of human
psychological and physical needs. It can be used by business managers to
better understand employee motivation.
The general needs in Maslow’s hierarchy include physiological needs (food
and clothing), safety needs (job security), social needs (friendship), self-
esteem, and self-actualization.
Maslow’s Hierarchy of Needs relates to organizational theory and behavior

due to it’s exploration of worker motivation, enabling better managerial
practices and higher job satisfaction.
Managers must be perceptive and empathetic to their employees—they

must listen to what their employees’ needs are and work to fulfill them.
self-actualization: The final level of psychological development, which can

be achieved when all basic and mental needs are fulfilled.
Abraham Maslow was a social psychologist who focused on the entirety of

human psychological needs rather than on individual psychological
problems. Maslow is best known for his theory, the Hierarchy of Needs.
Depicted in a pyramid, the theory explains the different levels of
importance of human psychological and physical needs.
The general needs in Maslow’s hierarchy include physiological needs (food

and clothing), safety needs (job security), social needs (friendship), self-
esteem, and self-actualization. Maslow’s Hierarchy of Needs can be used
by managers to better understand employees’ needs and motivations,
allowing them to best provide for employees’ needs and generate high
productivity and job satisfaction.
Maslow’s Hierarchy of Needs: Each level of Maslow’s hierarchy outlines a

specific category of need, each of which must be accomplished in a
bottom-up order. Managers should correlate their managerial style with
the needs of their employees.
At the bottom of the pyramid are the physiological (or basic) needs of a
human being: food, water, sleep, and sex. The next level is safety needs:
security, order, and stability. These two levels are important to the physical
survival of the person. Once individuals have basic nutrition, shelter, and
safety, they attempt to accomplish more.
The third level of need is love and belonging, which are psychological
needs; when individuals have taken care of themselves physically, they are
ready to share themselves with others, such as with family and friends. The
fourth level is achieved when individuals feel comfortable with what they
have accomplished. This is the esteem level, which includes the need to
feel competent and recognized, such as through status and level of
success. Then there is the cognitive level, where individuals intellectually
stimulate themselves and explore. After that is the aesthetic level, which
includes the need for harmony, order, and beauty.
At the top of the pyramid, self-actualization occurs when individuals reach

a state of harmony and understanding because they have achieved their
full potential. Once people have reached the self-actualization stage they
focus on themselves and try to build their own image. They may look at
this in terms of feelings such as self-confidence, or by accomplishing a set
goal.
Hierarchy of Needs and Organizational Theory
Maslow’s Hierarchy of Needs relates to organizational theory and behavior

because it explores a worker’s motivation. For example, some people are
prepared to work just for money, but others like going to work because of
the friends they have made there or the fact that they are respected by
others and recognized for their good work. One conclusion that can be
made from Maslow’s Hierarchy of Needs in the workforce is, “If a lower
need is not met, then the higher ones are ignored.” For example, if
employees are worried that they will be fired, and have no job security,
they will be far more concerned about capital accumulation and ensuring
their lower rungs can continue to be met (paying rent, paying bills, etc.)
than about friendship and respect at work. However, if employees are
wealthy enough to fulfill their basic needs, praise for good work and
meaningful group relationships may be a more important motivation.
If a need is not met, staff may become very frustrated. For example, if
someone works hard for a promotion and does not achieve the
recognition they want, they may become demotivated and put in less
effort. When a need is met it will no longer motivate the person, but the
next need in the hierarchy will become important to that person. Keep in
mind that it is not quite as simple in reality as in a model, and that
individuals may have needs that are more complex or difficult to quantify
than the hierarchy suggests. Managers must be perceptive and empathetic
to their employees, they must listen to what their needs are and work to
fulfill them.
Alderfer’s ERG Theory

Alderfer’s ERG theory, based on Maslow’s Hierarchy of Needs, outlines
three core needs: existence, relatedness, and growth.
Discuss Clayton Alderfer’s ERG Theory relative to employee needs and

motivation within an organization
ERG Theory posits that there are three groups of core needs: existence (E),
relatedness (R), and growth (G)—hence the acronym “ERG”. These groups
align with the levels of Maslow’s Hierarchy of Needs.
The “existence” needs describe our basic material requirements for living.
The “relatedness” needs concern the maintaining of important

interpersonal relationships.
The “growth” needs relate to self-actualization and self-esteem.
Alderfer also proposed that if an individual’s needs in a certain category

are not met, then they will redouble their efforts toward fulfilling needs in
a lower category.
existence: The state of being or occurring.
relatedness: The state of being connected, especially by kinship.
Clayton Paul Alderfer (b. 1940) is an American psychologist who further

developed Maslow’s Hierarchy of Needs into his own ERG Theory. ERG
Theory posits that there are three groups of core needs: existence (E),
relatedness (R), and growth (G)—hence the acronym “ERG.” These groups
align with the Maslow’s levels of physiological needs, social needs, and
self-actualization needs, respectively.
The “existence” needs describe our basic material requirements for living.
These include what Maslow categorized as physiological needs (such as air,
food, water, and shelter) and safety-related needs (such as health and
secure employment and property).
The “relatedness” needs concern the maintaining of important

interpersonal relationships. These needs are based in social interactions
with others and align with Maslow’s levels of love/belonging-related needs
(such as friendship, family, and sexual intiamcy) and esteem-related needs
(such as respect of and by others).
Finally, the “growth” needs describe our intrinsic desire for personal
development. These needs align with Maslow’s levels of esteem-related
needs (such as self-esteem, confidence, and achievement) and self-
actualization needs (such as morality, creativity, problem-solving, and
acceptance of facts).
Alderfer proposed that if an individual’s needs in a certain category are not

met, then they will redouble their efforts toward fulfilling needs in a lower
category. For example, if an individual’s self-esteem is suffering, they will
invest more effort in the relatedness category of needs.
McClelland’s Need Theory
David McClelland describes three central motivational paradigms:

achievement, affiliation and power.
Examine what McClelland’s Need Theory proposes

regarding motivating employees and fulfilling their needs
McClelland’s Need Theory, created by psychologist David McClelland, is a

motivational model that attempts to explain how the needs for
achievement, power, and affiliation affect people’s actions in a
management context.
People who are achievement-motivated are driven by the desire to master

tasks and situations.
People who are affiliation-motivated are driven by the desire to create and
maintain social relationships. They enjoy belonging to a group and want to
feel loved and accepted.
People who are power-motivated are driven by the desire to influence,

teach, or encourage others.
Each individual is motivated by varying degrees of each of these three

categories of needs.
zero-sum: Of any system in which all gains are offset by exactly equal
losses.
achievement: The act of performing, obtaining, or accomplishing.

affiliation: The relationship that results from combining one thing with
another.
Psychologist David McClelland developed Need Theory, a motivational

model that attempts to explain how the needs for achievement, power
(authority), and affiliation affect people’s actions in a management context.
Need Theory is commonly often taught in management and
organizational-behavior classes.
David McClelland: Psychologist David McClelland created Need Theory.
Achievement
People who are strongly achievement-motivated are driven by the desire

for mastery. They prefer working on tasks of moderate difficulty in which
outcomes are the result of their effort rather than of luck. They value
receiving feedback on their work.
Affiliation
People who are strongly affiliation-motivated are driven by the desire to

create and maintain social relationships. They enjoy belonging to a group
and want to feel loved and accepted. They may not make effective
managers because they may worry too much about how others will feel
about them.
Power
People who are strongly power-motivated are driven by the desire to

influence, teach, or encourage others. They enjoy work and place a high
value on discipline. However, they may take a zero-sum approach to group
work—for one person to win, or succeed, another must lose, or fail. If
channeled appropriately, though, this can positively support group goals
and help others in the group feel competent about their work.
Application of Need Theory
Need Theory does not claim that people can be categorized into one of
three types. Rather, it asserts that all people are motivated by all of these
needs in varying degrees and proportions. An individual’s balance of these
needs forms a kind of profile that can be useful in determining a
motivational paradigm for them. It is important to note that needs do not
necessarily correlate with competencies; it is possible for an employee to
be strongly affiliation-motivated, for example, but to still be successful in a
situation in which his affiliation needs are not met.
McClelland proposes that those in top management positions should have

a high need for power and a low need for affiliation. He also believes that
although individuals with a need for achievement can make good
managers, they are not generally suited to being in top management
positions.
Herzberg’s Two-Factor Theory
Herzberg’s Two-Factor Theory states that certain factors cause job

satisfaction and other factors cause dissatisfaction.
Analyze Frederick Herzberg’s perspective on motivating employees through

his Two-Factor Theory (also known as Motivation-Hygiene Theory)
According to Herzberg, intrinsic motivators and extrinsic motivators have

an inverse relationship: intrinsic motivators tend to create motivation when
they are present, whereas extrinsic motivators tend to reduce motivation
when they are absent.
Intrinsic motivators tend to represent less tangible, more emotional needs,

such as challenging work, recognition, relationships, and growth potential.
Extrinsic motivators tend to represent more tangible, basic needs, such as

status, job security, salary, and fringe benefits.
Extrinsic motivators are expected and so cause dissatisfaction if they are

absent. Intrinsic motivators, on the other hand, can provide extra
motivation. Because of this, satisfaction and dissatisfaction are
independent; one does not necessarily increase exactly as the other
decreases.
Management is tasked with differentiating when more job satisfaction is

needed (providing intrinsic motivators) and when less job dissatisfaction is
needed (providing extrinsic motivators).
hygiene factors: Elements of life or work that do not increase satisfaction
but that can lead to dissatisfaction if they are missing.
Two-Factor Theory: A framework, developed by Frederick Herzberg, that

suggests there are certain factors in the workplace that can cause job
satisfaction and a separate set of factors can cause dissatisfaction.
The Two Factors: Intrinsic and Extrinsic Motivators
Frederick Herzberg’s Two-Factor Theory, also known as Motivation-Hygiene

Theory or intrinsic vs. extrinsic motivation, concludes that there are certain
factors in the workplace that can cause job satisfaction and a separate set
of factors that can cause dissatisfaction. It is critical to emphasize that this
is not a linear relationship: the factors that cause satisfaction do not
necessarily negate those that cause dissatisfaction; one does not
necessarily increase exactly as the other decreases.
Extrinsic Motivators (Hygiene Factors)
Extrinsic motivators tend to represent more tangible, basic needs—i.e., the

kinds of needs identified in McClelland’s “existence” category of needs in
his ERG Theory or in the lower levels of Maslow’s Hierarchy of Needs.
Extrinsic motivators include status, job security, salary, and fringe benefits.
Managers must realize that not providing the appropriate and expected
extrinsic motivators will sow dissatisfaction and unmotivated behavior
among employees.
Intrinsic Motivators (Motivation Factors)
Intrinsic motivators tend to represent less tangible, more emotional needs

—i.e., the kinds of needs identified in McClelland’s “relatedness” and
“growth” categories of needs in his ERG Theory and in the higher levels of
Maslow’s Hierarchy of Needs. Intrinsic motivators include challenging work,
recognition, relationships, and growth potential. Managers must recognize
that while these needs may be outside the more traditional scope of what
the workplace should provide, they are absolutely critical in empowering
strong individual and team performance.
Herzberg’s Theory in Context
Herzberg’s Two-Factor Theory, McClelland’s Need Theory, and Maslow’s

