MP Consolidated Notes

Management Principles
R.NARASIMHAN
MA,MBA,M.com,LLM,Ph.D
• UNIT – I : Management- Definition,principles and process of management , management
functions,managementroles,managementskills,important managerial skills- the evolution of management thoughts –Major approaches
to management- definition and explanation-specific management, administrative management, human relation and system approach
to management. Planning –foundations of planning- principles and types of planning – goals and plans , types of goals and types of
plans approaches to setting goals- approaches to developing plans- steps in planning - limitations of planning-contemporary issues in
planning. Policymaking - general policies and specific policies in an organization-definition and steps in policy making- basic areas of
policy making and goal setting.
•
•
• Unit II -Decision making–Definition and understanding the importance of Decision Making-The decision making process- models and
techniques of decision making and implementation –Types of decision making- structured and programmed decisions- unstructured
and Non programmed decisions – Concepts of Classical Models, Administrative Models, Political Model- Management by objectives,
Management by Exception, Management by walking around: definition and detailed explanation.
•
•
•
• UNIT III : Organizing - organizational structure and design-nature and purpose of organizing-definition and need for organizational
structure- work specialization-departmentalization- authority and hierarchy-chain of command- span of management - pros and cons of
narrow and wide spans of control- optimum span definition and basic calculation using the formula - different types of structures in
brief. Use of organizational charts and manuals - explanations on lines and staff relationship - formal and informal groups -description of
delegation of authority– concepts of power and politics - centralization and decentralization of authority and the pros and cons each in
detail.
•
• UNIT IVCommunication–Concepts of Business Communication- importance of communication - Traits of Good communication: all the
factors of traits of communication in detail- Elements of communication- advantages and disadvantages of different traits of
communication-Formal and Informal Channels of communication- distinguishing between Downward and Upward communication–
Distinction between formal and informal communication- Follow up - standard indoctrination explaining why consultative direction links
in the chain of command.Types of Communication- concepts of communication networks-merits and demerits of different types of
communication - barriers to communication -essential of good communication system- process of communication - methods of
communication
•
• UNIT V: Co-ordination and control - Concept of control - process of control - listing elements of control - methods of control -
application of the process of control at different levels of management - Short concepts on Budgetary and non-budgetary control
techniques- Managing productivity- Cost control- Purchase control- Maintenance control- Quality control- Planning operations -
performance standards - Measurements of performance – Characteristics of an ideal control system- Remedial action -Definition of co-
ordination- Needs for co-ordination - Techniques of securing co-ordinations- concepts of work committee, joint management councils,
workers directors, co-partnership.
• UNIT – I :
Management- Definition,principles and process of
management , management
functions,managementroles,managementskills,important
managerial skills- the evolution of management thoughts –
Major approaches to management- definition and
explanation-specific management, administrative
management, human relation and system approach to
management. Planning –foundations of planning- principles
and types of planning – goals and plans , types of goals and
types of plans approaches to setting goals- approaches to
developing plans- steps in planning - limitations of
planning-contemporary issues in planning. Policymaking -
general policies and specific policies in an organization-
definition and steps in policy making- basic areas of policy
making and goal setting.
• Unit II -Decision making–Definition and
understanding the importance of Decision
Making-The decision making process- models
and techniques of decision making and
implementation –Types of decision making-
structured and programmed decisions-
unstructured and Non programmed decisions
– Concepts of Classical Models, Administrative
Models, Political Model- Management by
objectives, Management by Exception,
Management by walking around: definition
and detailed explanation.
• UNIT III : Organizing - organizational structure and
design-nature and purpose of organizing-definition and
need for organizational structure- work specialization-
departmentalization- authority and hierarchy-chain of
command- span of management - pros and cons of
narrow and wide spans of control- optimum span
definition and basic calculation using the formula -
different types of structures in brief. Use of
organizational charts and manuals - explanations on
lines and staff relationship - formal and informal
groups -description of delegation of authority–
concepts of power and politics - centralization and
decentralization of authority and the pros and cons
each in detail.
• UNIT IVCommunication–Concepts of Business
Communication- importance of communication - Traits
of Good communication: all the factors of traits of
communication in detail- Elements of communication-
advantages and disadvantages of different traits of
communication-Formal and Informal Channels of
communication- distinguishing between Downward
and Upward communication– Distinction between
formal and informal communication- Follow up -
standard indoctrination explaining why consultative
direction links in the chain of command.Types of
Communication- concepts of communication
networks-merits and demerits of different types of
communication - barriers to communication -essential
of good communication system- process of
communication - methods of communication
• UNIT V: Co-ordination and control - Concept of control
- process of control - listing elements of control -
methods of control - application of the process of
control at different levels of management - Short
concepts on Budgetary and non-budgetary control
techniques- Managing productivity- Cost control-
Purchase control- Maintenance control- Quality
control- Planning operations - performance standards -
Measurements of performance – Characteristics of an
ideal control system- Remedial action -Definition of co-
ordination- Needs for co-ordination - Techniques of
securing co-ordinations- concepts of work committee,
joint management councils, workers directors, co-
partnership.
• We all do something for living
• Economic Activity ----- Non economic Activity
• Rationality-------------Emotional /Sentimental
• Non economic activity also have economic

dimensions?
• The motive (or) Intent behind any activity
Mens Rea
• For us the focus in on Economic Activity
Income generating
Money and Kind
Economic activities are productive – Production

Making something material
Economic Activity
Production
Consumption
Savings , investments and wealth

• Business may be defined as an
economic activity comprising the
entire spectrum of activities
pertaining to production, distribution
and trading (exchange) of goods and
services.
ECONOMIC ACTIVITY
• BUSINESS
• PROFESSION
• EMPLOYMENT
Sole Proprietorship
• The easiest and earliest form of business.
• As a Human occupation/innovation/experiment
• Economic Hero – small scale
• MSME
• Employee people trust and provide personalised
services
• Unorganised (or) Informal sector
• Collectively tremendous contribution to National
economy
• Flip Side:
Local products
Working conditions
Hire and fire policy
Lack employee welfare
Not effective social and environmental concern
Fate of the enterprise is linked to the personal
well being of the owner.
Liability------Profit ( Micro finance)
Hindu Undivided Family (HUF)
• Separate entity status
• “Three successive generations of an undivided

family
• Hindu Succession act 1956
• Ascribed family members naturally join other
in the business.
• Common pool of capital
• Purely family trust and functional expertise
• Liabilities > Assets

• KARTA / Other members to their
limited contribution
• Succession Will.
Partnership firm
• Contractual Co-ownership
• Through Partnership DEED
• Partnership act 1932
• 10 for banking and 20 for other firm
• Profit sharing but not loss sharing
• Liability ???? Personal assest
• Succession of ownership
• Come to end by cessation of contract.
• LIMITED LIABILITY PARTNERSHIP ACT 2009
• MINISTRY OF CORPORATE AFFAIRS
• INCORPORATION AND REGISTRATION

• The Ministry of Corporate Affairs is an Indian
government ministry. It is primarily concerned
with administration of the Companies Act
2013, the Companies Act 1956, the Limited
Liability Partnership Act, 2008, Insolvency and
Bankruptcy Code, 2016 & other allied Acts and
rules & regulations framed there-under mainly
for regulating the functioning of the corporate
sector in accordance with law
• Ms. Nirmala Sitharaman
• Minister of Finance and Minister of Corporate
Affairs.
• Sh. Anurag Singh Thakur

Minister of State for Finance and Minister of
State for Corporate
• MCA regulates corporate affairs in India
through the Companies Act, 1956, 2013 and
other allied Acts, Bills and Rules. MCA also
protects investors and offers many important
services to stakeholders. This site is your
gateway to all services, guidance, and other
corporate affairs related information.
Companies Act 2013
• A business entity which acts as an artificial legal
person, formed by a legal person or a group of
legal persons to engage in or carry on
a business or industrial enterprise.
• “Company” means a company incorporated
under this Act or any previous company law; In
other words, A company is a legal entity which is
formed by different individuals to generate
profits through their commercial activities.
• Company: The Companies Act, 2013 focuses on the former; and the
Securities & Exchange Board of India Act, 1992
• A company has to file a Memorandum of Association (MoA) and

Article of Association (AoA) along with application for
incorporation. The MoA, among other things, spells out the
objectives of the company and its business. The AoA focuses on its
internal regulation. The company solicits capital contribution by
issue of a prospectus. There are elaborate provisions in the
Companies Act and the SEBI Act to ensure that the prospectus
contains such true and correct information as may enable the public
to form an informed judgment on whether or not to invest in a
company. A common man can avail the services of investment
advisors in this regard. Then there is a requirement of the statutory
audit of the accounts of a company and publication of its quarterly
results to keep the investors well informed. The SEBI also oversees
the subsequent trading of the company shares and the contract of
listing by which the shares of a company are put up for trading on a
stock exchange. The listing agreement, among other things, also
enjoins upon the companies to carry on business in an ethical,
transparent and accountable manner.
Meaning of company
• A company is a voluntary association of
persons formed under the company law, to
achieve some common objectives, having a
separate legal entity, independent and
separate from its members with a perpetual
succession and a common seal and with
capital divisible in to transferable shares.
Source: PPS GOGNA / S.Chand publications.
Identify nature of the both pics
So what is 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. Managers 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.
Koontz/o’donnel
• Management is the process of
designing and maintaining an
environment in which individuals,
working together in groups,
efficiently accomplish selected aims.
• Management (or managing) is the administration
of an organization, whether it is a business, a not-
for-profit organization, or government body.
Management includes the activities of setting
the strategy of an organization and coordinating
the efforts of its employees (or of volunteers) to
accomplish its objectives through the application
of available resources, such
as financial, natural, technological, and human
resources. The term "management" may also
refer to those people who manage an
organization - managers.
• "manage" comes from the Italian maneggiare
(to handle, especially tools or a horse), which
derives from the two Latin words manus
(hand) and agere (to act).
• The probable origin of the word

manager comes from the Latin word
manus, meaning "hand.“
• A good manager provides the necessary
"hand," guiding others.
Peter Drucker
coined the term
• The term was first outlined by management
guru Peter Drucker in his 1954 book, The
Practice of Management
• As the 1950s began, there was almost nothing
written explicitly about the practice of
management: what a manager should do, day-
to-day, to manage. That changed in 1954,
when Drucker wrote 'The Practice of
Management.
• Management brings together all Six Ms i.e.
Men and Women, Money, Machines,
Materials, Methods and Markets. They use
these resources for achieving the objectives of
the organisation such as high sales, maximum
profits, business expansion, etc.
• According to Fayol, management operates
through five basic functions: planning, organizing,
coordinating, commanding, and controlling.
• Planning: Deciding what needs to happen in the
future and generating plans for action (deciding
in advance).
• Organizing (or staffing): Making sure the human
and nonhuman resources are put into place.
• Commanding (or leading): Determining what
must be done in a situation and getting people to
do it.
• Coordinating: Creating a structure through which
an organization's goals can be accomplished.
• Controlling: Checking progress against plans.
• Definitions:
Koontz and O’ Donnell – “Getting things done
through and with people”
Henry Fayol – “To manage is to forecast, and to

plan, to organize, to command, and to co-
ordinate.
Hicks – “ The Process of getting things done by

the people and through the people”
• F.W. Taylor -"Management is an art of knowing
what is to be done and seeing that it is done in
the best possible manner." ( planning and
controlling) (father of scientific management)
• Peter Drucker,
• "Management is a multi-purpose organ that
manages business and manages managers and
manages workers and work.“
• Mary Parker Follet,
• "Management is the art of getting things done
through people."
The evolution of management
thought and patterns of
Management analysis
• Frederick.W.Taylor - Scientific Management
Shop Management 1903
Principles of scientific management 1911
Testimony before the special house committee
1912
1.Pre-scientific (before 1880)
2. Classical Management Era (1880-1930)
f.W taylor , henri fayol, Max weber.
3. Neo-classical management era (1930-1950)
4. Modern Management Era (1950-onwards)
I . Early management : theological stage

Church , king , military / farming and craft
1494- Double entry system
1800 – Mgnt as systematic knowledge
• Charles Babbage (1729-1871)
• Robert owens (1771 -1858)
• Henry robinson
Elton mayo
Robert.L.Katz
• Three kinds of skills for Administrators.
• Technical Skills
• Human Skills
• Conceptual and design skills
• Roles of the Manager ?????
Henry Mintzberg OC OQ FRSC
(born September 2, 1939) is a
Canadian academic and author on
business and management.
• Interpersonal Category
• The managerial roles in this category
involve providing information and ideas.
• Figurehead – As a manager, you have social, ceremonial and
legal responsibilities. You're expected to be a source of
inspiration. People look up to you as a person with authority,
and as a figurehead.
• Leader – This is where you provide leadership for your team,
your department or perhaps your entire organization; and it's
where you manage the performance and responsibilities of
everyone in the group.
• Liaison – Managers must communicate with internal and
external contacts. You need to be able to network effectively
on behalf of your organization.
• Informational Category
involve processing information.
• Monitor – In this role, you regularly seek out information
related to your organization and industry, looking for relevant
changes in the environment. You also monitor your team, in
terms of both their productivity, and their well-being.
• Disseminator – This is where you communicate potentially
useful information to your colleagues and your team.
• Spokesperson – Managers represent and speak for their
organization. In this role, you're responsible for transmitting
information about your organization and its goals to the
people outside it.
• Decisional Category
involve using information.
• Entrepreneur – As a manager, you create and control change
within the organization. This means solving problems,
generating new ideas, and implementing them.
• Disturbance Handler – When an organization or team hits an
unexpected roadblock, it's the manager who must take
charge. You also need to help mediate disputes within it.
• Resource Allocator – You'll also need to determine where
organizational resources are best applied. This involves
allocating funding, as well as assigning staff and other
organizational resources.
• Negotiator – You may be needed to take part in, and direct,
important negotiations within your team, department, or
organization.
Productivity
• Surplus : Money / Resources / Time / Labour
time.
• Creating extra (or) Saving
• Productivity : The output –input ratio within a
time period with due consideration for quality.
• Productivity = Output/Input
Three ways to increase productivity
1. By increasing outputs with the same inputs
2. By decreasing inputs but maintaining the
same outputs (or)
3. By increasing outputs and decreasing inputs
to change the ratio favourably.
Effectiveness / Efficiency
PLANNING
• Planning involves deciding in advance what is
to be done and where , how and by whom it
will be done.
• Philip Kotler:
Planning means deciding in the present what to
do the future. It is the process where by
companies reconcile their resources with their
objective and opportunities.
• ** Planning involves selecting missions and
objectives and actions to achieve them.
• It requires decision making.
• Bridges the gap between where we are and

where we want to go.
• PLANNING AND CONTROL ARE INSEPARABLE.
• Features :
Planning is a intellectual process: Not involves
guess work, Based on objectives and facts.
Primary function: All levels

Continuous Function: Due to change/revision
Pervasive function
TYPES
• Strategic Plan : 3 – 5 years / above
SWOT , Competitive analysis. Top Level
Tactical Plan : Mid term plan 1 to 3 years ,

creates a blue print for strategic plan Middle
and Lower level managers.
Operational Plan : Short term plan, maximum 1

year covers the entire organisational goals and
day to day operations. Ex: works committee.
• Being aware of Opportunities
• Objectives specify the end point of what is to

be done
• Short range and Enterprise objectives.
• Objectives form a hierarchy.
• Developing Premises: Establish, circulate and
obtain agreement to utilize critical planning
premises.
• They are assumptions about the environment
in which the plan is to be carried out.
• 4. Alternative course of action (reducing the
number )
• 5. Evaluate in light of premises and goals
7. Formulate Derivative plan: Almost to support
basic plan
8. Numberising plans by Budgeting:
Plans in to numbers.
Income / expenses
Profit / Loss
TYPES OF PLANS/ Planning components
Purposes (or) Missions : Basic Function (or) Task
of an enterprise assigned to them by society.
Purpose of every organisation: State highways

department , Electricity board , Maruthi
suzuki.
Objectives (or) Goals : End Points towards which

any activity is aimed. End point of all functions
movement.
• Strategies: The determination of the basic
long term objectives of an enterprise and the
adoption of course of action and allocation of
resources necessary to achieve these goals.
• Policies: They are plans in that they are
general statements (or) Understanding that
guide the thinking of decision making.
Policies ensure in which decisions are made and
how they are consistent with.
• Procedures: Plans that establish a required
method of handling future activities. They are
chronological sequences of required actions.
• They are guides to action rather than thinking.
• Rules: Spell out specific required actions (or)
Non actions allowing no discretion. They are
usually a simplest type of plans.
• Programs: They are complex of goals, policies,
procedures, rules, task assignments, steps to
be taken, resources to be employed and other
elements necessary to carry out a given
course of action.
• Budgets: A statement of expected results
expressed in a numerical terms. It may called
as numberized program.
What is Approach:
• In management and business
To begin to deal with a problem, a situation, etc.

