Evolution of Industries in India:

Indian Industries: Historical Perspective of Indian

Industries!
Early Times:
History of Industry in India dates back to the history of mankind.
India’s handicrafts manufactured in village huts and houses all over
the country were prized in foreign countries.

Working on the locally available raw materials and with the skills
and tools handed over to them by their forefathers, the village
artisans produced products of high aesthetic quality with ease and
efficiency.

Generations of such workers provided India with a long and

glorious tradition of artistic handicrafts of a varied nature. Among
all the industries of early times, the textiles, especially the cotton
textile industry, had the place of pride both in India and in the
outside world.

There is enough evidence to show that the Indians knew weaving

some 1,500 years before Christ, when the Europeans were still
covering themselves with animal skins. Pyrard, the 17th century
Portuguese writer has recorded that everyone from the Cape of
Good Hope to China was clothed from head to foot in Indian made
garments.

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The fine Dhaka muslin was the envy of the world for centuries
together. Iron and Steel industry was also in advanced stage at that
time. The iron column near Qutab Minar in Delhi is standing in the
open and is exposed to sun, rain and weathering over 1,500 years
old and it still looks fresh. It seems that this column will continue to
stand there till eternity.

This rare monument is a testimony to the forging and fabricating

ingenuity of ancient India. It is believed that the famous Damascus
swords were made from steel imported from India. In addition to
cotton textiles and steel industries; wood, stone and ivory carvings,
silk textiles, pottery, bronze, brass, silver and copper works, dyeing
and calico printing were also famous throughout the world.

Industrial Revolution in Europe resulted in modem factories. With

this the scale of manufacturing goods increased tremendously
leading to mechanisation. As a result migration of workers occurred
from villages to cities. The barter system of goods with goods came
to an end, exchange of goods with money started.

It is correct that a revolution occurred in the manufacturing sphere

but the traditional village handicrafts and cottage industries
witnessed their death toll. Thousands of artisans were rendered
jobless as their manufacturers could not compete with the fine and
low cost goods manufactured in modem industries. A near chaos
prevailed in villages. Goldsmiths, blacksmiths and weavers began to
starve. Thus, modem industry eroded the strong traditional
industrial base.

The Rise of Modern Industry:

The decline of the traditional industry and the rise of the modem
industry in India were neither simultaneous nor casually connected.
The beginning of modem large scale industry in India dates back to
1830 when the first charcoal fired iron making was attempted in
Tamil Nadu.

However, this venture collapsed in 1866. Therefore, the real

beginning of the modem industry in India is recognised with the
establishment of cotton textile industry at Mumbai in 1854. This
industry grew tremendously in 1870s due to a spurt in demand in
the wake of the American Civil War. By 1875-76, the number of
cotton textile mills rose to 47.

The first jute mill was set up at Rishra near Kolkata in 1855. Since
the geographical conditions were very much favourable for jute
industry in the Hugli basin, this industry flourished well and there
were 64 mills in 1913-14, providing employment to over two lakh
persons.

Among the other industries which appeared on the industrial scene

of India before the outbreak of World War I in 1914 were woollen
textiles, paper and breweries. The main industrial centres were port
cities of Mumbai, Kolkata and Chennai. This pattern of industrial
location was conceived by the British rulers to facilitate imports and
exports. The sole inland industrial centre of any consequence was
Kanpur, the base of military equipment production.

Inter War Period:

Indian industries made rapid strides during the First World War
(1914-18) due to rise in demand for industrial goods by the Armed
Forces. However, the real spurt was provided by the Indian Fiscal
Commission set up in 1921-22. This gave the much needed
protection to industries like iron and steel, textiles, cement, sugar,
paper and metals.

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One of the most prominent features of Indian industrial scene

during this period was the dispersal of cotton textile industry away
from Mumbai. In 1875-76, 61.7 per cent of cotton textile mills were
located in Mumbai and by 1938-39 only 17.5% per cent of the mills
remained in Mumbai.