Hierarchy of Needs all talk about higher-level psychological needs such as
achievement, recognition, responsibility, and advancement. The key factor
that differentiates Two-Factor Theory is the idea of expectation.
According to Herzberg, intrinsic motivators and extrinsic motivators have

an inverse relationship. This is to say that intrinsic motivators tend to
inspire motivation when they are present, while extrinsic motivators tend to
reduce motivation when they are absent. This is because of expectation.
Extrinsic motivators (e.g., salary, benefits) are expected and so will not
increase motivation when they are in place, but they will cause
dissatisfaction when they are missing. Intrinsic motivators (e.g., challenging
work), on the other hand, can be a source of additional motivation.
If management wants to increase employees’ job satisfaction, they should

be concerned with the nature of the work itself—the opportunities it
presents employees for gaining status, assuming responsibility, and
achieving self-realization. If, on the other hand, management wishes to
reduce dissatisfaction, then it must focus on the job environment—policies,
procedures, supervision, and working conditions. To ensure a satisfied and
productive workforce, managers must pay attention to both sets of job
factors.
Process and Motivation
Equity Theory
Equity theory explains the relational satisfaction in terms of fair or unfair

distribution of resources within interpersonal relationships.
Discuss equity theory and its motivational implications at the

organizational level
Equity theory proposes that individuals who perceive themselves as either

under-rewarded or over-rewarded will experience distress, and that this
distress leads to efforts to restore equity within the relationship.
If an employee feels underpaid, then that employee will experience

hostility towards the organization and perhaps co-workers, which may
result in the employee’s diminished performance.
When individuals find themselves participating in inequitable relationships,

they become distressed.
Managers must monitor their employees’ earnings, discuss this with their
superiors, assess efficacy, and provide intangible rewards.
equitable: Marked by or having equity.
equity theory: An attempt to explain relational satisfaction in terms of

perceptions of fair or unfair distribution of resources within interpersonal
relationships.
Motivated by Equity
Equity theory attempts to explain relational satisfaction in terms of

perceptions of fair or unfair distributions of resources within interpersonal
relationships. Regarded as one of many theories of justice, equity theory
was first developed in 1963 by John Stacey Adams. Adams, a workplace
and behavioral psychologist, asserted that employees seek to maintain
equity between what they put into a job and what they receive from it
against the perceived inputs and outcomes of others.
Equity theory posits that people value fair treatment, which motivates them
to maintain a similar standard of fairness with their co-workers and the
organization. According to the theory, equity structure in the workplace is
based on the ratio of inputs (employee contributions) to outcomes (salary
and other rewards).
Imbalances

distress leads to efforts to restore equity within the relationship. Equity
theory focuses on determining whether the distribution of resources is fair
to both relational partners. Equity is measured by comparing the ratios of
contributions and benefits of each person within the relationship. Partners
do not have to receive equal benefits (such as receiving the same amount
of love, care, and financial security) or make equal contributions (such as
investing the same amount of effort, time, and financial resources), as long
as the ratio between these benefits and contributions is similar.
Much like other prevalent theories of motivation, such as Maslow’s

hierarchy of needs, equity theory acknowledges that subtle and variable
individual factors affect individuals’ assessment and perception of their
relationship with their relational partners. According to Adams,
underpayment inequity induces anger, while over payment induces guilt.
Compensation, whether hourly or salaried, is a central concern for
employees and therefore the cause of equity or inequity in most, but not
all, cases.
The Employee/Organization Relationship
In any position, employees wants to feel that their contributions and work
performance are being rewarded with fair pay. An employee who feels
underpaid may experience feelings of hostility towards the organization
and perhaps co-workers. This hostility may lead to the employee under-
performing and could cause job dissatisfaction in others.
Subtle or intangible compensation also plays an important role in feelings

about equity. Receiving recognition for strong job performance and being
thanked can create employee satisfaction, and therefore help the employee
feel worthwhile, resulting in better outcomes for both the individual and
the organization.
When individuals find themselves participating in inequitable relationships,

they become distressed. The more inequitable the relationship, the more
distress individuals feel.
The Role of Management
Depending upon the organizational structure and its distribution of

authority, the decision to provide monetary compensation for a strong
work deliverable is not always in the hands of an employee’s direct
manager. As a result, managers must monitor their direct reports’ earnings,
discuss this with their superiors, assess efficacy, and provide intangible
rewards (such as recommendations, gratitude, authority, new projects, etc.).
Creating and maintaining equity is a responsibility of all managers.
Assessing and Restoring Equity
The assessment and restoration of equity helps improve employee

performance and organizational behavior.
Distinguish the core components of equity theory that seek

to measure equity accurately and restore equity when appropriate
under-rewarded or over-rewarded will experience distress, and this distress
leads to efforts to restore equity within the relationship.
Individuals consider themselves treated fairly if they perceive the ratio of

their own inputs to outcomes to be equivalent to those around them.
In any position, employees want to feel that their contributions and work
performance are being fairly rewarded. If this is not the case, management
must intervene and either renegotiate or replace dissatisfied individuals.
organization: A group of people or other legal entities with an explicit

purpose and written rules.
human resources: The personnel department of an organization, dealing

with the recruitment, administration, management and training of
employees.
Organizational Behavior
Similar to human resources management, organizational behavior

management (OBM) is an important aspect of management. OBM applies
psychological principles of organizational behavior and the experimental
analysis of behavior to organizations to improve individual and group
performance. The areas of application may include: systems analysis,
management, and training and performance improvement. Equity theory
plays a role in analyzing organizational behavior.
Definition of Equity Theory
Equity theory suggests that individuals who perceive themselves as either

distress leads to efforts to restore equity within the relationship. The theory
focuses on determining whether the distribution of resources is fair to both
relational partners. Equity is measured by comparing the ratios of
contributions and benefits of each person within the relationship.
Equity theory: The core concept of equity theory amounts to each party’s
inputs and outcomes equating.
Assessing Equity
Individuals consider themselves treated fairly when they perceive the ratio
of their inputs to outcomes to be equivalent to those around them. In
practice, all else being equal, this means an employee would find it
acceptable for a more senior colleague to receive higher compensation,
since the value of the senior employee’s experience (and input) is higher.
Employee job satisfaction often relies on comparisons with their co-
workers.
If an employee observes another employee receive more recognition and

rewards for contributions—even when both have performed the same
amount and quality of work—the employee who receives fewer rewards
will experience dissatisfaction. That employee may feel under-appreciated
as a consequence. Equity theory proposes that rewards (outcomes) should
be directly related to the quality and quantity of employees’ contributions
(inputs). If both employees in this situation receive the same reward, the
workforce is more likely to recognize that the organization is fair,
observant, and appreciative.
Managers are tasked with assessing equity: identifying both the quantity
and quality of a given individual’s inputs and comparing that to his or her
overall compensation. Managers are also responsible for discussing this
situation with their subordinates, ensuring that they feel their contributions
are being matched by their salary and other forms of compensation. While
this concern also falls within the human resources frame, the manager is
more directly involved with employee’s actual contributions (and thus more
accurate in assessing value).
Restoring Equity
In any position, employees want to feel that their contributions and work
performance are being fairly compensated. If this is not the case,
management must intervene and either renegotiate or replace the
dissatisfied individual. Workers have a right to be compensated in a
manner that reflects their value; if they are not, then management must
restore this equity or risk losing valuable talent.
Organizations can ensure collective rewards are maximized through the

use of accepted systems for equitably rewarding members. Systems of
equity will evolve within groups, and members must encourage other
members to accept and adhere to these systems. The only way groups can
ensure equitable practices are observed is by making it more profitable to
behave equitably than inequitably. Thus, an organization will generally
reward members who treat others equitably and generally punish (increase
the cost for) members who treat others inequitably.
Expectancy Theory
Expectancy theory deals with mental processes regarding choices and

behaviors.
Analyze Vroom’s expectancy theory to assess the accuracy and

effectiveness of motivating based upon expectancy, instrumentality, and
valence
Expectancy theory proposes that individuals decide to act in a certain way

because they are motivated to select a behavior over other behaviors
based on their expectation of the result.
The individual chooses based on estimates of how well the expected

results of a given behavior are going to match up with the desired results.
Expectancy theory explains the behavioral process of why individuals are

motivated to choose one behavioral option over another. It also explains
how they make decisions to achieve the outcome that they perceive as
most valuable.
instrumentality: The quality or condition of serving a purpose, being useful.
expectancy theory: A framework that holds that people decide to act in a

certain way because they are motivated to select a specific behavior over
other behaviors based on the expected result.
valence: A one-dimensional value assigned to an object, situation, or state

that can usually be positive or negative.
Overview
Expectancy theory is about the mental processes involved in making

choices. In organizational behavior, expectancy theory embraces Victor
Vroom’s definition of motivation. Vroom proposed that a person decides
to behave in a certain way, selecting one behavior over other behaviors,
based on the expected result of the selected behavior. For example, people
will be willing to work harder if they think the extra effort will be rewarded.
In essence, the motivation behind chosen behavior is determined by the
desirability of the expected outcome. At the theory’s core is the cognitive
process of how an individual process the different motivational elements.
Processing is done before an individual makes the final choice. The
expected result, therefore, is not the sole determining factor in the
decision of how to behave because the person has to predict whether or
not the expectation will be fulfilled.
Vroom’s Expectancy Theory
In 1964, Vroom defined motivation as a process controlled by the

individual that governed choices among alternative forms of voluntary
activities. Individuals make choices based on estimates of how well
the expected results of a given behavior are going to match up with or
eventually lead to the desired results.
In Vroom’s analysis, the basis for motivation is threefold:
the individual’s expectancy that effort will lead to the intended

performance
the instrumentality of this performance in achieving a certain result
the desirability of the result (known as valence ) to the individual
Vroom introduces three variables within his expectancy theory: valence (V),
expectancy (E), and instrumentality (I). These three elements also have
clearly defined relationships: effort-performance expectancy (E>P
expectancy), performance-outcome expectancy (P>O expectancy).
These three components of expectancy theory (expectancy, instrumentality,

and valence) fit together in this fashion:
Expectancy: Effort → Performance (E→P)
Instrumentality: Performance → Outcome (P→O)
Valence: V(O)
Effort → Performance (E→P): Expectancy is the belief that an effort (E) will
result in attainment of desired performance (P) goals. Usually, this belief is
based on an individual’s past experience, self-confidence, and the
perceived difficulty of the performance standard or goal. Factors associated
with the individual’s expectancy perception are competence, goal difficulty,
and control.
Performance → Outcome (P→O): Instrumentality is the belief that a person

will receive a desired outcome (O) if the performance expectation is met.
This outcome may come in the form of a pay increase, promotion,
recognition, or sense of accomplishment. Instrumentality is low when the
outcome is the same for all possible levels of performance.
V(O): Valence is the value individuals place on outcomes (O) based on their
needs, goals, values, and sources of motivation. Factors associated with the
individual’s valence are values, needs, goals, preferences, sources of
motivation, and the strength of an individual’s preference for a particular
outcome.
Implications
Expectancy theory can help managers understand how individuals are

motivated to choose among various behavioral alternatives. To enhance
the connection between performance and outcomes, managers should use
systems that tie rewards very closely to performance. Managers also need
to ensure that the rewards provided are deserved and wanted by the
recipients. To improve the connection between effort and performance,
managers should use training to improve employee capabilities and help
employees believe that added effort will in fact lead to better performance.
Goal-Setting Theory
People perform better when they are committed to achieving certain goals,
enabling businesses to benefit from employing goal-setting theory.
Apply goal-setting theory to the process and motivation considerations

inherent in organizational behavior and business procedure
Studies of goal -setting suggest that it is an effective tool for making

progress, as long as managers ensure that participants are clearly aware of
what is expected from them.
Goals that are difficult to achieve and specific tend to increase

performance more than goals that are not.
On a personal level, setting goals helps people work towards their own
objectives (most commonly, financial or career-based goals).
Managers should not constantly drive motivation, or keep track of an

employee’s work on a continuous basis. Instead, they should use goals,
which have the ability to function as a self-regulatory mechanism.
Managers should also keep track of performance to allow employees to

see how effective they have been in attaining their goals.
motivation: Willingness of action, especially in behavior.
productivity: The rate at which goods or services are produced by a

standard population of workers.
Overview
People perform better when they are committed to achieving certain goals.
Factors that ensure commitment to goals include:
The importance of the expected outcomes of goal attainment
Self-efficacy, or belief that the goal can be achieved
Promises or engagements to others, which can strengthen level of

commitment
Aim for the goal: Goal-setting is closely tied to performance. Those who
set realistic but challenging goals are likely to perform better than those
who do not.
Goal-setting is a key component of performance in a business setting, but

certain principles apply. Goals that are difficult to achieve and specific tend
to increase performance more than goals that are not. A goal can become
more specific by attaching a quantity to it (for example, “increase
productivity by 50 percent”) or by defining certain tasks that must be
completed.
Goals in Business (Motivation)