• a way of dealing with something : a way of
doing or thinking about something.
APPROACHES TO MANAGEMENT
ORGANISATION
• Organisation structure is the pattern of
relationships among the component parts of
the organisation.
• Organisation can be defined as a collection of
people and coordination of their activities to
achieve the objectives of the enterprise.
Nature and Purpose
• Human relationship in group activity??
• Organisation is concerned with Activity –
authority structure of an enterprise.
• So, 1. Organising is the grouping of activities
necessary to attain enterprise objectives and
assignment of ach grouping to an executive
with authority necessary to manage these
activities.
2. Then it involves establishment of authority
relationship with provisions for coordination
between them, both vertically and
horizontally in the enterprise structure.
Features:
It is a sub-process of management
It is goal oriented
It deals with group efforts
It is based on the principles of division of work
It establishes authority-responsibility
relationship
Formal and Informal Organisation
• Organisation grows out of human need for
cooperation. ( Human beings are forced to
cooperate)
• Human behaviour -----structural consideration
• (The importance of human behaviour independent of
the structural considerations of formal enterprise
organisation was brought out by the researchers of
Elton mayo and F.J Roethlisberger at Hawthorne
works of western electric company 1924)
Formal: When the activities of two or more
persons are consciously coordinated toward a
given objective. The formal organisation
comes in to being when persons a. Able to
communicate with each other, b. Willing to act
and c. Share a purpose.
Organisation structure must furnish a
constructive environment based on the
following principles : Principles of unity of
objective and Principles of efficiency
Informal : Organisation joint personal activity
without conscious joint purpose, even though
possibly contributing to joint results. ( All
forms of relationships not appearing on an
organisational charts) It can foster
communication between people so that they
can perform as a group. Pattern of behaviour
called conformity of speech , conduct , dress
or other behaviour.
(any kind of group)
Steps to determine the structure
1. Identification and classification of activities
consistent with organisational objectives
2. Formation of Workable units or departments
3. Delegation of authority and placing of
responsibility to the executives
4. Establishment of superior-subordinate
relationship
5. Provision for effective co-ordination and
establishment of line of supervision.
Three ways to determine the
structure
Importance of organisation
• Goal is to attain through mutual contribution
through effectiveness and efficiency.
• Facilitates administration
• Facilitates growth and diversification
• Permits optimum use of resources
• Stimulate creativity
• Transfer and adaptation of technology
• Encourages synergy effect.
Authority, responsibility and
accountability
• Authority: It is the right of the managers to
command the subordinates , issues them
orders and instructions.
• Henry Fayol – Authority as the right to give

orders and exact obedience.
Responsibility is the obligation to perform a
task. Thus its basic essence is obligation.
Authority down Responsibility up
Accountability means answerability for the
accomplishment of the task assigned by the
superior.
Delegation of authority is complete only after
the employees is able to answer all the
questions put up before him.
Authority and power continuum
• Authority and power are not same.
• Power means the capacity to influence the

behaviour of others
• Authority means right to command the
behaviour of others
• When power is legitimized it becomes

authority
• It is a relationship between two individuals,
one superior and another subordinate.
• There is existence of right in authority
• The right of giving of order is legitimate
• It gives right to decision making
Theory
• Formal Authority theory :
• Classical theory – authority inherent in
managerial position (top down)
• Acceptance theory: authority is present when
its acceptance is accepted from the below.
• Competence theory- Personal competence
Seniority or popularity.
Power types / sources
• Coercive power – application of threat
• Reward Power - wealth is power
• Legitimate power – agreement and commonly
held values
• Referent power- Identification
• Expert power – knowledge is power
Delegation of Authority
• TO grant or confer
• Authorization to a manager
• Dual characteristics
• Always to the position which created
Steps : Determination of Results Expected
Assignment of Duties
Authorization for action
Creation of obligation
TYPES OF ORGANISATIONAL STRUCTURE
• The formal organisation refers to the structure
of jobs and positions with defined functions
and relationships. This type of organisation is
built by the management to realize the
objectives of an enterprise.
• fundamental organisation structures may be
classified as follows: (1) Line Organisation (2)
Functional Organisation (3) Line and Staff
Organisation (4) Project Management
Organisation (5) Matrix Organisation.
• 1. Line Organisation Historically, line type of structure
is the oldest pattern of organisation. The oldest and
simplest form of organisation is line origination. Line
functions refer to those employees who have direct
responsibility for accomplishing the objective of the
enterprise. In this form of organisation, a supervisor
exercises direct supervision over a subordinate,
under the organisation, authority flows from the
person at the top to the person at the lowest ring of
the organisation. Here the chief executive leads the
organisation. This form of organisation is otherwise
called military organisation or scalar type of
organisation.
• Benefits of Line Organisation: (i) It is simple to
work. (ii) It is economical and effective. It
permits rapid decisions and effective
coordination. (iii) It promotes unity of
command and conforms to the scalar principle
of organisation. (iv) It fixes responsibility for
the performance of tasks in a definite manner
upon definite individuals. (v) With a unified
control and undivided loyalty, line
organisation ensures excellent discipline. (vi) It
is less expensive due to non-involvement of
staff personnel. (vii) It is stable.
• Weaknesses of Line Organisation: (i) It suffers from lack of
specialisation. Each department manager looks after activities
of his own department only. (ii) There is a possibility of
keymen being loaded to the breaking point. Since there is no
staff aid, the organisation can be seized by a strong man and
run on an arbitrary basis. Such a dictatorial or arbitrary power
can lead to a considerable damage to the organisation. (iii)
Such enterprises suffer from lack of expert staff to give them
advice. There are occasions when the line manager is not
competent enough to make decisions. (iv) Line organisation is
rigid and inflexible. Discipline is maintained to the extent that
organisation is rarely allowed to change. (v) It is based upon
an autocratic system of management. (vi) The work may be
divided according to the whims of the manager rather than
according to any scientific plan. (vii) It cramps progress and
prevents effective working of the unit. (viii) It is likely to
encourage nepotism (favoritism shown on the basis of family
relationship, in business and politics).
• The Line Organisation system can be
successfully utilised: (i) Where the scale of
business is small, and the number of
subordinates and operative employees are not
many; (ii) In continuous process industries; (iii)
Where the work is largely of routine nature;
(iv) Where the machinery is nearly automatic
and does not call for the intelligence of the
foreman; (v) Where labour-management
problems are not difficult to solve
• 2. Functional Organisation: Under this system, the whole task
of management and direction of subordinates is divided
according to the type of work involved. At the higher levels,
the functional organisation refers to the structure that is
formed by grouping all the work into major functional
departments. Related and similar work is done in one
department under one executive. For example, the purchaser
is responsible for all purchases of the company. The scope of
the work is limited but the area of authority is unlimited. The
chief advantage of functional system is that it ensures division
of labour and specialisation based on individual proficiency
and specialised knowledge. This makes for better utilisation of
employees and development of their skills. The disadvantage
of one-man control under line organisation is largely
alleviated here.
• Drawbacks of Functional Organisation: (i) Because of
high degree of specialisation, functional organisation
is difficult to establish. (ii) Changes in personnel
often lead to instability since performance also shifts
with these changes. (iii) Specialists often operate
with considerable independence so that the
organisation seldom functions as a total system. As a
result, control and coordination becomes difficult to
achieve. (iv) Authority and responsibility often
overlap and a great deal of friction results; locating
and fixing up responsibility becomes extremely
difficult. (v) Specialists usually ignore the big picture
so that the deficiency of leadership is almost
perennially (everlasting) felt.
• 3. Line and Staff Organisation: Both the line and functional
plans prove inadequate in operation. The line system
concentrates on authority too much. But purely functional
plan also divides it too much. The line and staff system strikes
a happy balance between the two. Under this organisation
“line” is supplemented by “staff”. The staff refers to officers
who are not line managers but are more or less permanently
detailed to special services or to the study of some phases of
operations. Staff personnel thus act as an advisory group
adjacent to the line. This pattern of organisation came into
being as a result of the departmental managers having to
investigate, think and plan and, at the same time, perform the
ordinary tasks of production and selling. Consequently, the
work of investigation, research, recording, standardisation
and advising, i.e., the work of experts, was wholly
distinguished and separated from the routine process of
manufacturing and selling. Thus, there arose a clear demarcation between
‘thinking’ and ‘doing’; the staff being the ‘thinkers’ and the line being the ‘doers’.
• 4. Project Management Organisation: Project organisation is not a
separate kind of organisation, like the line, line and staff and functional
organisations; it is rather set up within an existing organisation for the
purpose of completing a project or accomplishing assigned objectives in
time, and within cost and profit goals as laid down by the management in
this connection. Project organisation is directed by the project manager
responsible for project goals. Project management organisation may
involve development and introduction of a new product, complete
redesigning of an existing product line, installing a new plant, and the like.
For example, ‘software development’ for a client. Project organisation
involves appointment of the project manager usually drawn from the
middle management ranks. He is responsible for detailed planning,
coordination, control and achievement of the objectives within the time
schedule. Project manager operates with a team of qualified personnel
drawn from different functional departments involved in the project.
Moreover, project manager’s authority is functional within the limits of
the project. Another important characteristic of project organisation is
that it is dissolved after the project work is completed.
• Since project management is usually required to take
prompt decisions and actions from a number of
functional areas, flow of information is largely lateral
and not vertical. Thus project organisation is
characterised by exceptionally strong horizontal
working relationships.
• frequent product changes and decisions affecting
costs require communication with the superiors.
Project organisation, as such does not completely
rule out the possibility of vertical communication
though horizontal working relationships are stronger.
To be more effective, the project manager should
occupy the same status in organisational hierarchy as
is occupied by managers of the functional
departments.
• 5. Matrix Organisation A newly evolving organisation structure
which has received considerable attention in the West is the
Matrix Organisation. It combines functional departmentation
with product or project organisation. In a matrix organisation,
the functional departments, like manufacturing, marketing,
accounting and personnel constitute the vertical chains of
command, while the project organisation or product divisions
form the horizontal chains of command. The vertical lines of
authority are cut horizontally across by project or product line
divisions. The matrix or task force consists of a group of
individuals, drawn from the various functional departments,
who are assigned to particular projects or product divisions,
and are considered best qualified for the work. The project
manager or divisional manager usually reports to the Chief
Executive in a line capacity
• The matrix organisation structure is designed to
derive the benefits of both the functional structure
and the divisional structure. It helps to promote
specialisation as well as lateral coordination and
highlights the achievement of business results in
each of the divisions and the organisation as a
whole. However, it suffers from several limitations.
The multiplicity of vertical and horizontal
relationships impair organisational efficiency. The
secondment of specialists from functional
departments to a number of projects makes it
difficult for functional heads to appraise employee
performance. Disagreement between project teams
and functional departments results in the form of
considerable stress on the personnel.
Steps /Process of OS
• (i) Clear Definition of Objectives: The first step
in developing an organisation structure is to
lay down its objectives in very clear terms.
This will help determine the type, stability and
basic characteristics of the organisation. In
fact, organisation activities are detailed in
terms of objectives to be achieved.
• Identifying the Activities and Grouping them
into Convenient Classes: The next important
step in developing an organisation structure is
an enumeration of activities necessary to
achieve the objectives, their grouping in a
systematic manner, assignment of such groups
of activities to personnel and providing for
their coordination. Wherever possible, similar
functions should be combined into one
position.
• Determine the Structure: The first two steps
outlined above set the stage for actual
determination of the organisation structure.
More specifically, the organiser has to decide
about the span of supervision, types of
organisation, basis of departmentation and
the pattern of authority structure.
• (iv) Revise the Structure on the Basis of
Assessment of Personnel and Other
Resources: The last step in developing a
suitable organisation structure is to assess the
capacities and abilities of the people available
to man the different positions in the
organisation along with other resources at the
disposal of the enterprise. The ideal
organisation should then be adapted to fit the
reality of the situation.
• Delegation of Authority: Delegation is an
administrative process of getting things done
by others by giving them responsibility.
Authority is the degree of discretion conferred
on people to make it possible for them to use
their judgment. As the organisation grows
there is a need to delegate authority to more
and more people to cope with the volume of
work. Delegation of authority entails the
division of work load and the sharing of
responsibility.
• A single individual cannot manage and control
every activity of the business enterprise owing
to his limitations, both physical and mental.
There is a limit upto which a person can
supervise the subordinates. When the number
of subordinates increases beyond a limit, he
will have to delegate powers to those who will
perform supervision for him.
• (i) Allocation of Duties: Duties are the tasks and activities that
a superior desires someone else to do. So, before authority
can be delegated, the duties over which the authority relates
must be allocated to subordinate. (ii) Delegation of Authority:
The essence of the delegation process is empowering another
person to act on behalf of the manager. This denotes passing
on the formal rights to act on behalf of another. (iii)
Assignment of Responsibility: When authority is delegated,
one must assign responsibility along with it. That is, when one
is given “rights”, one must also be assigned a corresponding
“obligation” to perform. Here it is important to recognise the
importance of equating authority with responsibility. To
allocate authority without responsibility creates opportunities
for abuse, but no one should be held responsible for what one
has no authority over.
• Actually, one has to recognise two forms of
responsibility: operating responsibility and ultimate
responsibility. While the former can be delegated the
latter is absolute. (iv) Creation of Accountability: To
complete the delegation process, the manager must
create accountability; that is, subordinates must be
held answerable for the discharge of the duties
assigned to them and the judicious use of authority
delegated. Thus, duties, authority and obligation
constitute three important ingredients of delegation.
All the three aspects of delegation are interrelated.
Hence, a change in one will call for an adjustment
with others.
• Barriers to Delegation: – Fear of
loss of Power – Certain personal
attitudes – Lack of ability to
direct well
CENTRALISATION AND
DECENTRALISATION
• Centralisation refers to the tendency to
withhold a larger part of formal authority at
higher echelons of management hierarchy.
Thus, larger number of decisions more
important to them are made by those
occupying higher positions in the organisation.
When?
• larger part of the authority is delegated down
the levels of management so that decisions
are made as near the source of information
and action as possible, such a tendency and
characteristic in the organisation is described
as decentralisation.
• Place of decision-making authority in the
management hierarchy and degree of the
decision-making power at lower echelons of
the organisation are the two important tests
used to determine whether mode of working
is centralised or decentralised in the
organisation.
• Decentralisation should not be confused with
delegation of authority. Decentralisation is
basically concerned with attitude and
philosophy of the organisation and
management. It is not merely a process
involving the handing over a part of the
authority to the subordinates.
• Delegation is a process and decentralisation is
the situation produced by larger delegation of
authority down the levels of organisation.
• (i) Decentralisation makes for quick decision and improves
quality of the decisions by pushing decisionmaking closest to
the situation. (ii) Decentralisation helps improve effectivity of
managers. Development of self-reliant managers is
encouraged. Every manager knows what he is expected to do.
Good managers are tested and can be encouraged, whereas
weak managers can be counselled and reprimanded. (iii)
Democratisation of management is yet another advantage of
decentralisation. Those who are governed can assert their
voice and have a share in that governance. (iv)
Decentralisation provides actual work experience to a large
number of middle and lower managers and thus creates a
reservoir of promotable managerial manpower. (v) Improved
morale of personnel is another great advantage of
decentralisation. Managers at different levels and semi-
autonomous divisions are able to see by themselves the
results of their own actions and ascertain their role and
success.
• Advantages of centralisation are largely absent in a
decentralised organisation and they become
limitations of decentralisation.
(i) Uniformity of policy and procedure can strictly be
enforced since decisions and controls are largely
centralised. (ii) Centralisation helps to eliminate
overlapping or duplicate activities and thus effects
sufficient cost savings. (iii) Centralisation helps in
fuller utilisation of talents of outstanding executives
for enterprise as a whole. (iv) Centralisation ensures
consistency in operating and uniformity in decision
and consequently, helps to retain substantial control
over activities of the enterprise.
Part 2
R.NARASIMHAN
Faculty
HROD
MSSW
DECISION MAKING
• Decision-making signifies actual selection of a
course of action from among a number of
alternatives.
• decision-making involves selection from
among the alternatives, the course of action
to be followed, it is better regarded as part of
the planning process.
According to George Terry “Decision-Making” is
the selection of an alternative, from two or
more alternatives to determine an opinion or
a course of action” According to Philip Kotler
“A decision may be defined as a conscious
choice among alternative courses of action”
According to Henry Sisk and Cliffton Williams
“A decision is the selection of a course of
action from two or more alternatives, the
decision making process is a sequence of steps
leading to that selection”
Three possible conditions. These are: (i) Certainty (ii) Risk
(iii) Uncertainty. (i) Certainty: This condition is present
if the decision maker knows exactly what will happen.
Thus, he will be able to predict the outcome precisely.
For instance, if we put Rs. 1,000 in a fixed deposit for a
year at 6 per cent rate of interest we will know how
much interest (Rs. 60) our money will earn. When a
decision is made under certainty, a manager knows
exactly what the outcome will be because he knows his
resources, time available, and other associated things.
(ii) Risk: The future conditions are not always known in