In fact this industry gained a lot as a result of war. On the eve of the
war, India had emerged as the fourth largest cotton manufacturing
country next to the USA, the U.K. and Japan in that order. Jute
industry on the other hand, continued to concentrate in the Hugli
basin only. However, the number of jute mills rose from 64 in 1913-
14 to 107 in 1938-39.

World War II:

While Indian industry prospered during World War I, the Second
World War created problems for Indian industry. India became an
active participant in war and the entry of Japan in the hostilities
brought war to India’s doorstep. However, the impact of war was
short-lived and the industry was quick to recover from the initial
shock and exploited the opportunities offered by the war.

A programme costing Rs. 4 crore for the manufacture of armaments

and explosives was launched in 1941 to meet the immediate
requirements of war. The ordinance factories started producing 700
varieties of ammunition. There were pressing demands to meet the
civilian requirements too.

With this object in view, heavy chemical industry was started in

1941 and the production of sulphuric acid, synthetic ammonia,
caustic soda, chlorine and bleaching powder commenced. The
Hindustan Aircraft Company also assembled its first aircraft in
1941.

Metal fabricating industries such as copper were also initiated. A

wide variety of engineering industries like machine tools, machinery
manufacture in respect of cotton, tea, and oil processing industries,
electrical equipment, vanaspati manufacturing, power, alcohol,
synthetic resin and plastic industries also flourished.

However, some other industries including diesel engines, pumps,

sewing machines and electric fans suffered a setback. By and large,
the performance of individual industries varied considerably as is
indicated in the Table 27.1.

Table 27.1 Industrial Growth in India (1937 = 100):

Year General Cotton Jute Steel Chemic
Textile Textile

1939 105.4 104.3 90.3 108.0 84.4

1945 120.0 120.0 84.4 142.9 134.1

It is clear from the table that the overall performance of industry

was satisfactory. Steel, chemicals, cement and paper industries
recorded impressive gains. Cotton textile industry also showed
considerable improvement. However, jute and sugar industries
suffered decline.

Post War II and Partition:

The post war period was characterised by many ups and downs and
by the overall decline in industrial products. Several factors
contributed to this state of affairs, the most prominent among them
being fall in demand, overworked machinery, labour trouble and
bottlenecks of transport and distributions till 1946. Cotton textiles,
sugar, cement and steel industries were the worst sufferers.

Partition of the country in 1947 threw everything out of gear and

dealt a severe blow to industry in India. While Pakistan accounted
for only 23 per cent of the area and 18 per cent of the population of
pre-partition India, that country got 40 per cent of the cotton and
81 per cent of the jute output.

Obviously, jute and cotton industries were the worst sufferers.

Further India suffered losses in terms of markets as well as skilled
labour that migrated to Pakistan. However, India retained most of
the basic and important industries. (Table 27.2).

Table 27.2 Consequences of Partition (1947):

Item Share in percentage

India Pakistan

Area 77 23

Population 82 18
 Industrial Establishments 91 9

Mineral Production 97 3

Jute output 19 81

Cotton Mills 96 4

Cotton output 60 40

Railway mileage 83 17

The situation improved in 1948 following three year truce on labour

front, tax concessions and active state help by setting the Industrial
Finance Corporation. The industrial policy of 1948 indicated the
direction of industrial development in India.

Industrial Development in the Planning Era:

Immediately after independence, need to take solid steps for
improving industrial scene was badly felt. It was realised that
industrialisation was the only vehicle which could lead the shattered
economy of the country on the path of progress and prosperity.
Consequently, industry attracted special attention of plans and
planners.