Managers cannot constantly drive motivation, or keep track of an
employee’s work on a continuous basis. Goals are therefore an important
tool for managers, because goals have the ability to function as a self-
regulatory mechanism that gives an employee a certain amount of
guidance. Shalley, Locke, and Latham have identified four ways goal-setting
can affect individual performance:
Goals focus attention toward goal-relevant activities and away from goal-
irrelevant activities.
Goals serve as an energizer. Higher goals induce greater effort, while low
goals induce lesser effort.
Goals affect persistence.
Goals activate cognitive knowledge and strategies that help employees

cope with the situation at hand.
Locke et al. examined the behavioral effects of goal-setting, concluding

that 90 percent of laboratory and field studies involving specific and
challenging goals led to higher performance than those involving easy or
no goals. While some managers believe it is sufficient to urge employees
to “do their best,” Locke and Latham have a contrasting view. They
propose that people who are told to “do their best” generally do not. To
elicit some specific form of behavior from another person requires giving
the person a clear view of what is expected. A goal is therefore vital, as it
helps an individual focus his or her efforts in a specific direction.
However, when management merely dictates goals, employee motivation

to meet these goals is diminished. To increase motivation, employees
should participate in the goal-setting process.
Goals and Feedback
Managers should track performance so that employees can see how

effective they have been in attaining their goals. Without proper feedback
channels, employees find it impossible to adapt or adjust their behavior.
Goal-setting and feedback go hand-in-hand. Without feedback, goal-
setting is unlikely to work.
Providing feedback on short-term objectives helps to sustain an
employee’s motivation and commitment to a goal. When giving feedback,
managers should:
Create a positive context
Use constructive and positive language
Focus on behaviors and strategies
Tailor feedback to the needs of the individual worker
Make feedback a two-way communication process
Setting the Right Goals
People perform better when they are committed to achieving certain goals,
emphasizing the importance of strategic goal setting.
Examine the inherent motivational value in setting meaningful goals and

objectives in the organizational behavior frame
Setting goals is a process that requires buy-in from both the management
and employee; it is best executed using tools such as goal-setting theory.
The SMART model illustrates the goal-setting aims, where objectives are
identified and pursued through being specific, measurable, achievable,
realistic, and time-oriented.
According to Locke and Latham, the effectiveness of goal setting can be

explained by two aspects of Temporal Motivation Theory (TMT): the
principle of diminishing returns and temporal discounting.
Combining Locke and Latham’s perspective with SMART goal setting,

individuals should focus on taking small steps towards larger objectives
through specific, measurable, attainable, realistic, and timely goals.
https://courses.lumenlearning.com/boundless-
management/chapter/process-and-motivation/
CHAPTER 11
MOTIVATING
Leading and Motivating
What would you do?
When Jessica took over the department, she turned to Mary, her mentor
and boss, for support. On several occasions, Jessica asked Mary where she
saw the department going. Each time Mary would make a vague comment
or suggestion and then turn the question around, and ask her—"Where
do you see the department going?"
Jessica became increasingly frustrated with this response.
Mary was the boss, the person with the grand vision. Why wouldn't she tell
Jessica what she was supposed to be doing?
What would you do?
Mary is purposefully being vague and not answering Jessica's question

because it's Jessica's job, as a new leader, to create the vision and direction
for her department.
Jessica needs to think about where she sees her group going, what it will
take to get there, and how this fits into the company's overall strategy. The
vision that Jessica arrives at will be her most important motivational tool,
and will help her to align resources and to keep people focused on the
tasks at hand.
In this topic, you'll understand what makes an effective leader, as well as

learn how to create a vision and motivate others to do their best.
Topic Objectives
This topic helps you:
 Distinguish between managing and leading
 Recognize the skills and characteristics of leaders

 Understand that leaders use different styles
 Create an inspiring vision and align people to achieve it
 Understand what motivates people, and how to foster an inspiring

work environment
 Learn techniques for energizing problem employees
About the Mentor
Linda A. Hill
From her more than 20 years of extensive field work, Professor Linda A. Hill
has helped managers create the conditions for effective management in
today's flatter and increasingly diverse organizations. She is a Professor
and chair of the Leadership Initiative at Harvard Business School. She is
also the author of the best-selling Becoming a Manager (Harvard Business
School Press), now out in paperback. Linda served as the content expert
for Coaching for Results and Managing Direct Reports, two award-winning
interactive programs from Harvard Business School Publishing. She also
served as a mentor for many Harvard Manage Mentor topics.
What Leaders Really Do
Managing versus leading
A common misconception about leadership is that it's the province of a

chosen few. Some think that it's just a matter of possessing certain quasi-
mystical traits—like charisma and vision—which you either have or you
don't.
The fact of the matter is that leadership skills are not innate. They can be
acquired and honed.
In order to understand what leaders do, it is important to understand the

difference between management and leadership. They are two distinct and
complementary systems of action.
Management involves coping with complexity; leadership, coping

with change.
Managing requires bringing order and predictability to a situation, while
leading requires adapting to changing circumstances—an increasingly
important skill in today's volatile and competitive business environment. As
such, the work of management is significantly different from the work of
leadership.
For example, while managing requires planning and budgeting skills,

leading requires the ability to set direction. Organizing and staffing are
management tasks, whereas aligning people falls under the domain of
leadership. Finally, while managing concerns controlling and problem
solving, leading is about motivating and inspiring a team.
Planning and budgeting versus setting a direction
The aim of management is to obtain well-defined, orderly results.

Therefore, managers engaged in the planning and budgeting process
typically:
Craft specific targets or goals for the future (typically short-term)
Establish detailed steps for achieving the desired targets
Allocate the resources required to accomplish them
On the other hand, leadership's function is to enable change. Setting the

direction for that change is of paramount importance. While there's
nothing magical about this kind of work, it is more inductive and intuitive
than planning and budgeting, and does not result in detailed plans. Setting
a direction for change requires leaders to:
Gather a range of data and look for patterns, relationship, and linkages
Develop a vision of the future (often the distant future)
Craft the strategies necessary for achieving that vision
Organizing and staffing versus aligning people
The definition of leadership is to have inspired, energized followers.
—Warren G. Bennis
Organizing is a management process that, at its core, involves creating
systems that enable people to implement plans as precisely and efficiently
as possible. The processes of organizing and staffing require managers to:
Choose a job hierarchy and justify reporting relationships
Staff the positions with the appropriate people
Provide training for those who need it
Communicate plans to the workforce
Decide how much authority to delegate, and to whom
The organizing and staffing processes critical to effective management

illustrate the complex problem of designing a well-functioning system.
However, its leadership counterpart, aligning people, is not a design issue,
but rather a communications challenge.
To align people to a vision, a leader must:
Solicit input and discussion from a wide range of people
Help people to comprehend a vision of an alternative future
Get them to believe in and become energized by this vision once it is

understood
While organizing people to fulfill a short-term plan is difficult, getting a

large number of people from inside and outside the company first to
believe in an alternative future, and then to take initiatives based on this
shared vision, is often even more challenging.
Controlling and problem solving versus motivating and inspiring
Processes like controlling activities and solving problems are mechanisms

managers put in place to make it easy for people to complete their daily
jobs. Managers use these processes to:
Efficiently compare the behavior of the system they've organized and

staffed with the original plan and budget
If the comparison reveals a divergence from the original course, take the
corrective actions necessary to get the plan back on track
The leadership processes of motivating and inspiring are quite different.

Motivating and inspiring energizes people not by pushing or pulling them
in the right direction, but by satisfying basic human needs for achievement
—a sense of belonging, recognition, self-esteem, and having control over
one's life.
Effective leaders motivate in a variety of ways.
For example, they:
Articulate a vision in a manner that stresses the values of their audience
Involve people in deciding how to achieve the shared vision
Support employees' efforts to realize the vision by providing coaching,

feedback, and role modeling
Recognize and reward success
Management skills are essential. But in response to an ever-changing

economic and social marketplace, managers are increasingly being called
upon to be leaders as well. As a result, the ability to lead—that is, identify
a vision, align people to it, and motivate them to achieve it—has become
even more critical for today's managers.
Activity: Is it management or leadership?
Decide which of the following actions show management and which ones
show leadership.
Establish detailed steps for achieving the desired targets
Management
Correct choice. Establishing detailed steps for achieving the desired targets

is a management activity that takes place during the planning and
budgeting process. This activity is consistent with the aim of management:
to obtain well-defined, orderly results.
Leadership
Not the best choice. Establishing detailed steps for achieving the desired
targets is a management activity that takes place during the planning and
Allocate the resources required to accomplish desired targets
Management
Correct choice. Allocating the resources required to accomplish desired

targets is a management activity that takes place during the planning and
Leadership
Not the best choice. Allocating the resources required to accomplish

desired targets is a management activity that takes place during the
planning and budgeting process. This activity is consistent with the aim of
management: to obtain well-defined, orderly results.
Gather a range of data and look for patterns, relationship, and linkages
Management
Not the best choice. One of leadership's key functions is to set a direction

for change. Setting a direction for change requires leaders to gather a
wide range of data and look for patterns, relationships, and linkages.
Leadership
Correct choice. One of leadership's key functions is to set a direction for

change. Setting a direction for change requires leaders to gather a wide
range of data and look for patterns, relationships, and linkages.
Choose a job hierarchy and justify reporting relationships
Management
Correct choice. Organizing and staffing are management processes that
involve creating systems that enable people to implement plans as
precisely and efficiently as possible. One key component of the staffing
process is choosing a job hierarchy and justifying reporting relationships.
Leadership
Not the best choice. Organizing and staffing are management processes

that involve creating systems that enable people to implement plans as
precisely and efficiently as possible. One key component of the staffing
process is choosing a job hierarchy and justifying reporting relationships.
Solicit input and discussion from a wide range of people
Management
Not the best choice. Aligning people falls under the domain of leadership,
not management. To align people to a vision, a leader must solicit input
and discussion from a wide range of people, help them to comprehend a
vision of an alternative future, and get them to believe in and become
energized by this vision.
Leadership
Correct choice. Aligning people falls under the domain of leadership, not

management. To align people to a vision, a leader must solicit input and
discussion from a wide range of people, help them to comprehend a vision
of an alternative future, and get them to believe in and become energized
by this vision.
Decide on how much authority to delegate, and to whom
Management
Correct choice. Making decisions about how much authority to delegate,

and whom to delegate the authority to is a management task. Delegation
forms part of a manager's organizing and staffing function, which at its
core involves creating systems that enable people to implement plans as
precisely and efficiently as possible.
Leadership
Not the best choice. Making decisions about how much authority to
delegate, and whom to delegate the authority to is a management task.
Delegation forms part of a manager's organizing and staffing function,
which at its core involves creating systems that enable people to
implement plans as precisely and efficiently as possible.
Recognize and reward success
Management
Not the best choice. Recognizing and rewarding success form part of the
leadership process of motivating and inspiring. Motivating and inspiring
energizes people not by pushing or pulling them in the right direction, but
by satisfying basic human needs for achievement.
Leadership
Correct choice. Recognizing and rewarding success form part of the

leadership process of motivating and inspiring. Motivating and inspiring
energizes people not by pushing or pulling them in the right direction, but
by satisfying basic human needs for achievement.
Support employees' efforts to realize the vision by providing coaching,

feedback, and role modeling
Management
Not the best choice. Motivating and inspiring are components of

leadership. While a manager might control activities or solve problems,
leaders must energize people by satisfying basic human needs for
achievement by providing coaching, feedback, and role modeling.
Leadership
Correct choice. Motivating and inspiring are components of leadership.

While a manager might control activities or solve problems, leaders must
energize people by satisfying basic human needs for achievement by
providing coaching, feedback, and role modeling.
Efficiently compare the behavior of the system they've organized and

staffed with the original plan and budget
Management
Correct choice. Being able to efficiently compare a system they've

organized to its original intended parameters is an important management
task. To make such analysis possible, managers use processes like
controlling activities and solving problems.
Leadership
Not the best choice. Being able to efficiently compare a system they've

organized to its original intended parameters is an important management
task. To make such analysis possible, managers use processes like
controlling activities and solving problems.
If the comparison reveals a divergence from the original course, take the
corrective actions necessary to get the plan back on track
Management
Correct choice. A major component of the work of management is to

devise processes to make it easy for people to complete their daily jobs.
Managers use processes like controlling activities and problem solving to
reach this goal. In contrast, the work of leadership is to set direction, align
people to a vision, and motivate these people to achieve it.
Leadership
Not the best choice. A major component of the work of management is to

devise processes to make it easy for people to complete their daily jobs.
Managers use processes like controlling activities and problem solving to
reach this goal. In contrast, the work of leadership is to set direction, align
people to a vision, and motivate these people to achieve it.
 Skills and Characteristics of Leaders
 Leading today's business organizations
In the past, leaders generally knew they were invested with formal
authority. As such, their directives carried organizational weight. Today's
organizations are flatter and less hierarchical. Many leaders now do not
have formal authority and, even if they do, find it is not particularly useful.
Instead, they recognize that leading requires the mastery of certain skills,
all of which can be learned and developed.
 Successful leadership requires strong:
 Communication skills: To speak and write persuasively
 Interpersonal skills: To listen and hear what people are saying and react
in constructive ways (active listening)
 Conflict-resolution skills: To handle friction and inevitable tensions
 Negotiation skills: To bring different groups together in order to reach

mutually agreeable goals
 Motivational skills: To align people who may not report to you toward
a goal
Emotional intelligence capabilities
In addition to mastering certain concrete skills, effective leaders generally