advance. In real life, most managerial decisions are
made under risk conditions, that is, some information
is available but it is insufficient to answer all questions
about the outcome. So a decision maker has to make
probability estimates of these outcomes. How can one
assign probability estimates to various courses of
action? One has to depend on past experience if
the situation is similar. But no two situations are
exactly similar in business operations. If
probability estimates are assigned to expected
outcomes on the basis of past experience, it is
known as objective probability. On the other
hand, if the probability estimates are assigned on
the basis of what is known as “gut feel”, it is
subjective probability. The “gut feel” here refers
to how an individual feels about the problem and
the course of action to be taken to solve that
problem without totally relying on past
experience.
• There is no rule of thumb approach in assigning
probabilities to various courses of action. Some may use
quantitative technique, such as expected value analysis by
which the expected payoff of an action can be
mathematically determined. Whatever the method used,
the attitude of the decision maker becomes an essential
ingredient when making decisions under conditions of risk.
Some decision makers are risk takers while others are risk
averters. A certain amount of risk-taking ability is essential
for managerial success. (iii) Uncertainty: Sometimes there
are uncertain conditions when the decision maker feels
that he cannot estimate probabilities for various
alternatives or outcomes because he has no way of
measuring the likelihood of those alternatives. For instance,
if you are planning a trip to Kashmir and have never been
there before, and have not been heard about the weather
in Kashmir during winter, you may be in a predicament as
to what clothes to carry and what precautions to take.
Principles of Decision-Making A manager’s effectiveness is related to the
quality of his decisions. Decision-making by a manager involves arriving at
conclusions and exercising judgement. In all circumstances management
decisions should follow a few basic principles which are likely to ensure
their soundness. (i) Principle of Definition: A logical decision can be made
only if the real problem is defined with minute attention. Too often, time
and effort are wasted due to the manager’s inability to pin-point what the
problem or the objective is. Indeed, it would be no exaggeration to suggest
that a problem well defined is half solved. (ii) Principle of Evidence:
Decisions should not be taken hastily. They must be based on evidence
meaning that adequate facts must be present to back the judgement.
When the facts underlying a problem are discovered and care is taken to
analyse the situation, the basic work in decision-making is done. (iii)
Principle of Identity: People have different perspectives. As a result same
fact appears to be different to different people. Not only that, the relative
importance of the same fact differs from year to year. It is, therefore,
urged that the decision-maker should take into account different
viewpoints and determine the relative significance of the time period
during which the event happens. In case any decision involves two or more
ersons it is adviseable to consider the views of each person. All view points
should be weighed carefully and compared with other sources before a
decision is taken.
• Steps in Decision-Making : A manager is responsible for
making decisions on matters falling within the scope of his
authority. Moreover decisions that can be taken at a given
level should not be generally referred to higher levels. A
manager should use his skill and intelligence while deciding
something because the quality of decisions made by him
indicates the extent of responsibility discharged by him.
Steps taken in decision-making are as follows: (i)
Identifying and Diagnosing the Real Problem:
Understanding the problem intelligently is an important
element in decision-making. Predetermined objectives,
past acts and decisions and environmental considerations
provide the structure for current decisions. Once this
structure is laid, the manager can proceed to identify and
determine the real problem. Diagnosing the real problem
implies knowing the gap between what exists and what is
expected to happen,
organisation. However, sometimes symptoms are mistaken for real
problem. Defining a problem is thus not an easy task. Very often it
consumes a lot of time which is worth spending. (ii) Discovery of
Alternatives: The next step is to search for available alternatives
and assess their probable consequences. But the number of forces
reacting upon a given situation is so large and varied that
management would be wise to follow the principle of the limiting
factor. That is, management should limit itself to the discovery of
those key factors which are critical or strategic to the decision
involved. Thus, while planning for expansion of the enterprise,
availability of finance or of trained staff during a short span of time
might be the limiting factors. Discovery of the limiting factors is so
important to the process of decision-making that sometimes it is
described as search for the strategic factors. But search for the
limiting factor or factors is by no means easy. However, in any
attempt to discover the strategic factors management should not
lose sight of higher objectives of the enterprise, instead it should
analyse the limiting factors in terms of their contribution to the
accomplishment of organisational objectives.
• (iii) Analysis and Evaluation of Available Alternatives: Once the
alternatives are discovered, the next stage is to analyse and
compare their relative importance. This calls for listing of the pros
and cons of different alternatives in relation to one another.
Management should consider the element of risk involved in each
of them and also the resources available for their implementation.
Executives should weigh each of them from the viewpoint of
accomplishment of some common goals and in relation to the
effort involved and results expected. Both tangible and intangible
factors should be considered while evaluating different alternatives.
Tangible factors, like profits, time, money and rate of return on
capital investment can be expressed numerically. Such factors are
usually evaluated and compared by projecting their effects on
income, expense and cost structure of the enterprise. Since such
factors are analysed for the future, their evaluation is based on
forecasts and estimates. It is, therefore, better if the analyst
discovers the extent to which different estimates can be relied
upon.
Sometimes, the manager is faced with a situation where two or more
alternatives appear equally good or bad. In that case actual
difference will be the deciding factor. Similarly, where none of the
alternatives under consideration is expected to produce desired
results the manager will do well to decide in favour of no action or
else trace other undiscovered alternatives. The evaluation of
alternatives may utilize the techniques of marginal analysis,
wherein the additional revenues from additional costs are
compared. The real usefulness of marginal approach to evaluation
is that it accentuates the variables in a situation and de-emphasizes
averages and constants. Alternatives can also be evaluated on the
basis of cost effectiveness. It is a technique which implies choosing
from among the alternatives and thus identifying a preferred choice
when objectives are far less specific than those expressed by clear
quantities. Cost effectiveness criteria can be made more systematic
through the use of models and other techniques.
(iv) Selection of Alternatives to be Followed:
Defining the problem, identifying the alternatives
and their analysis and evaluation set the stage for
the manager to determine the best solution. In
such matters a manager is frequently guided by
his past experiences. If the present problem is
similar to the one faced in the past, the manager
may have a tendency to decide on that very basis.
Past experience is an useful guide for taking
decisions in the present. But it should not be
followed blindly. Changes in the circumstances
and underlying assumptions of decisions in the
past should be carefully examined before
deciding on a problem on the basis of experience
– Selection on the basis of experiments It is sometimes argued that managers
should draw conclusions on the basis of experiments. Say, a plan relating
to personnel matters may be tried in a branch office before extending it to
other places. Experimentation as the basis for final decision has the
advantage of incorporating intangible factors and also the environmental
changes. But it has the limitation of being the most expensive of the
techniques and as such is generally recommended for use only when all
other bases have been tried. – Research as the basis for decision Another
useful basis for decision is the application of scientific method to planning
and decision-making. Application of research techniques helps the
manager to visualise the problem and casual relationships between
different variables in mathematical terms. In the recent past, extensive
research has been carried out in the field of management with a view to
develop a sound theory and practices of decision-making. A number of
research approaches and techniques have been developed in economics,
accounting, mathematics and other disciplines which have greatly
contributed to this trend. Break-even analysis, marginal contribution
analysis, forecasting, capital budgeting, standard costing, sensitivity
analysis, operations research and the like, provide examples of research
techniques currently in use in the field of decision-making.
• v) Communication of Decision and its Acceptance by
the Organisation: Once decision is made it needs to be
implemented. This calls for laying down derivative
plans and their communication to all those responsible
for initiating actions on them. It will be better if the
manager takes into account beliefs, attitudes and
prejudices of people in the organisation and is also
aware of his own contribution to the implementation
of the decision. It is further required that subordinates
are encouraged to participate in decision-making
process so that they feel committed and morally bound
to support the decision. At the same time management
should establish effective control so that major
deviation can be observed, analysed and incorporated
in future decisions.
Hierarchy of Decisions.
• Hierarchy of Decisions All decisions taken at all times
are generally not of equal importance. The manager
should, therefore, determine the importance of each
decision in terms of its commitment and scope and the
risk involved therein. In essence, then the manager
would be able to pass on less important decisions to be
made at lower echelons of management in the
organisation, and this will help him to determine what
kind of analysis and research is needed in arriving at a
conclusion, keeping in view its importance. Thus, less
important decisions can be based on simple analysis,
whereas important decisions must be made after a
thorough analysis of all the pertinent factors.
1. Decision making is a goal-oriented process. It aims at
achieving certain specified goals of the organisation.
2. Decision making is a selection process in which
best alternative course of action is chosen from
amongst alternative courses of action. 3. Decision
making is a continuous process because a manager is
required to take decisions continuously for different
activities. 4. Decision making is considered both an
art and a science. 5. Decision making is the
responsibility of managers at different levels of
management. 6. Decision making involves deep and
careful thinking and hence it is a mental process.
Modelsof DecisionMaking
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Types
• . Routine and Strategic Decisions: Tactical or
routine decisions are made repetitively
following certain established rules, procedures
and policies. They neither require collection of
new data nor conferring with people. Thus
they can be taken without much deliberation.
They may be complicated but are always one
dimensional. They do not require any special
effort by the manager. Such decisions are
generally taken by the managers at the middle
and lower management level.
• Strategic or basic decisions, on the other hand
are important and so they are taken generally
by the top management and middle
management. The higher the level of a
manager, the more strategic decisions he is
required to take. The strategic decisions relate
to policy matters and so require a through fact
finding and analysis of the possible
alternatives. Finding the correct problem in
such decisions assumes great importance. The
managers are more serious about such
decisions as they influence the decision
making at the lower levels.
• Programmed/Structured Decision and Non Programmed / Unstructured
Decision They are routine and repetitive nature which is to be dealt with
according to specific procedure. If an employee takes leave the manager
can grant leave by approving the formal leave procedure. But if a majority
employee takes leave the manger cannot take a routine procedure
because all the employees taking leave at a time is not a routine problem.
These decisions are taken because of unstructured problem. There is no
standard procedure for handling such problems. When all the employees
take leave without any permission on a particular day is an unstructured
problem. These non programmed decisions require through study of the
problem and scientific study of the situational factors. 3. Policy and
Operating Decisions Policy decisions are of vital importance and are taken
by the top management. They affect the entire enterprise. But operating
decisions are taken by the lower management in order to put in to action
the policy decisions. For example, a bonus issue is a policy matter which is
decided by the top management, but the calculations of bonus issue is an
operating decision which is taken at the lower levels to execute the policy
decisions.
• . Organisational and Personal Decisions
Organisational decisions are those which a manager
takes in his official capacity. Such decisions can be
delegated. But personal decisions, which relate to
the manager as an individual and not as a member of
the organisation, cannot be delegated. 5. Individual
and Group Decisions When a decision is taken by an
individual in the organisation, it is known as
individual decision. Such decisions are generally
taken in small organisations and in those
organisations where autocratic style of management
prevails. Group or collective decisions refer to the
decisions which are taken by a group of
organisational members, say board of directors (or)
committee.
• Strategic and Routine Decision Strategic
decisions (or) Basic decision are complex in
nature and are always taken after deep
deliberations. Any mistake in such decisions
will prove to be dangerous for the concern.
These decisions can determine the very fate of
the organisations. Implementation of strategic
decisions would require heavy investments
and also greater commitment on the part of
the staff. The decision to introduce a new
product in the market or install very expensive
machinery is an example of a strategic
decision.
• Routine Decisions are taken for the
functioning of the organizations. Much
evaluation is not required. So it can be taken
quickly. Though the decision is taken for
routine activity powers are given to lower
level management to take this kind of decision
within their limit.
• What Is Management by Objectives (MBO)?
• Management by objectives (MBO) is
a strategic 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.
• Management by Objectives (MBO) in Practice
• Management by objectives outlines 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 individual 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 larger
organizational objectives. This gives employees greater motivation since they have greater
empowerment.
• Step four involves monitoring the progress of employees. In step two, a key component of
the objectives was that they are measurable in order for employees and managers to
determine how well they are met.
• The fifth step is to evaluate and reward employee progress. This step includes honest
feedback on what was achieved and not achieved for each employee.
• Advantages and Disadvantages of Management by Objectives (MBO)
• MBO comes with many advantages and disadvantages to a company's success. The benefits
include employees taking pride in their work with goals that they know they can achieve. It
also aligns employees with their strengths, skills, and educational experiences. MBO also
leads to increased communication between management and employees. Assigning tailored
goals brings a sense of importance to employees, bringing loyalty to the firm. And lastly,
management can create goals that lead to the success of the company
The benefits include employees taking pride in
their work with goals that they know they can
achieve. It also aligns employees with their
strengths, skills, and educational
experiences. MBO also leads to increased
communication between management and
employees. Assigning tailored goals brings a
sense of importance to employees, bringing
loyalty to the firm. And lastly, management
can create goals that lead to the success of the
company.
The purpose of the management by exception
concept is to only bother management with
the most important variances from the
planned direction or results of the business.
Managers will presumably spend more time
attending to and correcting these larger
variances. The concept can be fine-tuned, so
that smaller variances are brought to the
attention of lower-level managers, while a
massive variance is reported straight to senior
management.
• There are several valid reasons for using this technique. They
are:
• It reduces the amount of financial and operational results that
management must review, which is a more efficient use of
their time.
• The report writer linked to the accounting system can be set
to automatically print reports at stated intervals that contain
the predetermined exception levels, which is a minimally-
invasive reporting approach.
• This method allows employees to follow their own
approaches to achieving the results mandated in the
company's budget. Management will only step in if exception
conditions exist.
• The company's auditors will make inquiries about large
exceptions as part of their annual audit activities, so
management should investigate these issues in advance of the
audit.
MBE vs. MBO
Management by Objectives (MBO) is a principle or practice of
management that empowers employees. Employees take part in goal
setting process and they get involved in the organisation which makes
them more aligned to the organisation. As employees are involved in
goal setting process it is more likely that they try to achieve set goals.
Since, the goals motivates employees to works hard its is called
management by objectives (MBO).
Management by Exception (MBE) is a method of control. Managers
intervene the work of employees only when they work outside the
prescribed scope or when they can't meet the standard. Manager leaves
employee free till they work within the scope and within they meet the
standard.
MANAGEMENT BY WALKING
• It is Management by Walking Around. MBWA basically refers
to managers spending some part of their time listening to
problems and ideas of their staff, while wandering around an
office or plant
• The management by wandering around (MBWA),
also management by walking around, refers to a style of
business management which involves managers wandering
around, in an unstructured manner, through the workplace(s),
at random, to check with employees, equipment, or on the
status of ongoing work. The emphasis is on the
word wandering as an unplanned movement within a
workplace, rather than a plan where employees expect a visit
from managers at more systematic, pre-approved or
scheduled times.
• The origin of the term has been traced to
executives at the company Hewlett-
Packard for management practices in the
1970s. However, the general concept of
managers making spontaneous visits to
employees in the workplace has been a
common practice in some other companies as
well. Also, the management consultants Tom
Peters and Robert H. Waterman had used the
term in their 1982 book In Search of
Excellence: Lessons from America's Best-Run
Companies.
• Genba (現場, also romanized as gemba) is a Japanese term
meaning "the actual place". Japanese detectives call the crime
scene genba, and Japanese TV reporters may refer to
themselves as reporting from genba. In business, genba refers
to the place where value is created; in manufacturing
the genba is the factory floor. It can be any "site" such as a
construction site, sales floor or where the service provider
interacts directly with the customer.
• In lean manufacturing, the idea of genba is that the problems
are visible, and the best improvement ideas will come from
going to the genba. The gemba walk, much like Management
By Walking Around (MBWA), is an activity that takes
management to the front lines to look for waste and
opportunities to practice genba kaizen, or practical shop floor
improvement.
• Description: Management by Walking Around is a term coined by
management guru Tom Peters. Apparently, from his study of
successful companies and their practices, Tom Peters noticed that
good managers tend to communicate a lot better with their team.
And they do that in informal ways, like just hanging around in the
office and chatting with them, rather than having formal
interaction sessions in their cabins or boardrooms. Sam Walton,
the founder of the largest company in the world, Walmart, was a
great exponent of this practice. He believed in visiting as many of
his stores as many times as possible and talking to frontline staff.
The idea of this practice is to listen. You must also respond to