The First Five Year Plan (1951-56):

This plan became operational only four years after Independence.
The main thrust of the plan was on agriculture because the country
was facing shortage of food-grains at that time. Therefore, the
emphasis was on increasing capacity of existing industries rather
than starting new ones. Cotton textile, sugar, vanaspati, cement,
paper, chemical and engineering industries showed some progress.
Some of the new industries that emerged during this plan were
newsprint, power looms, medicines, paints and varnishes and
transport equipment. In spite of the top priority given to
agriculture, irrigation and power generation in the first five year
plan, industrial production showed 40 per cent increase as
compared to 30 per cent increase recorded by grain production. As
a matter of fact, the First Five Year Plan laid down the basis for
future progress of industries.

The Second Five Year Plan (1956-61):

This plan laid emphasis on the development of basic and heavy
industries and defined the key-role which the public sector was to
play in the economic development of the country. A comprehensive
Industrial Policy Resolution was announced on 20th April 1956.

This resolution had industrial development as major thrust. Iron

and steel, heavy engineering, lignite projects and fertilizer
industries formed the basis of industrial planning. In addition to the
expansion of pre-existing steel plants at Jamshedpur, Kulti-Bumpur
and Bhadravati, three new state owned plants at Durgapur,
Rourkela and Bhilai were either initiated or completed.

The Chittaranjan Locomotive Workshop, The Hindustan

Shipbuilding Yard (Vishakhapatnam), The Sindri Fertilizer Factory
and the Hindustan Machine Tools Limited (HMT) plant at
Bangalore were expanded. A heavy electrical equipment
manufacturing plant was established at Bhopal. Two new fertilizer
plants at Nangal and Rourkela were set up.

The Third Five Year Plan (1961-66):

This plan laid stress on the expansion of basic industries like steel,
chemicals, fuel, power and machine building. The basic philosophy
behind this plan was to lay foundation for a ‘self-generating’
economy. The Hindustan Machine Tools Limited had only one
factory in the Second Plan and this number rose to five in the Third
Plan.

Heavy Machine Tools plant at Ranchi was also completed. Machine

building, locomotive and railway coach making, shipbuilding,
aircraft manufacturing, chemical drugs and fertilizers industries
also made significant achievement.

However, the achievement fell short of the target to a

great extent due to the following reasons:
(i) Untimely monsoon rains, severe drought in 1965 and bad
weather conditions.

(ii) India’s war with China in 1962 and with Pakistan in 1965.

(iii) Non-availability of foreign credit.

(iv) Inability of rigid administrative rules to cope with such

abnormal situations.

The Annual Plans:

The Fourth Five Year Plan was deferred and Annual plans were
adopted for a period of three years (1966-69). Not much headway
was made due to resource crunch. The index of industrial
production increased only by 1.7 per cent and 0.3 per cent in 1966-
67 and 1967-68 respectively. However, things improved in 1968-69
and the industrial production rose by 7 per cent.
The Fourth Five-Year Plan (1969-74):
Indian Economy started recovering from recession at the beginning
of the Fourth Five Year Plan. But the growth rate showed wide
yearly fluctuations from peak of 7.3 per cent in 1969-70 to zero
growth in 1973-74 as against the stipulated annual growth rate of 8-
10 per cent.

Agro-based industries such as sugar, cotton, jute, vanaspati showed

uneven growth due to shortage of raw materials and difficult power
situation. Metal-based industries and chemical industries also
suffered setbacks.

However, a significant progress was reported by some other

industries like alloys and special steels, aluminium, automobile
tyres, petroleum refining, electronic goods, machine tools, tractors
and heavy electrical equipment. Public sector undertakings also
showed good progress. Efforts were made to accentuate the process
of industrial dispersal through regional and local planning process.

The Fifth Five Year Plan (1974-79):

The main emphasis of this plan was on rapid growth of core sector
industries and increase the production of export oriented articles
and articles of mass consumption. The average annual rate of
growth was 8.21 per cent. The public sector had assumed much
importance.