share a cluster of essential characteristics. These characteristics can be
categorized as components of emotional intelligence—the ability to
manage yourself and your relationships effectively. Research has shown
that what distinguishes outstanding leaders is their degree of emotional
intelligence, not their technical or analytical skills. Five key components of
emotional intelligence (EI) are:
Self-awareness: The ability to recognize and understand your moods,

emotions, and drives as well as their effect on others
Self-regulation: The ability to control or redirect disruptive impulses and

moods, suspend judgment, and think before acting
Motivation: The ability to pursue goals with energy and persistence, for
reasons that go beyond money or status
Empathy: The ability to understand people's emotional makeup
Social skill: The ability to manage relationships, build networks, and find
common ground
Crafting a Vision That Others Will Follow
Create the vision
Effective leaders create a vision that others will support with their hearts
and minds. Simply stated, a vision is a description of an altered and
improved future. Your vision need not be grand or necessarily innovative.
However, it does need to be sensible, and to motivate people to achieve it.
A vision has three important purposes:
First, it clarifies the general direction for the future: since people are often
confused or disagree on the paths their group, unit, or organization should
take, they can become mired in indecision. By establishing a clear
direction, a vision helps people make decisions and move forward more
confidently.
Second, a vision motivates people to take action in the right direction,

even if it is personally difficult: the alterations required to support a vision
are often not easy. Often, people are asked to learn new skills quickly or
work with constrained resources for a length of time. An effective vision
helps to overcome people's reluctance to do what is necessary by
providing hope and inspiration for the future.
And finally, a vision helps coordinate the actions of different people

efficiently: if you establish a clear vision, the people around you can often
figure out what to do by themselves. Without a well-articulated vision to
guide them, people spend valuable time constantly checking with others
for direction.
Characteristics of an effective vision
A leader's task is to offer guidance by holding up a vision of what is

possible.
—Lieutenant Colonel Bob Staub, II
An effective vision should be:
Vividly imaginable: Conveys a clear picture of what the future will look like
Desirable: Appeals to the long-term interests of employees and other
stakeholders
Compelling: Is so much better than the current state that people will gladly
undertake the effort and sacrifices necessary to attain it
Realistic: Comprises feasible goals that are attainable for a hardworking

group of people
Focused: Limits itself to a manageable and coherent set of goals and is

clear enough to provide guidance to others in decision making
Flexible: Is general enough to be adapted to changing circumstances
Easy to communicate: Can be successfully and succinctly explained to

people throughout different levels of your organization
Consider the following example of an effective vision, taken from a large

corporation:
"It's our goal to become the world leader in the pharmaceutical industry
within 10 years. This means we will increase profits, focus more on
customer-centered innovation, offer better employee benefits than any of
our competitors. Achieving this objective will require that we become more
globally focused. If we all work together, we can achieve this vision."
Here is another example of an effective vision, from a business unit:
"It is our aim to reduce our costs by at least 25% and increase our sales
group's revenues by at least 25%. These are stretch goals but, based on
our analysis, we know they are achievable within four years if we all work
together. When this is done, our unit will be publicly recognized for our
achievement. Likewise, our unit will serve as a model for process
improvement across the organization."
Be sure that the vision you craft is consistent with your organization's
overall mission. A vision should appeal to an organization's core values—
the guiding principles by which the organization navigates—like honesty,
creativity, or social responsibility. It should also draw upon an
organization's core purpose—its most fundamental reason for being—like
helping people to do something or improving a practice worldwide.
Mission and vision
Personal Insight
Whatever you do in life it helps to have a role model. The closer that role
model can be to you—whether it's your father, brother or a family member
is ideal—but it can be anyone. In my case my role model was my great
grandfather from my mother's side in India, and his motto was to aspire
and achieve. Throughout childhood and growing up it meant nothing to
me, like most school mottos mean nothing to anyone.
Then I went on a course at Cranfield; a mini MBA business growth

program tailored to owners of businesses. It had all the formal strands of
an MBA: finance, management and marketing. It was structured for
business; the course was very much about: 'Where is your business today?'
'Where do you want to take your business?' and 'How are you going to
get there?' My great grandfather's motto fell into place for me on that
course: 'Where do you want to take your business?' Aspire. 'How are you
going to get there?' Achieve. I added: to 'aspire and achieve...against all
odds with integrity,' and that's our vision. That is what we live by; that is
what we breathe every single day. That underlies everything we do and it's
almost a definition of entrepreneurship, where you come up with an idea
with limited resources; it's against all odds and you go out there and you
make it happen.
When you have a vision that really means something—that is something

you genuinely believe in—which underlies everything you do, it spreads
across the whole company. It isn't a motto that's just on a board or
printed; it is a living vision that everyone in the company believes in. It's an
attitude to aspire and achieve, and in our company it manifests itself in so
many areas; the way people come up with ideas and make them happen.
Aspire and achieve, ideas in action, innovation, making it happen; that's

what it should always be.
Every company should have a clearly defined mission and vision. The
mission says what the company is doing; the vision is something that
underlies everything you do. It spreads across the whole company, and
should be a living vision that everyone believes in, and aspires to achieve.
Lord Bilimoria
Founder and CEO, Cobra Beer
Lord Karan Bilimoria started his career at Ernst & Young in 1982, where he
spent four years working in audit, tax, training, and accounting.
He qualified as a Chartered Accountant in 1986 and graduated in Law from

Cambridge University in 1988. He then worked at Cresvale in London (part
of S&W Beresford) as a Consulting Accountant.
In 1989, he moved to European Accounting Focus magazine as its Sales

and Marketing Director.
Later that year he founded Cobra Beer, realizing his ambition to develop a
less gassy premium lager brewed to appeal to ale drinkers and lager
drinkers alike that also complemented the food.
He then extended into other markets with the launch of General Bilimoria
Wines in 1999, and Tandoori Magazine and tandoorimagazine.com. He has
also founded curryzone.com, and is the Founder and Chairman of
Cobrabyte Technologies.
Additionally, Lord Bilimoria is Chairman of the Government's National

Employment Panel's Small and Medium-Sized Enterprise Board. He is also
Vice Chairman of the London Chamber of Commerce and Industry's Asian
Business Association. He received his peerage in 2006.
Your vision as a leadership tool
A clear, simple, and enduring vision of a better future is a leader's most

important motivational tool. It becomes a guide as a group, unit, or
organization moves away from past beliefs, activities, and goals to a future
more suited to the changing needs of the organization and the demands
of the economic environment.
You will likely find yourself referring to your vision time and again,
explaining its benefits and relevance to various audiences as you work to
keep them on course.
Aligning People Through Successful Communication
Understand your audience
As a leader, your job is to motivate others to achieve your vision. That

means you need to be able to communicate your vision to a wide
audience in a way that they can understand, relate to—and ultimately
believe in.
Your audience comprises anyone who will be affected by the outcome of

your vision. These stakeholders may include: supervisors, peers, colleagues
in other parts of your organization, and direct reports, as well as suppliers
or vendors, shareholders, and even customers. Although each of these
people may react differently to your vision, everyone needs to be properly
aligned and focused on achieving the common goal.
How do you achieve this alignment? Effective communication.
Communicate effectively
It's important to effectively communicate your vision to key stakeholders

on your project. To communicate your vision, start by looking at it from
the perspective of each of your key stakeholders. Try to identify what
would most energize and inspire them to achieve your desired end-state.
When you communicate your vision to stakeholders, clearly spell out the
benefits of your alternative future in terms of its impact on them. Be sure
to use terminology and concepts that they will easily understand and
relate to.
One prerequisite for communicating your vision effectively is the credibility

you establish with your audience. Credibility derives from two factors:
expertise and trust.
When you exercise sound judgment that proves you're knowledgeable

about your ideas, and accumulate a history of successes, people perceive
you as an expert. If you are candid and sincere and put others' interests
ahead of your own, you will earn people's trust.
Only by establishing your trustworthiness and your expertise will you build

the credibility you need to get your audience to believe in—and follow—
your vision.
Communicate your vision
Think like a wise man but communicate in the language of the people.
—William Butler Yeats
When communicating a vision, you should:
Be consistent and willing to repeat yourself. Consistency of message is

essential; repetition helps spread and reinforce your vision. On a rational
level, repetition helps everyone stay focused and understand exactly what
they are supposed to do to help realize the vision.
Be passionate about your vision. Communicate with a passion that causes

people to desire the same end result. If you can't, you haven't effectively
tapped the motivation necessary to make the vision come to life.
Make communication an ongoing, two-way proposition. Leading people

should not involve a one-way stream of messages from top to bottom.
Instead, messages should flow both ways. If people are to feel that they
actually have a stake in the vision you are asking them to realize, it is
critical to facilitate two-way communication.
Provide feedback and be willing to coach. Since so much of leading is
about accomplishing results through others, you can only succeed if
stakeholders have the necessary tools and resources they need—including
your personal involvement. Provide feedback, both positive and negative,
on a regular basis, and take the time to coach others when needed.
Be out front. As the project of achieving your vision moves forward—or

falters, or even moves backward—make certain that you are front and
center and show your willingness to steer.
Issue calls to action. Should you need to change direction suddenly in the
face of unforeseen circumstances, or simply need to get people energized,
you should feel comfortable speaking up and asking for support directly.
Emphasize that everyone needs to communicate effectively. Leaders aren't

the only ones who need to communicate. Employees should foster
communication skills peer-to-peer as well as up and down the
organizational ladder. Groups, units, and even organizations that
emphasize open communications seem to have a greater sense of purpose
and unity, probably because employees take the time to keep one another
informed.
Choose media wisely. While leaders should use a wide range of media to

communicate their message, they also need to be sensitive to the media
they use. Electronic communications such as e-mail should never supplant
face-to-face communications. Also, large-scale meetings are most effective
for generating excitement about the company's vision, but less appropriate
for specific performance-related issues.
If you fail to communicate your vision effectively, people will not move in
the same direction. Without proper alignment, it will be difficult—if not
impossible—to motivate your stakeholders to make your vision a reality.
Find your personal communication style
Personal Insight
Communication has always been a part of my life. I've come out of an

academic tradition; I was a professor. I understood the importance of
communication, but I think it was most clarified for me as a leader when I
first arrived in Washington.
I was appointed as President Clinton's Chief Economic Advisor. One of the
responsibilities of that post is to essentially be a voice for the economic
policy of the administration. And that voice has to go through many
different audiences—through congressional testimony; dealing with the
media, both television and print media; and many private sector groups,
whether it's the National Chamber of Commerce or a local community
group that deals with, say, poverty in New Orleans. You are constantly put
on stage to communicate, explain, and motivate support for the President's
Economic Policy. I realized this was a key part of the job, and I also found
that my ability to do it rested really on three things—first of all,
understanding the content, knowing exactly what I should be saying in a
situation.
I really believe that in order to communicate, engage, or explain, you need

to know the content. You also need to know yourself. When I went before
the congress the first time, it was a very unnerving experience, because it's
highly political, and I was going to be attacked by those who didn't believe
President Clinton's Economic Policy and excoriated for being a big-
spending democrat, etcetera. I certainly had content, because I was a
professional economist and my questioners were not, but I also
understood the audience. I think that was a very important part. I knew
that my role would be to, on the one hand, mobilize those who could
work with us, and on the other hand, at least give those who were against
us some sense that it had been seriously thought through. The last thing is
just style of presentation. I think that it's very important for people to
realize what their natural style is. For example, I'm not a comedian. I don't
tell jokes. I don't consider myself a guru. I'm not there to entertain in a
kind of very energizing way. I'm there to explain; I'm there to take
economic concepts, and make them simple and compelling.
When communicating to a group it is important to find your own personal

style. Research the audience, know the content, and don't try to speak in a
manner that isn't comfortable to you.
Motivating Others
Keys to motivation
To realize a vision, leaders need to ensure that people are constantly
aligned throughout what can be a long and arduous process. The key to
keeping people energized and moving on the same path is motivation.
Leaders do not achieve their goals by force or pushing people in a certain

direction. Instead, successful leaders get the results they seek by appealing
to people's inner drives, needs, and desires.
Use external factors to motivate
Motivation is the art of getting other people to do what you want them
to do because they want to do it.
—Dwight Eisenhower
There are numerous ways to get people motivated. One popular approach
relies on enhancing or improving factors that are external to the specific
job a person performs. These "external" factors are aspects of a job that
are related to job environment, not the job content itself. External factors
include:
 Company policies and benefits
 Working conditions
 Salary and other forms of compensation
 Status
Job security
Some experts have demonstrated that externally focused incentives