ideas or problems voiced and take effective action about them.
• The expected benefit is that a manager, by random
sampling of events or employee discussions, is more likely to
facilitate improvements to the morale, sense of organizational
purpose, productivity and total quality management of the
organization, as compared to remaining in a specific office
area and waiting for employees, or the delivery of
status reports, to arrive there, as events warrant in the
workplace.
Should not be like this
UNIT 2 , 3 and 4
Contents included.
I year HROD
R.NARASIMHAN , FACULTY ,
HROD@MSSW
• The concept of "span of control," also known as
management ratio, refers to the number of subordinates
controlled directly by a superior.
• Span of control also called Span of Management, is the

term used in business management, particularly human
resource management. Span of control refers to the
number of subordinates a supervisor has. Simply a
manager or a supervisor or a superior who has a group of
subordinates, who can directly report him or her is called
a Span of Management.
• span of control means the manageable number of

subordinates of a superior.The bigger the number of the
subordinates a manager controls, the broader is her/his
span of control.
HROD@MSSW
HROD@MSSW
Depending upon the complexity of
organisational activities and relationships
amongst superiors and subordinates, it
becomes important the superiors manage an
optimum number of subordinates that result
in optimum organisational output. All the
subordinates cannot be managed by one
superior. There has to be a limit on the
number of subordinates who can be
effectively managed by one superior.
HROD@MSSW
The number of subordinates that a superior can
effectively supervise is known as span of
management or span of control. In the 19th and
middle of 20th century, management writers
determined 5 or 6 as the optimum number that a
manager could effectively manage at the upper
level.
• Beyond this number, managers faced problems
like:
• 1. Overburdened with work.
• 2. Difficulty in coordinating the activities of large
number of people.
• 3. Difficulty in controlling.
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• I. Tall structures:
• These structures are found in classical
bureaucratic organisations. In this structure, a
manager can supervise less number of
subordinates. He can, therefore, exercise tight
control over their activities. This creates large
number of levels in the organisation. This is
also known as narrow span of control. A tall
structure or a narrow span of control appears
like this.
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Merits
• 1. Managers can closely supervise activities of
the subordinates.
• 2. There can be better communication
amongst superiors and subordinates.
• 3. It promotes personal relationships amongst
superiors and subordinates.
• 4. Control on subordinates can be tightened in
a narrow span.
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• 1. It creates many levels in the organisation structure which
complicates co-ordination amongst levels.
• 2. More managers are needed to supervise the
subordinates. This increases the overhead expenditure
(salary etc.). It is, thus, a costly form of structure.
• 3. Increasing gap between top managers and workers slows
the communication process.
• 4. Decision-making becomes difficult because of too many
levels.
• 5. Superiors perform routine jobs of supervising the
subordinates and have less time for strategic matters.
• 6. Employees work under strict control of superiors.
Decision-making is primarily centralised. This restricts
employees’ creative and innovative abilities.
• 7. Strict control leads to low morale and job satisfaction.
This can affect productivity in the long-run.
Demerits
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• To overcome the limitations of a tall structure, many
organisations reduce the number of levels in the hierarchy
by downsizing the organisation. Downsizing is “the process
of significantly reducing the layers of middle management,
expanding spans of control and shrinking the size of the
work force.”
• Many companies downsize their work force through the
process of restructuring. Restructuring is “the process of
making a major change in organisation structure that often
involves reducing management levels and also possibly
changing some major components of the organisations
through divestiture and/or acquisition.”
• “The most common and most serious symptom of mal-
organisation is multiplication of the number of
management levels. A basic rule of organisation is to build
the least possible number of management levels and forge
the shortest possible chains of command.” — Peter F.
Drucker
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• II. Flat Structures:
• These structures have a wide span of control.
When superior supervises a larger number of
subordinates, flat structure is created with
lesser number of hierarchical levels. A
departure was made from tall structures to
flat structures by James C. Worthy who was a
consultant in the L. Sears, Roebuck and
company.
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• Merits of a Flat Structure:
• 1. There is low cost as less number of managers can
supervise organisational activities.
• 2. The decision-making process is effective as superiors
delegate authority to subordinates. They are relieved
of routine matters and concentrate on strategic
matters. The decision-making is decentralised.
• 3. Subordinates perform the work efficiently since they
are considered worthy of doing so by the superiors.
• 4. There is effective communication as the number of
levels is less.
• 5. It promotes innovative abilities of the top
management.
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• Limitations of a Flat Structure:
• 1. Superiors cannot closely supervise the activities of
employees.
• 2. Managers may find it difficult to co-ordinate the
activities of subordinates.
• 3. Subordinates have to be trained so that dilution of
control does not affect organisational productivity.
• Both tall and flat structures have positive and negative
features and it is difficult to find the exact number of
subordinates that a manager can effectively manage.
Some management theorists like David D. Van Fleet
and Arthur G. Bedeian assert that span of control and
organisational efficiency are not related and many
empirical studies have proved that span of control is
situational and depends on a variety of factors.
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• 1. Competence of managers:
• If managers are competent in their jobs, they can have a wide span
of management. Competence of managers is judged by their ability
to make decisions related to motivational plans, leadership styles,
communication channels and chains, techniques of control etc.
Managers who rank high on these parameters can effectively
supervise larger number of subordinates.
• 2. Nature of work:
• If employees perform similar and repetitive work, managers can
supervise large number of subordinates and, thus, have a wide span
of control. Non-repetitive and challenging work requires narrow
span of control. Changes in the nature of work also affects the span
of management.
• Frequent changes as a result of dynamic environment support a
narrow span as superiors frequently have to direct the activities of
subordinates. Stability in the nature of work supports a wide span
of management as superiors’ directions are not frequently required
to carry out the work processes.
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• 3. Assistance to managers:If managers have access to technical or secretarial assistance, a larger
group of subordinates can be managed. Span of control can, therefore, be wide. Staff
assistance can be useful for collecting and processing information related to various decisions
and issuing orders to the subordinates. Managers save time in communicating with
subordinates, direct the activities of larger number of subordinates and focus on other
strategic organisational matters.
• 4. Competence of subordinates:
• If subordinates are competent to manage their jobs without much assistance from the
superiors, span of control can be wide. Competent subordinates do not require frequent
directions from the superiors with respect to various organisational activities. Superiors can
thus, manage a larger group of subordinates.
• 5. Plans and policies:
• If plans clearly define the organisational/individual goals and policies, superiors can supervise
a larger group of subordinates and have a wide span of control. Clearly defined plans include
well-formulated policies procedures, methods etc. Particularly, if standing plans are well
defined, subordinates know the broad guidelines within which they have to make decisions in
similar and repetitive situations.
• They do not approach the superiors every time they face a similar problem-solving situations.
Superiors can, thus, manage a larger group of subordinates. However, if most of the decisions
are made by resorting to single use plans (programmes, budgets, projects etc.), managers
have to be frequently approached and the span can, thus, be narrow.
• 6. Organisational level:
• The top executives look after important and specialised activities and, therefore, the span is
narrow at the top level but at lower levels the span can be wide, since supervisors are mainly
concerned with routine jobs. According to J.C. Worthy, a manager can supervise as many as
20 subordinates at the lower levels.
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• 7. Authority-responsibility structure:
• If authority-responsibility structure is well-defined and understood, superiors can supervise
larger number of subordinates. People work within the confines of their responsibility and
take directions from superiors only when required. Lack of clarity in authority-responsibility
structure will create confusion in the organisation. Jobs and who will perform which job, who
is accountable to whom will not be clear. In such a situation, managers cannot supervise a
large group of subordinates. The span of management will, thus, be narrow.
• 8. System of control:
• Effective techniques of control can enable the manager to supervise larger number of
subordinates. Effective system of control promotes decentralisation. Superiors do not actively
involve in the decision-making processes as decisions are taken at the levels where they are
required. There is extensive delegation, clarity of jobs, authority-responsibility relationships
and freedom to take decisions. The span of control can, thus, be wide.
• 9. Financial factors:
• Both narrow and wide structures have financial constraints. A narrow span requires more
managers and is, thus, a costly form of structure. Wide span, on the other hand, may result
into organisational inefficiencies. Proper balance has to be maintained between the costs and
benefits of the span that a manager can effectively supervise.
• These factors are situational in nature and the span of management is also, thus, situational.
Sometimes it can be narrow and sometimes wide. For the same organisation, it can be
different for different functional areas and different levels. The span is usually narrow in the
finance department and wide in the marketing department for the same level. It may be
different in different organisations for the same functional areas and levels.
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Graicunas Theory of Span of Control
A French management consultant, V.A. Graicunas, introduced a theory on span of
management which explains three kinds of relationships that a superior can have
with subordinates. He formulated a theory and suggested the number of
subordinates under one superior based on mathematical calculations.
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•
In 1933, he published a paper called "Relationship in
Organisation." In this paper, he mentioned three types
of Superior-Subordinate relationships, viz.,
• Direct Single Relationships,
• Direct Group Relationships, and
• Cross Relationships.
• According to V.A. Graicunas, as the number of
subordinates increases arithmetically (like 1, 2, 3, 4, 5,
6, etc.) the number of relationships which the superior
has to control also increases almost geometrically (like
1, 6, 18, 44, 100, 244, etc.). Therefore, a superior can
only control a limited number of subordinates, and
anything beyond this limit is very hard to control
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•
V.A. Graicunas Theory can be explained with
the help of this simple example.
• For example, consider Gaurav (G) is a superior
(boss) and Manoj (M) and Sameer (S) are his
subordinates (juniors or lower-grade
employees).
• According to V.A. Graicunas, Gaurav (G) has to
control following three types of relationships,
with or among Manoj (M) and Sameer (S):-
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• Direct Single Relationships :-
• G with M, and G with S, i.e. a total of 2 direct single relationships.
• (b) Direct Group Relationship :-
• G with M in presence of S, and G with S in presence of M, i.e. a total
of 2 direct group relationships.
• (c) Cross Relationships :-
• M with S, and S with M, i.e. again a total of 2 cross relationships.
• Therefore, total number of relationships which Gaurav (G) has to
control are:- 2 + 2 + 2 = 6 relationships.
• Thus, when the number of subordinates is 2, the number of
relationships, which the superior (boss) has to control is 6. Similarly,
when the number of subordinates is 3, the number of relationships
to control will be 18.
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• By using Graicunas formula, we can find out
the number of relationships (r), if the number
of subordinates (n) is given.
• • Example of Graicunas Formula ↓
• Consider this e.g. If a superior has 5
subordinates (n=5) then the number of
relationships (r) which he has to control can
be calculated as follows:-
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• According to V.A. Graicunas, when the number of
subordinates increases then there is an increase in the Direct
Single Relationships, Direct Group Relationships and Cross
Relationships.
• So, as the number of subordinates increases arithmetically,
the number of relationships among them also increases
almost geometrically.
• So, according to him, a top-level manager can effectively
manage only 222 relationships. Therefore, a top-level
manager should not have more than 6 subordinates. Similarly,
a lower-level manager should not have more than 20
subordinates.
•
Limitations of Graicunas Theory
•
The Graicunas Theory is criticised because of the following reasons:-
• He gives more importance to the numerical factor.
• He gives more importance to the relationships.
HROD@MSSW
Decision making?
Decision making is the process of selecting
a logical choice from the available options, two or more
alternatives.
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Steps of decision making:
1.Identify a problem 2.Identify

decision criteria
3.Allocating weights of the criteria
4.Devloping alternatives
5.Analyzing alternatives 6.Selecting
an alternative 7.Implementing the
alternative 8.Evaluating decision
effectiveness
1.Identify a problem:
A discrepancy between an existing and desired state
of affairs.
2. Identifying Decision Criteria
investments required
chance of failure
growth of the firm .
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3.Allocating weights of the criteria
Decision criteria are not of equal importance
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4.Devloping alternatives:
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5.Analyzing alternatives
Appraising each alternative’s strengths and weaknesses
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6.Selecting an alternative
Choosing the best alternative
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7.Implementing the alternative
Putting the chosen alternative into action.
Conveying the decision to and gaining commitment
from those who will carry out the decision.
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8.Evaluating decision effectiveness
The soundness of the decision is judged by its

outcomes.
How effectively was the problem resolved by outcomes
resulting from the chosen alternatives?
If the problem was not resolved, what went wrong?
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Assessed Values of Laptop Computers
Using Decision making Criteria
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Styles of decision making:
Decision making style proposes people differ along
two dimensions in the way they approach decision
making. The first is an individual way of thinking.
The other dimension describes an individuals
tolerance for ambiguity.
# decision making styles of four types.
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1) Directive Style: Managers using directive style have
low tolerance for ambiguity and are rational in their way of
thinking. They are efficient and logical.
(2)Analytic Style: Managers with an analytic style have

high tolerance for ambiguity than do directive type and are
rational in their way of thinking.
(3)Conceptual Style: Managers with conceptual style have
high tolerance for ambiguity and an intuitive way of
thinking.
(4)Behavioral Style: Managers with behavioral style have

low toleranceand an intuitive way of thinking.
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Types of decision making:
.Routine and Tactical
Decisions: Routine
decisions are made
repetitively following
certain established
rules, procedures and
policies.
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• Routine Decisions are taken for the
functioning of the organisations. Much
evaluation is not required. So it can be taken
quickly. Though the decision is taken for
routine activity powers are given to lower
level management to take this kind of decision
within their limit.
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Example : ID act 1947
• The works committee members should be
comprised of equal number of workmen
(employees) and individuals representing
employers. The employer should select the
employees in consultation with the Union (if
already formed in the organization).
• There are various authorities under the act such as
the works committee, conciliation officer,
conciliation board, courts of inquiry, labour court,
tribunal, national tribunal.
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They neither require
collection of new data nor conferring with people. Thus
they can be taken without much deliberation. They may
be complicated but are always one dimensional. They
do not require any special effort by the manager. Such
decisions are generally taken by the managers at the
middle and lower management level. Tactical decisions,
on the other hand are important and so they are taken
generally by the top management and middle
management. The higher the level of a manager, the
more strategic decisions he is required to take. The
strategic decisions relate to policy matters and so
require a through fact finding and analysis of the
possible alternatives. Finding the correct problem in
such decisions assumes great importance. The
managers are more serious about such decisions as
they influence the decision making at the lower levels.
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Programmed/Structured Decision and
Non Programmed / Unstructured
Decision They are routine and repetitive
nature which is to be dealt with according
to specific procedure. If an employee takes
leave the manager can grant leave by
approving the formal leave procedure. But
if a majority employee takes leave the
manger cannot take a routine procedure
because all the employees taking leave at
a time is not a routine problem. These
decisions are taken because of
unstructured problem. There is no
standard procedure for handling such
problems. When all the employees take
leave without any permission on a
particular day is an unstructured problem.
These non programmed decisions require
through study of the problem and scientific
study of the situational factors.
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Policy and Operating Decisions Policy decisions are of vital
importance and are taken by the top management. They affect the
entire enterprise. But operating decisions are taken by the lower
management in order to put in to action the policy decisions. For
example, a bonus issue is a policy matter which is decided by the top
management, but the calculations of bonus issue is an operating
decision which is taken at the lower levels to execute the policy
decisions.
Organisational and Personal Decisions Organisational decisions are

those which a manager takes in his official capacity. Such decisions
can be delegated. But personal decisions, which relate to the manager
as an individual and not as a member of the organisation, cannot be
delegated.
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Individual and Group Decisions
When a decision is taken by an individual in the organisation, it is

known as individual decision. Such decisions are generally taken in
small organisations and in those organisations where autocratic style of
management prevails. Group or collective decisions refer to the
decisions which are taken by a group of organisational members, say
board of directors (or) committee.
Strategic decisions are complex in nature and are always taken

after deep deliberations. Any mistake in such decisions will prove to be
dangerous for the concern. These decisions can determine the very
fate of the organisations. Implementation of strategic decisions would
require heavy investments and also greater commitment on the part of
the staff. The decision to introduce a new product in the market or
install very expensive machinery is an example of a strategic decision
HROD@MSSW
Directing: is an important function of management which
involves communicating with and providing leadership to the
subordinates and motivating them to contribute their best for the
achievement of organizational objectives. It starts with issuing
orders and instructions to the subordinates and ends with getting
things done by satisfying various needs of the subordinates.
Essential elements of the directing function of management are:
(i) Issuing orders and instructions. (ii) Guiding, counselling and
teaching the subordinates the proper way of doing the job. (iii)
Supervising the work of subordinates to ensure that their
performance conforms to the plan. (iv) Motivating the
subordinates to direct their behaviour in a desired pattern. (v)
Maintaining discipline and rewarding effective performance.
Further, directing is a continuous function performed by
managers at all levels of the organization. Thus, a supervisor or a
foreman must direct the workers, just as the chief executive will
direct his immediate subordinate managers.
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In the light of the above and recent developments, the principles of
direction may be enumerated as follows: (i) Harmony of Objectives:
The most significant principle of direction is to harmonise the objectives
of the individuals, the groups and the enterprise. Synchronisation of
varied objectives is a must with a view to secure maximum prosperity
for the employers as well as the employees. Organisation should
devise and introduce effective measures to reconcile the conflicting
interests. Fayol emphasized direct communication to achieve this
harmony as he held that if orders go through a series of intermediaries,
divergent views about the objectives of the enterprise are likely to come
up. (ii) Unity of Command: This principle requires that an employee
should receive orders from one superior only. In other words, it signifies
a unified system of directives, instructions and other devices for
enforcing command or direction. This principle is based on the premise
that a man cannot shoulder dual or multiple command. (iii) Unity of
Direction: Unity of direction essentially signifies the existence of only
one head and one plan for a group of activities which have the same
objective. It should be noted, however, that unity of direction and unity
of command are not the same thing. Unity of direction results from
sound organisation structure, whereas unity of command leads to
effective functioning of the subordinates.
R.NARASIMHAN “Unity
, FACULTY , of command cannot
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exist without unity of direction, but does not flow from it” – Fayol
(iv) Direct Supervision: Any endeavour in directing becomes more effective
if it is accompanied by personal touch. Subordinates feel happy and a
sense of participation is inculcated in them if the seniors maintain direct
contact with their juniors. Such relationship, undoubtedly, motivates them
for effective functioning and thus direct supervision may be considered as
one of the best ways to get things done by others. (v) Democratic
Leadership: In order to make any direction effective, the leader should
have respect for the opinion and views of his followers. He should ensure
their participation in matters related to their job, functioning, working
environment and so on. As a result, seniors can secure maximum
contribution from their subordinates in the accomplishment of the
designated tasks. (vi) Follow-up: It is to be remembered in all situations
that direction does not mean simply issuing orders and instructions and
through them getting the things done within the stipulated time. In order to
make direction effective, executives and managers should not only instruct
their subordinates but also follow-up their work. It is the duty of the seniors
to oversee the working of subordinates, check their performance, guide
them to follow the right course of action, point out their short comings,
suggest the ways and means to develop their work methods and change
the mode of directing, if circumstances necessitate. In short, above
mentioned are the principles of HROD@MSSW
direction which seniors should follow to
In directing the human effort towards
organizational objectives, managers soon
realise that they should think in terms of the
following elements: – Supervision –
Motivation – Leadership – Communication
CONCEPT OF SUPERVISION Supervision refers to the
direct and immediate guidance and control of subordinates in
the performance of their work. It involves observing the
subordinates at work and ensuring that they work according
to the plans and policies of the organization. George R. Terry
and Stephen G. Franklin have defined supervision as
“Supervision is guiding and directing efforts of employees
and other resources to accomplish stated work outputs.”
HROD@MSSW
Communication is a vital aspect of the managerial process. In fact,
superior- subordinate relation cannot thrive without effective and
meaningful communication. Effective communication is often defined
as the exchange of thoughts, facts, opinions, or information between
two or more persons so as to bring about mutual understanding or
confidence.
Communication may be through words, symbols,

letters, or actions. But so long as people in the
organisation share the meaning and
understanding with one another, there is
communication. To be more specific,
communication may be defined as the transfer of
information and understanding from one person to
another.
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There are two indispensable features of
communication: (i) Communication cannot take
place until there are at least two persons - the
receiver and the sender.
(ii) Communication need not elicit confidence, but

the information which is so exchanged must be
understood by the receiver. However, understanding
does not mean that the receiver must agree to the
information. Communication takes place when the
information is understood even though there is
disagreement.
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TYPES /
CHANNEL /
MEDIUM
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The two distinct channels of communication are as
follows: – The formal official channels of communication.
– The informal channels of communication. They are
discussed as below: Formal Channels of Communication
Formal channels of communication are established
mainly by the organizational structure, and are referred
to as “communication through the chain of command”.
While developing a communication network, the primary
attention should be directed towards determining the
degree of reliance to be placed upon the formal channels.
The reason is that official channel has traditionally been
used as the chief avenue for communication
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Formal channels of communication provide: – Vertical flow of
communication, and – Horizontal flow of communication. Vertical
communication flows downward as well as upward. While directing
activities of his subordinates, the manager issues instructions and
orders and transmits information down the levels in management
hierarchy. Organisation charts exhibit the flow of authority and the
channels through which downward communication must flow. –
Downward communication is frequently used to direct subordinates and
transmit information relating to company objectives, policies and
procedures. – Upward communication is another aspect of vertical flow
of communication. The organisational structure while laying down
activity-authority relations not only establishes the channel of command
through which the manager transmits directives and information to
subordinates but also creates a line of communication for conveying
information sent by subordinates to their seniors (which can be
suggestions, grievances, etc). Horizontal Communication means
communication between people at the same level in an organization,
community or peer group, usually used as a means to coordinate
efforts.
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Flow of Communication There is yet another flow of communication commonly
described as sideward, horizontal, or lateral communication. This type of flow is
concerned primarily with the transmission of information and understanding
between different departments or people at the same level of organisation. Like
vertical flow, horizontal flow of communication is also essential for the efficient
functioning of an enterprise. It enables executives on the same level of
management hierarchy to exchange information and coordinate their activities
without referring all matters to superior managers. This is sometimes called as a
“gangplank”. Matters when handled on the same level of organisation speed up
actions and relieve superiors of a number of unnecessary or less important
problems. An important aspect of communication network is that there should be a
rapid flow of information to different people in the organisation which is essential for
its smooth working. Management should sort out information of routine and non-
routine nature and develop standard procedures for dealing with routine
communication. This will help the communication to flow speedily. Standard
procedures should also be developed for transferring information from one part of
the organization to another. These standard procedures constitute functions of the
formal organization. Standard forms, summary reports and official bulletins also
greatly help in developing smooth flow of information throughout the organization.
However, it should be remembered that communication network for dealing with
major and non-routine issues tend to be more complex.
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The formal lines of authority from superior
to his subordinates or from the highest to
the lowest rank is known as Scalar Chain.
... In case of emergencies a subordinate of
one line of authority can communicate with
another subordinate of another line of
authority. This is known as Gang Plank
Fayol defines scalar chain as

'The chain of superiors ranging
from the ultimate authority to
the lowest”. Every orders,
instructions, messages,
requests, explanation etc. has
to pass through Scalar chain.
But, for the sake of
convenience & urgency, this
path can be cut shirt and this
short cut is known as Gang
Plank.
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GRAPEVINE: Sociologists and psychologists point out the
inherent tendency of the people in the organization to cut
across formal channels and communicate informally.
Informal organization emerges spontaneously within every
formal organization, and along with it grow the informal
channels of communication, commonly referred to as the
grapevine. Any informal communication about company
and personal matters outside the official network
constitutes grapevine. Thus, the grapevine consists of a
complex network of informal communication taking place
all day long in the workplace. It is characterized by the
emergence of spontaneous channels through which facts,
half truths, and rumours pass.
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Positive Aspects of Grapevine: Though grapevine is not the result of a
deliberative management design, it offers certain attractions for its better
use by managers: (i) The informal network of communication represents the
natural desire of the subordinates in an organization to interact and
communicate with one another, and fulfills their desire to know the latest
information or course of events. (ii) The grapevine works with surprising
speed and is often faster than the official channels; information gets
disseminated very promptly. (iii) It also offers the managers insight into what
the subordinates think and feel. (iv) The informal network of communication
is also useful for disseminating certain information which, in the general
interest of the organization, could not be transmitted through the official
channels. Thus, cases that lead to sudden resignation of a manager may be
communicated through the grapevine without giving members of the
organization the impression that he was the victim of some unfair section of
the top management. (v) During periods of insecurity and uncertainty, the
grapevine provides the members of the organisation an outlet to express
their fears and misgrovings, and attitudes and thoughts freely
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There are also certain negative aspects of the grapevine. Management
should take care of these while putting the informal network of
communication into use: (i) Often the grapevine carries rumours, and
inaccurate and partial information. Because of varied interpretations of
each individual the information gets distorted. (ii) Since it is spontaneous,
the grapevine has no stable associates or a definite pattern. Generally, a
few persons are usually found active participants in the grapevine. The
path and behaviour of the grapevine is also unpredictable. (iii) The
grapevine is based on oral communication where the communicator is
not held accountable for the information so transferred by him. The result
is that the sender feels free to exercise his imagination and transmit
information according to his whims and fancies. He communicates the
information as he understands it. Moreover, with a view save source
from embarrassment and from the fear of being cut off in the future, the
communicator may withhold certain information. In the same way,
consideration of the feeling of listeners also tempts him to transmit
information which is pleasant to hear.
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CROSSWISE COMMUNICATION
Crosswise communication is also
known as diagonal communication
which signifies the communication
between different departments of
equal, higher or lower levels.
Organisations of the day not only
permit but also insist on voluntary
crosswise communication to expedite
information, transfer and improve
understanding since the flow of
information through regular chain of
command is very much time
consuming and quality of
understanding also suffers. Crosswise
communication may create some
confusion and difficulties and it affects
the unity of the command. As a matter
of fact, certain measures, in all
circumstances, must be taken to make
any such communication
HROD@MSSW effective.
The term "medium" (the singular form of
"media") is defined as "one of the means or
channels of general communication,
information, or entertainment in society, as
newspapers, radio, or television."
We divide the different types of

communication medium into two different
categories:
1. Physical media
2. Mechanical media
With mechanical media we mean
With physical media we mean channels
written or electronic channels.
where the person who is talking can be
These channels can be used as
seen and heard by the audience. The
archives for messages or for giving
whole point here is to be able to not only
the big picture and a deeper
hear the messages but also to see the
knowledge.
body language and feel the climate in the
room. This does not need to be two-way
channels. In certain situations the receiver
expect physical communication
HROD@MSSW
Large meetings, town hall meetings
Department meetings (weekly meetings)
Up close and personal (exclusive meetings)
Video conferences (physical)
Viral communication or word of mouth
E-mail
Weekly letters or newsletters
Personal letters
Billboards
Intranet (Mechanical)
Magazines or papers
Sms
Social media
HROD@MSSW
HROD@MSSW
HROD@MSSW
HROD@MSSW
• Non verbal communication is more reliable
and more efficient than verbal
communication. Words are relatively easy to
control ; body language , facial expression and
vocal characteristics are not. By paying
attention to these nonverbal cues , you can
detect deception or affirm a speaker’s
honesty. Non verbal communication is also
important because it is efficient.
Facial expression : Your face is the primary site for expressing your
emotions , it reveals both type and intensity of your feelings
. Facial expression differs from culture to culture , composed of various types
but throughout the world there are six types of facial expression that are
widely accepted. They are FEAR , ANGER , DISGUST , JOY , SURPRISE ,
SORROW.
• Gesture and posture : By moving your body ,
you can express both specific and general
messages , some voluntary and some
involuntary.
• Vocal characteristics : Like body language ,
your voice carries both intentional and
unintentional messages.
• Personal Appearance : People respond to others
on the basis of their physical appearance. Physical
appearance and personal style contribute to
one’s identity
• Touching behavior : Touch is an important way to
convey warmth , comfort and reassurance.
Touching behavior depends on many variables.
• Use of time and space : Like touch , time and
space can be used to assert authority. Some
people demonstrate their importance by making
other people wait , others show respect by being
on time. People can also assert their status by
occupying the best space. Punctuality and
comfort zones vary by culture and authority.
• For writing any good business written messages it
is important to note that your letter should
compete the attention of the reader. Your
message should be purposeful , audience-
centered and concise.
• PLANNING -----→ WRITING ---- COMPLETING
inform , persuade , or motivate and channel and
medium. establish a good relationship with your
audience.
stage when you commit your thoughts to words ,
create sentences and paragraphs, and select
illustrations and details to support your main
idea.
• review the content and organization for
overall style, structure , and readability.
• Finally proof the final draft for typos, spelling
errors and other mechanical problems.
• Any business communication can be grouped in to three
forms , they are letters , memo (memorandum) and email.
• Letters : Document that conveys information to a member
of one organization from someone outside that same
organization. Also called correspondence letters usually
cover one major point and go on one page. Letters can be
grouped in to positive , negative , neutral and sales.
• Memo : Document written from a member of an
organization to one or more members of the same
organization. Officially called memorandum it usually
covers just one main point and no more than a few.
Readers prefer one page memos.
• Email : Document written usually in an informal style
either to members of one’s own organization or to an
external audience. Characterized by the speed with which it
is written and delivered and email can include more formal
attachments to be read and possibly printed by the
audience.
• General guidelines for letters and memos
•
• 1. Know your purpose
• 2. Know your readers
• 3. Follow correct format
• 4. Follow the ABC format ( abstract , body , conclusion )
• 5. Use the 3C strategy ( Capture the reader interest with
good opening , convince him with supporting point , control
the closing with a statement of following up with the
reader )
• 6. Stress the “you” attitude
• 7. Use attachments for details
• 8. Be diplomatic
• 9. Edit carefully
• 10. Respond quickly
• Guidelines for effective email :
• Begin with standard memorandum format
• Don’t send it too quickly
• Focus on one main subject in a message
• Use a positive conversational style
• Be sure your message indicates the context to which it applies
• Choose the most appropriate method for replying to a message
• Format your message carefully
• Chunk information for easy scanning
• When writing to groups , give readers a method to abstain from
receiving future notices
• When writing to groups , suppress the email addresses of recipients –
unless the group has agreed to let addresses be known.
• When composing an important message , consider composing it on your
word processor.
• The most essential and crucial aspect of
communication is the listening skills. Your
ability to listen others plays a vital role in
organizational communication. Effective
listening requires a conscious effort and a
willing mind. Effective listeners welcome new
information and new ideas. Effective listening
strengths organizational relationships ,
enhances product delivery , alerts the
organizational innovation from both internal
and external sources and company that listens
stay informed , up to date , and out of trouble.
Types and process of listening
• Content
• Critical
• Emphathetic
• Listening involves five steps : Receiving ,
interpreting , remembering , evaluating and
responding.
• BARRIERS TO EFFECTIVE LISTENING :
• 1. Listeners who jump to conclusions close their minds to
additional information.
• 2. Self-centered listeners shift their attention from the speaker to
themselves.
• 3. Selective listeners tune the speaker out.
• 4. Another common problem in listening is selective listening. Also
known as out-listening
• Your mind can process information more than four times faster
than the rate of speech , therefore listening skills helps you in
overall improvement in personality.
• IMPROVING LISTENING SKILLS :
• A. Look beyond the speaker’s style
• Don’t judge the message by the speaker but by the argument.
• Ask yourself what the speaker knows that you don’t
• Depersonalize your listening
• Decrease the emotional impact of what’s being said.
• . Fight distractions B
• Close doors
• Turn off radios or televisions
• Move closer to the speaker
• Stay ahead of the speaker by anticipating what will be said next and summarizing what’s already
been said.
• Don’t interrupt – avoid sidetracking solutions and throwing the speaker off course.
• Hold your rebuttal until you’ve heard the entire message.
• C. Provide feedback
• Let the speaker know you’re paying attention
• Maintain eye contact
• Offer appropriate facial expressions
• Paraphrase what you’ve heard when the speaker reaches a stopping point.
• Keep all criticism and feedback positive
• D. Listen actively
• Listen for concepts , key ideas and facts.
• Be able to distinguish between evidence and argument , idea and example , fact and principle
• Analyze the key points – whether they make sense and are supported by facts.
• Look for unspoken messages in the speaker’s tone of voice or expressions.
• Keep an open mind .
• Ask questions that clarify.
• Reserve judgment until the speaker has finished.
• Take meaningful notes that are brief and to the point.
CONTROLLING
• The word control is very commonly used. You must
have come across statements, like control your anger,
control your expenses and save money and control
your kids. In common parlance, word control means
to check or verify ; to regulate; to curb or restrain,
etc. However, in the context of a business it means a
process of controlling the activities of an
organisation. A good definition of control is that it is
a process through which managers assure that actual
activities conform to planned activities. Control is
directly related to planning. The process of
controlling ensures that plans are being
implemented properly.
HROD@MSSW
In the management cycle functions, i.e., planning, organizing,
directing and controlling, planning comes before all other
functions and controlling comes the last. This is because control is
the final link in the function chain of management activities. It is
the only way the managers know whether the organizational goals
are being met.
Controlling as a function of management, therefore, means the
measurement and correction of performance of activities of
subordinates in order to make sure that enterprise objectives, and
the plans devised to attain them are accomplished. Control thus
consists in assessing the extent to which actions are in conformity
with the plans adopted and instructions issued, so that errors and
deviations are promptly reported and analyzed, and suitable
corrective actions are taken. Remedial action may result in
alteration of plans, change in the organization structure,
modification in the staffing process, or change in the process and
techniques of direction.R.NARASIMHAN , FACULTY ,
HROD@MSSW
• no manager can control actions which are not
planned. Thus, complete and coordinated plans
greatly facilitate the Control process.
• Control is sometimes considered to be the
function of top management, and many are
under the impression that little control is needed
at lower levels. But this is erroneous and
misleading. Although the nature of control
exercised by the managers varies, it is an
essential function of management performed at
all levels in the organization.
HROD@MSSW
Characteristics:
(i) Controlling is forward looking: A manager cannot control the past.

A manager can take corrective action only about future
operations. By reviewing past events, a manager applies the
advantages of previous experience to future corrections. Control
is usually preventive as presence of control system tends to
minimize wastage, losses and deviations from standards.
(ii) Controlling exists at every management level: Controlling is a
function of every manager in the organization – right from the
Chairman of the Board of Directors down to the first-line
supervisor. For example, top management is involved in
exercising strategic control, middle management concentrates on
tactical control, and operational control is the responsibility of
supervisory management.
HROD@MSSW
• (iii) Controlling is a continuous activity: Control is not a one-step
process but a continuous one. It involves constant revision and
analysis of standards resulting from the deviations between
actual and planned performance.
• (iv) Purpose of controlling is positive: Controlling serves a positive