provide only a short-term means of motivation. They argue that, to be
effective and keep people moving forward, leaders need to continuously
provide these rewards—while upping the ante each time. Using only
external factors to motivate employees, therefore, can become increasingly
costly over time.
Tap into internal sources of motivation
An alternative and more sustainable approach to motivation draws upon

tapping into employees' desire to perform. Using this approach, leaders try
to inspire people by enriching their jobs and giving them broad
responsibilities that increase their overall job satisfaction. This type of
intrinsic motivation relies on "internal" factors that are related to job
content (the nature of the work itself), and comes from within employees.
Internal motivational factors include:
Achievement on the job
Direct feedback from people internal and external to the company about
the quality of their work
The work itself
A sense of responsibility for the work they are doing
Opportunities for growth or learning
Some experts note that the presence of a strong external reward structure
diminishes an individual's ability to react to internal motivators. Others
maintain that these two means of motivating people are complementary,
and that leaders should strive to provide both where possible. One thing is
certain: all people have individual drives, needs, and desires. Because of
this, they will be motivated by different factors.
Finding out what motivates people on an individual level is critical. Taking

the time to discover what inspires each of your key stakeholders, and
devising the plan that best meets their needs, will help ensure that people
stay motivated for the long term.
Celebrate successes
Celebrating milestones, whether large or small, is critical to keeping people
motivated. Good leaders not only recognize individuals for their efforts, but
also the successful completion of goals on the group, unit, and
organizational level.
Broadcast every milestone reached or project completed to upper

management, colleagues, and even outside stakeholders. Recognize
everyone responsible for achieving the milestone, and strive to provide
each person the type of "reward" that best motivates him or her.
Taking the time to celebrate is essential because it acknowledges people's

hard work, boosts morale, and helps keep up the momentum necessary to
achieve your vision.
Energizing Difficult People
People who don't follow
In an ideal world, everyone in your organization would be inspired by your

vision and willing to work toward your end goals. However, in reality, you
will likely find people who do not want to follow your lead. As tempting as
it may be to ignore such individuals, you must deal with them head-on. If
left alone, they can undermine your efforts by lowering levels of
productivity and morale.
In trying to motivate intractable employees, inexperienced leaders often

make the mistake of forgetting that everyone has different motivational
drivers, values, and biases. They think that if they position their perspective
in a certain way and use the "right" language, problem employees will see
the logic of their views. Unfortunately, efforts such as these are doomed to
failure. So, how do you energize difficult people?
To successfully motivate problem employees, you must uncover their
inherent motivations.
Everyone has motivational energy, it just may not be directed effectively in

the workplace.
As a leader, then, your role is not to try and motivate your problem
employees; rather it's to help them motivate themselves. Instead of trying
to impose a solution on your employees, work with them to uncover the
barriers that prevent them from achieving desired goals.
A three-step approach to motivating a problem employee
The following three-step approach can help you to tap into an employee's
inherent motivation:
Flesh out your picture of the employee and the problem. Try to gain a
better understanding of the issue. Attempt to see the situation from the
employee's vantage point. Pinpoint any context or relationships that may
be influencing his behavior. Consider these factors individually:
The person who lacks motivation. Through informal conversations with the
employee and other colleagues, find out her drives and passions and what
could be blocking them at your workplace. Ask yourself what could result if
those impediments were somehow removed.
Yourself. Ask yourself how you might be contributing to the problem. Then
ask the person in question and her colleagues how they perceive you. You
may discover that you are the person's chief demotivator. Without knowing
it, you might be putting her off by actions that make her feel that you
don't care about her. Or worse, you may be engaged in a cycle of mistrust,
micromanagement, and poor performance that sets the individual up for
failure.
The context. Ask yourself if there is anything about the current situation
that might be bringing out the worst in the person—or you. Is there
something happening or that recently happened at your organization, such
as a restructuring or a layoff, which may be adding stress?
Consider a range of outcomes. Actively switch your mindset from trying to

achieve a single, predetermined "solution" to the employee's problem (e.g.,
he must improve his lackluster performance in a certain amount of time or
he will be dismissed) to considering several different possibilities (e.g., he
should be moved to a different department/function or he needs better
coaching). Being open to changing your definition of what your solution
looks like can yield surprisingly rich alternatives.
Meet to discuss the problem and reach a resolution. This process

culminates in a face-to-face meeting with the problem worker, ideally held
in a neutral space like a conference room. During the meeting, you should:
Affirm the person's value to your organization to get the meeting off on
the right foot.
Describe the problem from your perspective and point out that that it
cannot continue.
Ask probing questions to test the assumptions you've made about the
situation. Is the individual clear about his role or expectations? These
questions will likely expose your differences but will also reveal areas of
agreement.
Work with the individual to help him "solve" the problem. Invite the
employee to suggest tactics for resolving the issue. Use the insight you
have gained into what motivates him to guide the process. The resolution
you mutually determine should play to the individual's drives.
While trying to turn around a problem employee takes time and energy, it
is well worth the investment. The payoffs of using this method extend far
beyond the situation and specific person involved; the method boosts
morale and can help motivate others as well. In addition, your efforts will
send the strong message that you are willing to grapple with difficulties
head-on, instead of simply dismissing them.
Activity: Motivate a problem employee
Motivating a problem employee takes time and energy. Handle it correctly,

and you make it all worthwhile.
Hank has been one of your direct reports in the production department for
two years. Though his work is generally solid, he often seems to lack a real
drive to excel. He also tends to bring a pessimistic attitude to new projects.
You worry that this attitude could negatively affect other employees. You
want to motivate Hank.
Which of the following steps would you not take?
Look into other opportunities in the company for Hank
Correct choice. It's too early to conclude that Hank must be moved
elsewhere in the company. Your first step to motivating Hank should be
learning more about Hank's interests.
Ask other team members what projects they've seen Hank get excited
about in the past
Not the best choice. This would actually be a good first step in addressing
Hank's lack of motivation. If Hank's fellow team members have seen him
get excited about certain projects in the past, then his current lack of
motivation might have to do with the types of projects you're assigning
him.
Review Hank's résumé to see his previous experiences and interests
Not the best choice. This would actually be a good first step to addressing
Hank's lack of motivation. By reviewing Hank's previous jobs, education,
and outside-of-work interests, you might learn where his passions lie. You
could then discern what's blocking these passions in his job.
You review Hank's résumé. Nothing in it indicates to you that he would be

dissatisfied in his current job.
Next, you try talking to his fellow team members. Some of them have
worked with Hank for more than two years—including the time before you
became head of the department.
Several of these employees say that Hank used to be a very positive,

energetic, and exceptional performer. Then, at some point, he just seemed
to lose interest in projects.
Given this information, which of the following reasons can you rule out as
an explanation for Hank's loss of motivation?
Personal problems
Not the best choice. Hank's résumé and your talks with his colleagues
yielded no information about any personal problems. Thus you cannot rule
this out as a possible explanation for Hank's lack of motivation.
Conflicts with your management style
Not the best choice. Apparently, Hank's behavior began to change at

about the time you began managing the production department. Thus you
cannot rule out conflicts with your management style as a possible
explanation for Hank's current lack of motivation.
Lack of needed skills
Correct choice. From your own experience, you know that Hank is
generally a solid worker. And according to other team members, he had
performed even better in the past.
You meet with Hank to discuss his apparent lack of enthusiasm. After some
prying, it becomes clear to you that Hank has some difficulties with your
managerial style.
You have had great success with encouraging your direct reports to solve
problems and develop plans to meet department goals on their own. Hank
prefers the style of your predecessor, who gave staff members far more
incentives and recognition for working collectively on problems and
projects.
What should you do next to continue addressing Hank's motivation

problem?
Offer to sponsor a group project in the short term while coaching Hank
to take more initiative in setting up group projects on his own in the long
term.
Correct choice. By tailoring your management style in the short run to

meet Hank's desire for more collaborative work, you show Hank that you
value and respect him. And by coaching him to take more initiative in
organizing collaborative work in the future, you stay true to your preferred
—and effective—management style.
Agree to move to a more "team-oriented" style of management.
Not the best choice. Changing your management style to satisfy one
employee may not be the wisest move, especially since you have
generated excellent results with your other employees using this style.
Explain the benefits of your management style to Hank and ask him to
make more of an effort to adjust to that style.
Not the best choice. Asking Hank to adapt to a more independent work
environment without helping him acquire the skills to organize group
projects on his own will likely only further alienate Hank.
Creating a Work Environment that Motivates
The holding environment
When leaders offer their vision of a new future, they recognize that the
change required comes with inherent challenges. They recognize that a
certain level of stress is healthy and necessary for change to occur.
However, they also know that people can't—or won't—learn new ways of
doing things if they are feeling anxious or overwhelmed.
To help motivate people without immobilizing them, create a holding

environment—a "safe" organizational space in which the conflicts,
emotions, and stresses related to the change associated with your vision
can be worked out.
In the early stages of implementing a vision, a leader may establish a

holding environment for the team to talk openly about the initial
challenges, to frame and debate issues, and to clarify assumptions. Over
time, the scope of the issues discussed will likely broaden.
Handle destructive conflict
While a certain level of conflict is likely to be the norm, it is your

responsibility as a leader to identify whether it
is destructive or constructive. Destructive conflict undermines the trust that
is vital to a working relationship and includes:
Personal attacks, either directly or through gossip
Scapegoating
Pointless griping about irrelevant issues or external forces that cannot be

controlled
Handle destructive conflict by acknowledging the problem and using

persuasion, reminding others of the vision, or otherwise deploying your
power as a leader to resolve the conflict.
Constructive conflict, on the other hand, concerns divergent perspectives

on your most important tasks or priorities—and needs to be incorporated
into your vision. Ask pointed questions to draw the issues out, then insist
that your employees discuss them openly and work out solutions.
Regulate distress
In an environment of change, a leader is responsible for regulating the

distress that team members are feeling; this entails ensuring that the team
members remain motivated and in control of their workloads. Effective
leaders are masters of sequencing and pacing work. They know how to
prioritize and order tasks to minimize confusion and chaos. Successful
leaders do not strive to eliminate all of their team's stressors, but instead
help team members manage them.
You can establish a holding environment that fosters motivation by:
Treating everyone, at every level of the organization, with the same respect
Giving everyone's ideas serious consideration
Being fair, kind, and courteous at all times
Being honest, admitting when you make a mistake or when you don't have
an answer
Never putting other people down
Protecting your unit or group by defining a boundary around your people

and sheltering them from interference, going to bat for your team to get
the resources you need, and showing courage in sticking up for your
people
Not tolerating scapegoating or misapplied blame
Using every reasonable opportunity to foster others' professional growth
Benefits of a holding environment
There are many benefits of establishing a holding environment. Specifically,

it:
Reinforces trust among all stakeholders
Forces people together to address issues
Fosters a positive attitude
Upholds principles of mutual respect and consideration
Protects its members
Helps a leader address the conflict necessary to reach goals
In a holding environment, your team members should feel comfortable

sharing the fears, frustrations, and pain associated with the realization of
your vision. One of your greatest challenges, then, is to be able to
understand and empathize with team members' experience without easing
up on the tension necessary to see the vision through.
Activity: Have you created a holding environment?
This assessment can help you evaluate whether you have built an effective
holding environment.
Would colleagues at any level say they have never heard you put another
person down?
Yes
Correct choice. Putting people down can damage the safety of a holding

environment and contributes to employees' distress. As a leader, model
appropriate behavior by never putting other people down.
No
Not the best choice. Putting people down can damage the safety of a
holding environment and contributes to employees' distress. As a leader,
model appropriate behavior by never putting other people down.
Do you show that you will not tolerate "scapegoating," or misapplied

blame?
Yes
Correct choice. "Scapegoating" and misapplying blame are examples of

destructive conflict. If you allow them, you will likely contribute to
employees' distress instead of regulating it.
No
Not the best choice. "Scapegoating" and misapplying blame are examples

of destructive conflict. If you allow them, you will likely contribute to
employees' distress instead of regulating it.
Do you listen fairly, kindly, and with courtesy to the opinions of others?
Yes
Correct choice. In a holding environment, your team members should feel

comfortable sharing the fears, frustrations, and pain associated with the
realization of your vision.
No
Not the best choice. In a holding environment, your team members should
feel comfortable sharing the fears, frustrations, and pain associated with
the realization of your vision.
Do you respect other people's ideas and give each one the same amount
of consideration, regardless of level?
Yes
Correct choice. Consistency is very important to developing a holding

environment. Only by showing all members of your team the same level of
respect will you truly make people feel safe.
No
Not the best choice. Consistency is very important to developing a holding

environment. Only by showing all members of your team the same level of
respect will you truly make people feel safe.
Do you go to bat for your team to get the resources you need?
Yes
Correct choice. "Going to bat" for your team to get the resources they
need is crucial for regulating employees' distress. Without enough
resources, workloads will become too demanding, and motivation will flag.
No
Not the best choice."Going to bat" for your team to get the resources they
need is crucial for regulating employees' distress. Without enough
resources, workloads will become too demanding, and motivation will flag.
Do you shelter your team from interference and show courage in sticking
up for your people?
Yes
Correct choice. Protecting your team from meddling is crucial for
regulating distress and empowering employees to regulate their own
workloads.
No
Not the best choice. Protecting your team from meddling is crucial for
regulating distress and empowering employees to regulate their own
workloads.
Do you protect voices of dissent?
Yes
Correct choice. If dissenters are not protected, they may be silent.