purpose both at the organizational level as well as the individual
level. At the organizational level, the purpose of control is to
make things happen– to achieve organizational goals within
stated constraints or by means of planned activities. At the
individual level, the purpose of control is to make individuals give
up a part of their independence so that common goal and
objectives may be accomplished.
HROD@MSSW
• Control consists of assuring that the results of operations conform,
as closely as possible, to the established goals and predetermined
standards. The essential elements of any control process are:
• 1. Establishment of Goals and Standards Standards are the norms
against which any performance is measured to find out its results.
The first essential element of any control process is to know what
should be the result. This requires projecting the future and
determining the goals and standards of performance. Standards
may be : – tangible or specific (like production of 200 units per day
or sale of 1500 units per day) – intangible or abstract (to be the
most preferred employer) But these must be so expressed that
people concerned understand them, and that accomplishment of
assigned duties can be measured against them.
HROD@MSSW
2. Measurement of Actual Performance against Standards and
their Comparison
Once the standards are set, the second basic step in control
process is the evaluation of performance. This requires
measuring the work in terms of control standards, and
communicating the appraisal with the persons responsible for
taking corrective actions. Measurement of performance must
be in units similar to those in which standards are expressed.
Checking on performance is not intended just to determine that
a mistake has been made, rather it enables the manager to
predict the future problems. Customer inquiries are sometimes
used to predict a rise or fall in sales: a machine’s vibration may
be used to predict a breakdown; or grievances may be used to
predict a strike. Through such predictions, corrective actions
can be initiated without waiting for the actual event to occur.
HROD@MSSW
• 3. Corrective Action When a significant
discrepancy occurs between the actual output or
performance and the planned or predetermined
performance standards, specific action must be
taken to correct the situation.
• Some innovative people and organizations
already have built-in corrective actions in their
control process, if the deviations are due to
controllable factors.
HROD@MSSW
• (i). The Operation Phase (a) Prompt investigation of
the causes of the deviation. (b) Decisions concerning
the required corrective action. (c) Prompt direction
for correcting the situation in accordance with the
decision. (d) Close supervision of the corrective
action to ensure that it takes place according to the
instructions and is effective
• (ii). The Administrative Phase (a) Further
investigation of recurring difficulties to determine
the basic factors, either human or physical, that are
responsible. (b) Disciplinary action, either positive or
negative, as the situation requires. (c) Creative
planning to prevent a recurrence of the situation. (d)
Recognition of the situation and introduction of the
planned measurement. HROD@MSSW
• 4. Follow-Through Recommending corrective actions for
underperformance is not enough in itself. The managers
responsibility does not end here. Often the control proves
ineffective or fails because the corrective actions
recommended are not alloed through. Suppose the
performance evaluation of a subordinate indicates weakness
in his supervisory practices. The superior of this individual
recommends a corrective action and ensures that he
undergoes some kind of training in supervisory practices. The
responsibility of the superior does not end here. The superior
has to follow through his recommendations to ensure that the
subordinate participates and makes progress in the training
programme. Further, the superior must watch whether the
subordinate is applying what he had learnt in the training
programme to the actual work situation.
HROD@MSSW
• A variety of tools and techniques have been
developed and used for years for the purposes
of managerial control. These tools are, in the
first instance, planning devices. Some of these
techniques are termed as traditional and
others as modern. Most of the modern control
devices usually reflect the system techniques
long used in physical sciences
HROD@MSSW
• Thus, the main traditional control devices are: –
Budgetary Control – Standard Costing –
Financial Ratio Analysis – Internal Audit –
Break-Even Analysis – Statistical Control
• Some of the non-traditional (modern) control
devices are: – Zero Base Budgeting – Network
Analysis – CPM - Critical Path Method – PERT -
Programme Evaluation and Review Technique –
Management Audit. Traditional devices focus on
non-scientific methods whereas, non-traditional
devices are based more on scientific methods
and are more accurate.
HROD@MSSW
Budget as a plan represents a statement of anticipated inflows and
expected outflows expressed numerically. Exercising control over
day-to-day operations of the enterprise for the purpose of
executing budgets is known as budgetary control. The Institute of
Cost and Management Accountants of England and Wales defines
a budget as “a financial and/ or quantitative statement prepared
prior to a defined period of time of the policy to be pushed during
that period for the purpose of attaining a good objective”. The
Institute of Cost and Management Accountants of England and
Wales has defined budgetary control as “the establishment of
objectives relating to the responsibilities of executives to the
requirements of a policy and the continuous comparison of actual
with budgeted results, either to secure by individual action the
objective of that policy or to provide a basis for its revision”.
Expected results in a budget may be expressed in financial terms,
in terms of man hours, units of output, machine hours, or in any
other numerically measurable term. A budget may deal with
operations, such as the HROD@MSSW
expense budget; it may relate to capital outlays,
like the capital budget; or it may reflect flow of
cash, as does the cash budget. Full benefits of
budgeting and budgetary control can be realised
if different phases of all the operations of the
company are covered by budgets and
comprehensive budgeting is used. In such cases,
planning is largely confined to budgeting. In a
number of enterprises, however, only important
activities are planned and controlled by mean
HROD@MSSW
• Elements of Budgetary Control Basically, budgetary
control involves the following steps: – Determination
of objectives to be achieved, like higher profits,
better finance position and better position in the
market. – Noting the steps necessary to achieve the
objectives, i.e., laying down the exact and detailed
course of action month by month and over the whole
period. – Translating the course of action into
quantitative and monetary terms. – Constant
comparison of the actual with the budget (again both
physical achievement and the money values
involved). Noting deviations and rectifying the same
to eliminate the gap between the budget planned
and the budget achieved.
HROD@MSSW
Purpose of Budgeting Budgeting is used for a variety of purposes. Thus, according
to Koontz and O’Donnel, “Budgets correlate planning and allow authority to be
delegated without loss of control”. Some of the basic general purposes for
which budgeting is used are as follows: (i) To Develop an Organized Procedure
for Planning: A budget requires planning and is also in itself an instrument of
planning. Budgeting involves anticipating of results and expressing them in
numerical terms. The revenue and expense budget, for example, requires
compilation of sales budget and a number of different expense budgets.
Forecasting or projecting a future course of action implied in budgeting is
essentially a planning process. Comprehensive budgeting forces management
to develop a network of objectives and policies and plans for all the phases of
operations of the enterprise. (ii) Means of Coordination: Budgeting is also used
for coordinating the activities of the various divisions of a business. Thus,
production must bear a logical relation to sales. While preparing budgets
information is certainly required relating to the different divisions and
activities in the enterprise. A sales budget, for instance, cannot be prepared
without the knowledge of production programme of the enterprise. The very
act of preparing budgets, therefore, forces coordination. The process of
integrating various budgets into a master budget also highlights the
importance of coordination implied in budgeting
HROD@MSSW
. (iii) Basis for Control: Control represents the most
widely known use of budgeting. Events can be
compelled to conform to plans only when there are
predetermined objectives and standards. Budgeting
forces management to lay down objectives, goals
and plans in numerical terms. It thus provides the
yardstick for the measurement of performance, so
very essential for effective control. Budget reports
analyze the deviations and also suggest corrective
actions. Thus, budgeting is also used as an aid to
managerial control. Stated above are the general or
overall purposes of budgeting and budgetary control
HROD@MSSW
• Types of Budget Budgets are drawn on the basis of
plans, and since an average enterprise has a large
variety of plans, there are many types of budgets
currently in use in business organizations. The following
are the important types of budgets. – Sales budgets
including selling and distribution costs budgets. –
Production and manufacturing budgets. – Purchase
Budget. – Capital Expenditure Budget. – Administration
Expenses Budget. – Research and Development Budget.
– Cash Budget. A master budget is frequently prepared
to combine all other budgets in a summary form. The
components of the master budget are the various
functional budgets. The summary plan of master budget
is generally divided into two parts- a forecast income
statement and a forecast balance sheet.
HROD@MSSW
• 1. Variance Analysis
First of all, budgets of different departments are made
with estimated figures. After this, it is compared with
actual accounting figures. In this technique, we find
variances. These variances may be favourable and
unfavourable. For example, we have recorded actual
quantity and cost of our raw material, after this, it is
compared with budgeted value of raw material
quantity and cost. Result of this will be material cost
variance. Like this, we will find the variance of labour
cost and overhead cost. This technique of budgetary
control is helpful for reducing the cost of business.
HROD@MSSW
2. Responsibility Accounting
Responsibility accounting is also a good budgetary control

technique. In this technique, we create cost centre, profit
centre and investment centre. All these centres are just like
department of any organisation. Now, we classify our all
employees work on the basis of their centres. Every
employee’s responsibility is fixed on the basis of his target or
performance. After this, we record their performance
manually. Then, we fix their accountability. For example, we
have fixed the target of sales department is of Rs. 5 Lakh per
month. For this, we have appointed expert salesman. But
sales department’s total per month sales is Rs. 3 Lakh which is
Rs. 2 Lakh less than our sales department target. Through this
budgetary control, we can take the decision of promotion and
demotion of our employees or
R.NARASIMHAN find other
, FACULTY
HROD@MSSW
, reasons if we do not
obtain our targets.
• 3. Adjustment of Funds
In this technique of budgetary control, top management
take the decision to adjust fund from one project to
other project. For example, when Govt. of India makes
budget for allocation of its total fund in different
projects, at that time, it has to take decision for
adjustment of funds. For example, railway department
needs money for specific new project. If Govt. of India
sees that project of IT has excess money, then it can be
utilized for railway budget. In adjustment of funds, we
also use fund flow analysis. We can also decrease
misuse of funds by forecasting proper amount.
HROD@MSSW
• 4. Zero Base Budgeting (ZBB)
These days zero base budgeting is popular technique of
budgetary control. In this technique, every next year
budget is made on nil base. It can only be possible, if
your estimated income will be equal to the estimated
expenses. At that time, difference between estimated
income and estimated expenses will be zero. If there is
any excess, it will be adjusted. For example, if your
estimated revenue is more than estimated expenses, you
need to increase the amount or allocate in new
estimated expenses. With this, nothing will go to next
year. With zero base budgeting technique, you can
control on every money which you have to spend. Its
base will be the current year income only.
HROD@MSSW
• Peter Pyhrr developed the idea of zero-based budgeting in the
late 1960s to early 1970s while he was an account manager at
Texas Instruments. In recent years, both Fortune
500 and private equity companies have adopted this
budgeting technique.
• A study from Accenture Strategy on zero-based thinking
published in 2018 found that from 2013 through 2017, this
budgeting method grew exponentially among the world's 85
largest companies at a rate of 57% each year. Those
companies include Kraft Heinz Co., Mondelez International
Inc., and Unilever PLC.
• In traditional budgeting, companies start with the previous
period's budget as a template and then build upon it. Usually,
each new budget increases incrementally compared to the
previous period's budget, and companies only need to justify
new expenses.
HROD@MSSW
• Zero-based budgeting (ZBB) is a method of
budgeting in which all expenses must be
justified for each new period. The process of
zero-based budgeting starts from a "zero
base," and every function within an
organization is analyzed for its needs and
costs. Budgets are then built around what is
needed for the upcoming period, regardless of
whether each budget is higher or lower than
the previous one.
HROD@MSSW
• The Basics of Zero-Based Budgeting (ZBB)
• ZBB allows top-level strategic goals to be implemented into the
budgeting process by tying them to specific functional areas of
the organization, where costs can be first grouped and then
measured against previous results and current expectations.
• Because of its detail-oriented nature, zero-based budgeting may
be a rolling process done over several years, with a few
functional areas reviewed at a time by managers or group
leaders. Zero-based budgeting can help lower costs by avoiding
blanket increases or decreases to a prior period's budget. It is,
however, a time-consuming process that takes much longer than
traditional, cost-based budgeting. The practice also favors areas
that achieve direct revenues or production, as their contributions
are more easily justifiable than in departments such as client
service and research and development.
HROD@MSSW
• Zero-Based Budgeting vs. Traditional Budgeting
• Traditional budgeting calls for incremental
increases over previous budgets, such as a 2%
increase in spending, as opposed to a justification
of both old and new expenses, as called for with
zero-based budgeting. Traditional budgeting
analyzes only new expenditures, while ZBB starts
from zero and calls for a justification of old,
recurring expenses in addition to new
expenditures. Zero-based budgeting aims to put
the onus on managers to justify expenses, and
aims to drive value for an organization
by optimizing costs and not just revenue.
HROD@MSSW
• Suppose a company making construction equipment implements
a zero-based budgeting process calling for closer scrutiny of
manufacturing department expenses. The company notices that
the cost of certain parts used in its final products and outsourced
to another manufacturer increases by 5% every year. The
company has the capability to make those parts in-house using its
own workers. After weighing the positives and negatives of in-
house manufacturing, the company finds it can make the parts
more cheaply than the outside supplier.
• Instead of blindly increasing the budget by a certain percentage
and masking the cost increase, the company can identify a
situation in which it can decide to make the part itself or buy the
part from the external supplier for its end products. Traditional
budgeting may not allow cost drivers within departments to be
identified. Zero-based budgeting is a more granular process that
aims to identify and justify expenditures
HROD@MSSW
• A cost center is a department or function
within an organization that does not directly
add to profit but still costs the organization
money to operate. Cost centers only
contribute to a company's profitability
indirectly
HROD@MSSW
HROD@MSSW
• A profit center is a business unit or
department within an organization that
generates revenues and profits or losses.
Management closely monitors the results
of profit centers, since these entities are the
key drivers of the total results of the parent
entity
HROD@MSSW
HROD@MSSW
HROD@MSSW
• Benefits of Zero-Based Budgeting
• The benefits of this budgeting method include:
• Managers Must Justify All Operating Expenses
• Zero-based budgeting ensures that managers think about how every dollar is spent,
every budgeting period. This process also forces them to justify all operating
expenses and consider which areas of the company are generating revenue.
• Keeps Legacy Expenses in Check
• In traditional budgeting, legacy costs may not be examined for years until there is
some sort of economic shock that forces the company to take extreme actions.
Expenses have a tendency to grow over time, with each department protecting its
budget from cuts. This approach can be myopic and, over time, it can lead to
significant misallocation of resources. If done correctly, zero-based budgeting can
prevent this from happening.
• While managers must justify all expenses with zero-based budgeting, generally, it
doesn't matter if the new budget is higher or lower than the one before it.
HROD@MSSW
• Drawbacks of Zero-Based Budgeting
• There are also several drawbacks to zero-based budgeting:
• Can Reward Short-Term Thinking
• One of the major shortcomings of zero-based budgeting is that it can reward short-
term thinking by shifting resources toward areas of companies that will generate
revenue over the next calendar year or budgeting period. As a result, some areas
of companies that are typically viewed as long-term investments that aren't
directly tied to revenue, such as research and development or worker training,
may be left with smaller budgets than they actually need. This could possibly hurt
a company because, although these areas won't be generating revenue in the near
term, they're often the keys to remaining competitive over the long term.
• Resource Intensive
• Zero-based budgeting is also resource-intensive. It takes a lot more time and effort
to closely review and justify every budget element rather than modify an existing
budget and review only new elements. Because of this, some critics argue that the
benefits of zero-based budgeting do not justify its time cost.
• Manipulation by Savvy Managers
• In addition, the process can be gamed by savvy managers to get more resources
into their departments. If this happens, it can lead to a change in culture where
there is a decreased spirit of cooperation in the company, as workers feel
expendable. R.NARASIMHAN , FACULTY ,
HROD@MSSW
• Statistical process control (SPC) is a method
of quality control which employs statistical
methods to monitor and control a process. This helps
to ensure that the process operates efficiently,
producing more specification-conforming products
with less waste (rework or scrap). SPC can be applied
to any process where the "conforming product"
(product meeting specifications) output can be
measured. Key tools used in SPC include run
charts, control charts, a focus on continuous
improvement, and the design of experiments. An
example of a process where SPC is applied is
manufacturing lines.
HROD@MSSW
• In manufacturing, quality is defined as conformance to
specification. However, no two products or
characteristics are ever exactly the same, because any
process contains many sources of variability. In mass-
manufacturing, traditionally, the quality of a finished
article is ensured by post-manufacturing inspection of
the product. Each article (or a sample of articles from a
production lot) may be accepted or rejected according
to how well it meets its design specificationcontras, SPC
uses statistical tools to observe the performance of the
production process in order to detect significant
variations before they result in the production of a sub-
standard article. Any source of variation at any point of
time in a process will fall into one of two classes.
HROD@MSSW
• (1) Common causes'Common' causes are sometimes referred to as 'non-
assignable', or 'normal' sources of variation. It refers to any source of
variation that consistently acts on process, of which there are typically
many. This type of causes collectively produce a statistically stable and
repeatable distribution over time.(2) Special causes'Special' causes are
sometimes referred to as 'assignable' sources of variation. The term
refers to any factor causing variation that affects only some of the process
output. They are often intermittent and unpredictable.Most processes
have many sources of variation; most of them are minor and may be
ignored. If the dominant assignable sources of variation are detected,
potentially they can be identified and removed. When they are removed,
the process is said to be 'stable'. When a process is stable, its variation
should remain within a known set of limits. That is, at least, until another
assignable source of variation occurs.
• For example, a breakfast cereal packaging line may be designed to fill each
cereal box with 500 grams of cereal. Some boxes will have slightly more
than 500 grams, and some will have slightly less. When the package
weights are measured, the data will demonstrate a distribution of net
weights.
HROD@MSSW
• If the production process, its inputs, or its
environment (for example, the machine on the line)
change, the distribution of the data will change. For
example, as the cams and pulleys of the machinery
wear, the cereal filling machine may put more than
the specified amount of cereal into each box.
Although this might benefit the customer, from the
manufacturer's point of view it is wasteful, and
increases the cost of production. If the manufacturer
finds the change and its source in a timely manner,
the change can be corrected (for example, the cams
and pulleys replaced).
HROD@MSSW
• The application of SPC involves three main
phases of activity:
• Understanding the process and the
specification limits.
• Eliminating assignable (special) sources of
variation, so that the process is stable.
• Monitoring the ongoing production process,
assisted by the use of control charts, to detect
significant changes of mean or variation.
HROD@MSSW
• When the process triggers any of the control chart
"detection rules", (or alternatively, the process
capability is low), other activities may be performed
to identify the source of the excessive variation. The
tools used in these extra activities include: Ishikawa
diagram, designed experiments, and Pareto charts.
Designed experiments are a means of objectively
quantifying the relative importance (strength) of
sources of variation. Once the sources of (special
cause) variation are identified, they can be
minimized or eliminated. Steps to eliminating a
source of variation might include: development of
standards, staff training, error-proofing, and changes
to the process itself or its inputs.
HROD@MSSW
HROD@MSSW
HROD@MSSW
FISH BONE
R.NARASIMHAN Faculty, HROD

Department- MSSW
Department- MSSW
Department- MSSW
ASK???
For each cause how we can prevent it: Mark
with “C” controllable.
Don’t know yet –but we can find out means
mark X (experimentation)
Cannot prevent it or detect it mark N (Noise)
C needs new methods /procedures
X needs trail and error
N needs protection.