Promoting the safe sharing of ideas will allow team members to
productively express frustration and confusion.
No
Not the best choice. If dissenters are not protected, they may be silent.
Promoting the safe sharing of ideas will allow team members to
productively express frustration and confusion.
Do you admit it when you make a mistake?
Yes
Correct choice. Admitting to your mistakes or gaps in knowledge helps

reinforce trust among all stakeholders and establish your credibility as a
leader.
No
Not the best choice. Admitting to your mistakes or gaps in knowledge

helps reinforce trust among all stakeholders and establish your credibility
as a leader.
Do you disclose when you don't know the answer?
Yes
Correct choice. Admitting when you don't know the answer fosters an

open environment of trust. This encourages stakeholders to share their
own fears, frustrations, and gaps in knowledge.
No
Not the best choice. Admitting when you don't know the answer fosters an
open environment of trust. This encourages stakeholders to share their
own fears, frustrations, and gaps in knowledge.
Do you use every reasonable opportunity to foster others' professional

growth?
Yes
Correct choice. Making it clear that you will foster other's professional

growth—and then doing so—curbs destructive conflict before it begins by
reducing unhealthy competition.
No
Not the best choice. Making it clear that you will foster other's professional
growth—and then doing so—curbs destructive conflict before it begins by
Part 1
Owen manages the product development group at InfoMed, a small, public

company that creates information resources for the healthcare industry.
InfoMed is struggling financially, and Owen is trying to think of ways his
group might help revive sales.
Owen has an idea for a new product: an online resource containing up-to-
date information on healthcare providers, which people could consult while
selecting health insurance plans.
This resource would represent a new direction for Info Med and would
involve substantial investment and risk. Yet Owen believes it could succeed
—if he can get enough support behind his vision. Excited, he researches
the potential market and prepares to present his idea to his group and
other key Info Med players.
Besides explaining how the product would work, how might Owen express
his vision?
"If we give it a chance and all pull together, I believe this product would
put Info Med at the top of our industry within four months after its
release."
Not the best choice. This vision may be inspiring, but it isn't realistic. As a
small, struggling company, Info Med isn't likely to rise to the top of its
industry in just four months by introducing any new product. Also, it's
unrealistic to expect Owen's team to develop the new product's content
quickly enough to realize that vision—given that the product represents a
completely new direction for Info Med.
An effective vision should touch people's core needs for achievement,

recognition, and belonging. However, if it can't easily be translated into a
realistic competitive strategy, people won't know how to make the vision
real.
"My research suggests that introducing this product next year could boost
our revenues by 30%, make us known on Wall Street, and improve
consumers' lives. Of course, we would all have to work together to make
this happen."
Correct choice. This vision paints a clear and compelling picture of how the
new resource would benefit all major stakeholders: Info Med employees,
investors, and customers. It's also expressed in easy-to-understand terms.
Finally, it's realistic and achievable.
An effective vision is a leader's most important motivational tool. You

should refer to your vision often, explaining its relevance to various
audiences as you work to keep them on board.
"Info Med needs to enter this market if we hope to make value-added

contributions to the emerging consumer-driven healthcare industry. If we
can start production rollout soon, we'll gain first mover advantage."
Not the best choice. This vision is vague and contains uninspiring jargon
("value-added," "emerging consumer-driven healthcare industry," "first
mover advantage"). An effective vision is easy to explain and understand—
even if implementing it will be a complicated process. If a vision is
unfocused and overly complex, people won't understand it—and they can't
support what they don't understand. When crafting a vision, use plain but
inspiring language. Explain how the new product or idea would work, and
how key stakeholders—employees, investors, and customers—would
benefit.
Part 2
By communicating his vision effectively using realistic, inspiring, and easy-

to-understand terms, Owen gains support from key stakeholders both
inside and outside InfoMed. He understands, however, that to realize his
vision, he'll need to ensure that everyone involved stays energized, aligned,
and working toward the same goal.
What would be the best way for Owen try to ensure that all of InfoMed's
employees remain motivated?
Inform all employees involved with the project that there will be a
significant bonus for everyone involved if they work hard and develop the
product in the expected time frame.
Not the best choice. Financial compensation will motivate some people,

but not necessarily all of them. All people have individual drives, needs,
and desires—and thus will be motivated by different factors. While some
are motivated by "external" factors that are related to their job
environment (e.g., company policies and benefits, working conditions,
salary, status), others are motivated by "internal" factors that are related to
their job content (the nature of the work itself).
Finding out what motivates people on an individual level will be critical to

Owen's success. If he takes the time to find out what inspires each of his
employees, and devises the plan that best matches their needs, he will
help ensure that they stay motivated for the long term.
Provide employees with opportunities for growth and learning as well as
positive feedback on the quality of their work.
Not the best choice. Opportunities for growth and positive feedback will
motivate some people, but not necessarily all of them. All people have
individual drives, needs, and desires—and thus will be motivated by
different factors. While some are motivated by "internal" factors that are
related to their job content (the nature of the work itself), others are
motivated by "external" factors that are related to their job environment
(e.g., company policies and benefits, working conditions, salary, status).
Finding out what motivates people on an individual level will be critical to

Owen's success. If he takes the time to find out what inspires each of his
employees, and devises the plan that best matches their needs, he will
help ensure that they stay motivated for the long term.
Ask employees what motivates them, and develop individualized plans

accordingly.
Correct choice. Finding out what motivates people on an individual level

will be critical to Owen's success. Understanding that some people are
motivated by "external factors" that are related to their job environment,
while others are motivated by "internal" factors that are related to the job
content, is Owen's first step.
If Owen then takes the time to find out what inspires each of his
employees and devises the plan that best matches their needs, he will help
ensure that they stay motivated for the long term.
Part 3
Owen sits down with his direct reports individually to discover what
motivates them best. Within reason, he devises individualized plans that
meet their needs. He then encourages other managers to find out the
same information from their teams. He is satisfied that he has set the
project up for success.
But as the work proceeds, long hours begin adding up and expenses climb
beyond initial expectations. Despite a small victory—a team member has
enlisted the help of a highly esteemed outside researcher—some of
Owen's direct reports begin arguing over how to prioritize tasks. Owen's
supervisor starts questioning him about the project's progress and what
he's overheard about his team's internal conflicts.
Owen fears that his project is losing momentum—just when he needs it

the most. He wonders what he can do to keep the project moving forward.
What should Owen do to keep his project moving forward?
E-mail key stakeholders, including his supervisor, peers, direct reports, and
affected customers, announcing the participation of the external researcher
and explaining the positive impact this will have on the project.
Correct choice. A good way to keep people motivated during the difficult
stages of a project is to regularly acknowledge and celebrate successes—
no matter how minor the victory. By sending an e-mail to upper
management, colleagues, and outside stakeholders, Owen lets everyone
know that the team is making concrete progress, despite some setbacks.
Honestly admit to his supervisor and peers that there has been some
tension within his team. Enlist the support of his supervisor in resolving
disagreements.
Not the best choice. When motivation starts to falter, Owen should protect
his group rather than expose tensions within it. This means defining a
boundary around the team and sheltering members from interference. It
entails showing courage and sticking up for his people—and going to bat
for his team for any resources it may need.
Protecting your group is one way to create a holding environment, a safe

place where employees can feel secure and heard. By establishing such an
environment, you help your direct reports do their best work and maintain
their enthusiasm for the project. You can also help relieve tensions by
refocusing on the vision and emphasizing short-term wins.
Ask his team members to set aside any disagreements about how to
prioritize the project's tasks until he can revive the project's forward
momentum.
Not the best choice. Disagreements about task priorities actually represent

constructive conflict within a team and should be addressed immediately.
When such conflict arises, team members' various perspectives should be
incorporated into the group's strategy or vision, not repressed.
In this situation, Owen should ask pointed questions to draw the issues
out. Then he should insist that the employees involved discuss their
differences and work out a solution.
Conclusion
By regularly broadcasting milestones, creating a holding environment, and

regulating constructive conflict, Owen revives his project's forward
momentum. His team finishes the development work, and InfoMed
launches the new product. Early reviews of the product look promising.
Leading and motivating aren't easy. But they've become more important
than ever in an age of accelerating change in business—whether change
takes the form of new products, new technologies, emerging markets, or
other competitive challenges. Good leaders create compelling, clear, and
achievable visions, communicate them effectively to key stakeholders, and
keep people involved and motivated during tough times.
Organizing projects
Not the best choice. Organizing projects is a management, not a

leadership task. Other management tasks include staffing, planning,
controlling, and problem solving. Managing and leading are distinct but
complementary tasks. Managing involves coping with complexity, while
leading involves coping with change. Managing requires bringing order
and predictability to a situation, while leading involves adapting to
changing circumstances.
Aligning people
Correct choice. Aligning people to a vision is a core leadership task. To

align people, you solicit input and discussion from a wide range of people,
help people to comprehend a vision of an alternative future, and get them
to believe in and become energized by this vision once it is understood.
Other leadership tasks include setting direction and motivating others.
Managing and leading are distinct but complementary tasks. Managing
involves coping with complexity, while leading involves coping with
change. Managing requires bringing order and predictability to a situation,
while leading involves adapting to changing circumstances.
Budgeting
Not the best choice. Budgeting is a management, not a leadership, task.
Other management tasks include staffing, planning, controlling, and
problem solving. Managing and leading are distinct but complementary
tasks. Managing involves coping with complexity while leading involves
coping with change. Managing requires bringing order and predictability
to a situation, while leading involves adapting to changing circumstances.
A leader sequences and prioritizes tasks to minimize confusion and chaos.
Correct choice. A holding environment is a "safe" organizational space in

which the conflicts, emotions, and stresses related to the change
associated with your vision can be worked out. In a holding environment,
you are responsible for regulating the distress of your team. To carry out
this responsibility, you can sequence and pace work to avoid overwhelming
your direct reports. Leaders understand that people cannot make the
changes necessary to realize a vision if they are anxious about their
workloads. However, leaders also understand that a certain level of stress is
healthy—and necessary—for any change to occur.
A leader strives to eliminate all stressors to improve his or her team's

productivity.
Not the best choice. A certain level of stress is actually healthy—and

necessary—for changes to occur that will enable a team to realize a vision.
In a holding environment—a "safe" organizational space in which the
conflicts, emotions, and stresses related to the change associated with your
vision can be worked out—you're responsible for regulating the stress felt
by employees, not eliminating it altogether. You can regulate stress by
sequencing and prioritizing tasks to minimize confusion and chaos.
A leader discourages people from complaining and being negative in order

to foster a comfortable environment.
Not the best choice. A holding environment is meant to be a "safe"

organizational space where people can come together to work out the
conflicts, frustrations, and stresses related to the change required to realize
a vision—candidly and without fear of reprisal. Discouraging people from
complaining may send the message that the environment is not safe. The
correct answer is "A leader sequences and prioritizes tasks to minimize
confusion and chaos"; doing so can help you regulate the stress felt by
your team as they work toward realizing your vision.
Humorous and politically astute
Correct choice. Socially skilled leaders know how to inject humor when the
situation warrants it. They also have a solid sense of their organization's
power structure, and know where to turn for the support and resources
they need. Social skill is one of the five competencies of emotional
intelligence, or the ability to manage oneself and one's relationships
effectively. The other competencies are self-awareness, self-regulation,
motivation, and empathy.
Comfortable with ambiguity and level-headed
Not the best choice. Comfort with ambiguity and level-headedness

describe the emotional intelligence competency of self-regulation, not
social skill. Socially skilled leaders know how to inject humor when the
situation warrants it. They also have a solid sense of their organization's
power structure, and know where to turn for the support and resources
they need.
In addition to self-regulation and social skill, emotional intelligence

competencies include self-awareness, motivation, and empathy.
Persistent and knowledgeable about his or her own weaknesses and

strengths
Not the best choice. "Persistent" describes the emotional intelligence

competency of motivation, not social skill. And "knowledgeable about
one's strengths and weaknesses" describes the EI competency of self-
awareness, not social skill.
Socially skilled leaders know how to inject humor when the situation
warrants it. They also have a solid sense of their organization's power
structure, and know where to turn for the support and resources they
need.
In addition to motivation, self-awareness, and social skill, emotional

intelligence competencies include self-regulation and empathy.
Affiliative
Not the best choice. While the Affiliative style is useful in situations where
team cohesion is needed, no one leadership style is appropriate for all
situations. Savvy leaders choose from a range of styles the one that best
addresses the demands of the situation at hand. Being able to switch
among four styles—authoritative, Affiliative, democratic, and coaching—as
conditions dictate tends to create the optimal work environment.
Democratic
Not the best choice. While the democratic style is useful when trying to
build consensus, no one leadership style is appropriate for all situations.
Savvy leaders choose from a range of styles the one that best addresses
the demands of the situation at hand. Being able to switch among four
styles—authoritative, affiliative, democratic, and coaching—as conditions
dictate tends to create the optimal work environment.
Change style as needed
Correct choice. There is no one "best" leadership style for all situations.