Department- MSSW
A PERT chart is a project management tool that
provides a graphical representation of a project's
timeline. The Program Evaluation Review
Technique (PERT) breaks down the
individual tasks of a project for analysis. PERT
charts are considered preferable to Gantt
charts because they identify task dependencies,
but they're often more difficult to interpret.
• A PERT chart helps a project manager analyze a
project's tasks and estimate the amount of time
required to complete each task in the project.
Using this information, the project manager can
estimate the minimum amount of time required
to complete the entire project. This information
also helps the manager develop a project
budget and determine the resources needed to
accomplish the project.
• A PERT chart uses circles or rectangles called
nodes to represent project events or milestones.
These nodes are linked by vectors or lines that
represent various tasks. Dependent tasks are
items that must be performed in a specific
manner. For example, if an arrow is drawn from
Task No. 1 to Task No. 2 on a PERT chart, Task No.
1 must be completed before work on Task No. 2
begins.
• Items at the same stage of production but on
different task lines within a project are referred to
as parallel tasks. They're independent of each
other, but they're planned to occur at the same
time.
• Interpreting PERT Charts
• A PERT chart is a visual representation of a series of
events that must occur within the scope of a project’s
lifetime. The direction of arrows indicates the flow and
sequence of events required for project completion.
Dotted activity lines represent dummy activities—items
that are located on another PERT path. Numbers and time
allotments are assigned and shown inside each vector.
• These charts have their distinct definitions and terms, the
most important of which anticipate how long it will take
to finalize a project. "Optimistic time" refers to the
shortest duration. "Pessimistic time" is logically the
longest it might take. The "most likely time" indicates a
reasonable estimate of the best-case scenario, whereas
"expected time" accounts for problems and obstacles.
• A PERT chart allows managers to evaluate the
time and resources necessary to manage a
project. This evaluation includes the ability to
track required assets during any stage of
production in the course of the entire project.
• PERT analysis incorporates data and information
from multiple departments. This combining of
information encourages department
responsibility and it identifies all responsible
parties across the organization. It also improves
communication during the project and it allows
an organization to commit to projects that are
relevant to its strategic positioning.
• PERT Analysis
• Program Evaluation and Review Technique (PERT) is a method used to examine
the tasked that are in a schedule and determine a variation of the Critical Path
Method (CPM). It analyzes the time required to complete each task and its
associated dependencies to determine the minimum time to complete a project.
It estimates the shortest possible time each activity will take, the most likely
length of time, and the longest time that might be taken if the activity takes
longer than expected. The method was developed by the US Navy in 1957 on
the Polaris nuclear submarine project.
• To conduct PERT Analysis, three time estimates are obtained (optimistic,
pessimistic, and most likely) for every activity along the Critical Path. Then use
those estimates in the formula below to calculate how much time for each
project stage:
• Formula: (P+4M+O)/6
• Optimistic Time (O): the minimum possible time required to accomplish a task,
assuming everything proceeds better than is normally expected.
• Pessimistic Time (P): the maximum possible time required to accomplish a
task, assuming everything goes wrong (excluding major catastrophes).
• Most likely Time (M): the best estimate of the time required to accomplish a
task, assuming everything proceeds as normal.
• Example of the three time estimates
• Example of a Critical Path Nodal Diagram
COST CONTROL
Standard Costing
Value Analysis
Ratio Analysis
HROD@MSSW
HROD@MSSW
HROD@MSSW
HROD@MSSW
• Value Analysis is one of the major techniques
of cost reduction and control. It is a
disciplined approach which ensures the
necessary functions for the minimum cost
without diminishing quality, reliability,
performance and appearance.
• It is a creative approach to eliminate the
unnecessary costs which add neither to
quality nor to the appearance of the product.
It is a systematic application of techniques to
identify the functions of a product or a
component and to provide the desired
function at the lowest total cost.
HROD@MSSW
• Value analysis is an organised approach to identify
unnecessary costs associated with any product,
material, part, component, system or service by
analysis of function and efficiently eliminating them
without impairing the quality functional reliability or its
capacity to give service.
• According to Society of American Value
Engineers (SAVE) “Value analysis is the
systematic application of recognised techniques
which identify the function of a product or
services establish a monetary value for the
function and provide the necessary function
reliability at that lowest overall cost.”
HROD@MSSW
• “Value Analysis” is the application of a set of techniques to
an existing product with a view to improve its value. Thus, it
is remedial process. “Value Engineering” is the application of
exactly the same set of techniques to a new product at the
design stage project concept or preliminary design when no
hardware exists to ensure that bad features not added.
Thus, it is a ‘preventive’ measure. In that sense, ‘VE’ is
fundamental and VA is collateral because ‘prevention is
better than cure.”
• Techniques:
• Design
• Check list
• Brain storming
• Price analysis
HROD@MSSW
• In the field of value investigation, value refers to economic value, which
itself can be sub-divided into four types as cost value, exchange value,
use value and esteem value.
• “Cost Value” is the measure of sum of all costs incurred in producing the
product. The ‘cost value’, therefore is the sum of raw-material cost,
labour cost, tool cost and overheads expended to produce the product
• “Exchange Value” is the measure of all the properties, qualities and
features of the product which make the product possible of being traded
for another product or for money. In a conventional sense, ‘exchange
value’ refers to the price that a purchaser will offer for the product, the
price being dependent upon the satisfaction value which derives from
the product.
• Value derived from the product consists of two components namely (a)
value due to reliability of performance of the product and the value
which the possession bestows upon the buyer. These are often referred
to as “value in value” and “esteem in value”.
HROD@MSSW
• “Use Value” is the measure of properties, qualities and
features which make the product accomplish a use, work or
service. Use value, therefore, is the price paid by the buyer
or the cost incurred by the manufacturer in order to ensure
that the product performs its intended function efficiently.
• Use value in the fundamental form of economic value. An
item without use value can have neither exchange value nor
esteem value. “Esteem Value” is the measure of properties,
features, attractiveness graphic packaging and the like which
increases sales appeal or which attracts customers and
create in them a strong desire to own the product.
• “Esteem value”, therefore, is the price paid by the buyer or
the cost incurred by the manufacturer beyond the use value.
It is the perception value.
HROD@MSSW
Ratio Analysis
• Ratio analysis is a quantitative method of gaining insight into a company's
liquidity, operational efficiency, and profitability by studying its financial
statements such as the balance sheet and income statement. Ratio analysis is a
cornerstone of fundamental equity analysis.
• Investors and analysts employ ratio analysis to evaluate the financial health of
companies by scrutinizing past and current financial statements. Comparative
data can demonstrate how a company is performing over time and can be used
to estimate likely future performance. This data can also compare a company's
financial standing with industry averages while measuring how a company stacks
up against others within the same sector.
• Investors can use ratio analysis easily, and every figure needed to calculate the
ratios is found on a company's financial statements.
•
• Ratio analysis compares line-item data from a company's financial statements to
reveal insights regarding profitability, liquidity, operational efficiency, and
solvency.
• Ratio analysis can mark how a company is performing over time, while
comparing a company to another within the same industry or sector.
• While ratios offer useful insight into a company, they should be paired with other
metrics, to obtain a broader picture of a company's financial health.
HROD@MSSW
• Break-even analysis tells you how many units
of a product must be sold to cover the fixed
and variable costs of production. The break-
even point is considered a measure of the
margin of safety. Break-even analysis is used
broadly, from stock and options trading to
corporate budgeting for various projects FC +
VC = TC Total cost 100 sales 120
•
• In other words, the analysis shows how many
sales it takes to pay for the cost of doing
business.
HROD@MSSW
• Break-even analysis tells you how many units
of a product must be sold to cover the fixed
and variable costs of production.
• The break-even point is considered a measure
of the margin of safety. The margin of safety,
or safety margin, refers to the difference
between actual sales and break-even sales.
HROD@MSSW
HROD@MSSW
• Fixed costs: As noted above, fixed costs are not affected by the number of
items sold, such as rent paid for storefronts or production facilities,
computers, and software. Fixed costs also include fees paid for services
like graphic design, advertising, and public relations.
• Contribution margin: The contribution margin is calculated by subtracting
an item’s variable costs from the selling price. So if you’re selling a product
for Rs100 and the cost of materials and labor is Rs40, then the
contribution margin is Rs60. This Rs60 is then used to cover the fixed
costs, and if there is any money left after that, it’s your net profit.
• Contribution margin ratio: This figure, usually expressed as a percentage,
is calculated by subtracting your fixed costs from your contribution
margin. From there, you can determine what you need to do to break
even, like cutting production costs or raising your prices.
• Profit earned following your break even: Once your sales equal your fixed
and variable costs, you have reached the break-even point, and the
company will report a net profit or loss of Rs0. Any sales beyond that point
contribute to your net profit.
HROD@MSSW
• A break-even analysis isn’t just useful for startup planning. Here are some ways
that businesses can use it in their daily operations and planning.
• Prices: If your analysis shows that your current price is too low to enable you
to break even in your desired timeframe, then you might want to raise the
item’s cost. Make sure to check the cost of comparable items, though, so you
don’t price yourself out of the market.
• Materials: Are the cost of materials and labor unsustainable? Research how
you can maintain your desired level of quality while lowering your costs.
• New products: Before you launch a new product, take into account both the
new variable costs as well as the fixed ones, like design and promotion fees.
• Planning: When you know exactly how much you need to make, it’s easier to
set longer-term goals. For example, if you want to expand your business and
move into a larger space with higher rent, you can determine how much more
you need to sell to cover new fixed costs.
• Goals: If you know how many units you need to sell or how much money you
need to make to break even, it can serve as a powerful motivational tool for
you and your team.
HROD@MSSW
HROD@MSSW
CONCEPT OF COORDINATION
Coordination is the orderly synchronization of
group efforts so as to provide unity of action
in the pursuit of a common purpose.
Differences in understanding, timing, effort, or
approach create the need for harmonizing
individual efforts towards the accomplishment
of group goals. Coordination should rightly be
considered as the essence of management,
because each of the managerial functions of
planning, organizing, staffing, directing and
controlling is an exercise in coordination.
HROD@MSSW
Ordway Tead (10 September 1891 – November 1973) was an
American organizational theorist, adjunct professor of industrial relations
at Columbia University, chair of the New York Board of Higher Education, and
first president of the Society for Advancement of Management
• According to Tead, “Coordination is the effort

to assure a smooth interplay of the functions
and forces of the different component parts
of an organization to the end that its purpose
will be realized with a minimum of friction
and a maximum of collaborative
effectiveness.”
HROD@MSSW
• In an organization, every individual is related to others, hence
his functions affect others. Since all individuals ultimately
contribute to the same end result, their contribution will be
maximum when there is positive effect of one’s efforts over
others. If this is not done, the efforts of some will be counter-
productive for others. From this point of view, coordination
has the following features: (i) Coordination is relevant for
group efforts and not for individual efforts. It involves the
orderly pattern of group efforts, because if an individual
works in isolation his efforts not affect the functioning of
others, and hence the need for coordination does not arises.
(ii) Coordination is a continuous and dynamic process. It is a
continuous phenomenon because it is achieved through the
performance of functions. In every organization, some sort of
coordination does exist; however, management may make
special efforts to achieve coordination of a higher degree.
HROD@MSSW
• (iii) Coordination emphasizes unity of efforts which
central to it. This involves the fixation of time and
manner of performance of various functions in the
organization and makes the individual efforts
integrate with the total process. (iv) The higher is the
degree of integration in the performance of various
functions by various persons in the organization, the
higher is the degree of coordination and the
possibility of achievement of organizational
objectives. (v) Coordination is the responsibility of
every manager in the organization because he has to
synchronize the efforts of his subordinates with
others. However, if this does not work, there is need
for special coordinators.
HROD@MSSW
• Importance of Coordination The effective performance of managerial
functions require coordination. (i) Unity in Diversity: Effective
coordination is the essence of good management. There are a large
number of employees and each one has his different ideas, views or
opinions, activities and background in a big organization. Thus, there are a
diverse activities in a large organization; but these activities would prove
ineffective in the absence of coordination. So coordination is the main
element of unity in diversity. (ii) Teamwork or Unity of Direction: The
efforts, energies and skills of various persons should be integrated as
group efforts to achieve the objectives of organization. In the absence of
coordination, the group efforts may be diversified and thus fail to achieve
the common objectives. Besides, coordination eliminates duplication of
work which leads to economic and efficient management. (iii) Functional
Differentiation: The organizational functions are divided department-wise
or section-wise. Each department performs different jobs. They are
necessary to achieve the general objectives. Coordination ensures definite
achievement of the objectives. If each department tries to perform its
function in isolation from the other, it may create a problem. Therefore,
coordination is necessary to integrate the functions of the related
departments.
HROD@MSSW
• (iv) Specialization: There is a high degree of specialization in the modern
industrial world. Specialists have thorough knowledge of their respective
fields. They are able to judge the scope, nature and kind of work they
perform. But they fail to know the job of others and the importance of
others’ performances. This tends to cause dispute among the specialists.
Disputes can be solved with the help of coordination. (v) Reconciliation of
Goals: Each department or division has its own goals to achieve within the
stipulated time period. There are general goals in relation to an
organization. Individuals or employees give more importance to their own
departmental goals than to the total organizational goals. Therefore,
coordination reconciles the employees’ goals with both departmental and
organizational goals. (vi) Congruity of Flows: Congruity of flows refers to
the continuous flow of similar information from one direction to the other
directions. Information regarding the utilization of resources, activities,
use of authority, and output is made to flow in an organization.
Coordination ensures the smooth and continuous flow of information. (vii)
Differentiation and Integration: The whole activity of every organization is
classified into two units. They are specialized and homogenous units.
Authority is delegated to the various levels of organization. This is
necessary to achieve group efforts. Coordination facilitates this process.
HROD@MSSW
• Coordination is of two types. They are explained herein
below: 1. Internal Coordination: It is the establishment of
relationship with a view to coordinate the activities of all the
managers, executives, divisions, subdivisions, branches and
other workers. Internal Coordination is further sub-divided
into the following two groups: (i) Vertical Coordination: In
vertical coordination a superior authority co-ordinates his
work with that of his subordinates and vice versa. Sales
manager coordinates his work with the activities of the sales
supervisor. Similarly, the sales supervisor is required to have
coordination, and cordial relationship with his superiors. (ii)
Horizontal Coordination: This refers to the establishment of a
relationship between the persons of the same status. For
example, coordination between the departmental heads,
supervisors, co-workers, etc.
HROD@MSSW
2. External Coordination: External co-ordination is the
establishment of a relationship between the employees of the
organization and the outsiders of the enterprise. This
relationship is established for the benefit of the organization
as a whole. An organization has to establish better
relationship with the following outsiders : – Market agencies.
– General public. – Competitors. – Customers. – Union
Government, State Government, local self-governments and
other government agencies. – Different institutions rendering
auxiliary services. – Financial Institutions. – Media. –
Technological Agencies. – Different commercial organizations.
The work to establish a good and cordial relationship between
the employees of the organization and the outsiders is
entrusted to a person who is designated as Public Relations
Officer (PRO).
HROD@MSSW
• Coordination is considered as the essence of
management for following reasons: 1.
Management and its functions are an exercise
in coordination. Different functions of
management when effectively carried out lead
to better coordination. 2. Coordination is
involved in every function of management,
and hence should not be regarded as only one
of its functions.
HROD@MSSW
3. Planning, organizing, staffing, directing and
controlling all involve coordination. Coordination is
different from cooperation. Cooperation is a
voluntary collective action to serve a common
purpose, whereas coordination is an art of
synchronization of efforts so that the common goal is
attained. The need for coordination is all-pervasive
and ever present in every organization. However,
coordination is by no means easily attained. In fact,
with every increase in size and specialization,
cohesion becomes more and more difficult. The best
coordination will occur when individuals know how
their actions and jobs contribute to the goals of the
enterprise and how their functions are related to
other’s functions in the organization.
HROD@MSSW
• Fayol has suggested three things for effective
internal coordination: – each department
should work in proper harmony with the rest;
– each department or division should be
informed of its share in the group task; and –
working schedule of different departments
should be constantly attuned to
circumstances.
HROD@MSSW
• The techniques of coordination may be
subdivided under:-
• 1. Structural and Formal Techniques
• 2. Informal and Subtle Techniques.
1.The structural and formal techniques of
coordination include:- i. Departmentalization ii.
Centralization/Decentralization iii. Formalization
and Standardization iv. Planning v. Output and
Behavioural Control.
2. The informal and subtle techniques of coordination
are:- i. Lateral or Cross-Departmental Relations ii.
Informal Communication iii. Socialization.
HROD@MSSW
• Additionally, some of the other techniques of coordination
are:-
• 1. Chain of Command 2. Leadership 3. Committees 4.
Communication 5. Voluntarily Coordination 6. Sound
Planning 7. Incentives 8. Clearly Defined Goals 9. Co-
Ordination by Simplified Organization 10. Harmonized
Programmes and Policies 11. Co-Ordination by Group
Meeting 12. Co-Ordination through Liaison Men 13. Co-
Ordination by Special Appointee 14. Grouping 15.
Conferences 16. Programmes 17. Reorganisation of
Departments 18. Cross-Functioning Among Departments 19.
Special Coordinators 20. Direct Supervision 21. Organization
Structure 22. The Hierach 23. Personal Contact 24. General
Staff 25. Task Forces 26. Teams 27. Plans and Goals 28. Rules
and Procedures 29. Coordination Decisions 30. Co-Operation
31. Self-Coordination 32. Incentives 33. Public Relations.
HROD@MSSW
Work specialization, sometimes called a division
of labor, refers to the degree to which an
organization divides individual tasks into
separate jobs. It allows the manager to take
complex tasks and break them down into
smaller, more precise tasks that individual
workers can complete.
HROD@MSSW
• The division of labour is the separation of
tasks in any economic
system or organisation so that participants
may specialize (specialization). Individuals,
organisations, and nations are endowed with
or acquire specialized capabilities and either
form combinations or trade to take advantage
of the capabilities of others in addition to their
own. The division of labour is the motive
for trade and the source of economic
interdependence.
HROD@MSSW
• The specialisation and concentration of the
workers on their single subtasks often leads to
greater skill and greater productivity on their
particular subtasks than would be achieved by
the same number of workers each carrying out
the original broad task. In the first sentence of An
Inquiry into the Nature and Causes of the Wealth
of Nations (1776), Adam Smith foresaw the
essence of industrialism by determining that
division of labour represents a substantial
increase in productivity.
HROD@MSSW
• Departmentalization (or departmentalisation) refers to
the process of grouping activities into
departments. Division of labour creates specialists who
need coordination. This coordination is facilitated by
grouping specialists together in departments.
• Functional departmentalization - Grouping activities by functions