Savvy leaders choose from a range of styles the one that best addresses
the demands of the situation at hand. Being able to switch among four
styles—authoritative, affiliative, democratic, and coaching—as conditions
dictate tends to create the optimal work environment.
A clear vision of a better future
Correct choice. An easy-to-understand description of an altered and

improved future is the most fundamental tool in a leader's arsenal. This
vision functions as a guide as your group, unit, or organization moves
away from past beliefs, activities, and goals to a future more suited to the
company's changing needs and the demands of the economic
environment.
A well-established rewards structure
Not the best choice. While having a solid rewards structure in place may
help motivate some employees, having a clear and simple vision is the
foundation on which everything else rests. The vision functions as a guide
as your group, unit, or organization moves away from past beliefs,
activities, and goals to a future more suited to the company's changing
needs and the demands of the economic environment.
An ability to empathize with other people's experience

Not the best choice. While a leader's ability to empathize is critical for
creating an inspiring work environment, having a clear and simple vision is
the foundation on which everything else rests. The vision functions as a
guide as your group, unit, or organization moves away from past beliefs,
activities, and goals to a future more suited to the company's changing
needs and the demands of the economic environment.
Correct choice. Emotional intelligence (EI) is not genetic; it is learned.

Therefore, strengthening your EI capabilities is possible. Leaders can
improve their EI skills through extended practice, feedback from
colleagues, and their own enthusiasm for making a change.
Not the best choice. This statement is actually true. Emotional intelligence

(EI) is not genetic; it is learned. Therefore, strengthening your EI capabilities
is possible. Leaders can improve their EI skills through extended practice,
feedback from colleagues, and their own enthusiasm for making a change.
Not the best choice. When communicating your vision, you

actually should be willing to repeat yourself. Repetition helps everyone stay
focused and understand exactly what they are supposed to do to help
realize your vision.
The correct answer is "Be sensitive to the delivery media you choose."
While leaders need to use a wide range of media to communicate their
message, they must be judicious. For example, electronic communications
such as e-mail should never supplant face-to-face conversations, which are
far more effective for communicating your vision.
Not the best choice. When communicating your vision, you actually

should not contain yourself emotionally. By communicating with feeling,
you increase the odds of activating others' desire for the same end result
you're depicting in your vision.
The correct answer is "Be sensitive to the delivery media you choose."
While leaders need to use a wide range of media to communicate their
message, they must be judicious. For example, electronic communications
such as e-mail should never supplant face-to-face conversations, which are
far more effective for communicating your vision.
Be sensitive to the delivery media you choose

Correct choice. While leaders need to use a wide range of media to
communicate their message, they must be judicious. For example,
electronic communications such as e-mail should never supplant face-to-
face conversations, which are far more effective for communicating your
vision.
Not the best choice. This is too formulaic an approach to motivating

employees. All people have individual drives, needs, and desires, and will
be motivated by different things. Therefore, your first step should be to
find out what motivates people on an individual level. Crafting a plan that
includes the blend of motivators that best meets an individual's needs will
help ensure that he or she stays motivated for the long term. Motivators
may be external, or not related to the job itself (such as raises or bonuses)
or internal; that is, related to the job (such as employees' sense of
achievement, pride in their work, or working conditions).
Tap into internal sources of motivation, such as employees' pride in their

work and sense of achievement. If that doesn't work, improve external
sources of motivation, such as working conditions.
Not the best choice. This is too formulaic an approach to motivating

employees. All people have individual drives, needs, and desires, and will
be motivated by different things. Therefore, your first step should be to
find out what motivates people on an individual level. Crafting a plan that
includes the blend of motivators that best meets an individual's needs will
help ensure that he or she stays motivated for the long term. Motivators
may be external, or not related to the job itself (such as raises or bonuses)
or internal; that is,related to the job (such as employees' sense of
achievement, pride in their work, or working conditions).
Correct choice. All people have individual drives, needs, and desires, and
will be motivated by different things. Therefore, finding out what motivates
people on an individual level is critical. Crafting a plan that includes the
blend of motivators that best meets an individual's needs will help ensure
that she stays motivated for the long term. Motivators may be external, or
not related to the job itself (such as raises or bonuses) or internal; that is,
related to the job (such as employees' sense of achievement, pride in their
work, or working conditions).
Innovative and awe-inspiring

Not the best choice. A vision need not be innovative or awe-inspiring. In
fact, visions are often quite mundane. As a description of an altered and
improved future, an effective vision must be realistic and compelling. A
vision must also clarify the general direction for the future, efficiently
coordinate the actions of different people, and be desirable enough to
motivate people to take action in the right direction, even if such changes
are personally painful.
Complex and multifaceted
Not the best choice. A vision need not be complex and multifaceted. In
fact, as a description of an altered and improved future, it's more
important for a vision to be realistic and compelling. A vision must also
clarify the general direction for the future, efficiently coordinate the actions
of different people, and be desirable enough to motivate people to take
action in the right direction, even if such changes are personally painful.
Realistic and compelling
Correct choice. As a description of an altered and improved future, an

effective vision must be both realistic and compelling. A vision must also
clarify the general direction for the future, efficiently coordinate the actions
of different people, and be desirable enough to motivate people to take
action in the right direction, even if such changes are personally painful.
Schedule a formal meeting with the employee to discuss the problem
Not the best choice. While discussing the issue with the employee is
critical, it is not the next step. Well before you hold your meeting, you
should take the time to actively switch your mindset from seeking a single,
predetermined "solution" (e.g., termination) to considering a range of
possible desirable outcomes. By reframing your goals regarding the
employee and being open to changing the definition of what the solution
might look like, you will likely discover novel and rich alternatives. For
example, perhaps the person would benefit from coaching or would do
better in another department.
Reevaluate your goals regarding the employee and consider a range of

possible solutions to the problem
Correct choice. The next step after gathering information is to switch your

mindset from seeking a single, predetermined "solution" (e.g., termination)
to considering a range of possible desirable outcomes. By reframing your
goals regarding the employee and being open to changing the definition
of what the solution might look like, you will likely discover novel and rich
alternatives. For example, perhaps the person would benefit from coaching
or would do better in another department.
Be alert for a casual opportunity to discuss the problem with the

employee, such as immediately after a staff meeting
Not the best choice. While discussing the issue with the employee is
critical, it is not the next step. Well before you hold your meeting, you
should take the time to actively switch your mindset from seeking a single,
predetermined "solution" (e.g., termination) to considering a range of
possible desirable outcomes. By reframing your goals regarding the
employee, and being open to changing the definition of what the solution
might look like, you will likely discover novel and rich alternatives. For
example, perhaps the person would benefit from coaching or would do
better in another department.
Steps
Steps for adapting your leadership style to individual needs
Determine the individual's developmental level in relation to the task at

hand.
Work with employees to identify their developmental level related to the

task you have assigned them. An employee's developmental level can be
assessed by examining two factors:
Competence: The person's task-specific knowledge and any transferable

skills that could be applied to the task
Commitment: The combination of the individual's motivation and

confidence to perform the task
After you have assessed the employee's developmental level, choose a

leadership approach that will best meet his or her needs.
In general, there are four different leadership approaches that you will
employ when working with employees. They are directive, coaching,
supporting, and delegating.
For those who are learning new skills, be directive.
People who are in this stage need very specific instructions and ongoing
feedback. As a leader, your responsibilities include:
Defining tasks clearly and in sufficient detail
Orienting the individual to the task
Checking and monitoring progress to make sure the person is not faltering
For those who are learning skills, but are still gaining experience, provide
coaching.
While these people may still need a certain level of direction, they also
need the freedom to make some mistakes, and encouragement to keep
going. As a leader, your responsibilities include:
Explaining tasks
Clarifying issues if necessary
Redirecting if the person goes astray
For those who may be highly competent, but who may lack self-
confidence, offer support and encouragement.
Use positive reinforcement to help these people recognize their developing

abilities. As a leader, your responsibilities include:
Facilitating their progress, if necessary
Collaborating on issues
Reassuring them that they are doing a good job
With highly motivated and experienced employees, you delegate tasks.
Don't just delegate work that you find unpleasant. Determine whose
expertise or personal experience is suited to a "stretch" assignment, then
give that person the freedom and support she needs to succeed. As a
leader, your responsibilities include:
Affirming that the person is doing a good job
Challenging her to do her best
Empowering her to take on new tasks and responsibilities
Steps for formulating a vision
Conduct internal research throughout the organization or talk with

customers or other stakeholders to learn the relative importance of a
problem or a new goal.
Work with colleagues from various functions across the organization to get
valuable information, input, and early support.
Make sure that all crucial perspectives are represented.
Failure to listen to a powerful group or voice can spell disaster later on:
Stakeholders may be unwilling to support you at a critical juncture. More
important, not incorporating the opinion of an important group may mean
that your vision won't address all the relevant organizational needs.
Use the results of your research to define a vision that is both realistic and
focused.
To be effective, a vision must be achievable. Even if it is ambitious, you

and your stakeholders must be able to imagine the outcomes described
actually occurring. And it needs to be focused enough to ensure that all
stakeholders are imagining the same set of outcomes.
Ask key stakeholders or trusted advisers to provide reality checks to help

clarify the vision.
Clearly define the vision's benefits to all involved.
Determine the benefits not only to your unit and company, but to
employees, stockholders, and customers as well. If people know "what's in
it for them," they'll be more likely to embrace the vision and offer
assistance when asked.
Capture the vision in a few simple sentences so that it is easy to explain to

others.
This vision statement will become your most important motivational tool. It
must be clear and specific, but not so detail-oriented that it loses its ability
to inspire.
Steps for creating forward momentum
Communicate with core team members to monitor progress.
Hold frequent short meetings with the core team. You can establish a 15-
minute time frame or conduct stand-up meetings to guarantee brevity.
Ask for brief, weekly status reports from members, and respond to them.
Listen for obstacles and signs of slipping morale. Be supportive and

positive.
Advertise progress to external parties who have an interest in your success.
Send memos or e-mails to key stakeholders to let them know that you are
moving ahead.
Make frequent presentations to upper management to ensure their

ongoing support.
Broadcast early rewards and successes to your group and/or organization.

Publicly recognize the achievements of those who deserve credit.
Deal with conflict when it arises
Conflict is a natural response to change, and some conflict can be healthy

and constructive. Use your communication skills to regulate the
temperature of the conflict.
Pace the flow of information. Give the group time to digest new
information and ideas.
Listen. Get perspectives on the conflict from key players. Get a sense of
people's tolerance levels so that the temperature can be turned up or
down, as necessary.
Be objective and calm.

Keep talking about the issues. Don't let people change the subject.
Ask questions that draw issues out into the open. Force people to discuss
them and to work out solutions.
If the group's temperature is already too high, withhold information you

feel might cause an explosion.
If destructive conflict surfaces, try to persuade the people involved that

their behavior is counterproductive, or enlist the help of others in resolving
the conflict. Otherwise, revise your strategy so that it addresses or
eliminates the issue.
Maintain perspective.
Throughout any stressful and complex project or initiative, it's vital that
you take a step back every now and then—so that you can see the broad
sweep of what's happening. It often helps to talk through problems and
issues with a close friend, spouse, mentor, or other confidant.
Listen to voices from the front lines. Maintain connections with those in
different areas and levels of authority so that you don't lose touch with
any critical perspective. Be open and approachable so that people are
willing to share information with you in a way that is timely and honest.
Tips
Tips for establishing your credibility
Demonstrate competence in a particular area.
Show your willingness to work hard.
Model the behaviors you're trying to encourage.
Use power and influence for the benefit of others.
Treat others consistently and fairly.
Practice active listening.
Keep promises and meet deadlines.

Remain calm under pressure.
Prepare thoroughly for meetings and presentations.
Answer all phone calls and respond to all important e-mails promptly.
Keep good records.
Tips for developing your leadership skills
Create a personal development plan that specifies the skills you would like
to acquire and steps you will need to take in order to obtain them.
Enroll in formal leadership development programs that are offered either

through your organization or through an outside training company.
Ask to be assigned to challenging projects that will provide new and

unusual problems to solve.
Get involved in a variety of assignments; don't just do the same tasks over
and over again.
Observe how others you admire approach and solve similar problems.
Don't be afraid to take risks—you'll probably learn more from failing once
than from succeeding all the time.
If possible, elect to join rotation programs in which you can be exposed to

different functional areas of your organization. These programs can help
you develop your technical, business, and communication skills.
Find a colleague or executive who has the experience you want to gain
and see if he or she would be willing to mentor you.
Tips for creating an inspiring work environment
Articulate your vision in a manner that stresses the values of the audience
you're addressing.
Regularly explain to your staff the importance of their work to the

company's larger goals.
Break long-term assignments down into clear, achievable, short-term goals.

Demonstrate confidence in your staff's ability to overcome problems.
At regular intervals, take staff members aside and ask them if they feel
challenged, listened to, and recognized.
When giving feedback, balance negative criticism with comments that also
accentuate the positive.
Always recognize others for a job well done. Establish reward systems to
acknowledge superior performance.
Celebrate every success and milestone.
If possible, improve your staff's physical workspace.
http://training.albrightonconsulting.com.au/Learning
%20Objects/Leading%20and
%20Motivating/leading_and_motivating/leading_and_motivating.html
CHAPTER 12
CONTROLLING
Definition: Control is a primary goal-oriented function of management in

an organization. It is a process of comparing the actual performance with
the set standards of the company to ensure that activities are performed
according to the plans and if not then taking corrective action.
Every manager needs to monitor and evaluate the activities of his

subordinates. It helps in taking corrective actions by the manager in the
given timeline to avoid contingency or company’s loss.
Controlling is performed at the lower, middle and upper levels of the
management.
Features of Controlling
An effective control system has the following features:
It helps in achieving organizational goals.
Facilitates optimum utilization of resources.
It evaluates the accuracy of the standard.
It also sets discipline and order.
Motivates the employees and boosts employee morale.
Ensures future planning by revising standards.
Improves overall performance of an organization.
It also minimises errors.
Controlling and planning are interrelated for controlling gives an important

input into the next planning cycle. Controlling is a backwards-looking
function which brings the management cycle back to the planning
function. Planning is a forward-looking process as it deals with the
forecasts about the future conditions.
Process of Controlling
Control process involves the following steps as shown in the figure:

Establishing standards: This means setting up of the target which needs to
be achieved to meet organisational goals eventually. Standards indicate the
criteria of performance.
Control standards are categorized as quantitative and qualitative

standards. Quantitative standards are expressed in terms of
money. Qualitative standards, on the other hand, includes intangible items.
Measurement of actual performance: The actual performance of the

employee is measured against the target. With the increasing levels of
management, the measurement of performance becomes difficult.
Comparison of actual performance with the standard: This compares the

degree of difference between the actual performance and the standard.
Taking corrective actions: It is initiated by the manager who corrects any

defects in actual performance.
Controlling process thus regulates companies’ activities so that actual

performance conforms to the standard plan. An effective control system
enables managers to avoid circumstances which cause the company’s loss.
Types of control
There are three types of control viz.,
Feedback Control: This process involves collecting information about a

finished task, assessing that information and improvising the same type of
tasks in the future.
Concurrent control: It is also called real-time control. It checks any problem

and examines it to take action before any loss is incurred. Example: control
chart.
Predictive/ feedforward control: This type of control helps to foresee

problem ahead of occurrence. Therefore action can be taken before such a
circumstance arises.
In an ever-changing and complex environment, controlling forms an

integral part of the organization.
Advantages of controlling
Saves time and energy
Allows managers to concentrate on important tasks. This allows better

utilization of the managerial resource.
Helps in timely corrective action to be taken by the manager.
Managers can delegate tasks so routinely chores can be completed by

subordinates.
On the contrary, controlling suffers from the constraint that the

organization has no control over external factors. It can turn out to be a
costly affair, especially for small companies.
Controlling Function of Management
What is Controlling?
Controlling consists of verifying whether everything occurs in confirmities

with the plans adopted, instructions issued and principles established.
Controlling ensures that there is effective and efficient utilization of
organizational resources so as to achieve the planned goals. Controlling
measures the deviation of actual performance from the standard
performance, discovers the causes of such deviations and helps in taking
corrective actions
According to Brech, “Controlling is a systematic exercise which is called as

a process of checking actual performance against the standards or plans
with a view to ensure adequate progress and also recording such
experience as is gained as a contribution to possible future needs.”
According to Donnell, “Just as a navigator continually takes reading to

ensure whether he is relative to a planned action, so should a business
manager continually take reading to assure himself that his enterprise is on
right course.”
Controlling has got two basic purposes
It facilitates co-ordination
It helps in planning
Features of Controlling Function

Following are the characteristics of controlling function of management-
Controlling is an end function- A function which comes once the

performances are made in conformities with plans.
Controlling is a pervasive function- which means it is performed by

managers at all levels and in all type of concerns.
Controlling is forward looking- because effective control is not possible

without past being controlled. Controlling always look to future so that
follow-up can be made whenever required.
Controlling is a dynamic process- since controlling requires taking reviewal

methods, changes have to be made wherever possible.
Controlling is related with planning- Planning and Controlling are two

inseparable functions of management. Without planning, controlling is a
meaningless exercise and without controlling, planning is useless. Planning
presupposes controlling and controlling succeeds planning.
https://www.managementstudyguide.com/controlling_function.htmProc
ess of Controlling
Controlling as a management function involves following steps:
Establishment of standards- Standards are the plans or the targets which

have to be achieved in the course of business function. They can also be
called as the criterions for judging the performance. Standards generally
are classified into two-
Measurable or tangible - Those standards which can be measured and
expressed are called as measurable standards. They can be in form of cost,
output, expenditure, time, profit, etc.
Non-measurable or intangible- There are standards which cannot be

measured monetarily. For example- performance of a manager, deviation
of workers, their attitudes towards a concern. These are called as intangible
standards.
Controlling becomes easy through establishment of these standards

because controlling is exercised on the basis of these standards.
Measurement of performance- The second major step in controlling is to

measure the performance. Finding out deviations becomes easy through
measuring the actual performance. Performance levels are sometimes easy
to measure and sometimes difficult. Measurement of tangible standards is
easy as it can be expressed in units, cost, money terms, etc. Quantitative
measurement becomes difficult when performance of manager has to be
measured. Performance of a manager cannot be measured in quantities. It
can be measured only by-
Attitude of the workers,
Their morale to work,
The development in the attitudes regarding the physical environment, and
Their communication with the superiors.
It is also sometimes done through various reports like weekly, monthly,

quarterly, yearly reports.
Comparison of actual and standard performance- Comparison of actual

performance with the planned targets is very important. Deviation can be
defined as the gap between actual performance and the planned targets.
The manager has to find out two things here- extent of deviation and
cause of deviation. Extent of deviation means that the manager has to find
out whether the deviation is positive or negative or whether the actual
performance is in conformity with the planned performance. The managers
have to exercise control by exception. He has to find out those deviations
which are critical and important for business. Minor deviations have to be
ignored. Major deviations like replacement of machinery, appointment of
workers, quality of raw material, rate of profits, etc. should be looked upon
consciously. Therefore it is said, “ If a manager controls everything, he ends
up controlling nothing.” For example, if stationery charges increase by a
minor 5 to 10%, it can be called as a minor deviation. On the other hand,
if monthly production decreases continuously, it is called as major
deviation.
Once the deviation is identified, a manager has to think about various

cause which has led to deviation. The causes can be-
Erroneous planning,
Co-ordination loosens,
Implementation of plans is defective, and
Supervision and communication is ineffective, etc.
Taking remedial actions- Once the causes and extent of deviations are

known, the manager has to detect those errors and take remedial
measures for it. There are two alternatives here-
Taking corrective measures for deviations which have occurred; and
After taking the corrective measures, if the actual performance is not in

conformity with plans, the manager can revise the targets. It is here the
controlling process comes to an end. Follow up is an important step
because it is only through taking corrective measures, a manager can
exercise controlling.
https://www.managementstudyguide.com/controlling_process.htm
Relationship between planning and controlling
Planning and controlling are two separate functions of management, yet

they are closely related. The scope of activities if both are overlapping to
each other. Without the basis of planning, controlling activities becomes
baseless and without controlling, planning becomes a meaningless
exercise. In absence of controlling, no purpose can be served by. Therefore,
planning and controlling reinforce each other. According to Billy Goetz, "
Relationship between the two can be summarized in the following points
Planning precedes controlling and controlling succeeds planning.
Planning and controlling are inseparable functions of management.
Activities are put on rails by planning and they are kept at right place
through controlling.
The process of planning and controlling works on Systems Approach which

is as follows:
Planning → Results → Corrective Action
Planning and controlling are integral parts of an organization as both are

important for smooth running of an enterprise.
In the present dynamic environment which affects the organization, the

strong relationship between the two is very critical and important. In the
present-day environment, it is quite likely that planning fails due to some
unforeseen events. There controlling comes to the rescue. Once controlling
is done effectively, it gives us stimulus to make better plans. Therefore,
planning and controlling are in separate functions of a business enterprise.
https://www.managementstudyguide.com/relationship-planning-
controlling.htm

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CHAPTER 1

Management by Objectives (MBO)

Definition: Management by Objectives (MBO) or otherwise called as

Management by objectives is a planning and controlling system, in which the

Assumption of Management by Objectives

Process of Management by Objectives

MBO, is directed towards raising the performance level of the organization by

Benefits of Management by Objectives

 It facilitates the employees to understand their tasks and duties in a better

 It is helpful in designing Key Result Area (KRA) for each employee,

 It eliminates overlapping and confusions in the tasks and duties.

 Every employee contributes towards the achievement of the objectives by

 It creates an open communication environment in the organization.

 In a nutshell, Management by objectives is nothing but a process wherein

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

Management is often included as a factor of production along with?

What is 'Management By Objectives - MBO'

Management by objectives (MBO) is a management model that aims to

BREAKING DOWN 'Management By Objectives - MBO'

Management by objectives (MBO) is the establishment of a management

Putting Management by Objectives Into Practice

 The first step is to either determine or revise organizational objectives for

 The second step is to translate the organizational objectives to employees.

 Step three is stimulating the participation of employees in setting

According to Theo Heimann, management has three different meanings, viz.,

Management as a Noun : refers to a Group of Managers.

Management as a Process : refers to the Functions of Management i.e.

Management as a Discipline : refers to the Subject of Management.

Management is an individual or a group of individuals that accept

The nature, main characteristics or features of management:

1. Continuous and never ending process.

2. Getting things done through people.

3. Result oriented science and art.

5. A group and not an individual activity.

6. Follows established principles or rules.

9. Need not be an ownership.

10. Both an art and science.

11. Management is all pervasive.

12. Management is intangible.

13. Uses a professional approach in work.

14. Dynamic in nature.

15. Now let's briefly discuss each feature of management.

1. Continuous and never ending process

Management is a Process. It includes four main functions, viz., Planning,

2. Getting things done through people

3. Result oriented science and art

Management is result oriented because it gives a lot of importance to

management uses knowledge from many different subjects such as

5. A group and not an individual activity

Management is not an individual activity. It is a group activity. It uses group

6. Follows established principles or rules

Management follows established principles, such as division of work,

7. Aided but not replaced by computers

Now-a-days, all managers use computers. Computers help the managers to

Management makes plans, policies and decisions according to the situation. It

9. Need not be an ownership

10. Both an art and science

Management is result-oriented. Therefore, it is an Art. Management conducts

11. Management is all pervasive

Management is necessary for running a business. It is also essential for

12. Management is intangible

Management is intangible, i.e. it cannot be seen and touched, but it can be