performed. Activities can be grouped according to function (work
being done) to pursue economies of scale by placing employees
with shared skills and knowledge into departments for example
human resources, IT, accounting, manufacturing, logistics, and
engineering. Functional departmentalization can be used in all
types of organizations. Group activities in accordance with the
function of an enterprise
HROD@MSSW
• Product departmentalization - Grouping activities by product
line. It can also be grouped according to a specific product or
service, thus placing all activities related to the product or the
service under one manager. Each major product area in the
corporation is under the authority of a senior manager who is
specialist in, and is responsible for, everything related to the
product line. LA Gear is an example of company that uses
product departmentalization. Its structure is based on its
varied product lines which include women’s footwear etc.
• Customer departmentalization - Grouping activities on the
basis of common customers or types of customers. Jobs may
be grouped according to the type of customer served by the
organization. The assumption is that customers in each
department have a common set of problems and needs that
can best be met by specialists. The sales activities in an office
supply firm can be broken down into three departments that
serve retail, wholesale and government accounts.
HROD@MSSW
• Geographic departmentalization - Grouping activities on the basis of territory. If an
organization's customers are geographically dispersed, it can group jobs based on
geography. For example, the organization structure of Coca-Cola has reflected the
company’s operation in two broad geographic areas – the North American sector and
the international sector, which includes the Pacific Rim, the European Community,
Northeast Europe, Africa and Latin America groups.
• Process departmentalization - Grouping activities on the basis of product or service
or customer flow. Because each process requires different skills, process
departmentalization allows homogeneous activities to be grouped together. For
example, applicants might need to go through several departments, namely
validation, licensing and treasury, before receiving a driver’s license.
• Divisional departmentalization - When the firm develops independent lines of
business that operate as separate companies, all contributing to the corporation
profitability, the design is called divisional departmentalization or (M-FORM). For
example, the Limited. Inc., has these divisions: The Limited, Express, Lerner New York,
Lane Bryant and Mast Industries.
• Owing to the complexity of tasks and the competitive environment in which
organisations operate, they often use a combination of the above-mentioned
methods in departmentalization.
HROD@MSSW
Forms of Workers Participation in Management in
India
• Forms of workers’ participation in management
• The various forms of workers’ participation in management currently
prevalent in the country are:
• Suggestion schemes: Participation of workers can take place through
suggestion scheme. Under this method workers are invited and
encouraged to offer suggestions for improving the working of the
enterprise. A suggestion box is installed and any worker can write his
suggestions and drop them in the box. Periodically all the suggestions are
scrutinized by the suggestion committee or suggestion screening
committee. The committee is constituted by equal representation from
the management and the workers. The committee screens various
suggestions received from the workers. Good suggestions are accepted for
implementation and suitable awards are given to the concerned workers.
Suggestion schemes encourage workers’ interest in the functioning of an
enterprise.
HROD@MSSW
• Works committee: Under the Industrial Disputes Act, 1947, every establishment
employing 100 or more workers is required to constitute a works committee. Such a
committee consists of equal number of representatives from the employer and the
employees. The main purpose of this committee is to provide measures for securing
and preserving amity and good relations between the employer and the employees.
Functions: Works committee deals with matters of day-to-day functioning at the
shop floor level. Works committees are concerned with:
– Conditions of work such as ventilation, lighting and sanitation.
– Amenities such as drinking water, canteens, dining rooms, medical and health services.
– Educational and recreational activities.
– Safety measures, accident prevention mechanisms etc.
– Works committees function actively in some organizations like Tata Steel, HLL, etc but the
progress of
– Works Committees in many organizations has not been very satisfactory due to the
following reasons:
– Lack of competence and interest on the part of workers’ representatives.
– Employees consider it below their dignity and status to sit alongside blue-collar workers.
– Lack of feedback on performance of Works Committee.
– Undue delay and problems in implementation due to advisory nature of
recommendations.
HROD@MSSW
• Work directors: Under this method, one or two
representatives of workers are nominated or elected
to the Board of Directors. This is the full-fledged and
highest form of workers’ participation in
management. The basic idea behind this method is
that the representation of workers at the top-level
would usher Industrial Democracy, congenial
employee-employer relations and safeguard the
workers’ interests. The Government of India
introduced this scheme in several public sector
enterprises such as Hindustan Antibiotics, Hindustan
Organic Chemicals Ltd etc. However the scheme of
appointment of such a director from among the
employees failed miserably and the scheme was
subsequently dropped.
HROD@MSSW
• Co-partnership: Co-partnership involves employees’
participation in the share capital of a company in
which they are employed. By virtue of their being
shareholders, they have the right to participate in the
management of the company. Shares of the company
can be acquired by workers making cash payment or
by way of stock options scheme. The basic objective
of stock options is not to pass on control in the hands
of employees but providing better financial
incentives for industrial productivity. But in
developed countries, WPM through co-partnership is
limited.
HROD@MSSW
• Joint Councils: The joint councils are constituted for the
whole unit, in every Industrial Unit employing 500 or more
workers; there should be a Joint Council for the whole unit.
Only such persons who are actually engaged in the unit shall
be the members of Joint Council. A joint council shall meet at
least once in a quarter. The chief executive of the unit shall be
the chairperson of the joint council. The vice-chairman of the
joint council will be nominated by the worker members of the
council. The decisions of the Joint Council shall be based on
the consensus and not on the basis of voting.
• In 1977 the above scheme was extended to the PSUs like
commercial and service sector organizations employing 100 or
more persons. The organizations include hotels, hospitals,
railway and road transport, post and telegraph offices, state
electricity boards.
HROD@MSSW
• Shop councils: Government of India on the 30th of
October 1975 announced a new scheme in WPM. In
every Industrial establishment employing 500 or
more workmen, the employer shall constitute a shop
council. Shop council represents each department or
a shop in a unit. Each shop council consists of an
equal number of representatives from both
employer and employees. The employers’
representatives will be nominated by the
management and must consist of persons within the
establishment. The workers’ representatives will be
from among the workers of the department or shop
concerned. The total number of employees may not
exceed 12. R.NARASIMHAN , FACULTY ,
HROD@MSSW
• Functions of Shop Councils:
– Assist management in achieving monthly
production targets.
– Improve production and efficiency, including
elimination of wastage of man power.
– Study absenteeism in the shop or department and
recommend steps to reduce it.
– Suggest health, safety and welfare measures to be
adopted for smooth functioning of staff.
– Look after physical conditions of working such as
lighting, ventilation, noise and dust.
– Ensure proper flow of adequate two way
communicationR.NARASIMHAN
between, FACULTY
management
,
and
workers. HROD@MSSW
• A policy is a deliberate system of principles to guide
decisions and achieve rational outcomes. A policy is a
statement of intent, and is implemented as a
procedure or protocol. Policies are generally adopted
by a governance body within an organization. Policies
can assist in both subjective and objective decision
making. Policies to assist in subjective decision
making usually assist senior management with
decisions that must be based on the relative merits
of a number of factors, and as a result are often hard
to test objectively, e.g. work–life balance policy
HROD@MSSW
• Policies are typically promulgated through official
written documents. Policy documents often come
with the endorsement or signature of the executive
powers within an organization to legitimize the policy
and demonstrate that it is considered in force. Such
documents often have standard formats that are
particular to the organization issuing the policy.
While such formats differ in form, policy documents
usually contain certain standard components
including:
• A purpose statement, outlining why the organization
is issuing the policy, and what its desired effect or
outcome of the policy should be.
HROD@MSSW
• . In contrast policies to assist in objective decision
making are usually operational in nature and can
be objectively tested, e.g. password policy.
• The term may apply to government, public sector
organizations and groups, as well as
individuals. Presidential executive
orders, corporate privacy policies, and
parliamentary rules of order are all examples of
policy. Policy differs from rules or law. While law
can compel or prohibit behaviors (e.g. a law
requiring the payment of taxes on income), policy
merely guides actions toward those that are most
likely to achieve a desired outcome
HROD@MSSW
• The intended effects of a policy vary widely according to the organization and the
context in which they are made. Broadly, policies are typically instituted to avoid some
negative effect that has been noticed in the organization, or to seek some positive
benefit.
• Corporate purchasing policies provide an example of how organizations attempt to
avoid negative effects. Many large companies have policies that all purchases above a
certain value must be performed through a purchasing process. By requiring this
standard purchasing process through policy, the organization can limit waste and
standardize the way purchasing is done.
• Unintended effects
• Policies frequently have side effects or unintended consequences. Because the
environments that policies seek to influence or manipulate are typically complex
adaptive systems (e.g. governments, societies, large companies), making a policy
change can have counterintuitive results. For example, a government may make a
policy decision to raise taxes, in hopes of increasing overall tax revenue. Depending on
the size of the tax increase, this may have the overall effect of reducing tax revenue by
causing capital flight or by creating a rate so high that citizens are deterred from
earning the money that is taxed.
• The policy formulation process theoretically includes an attempt to assess as many
areas of potential policy impact as possible, to lessen the chances that a given policy
will have unexpected or unintended consequences
HROD@MSSW
• Good policy has the following Five
characteristics:
• Endorsed – The policy has the support of
management.
• Relevant - The policy is applicable to the
organization.
• Realistic – The policy makes sense.
• Attainable – The policy can be successfully
implemented.
• Adaptable – The policy can accommodate
change.
HROD@MSSW
• James E. Anderson, in his Public Policy-Making (1974) has the following
stages:
• Agenda setting (Problem identification) – The recognition of certain subject
as a problem demanding further government attention.
• Policy formulation – Involves exploring a variation of options or alternative
courses of action available for addressing the problem. (appraisal, dialogue,
formulation, and consolidation)
• Decision-making – Government decides on an ultimate course of action,
whether to perpetuate the policy status quo or alter it. (Decision could be
'positive', 'negative', or 'no-action')
• Implementation – The ultimate decision made earlier will be put into
practice.
• Evaluation – Assesses the effectiveness of a public policy in terms of its
perceived intentions and results. Policy actors attempt to determine
whether the course of action is a success or failure by examining its impact
and outcomes.
HROD@MSSW
• Policies are typically promulgated through official
written documents. Policy documents often come
with the endorsement or signature of the executive
powers within an organization to legitimize the policy
and demonstrate that it is considered in force. Such
documents often have standard formats that are
particular to the organization issuing the policy.
While such formats differ in form, policy documents
usually contain certain standard components
including:
• A purpose statement, outlining why the organization
is issuing the policy, and what its desired effect or
outcome of the policy should be.
HROD@MSSW
• An applicability and scope statement, describing who the policy affects and which actions are
impacted by the policy. The applicability and scope may expressly exclude certain people,
organizations, or actions from the policy requirements. Applicability and scope is used to focus
the policy on only the desired targets, and avoid unintended consequences where possible.
• An effective date which indicates when the policy comes into force. Retroactive policies are rare,
but can be found.
• A responsibilities section, indicating which parties and organizations are responsible for carrying
out individual policy statements. Many policies may require the establishment of some ongoing
function or action. For example, a purchasing policy might specify that a purchasing office be
created to process purchase requests, and that this office would be responsible for ongoing
actions. Responsibilities often include identification of any
relevant oversight and/or governance structures.
• Policy statements indicating the specific regulations, requirements, or modifications to
organizational behavior that the policy is creating. Policy statements are extremely diverse
depending on the organization and intent, and may take almost any form.
• Some policies may contain additional sections, including:
• Background, indicating any reasons, history, ethical background statements, and/or intent that
led to the creation of the policy, which may be listed as motivating factors. This information is
often quite valuable when policies must be evaluated or used in ambiguous situations, just as the
intent of a law can be useful to a court when deciding a case that involves that law.
• Definitions, providing clear and unambiguous definitions for terms and concepts found in the
policy document
HROD@MSSW
• 1. Originated Policy:
• By originated policy they refer to policy which originates from the top
management itself. These policies are aimed at guiding the managers and
their subordinates in their operations. They flow basically from the
organisation’s objectives as defined by top management. From the broad
policy at the top, other derived policies may be developed at subsequent
levels depending upon the extent of decentralization. However all such
policies, whether originated by top management or subordinate
managers, are described as “originated policy”.
• 2. Appealed Policy:
• It is meant decisions given in case of appeals in exceptional cases upto
management hierarchy. In case of doubts, an executive refers to higher
authority on how he should handle the matter. The direction that he gets
is described as appealed policy and constitutes a precedent for future
managerial action.
HROD@MSSW
• 3. Implied Policy:
• Implied policy is meant policies which
emanate from conduct. It also originates
where existing policies are not enforced.
Again, guidelines may be provided by the
decision makers unconsciously and become
implied policies.
• 4. Externally Imposed Policy:
• Policies may be imposed externally that is
from outside the organisation on such as by
Government control or regulation, trade
associations and trade union etc.
HROD@MSSW
• Policies can be classified into two types on
the basis of dissemination:
• 1. Written statements—Explicit policies.
• 2. Oral dissemination—Implicit policies.
• 1. Explicit Policies:
• Policies which are in writing or included in the
manual or records are called explicit policies. In
case of written statements adequate media should
be used.
• The following are some of the written media:
• (a) Bulletins or notice boards.
• (b) Hews releases.
• (c) Company manualsHROD@MSSW

or handbooks.
• Advantages of written policy:
• (a) All the members of the organisation can be guided as to the exact interpretation of policies so that
they all possess a common understanding.
• (b) It can be more easily reviewed from time to time to meet changing conditions.
• (c) It can be checked more readily for compliance within the organisation.
• (d) Policies becomes available in the same form to all concerned.
• (e) They can be communicated and taught to new employees more readily.
• (f) The process of writing down policies forces the managers concerned to think through more clearly
about the policy.
• Disadvantage of written policies:
• (a) Written policies are inclined to promote rigid thinking and prevent flexibility which may be
undesirable in special circumstances.
• (b) It is difficult to adopt written policies to situations and conditions which change from time to time.
There is bound to be a time lag for incorporation of such changes into existing written policies.
• (c) Although in one sense there is uniform communication of policies in the form of a written statement
it is likely to be interpreted in many cases differently depending on the background of the interpreter.
• (d) In case of confidential policy statements, there is a greater chance of their being communicated to
those from whom they are to be kept secret, thus, probably marring the strength of the organisation.
• (e) Difficult to write it accurately and adequately.
• Implicit Policies:
• Implicit policies are disseminated merely by word of mouth through the key people in an organisation.
Policies which are not in writing or not included in the manuals or records but which are well
understood and practised are called implicit policies.
HROD@MSSW
• Functional policies can be classified as
follows:
• 1. Marketing policies.
• 2. Production policies.
• 3. Finance policies.
• 4. Personnel policies
HROD@MSSW
• Policies are divided into the following types on the
basis of levels:
• 1. Basic Policies.
• 2. General policies.
• 3. Departmental Policies.
• 1.Basic Policies
• Policies which are followed by top management level are called as basic
policies. For example, the branches will be opened in different place
where the sales exceed Rs. Five, lakhs.
• 2. General Policies:
• These policies affect the middle level management and more specific than
basic policies.
• Example:
• Payment will be provided for overtime work only if it is allowed by the
management.
HROD@MSSW
• 3 . Department Policies:
• These policies are highly specific and

applicable to the lower levels of management.
• Example:
• Tea will be provided free for workers in night
shifts.
HROD@MSSW
• Goal setting involves the development of an
action plan designed to motivate and guide a
person or group toward a goal. Goal setting
can be guided by goal-setting criteria (or rules)
such as SMART criteria. Goal setting is a major
component of personal
development and management literature.
HROD@MSSW
• The end of each day, you should review what
you have accomplished for the day and think
about what you would like to achieve on the
following day. Preparing a to-do list for the
next day each night is an excellent practice
that will help keep you on track.
• Business goals are typically set on an annual
basis and should be aligned with your long-
term goals. These goals should be worked into
your business plan and, when appropriate,
specific areas like sales forecasts.
HROD@MSSW
• Goals You Can Track
• One easy way to ensure you accomplish your goals is
to follow the SMART acronym, which stands for:
• Specific: Rather than, "I want to increase my revenue
this year," try, "I want to increase my business
revenue by 30% this year."
• Measurable: "Increasing sales" or "reducing debt"
are measurable goals; "working harder" or
"increasing my personal satisfaction" are vague and
difficult to measure. Putting measurable goals in
writing helps to keep you focused and see how much
progress you've made at the end of the defined time
period.
• R.NARASIMHAN , FACULTY ,
HROD@MSSW
• Attainable: A goal should be challenging but achievable. If
your business is a lumber yard, overtaking Home Depot in
sales is not a reasonable goal. Perhaps a 5% increase in
market share is just enough of a stretch.
• Relevant: Goals should be aligned with your long-term plans.
If your long-term plan is for your business to attain $200,000 a
year in sales, your short-term goals should directly relate to
achieving this.
• Time-bound: Without a specific time frame for your goals,
they can't be properly measured. A goal should contain a time
limit (e.g., "by the end of the year I want to increase sales by
20%").
• Effective goal setting begins with a clear understanding of
what SMART goals are and an awareness of the process
needed to achieve them.
HROD@MSSW

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Management Principles

• Non economic activity also have economic

• The motive (or) Intent behind any activity

Money and Kind

Economic activities are productive – Production

Savings , investments and wealth

• “Three successive generations of an undivided

• Liabilities > Assets

• MINISTRY OF CORPORATE AFFAIRS

• INCORPORATION AND REGISTRATION

• Sh. Anurag Singh Thakur

• A company has to file a Memorandum of Association (MoA) and

• The probable origin of the word

Henry Fayol – “To manage is to forecast, and to

Hicks – “ The Process of getting things done by

I . Early management : theological stage

• Bridges the gap between where we are and

Primary function: All levels

Tactical Plan : Mid term plan 1 to 3 years ,

Operational Plan : Short term plan, maximum 1

• Objectives specify the end point of what is to

Purpose of every organisation: State highways

Objectives (or) Goals : End Points towards which

To begin to deal with a problem, a situation, etc.

• Henry Fayol – Authority as the right to give

• Power means the capacity to influence the

• When power is legitimized it becomes

The idea of this practice is to listen. You must also respond to

• Span of control also called Span of Management, is the

• span of control means the manageable number of

1.Identify a problem 2.Identify

Decision criteria are not of equal importance

Choosing the best alternative

The soundness of the decision is judged by its

# decision making styles of four types.

(2)Analytic Style: Managers with an analytic style have

(4)Behavioral Style: Managers with behavioral style have

Organisational and Personal Decisions Organisational decisions are

When a decision is taken by an individual in the organisation, it is

Strategic decisions are complex in nature and are always taken

Communication may be through words, symbols,

(ii) Communication need not elicit confidence, but

Fayol defines scalar chain as

We divide the different types of

(i) Controlling is forward looking: A manager cannot control the past.

• (iv) Purpose of controlling is positive: Controlling serves a positive

Responsibility accounting is also a good budgetary control

R.NARASIMHAN Faculty, HROD

R.NARASIMHAN Faculty, HROD

• According to Tead, “Coordination is the effort

• Functional departmentalization - Grouping activities by functions

• (c) Company manualsHROD@MSSW

• These policies are highly specific and

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