Steel plants at Salem, Vijaynagar and Vishakhapatnam were

proposed to create additional capacity. Steel Authority of India
(SAIL) was constituted. Drug manufacturing, oil refining, chemical
fertilizers and heavy engineering industry made good progress.
The Sixth Five Year Plan (1980-85):
This plan marked a watershed in the development process which
was initiated three decades ago with the commencement of the first
plan. Although considerable growth was achieved during the first
five plans, much thought could not be given to quality, cost
competitiveness or needs of modernisation. Thus high cost, low
quality production structure had emerged.

The period 1950-80 marked the first phase of industrialisation. The

second phase started with the commencement of the Sixth Five Year
Plan. It was felt that large domestic and foreign market remained to
be exploited for industrial growth.

This was possible only if our industries were efficient, globally

competitive, cost effective and modernised. For this purpose
liberalisation was initiated. The average annual growth rate was 5.5
per cent which fell short of the initial target of 8 per cent.

Targets of capacity creation had been achieved for industries like

aluminium, zinc, lead, thermoplastics, petro-chemicals, electrical
equipment, automobiles and consumer durables. Production targets
were achieved in industries like petroleum, machine tools,
automobiles, T.V. receivers, etc. Shortfall in production was
reported for coal, steel, cement, non-ferrous metals, drugs and
pharmaceuticals, textiles, jute manufacture, commercial vehicles,
railway wagons, sugar, etc.

Seventh Five Year Plan (1985-1990):

This plan registered an annual growth rate of 8.5 per cent as against
the target of 8.7 per cent. The plan aimed at developing a ‘high tech’
and electronics industrial service base. Industrial dispersal, self
employment, improving the exploitation of the local resources,
proper training were the main planks of the plan.

Annual Plans:
Eighth five year plan (1990-95) could not take off due to fast-
changing political situation at the centre. The new Government
which assumed power at the Centre in June, 1991, decided that the
Eighth Five-year Plan would commence on 1 April 1992 and that
1990-91 and 1991-92 should be treated as separate Annual Plans.
The impact of liberalisation was felt on industries, along with other
sectors of economy.

Eighth Five Year Plan (1992-97):

The major policy changes initiated in the industrial sector in 1991
included removal of entry barriers, reduction of areas reserved
exclusively for public sector, rationalisation of approach towards
monopolistic and restrictive practices, liberalization of foreign
investment policy and import policy, removing regional imbalances
and encouraging the growth of employment intensive small and tiny
sector.

The period immediately following the reforms was marked by low

growth rates and even stagnations in the major industrial sectors.
However, the growth rate$ quickly recovered and the index of
industrial production increased by 6 per cent. The general annual
growth rate in major sectors of industry was 12 per cent in 1995-96.

Ninth Five Year Plan (1997-2002):

Industrial growth improved marginally to 6.6 per cent in 1997-98
but fell to 4.1 per cent in 1998-99. This decline was probably caused
by poor performance in mining and manufacturing sectors. The
overall industrial output grew by 6.7 per cent in 1999-2000, which
again fell to 4.9 per cent in 2000-01 mainly due to fall in
manufacturing sector.

The growth rate of consumer goods including durables and non-

durables accelerated to 7.9 per cent during 2000-01. The growth
rate of basic goods, capital goods and intermediate goods declined
drastically and it was estimated at 3.8 per cent, 1.4 per cent and 4.5
per cent respectively during the year 2000-01.

Six core and infrastructure industries, viz., electricity, crude oil,

refinery, coal, steel and cement, having a weight-age of 26.7 per cent
in the average Index of Industrial Production (IIP) grew by 5.3 and
in 2000-01 compared to 9.1 per cent in 1999-2000.

The main factors responsible for slowdown of industrial growth

during the year 2000-01 were lack of domestic demand for
immediate goods, low inventory demand for capital goods, high oil
prices, existence of excess capacity in some sectors, business cycle,
inherent adjustment lacks in industrial restructuring and calamity
like Gujarat earthquake, and high interest rate with an adverse
impact on private investment, and slow down in the world
economy.

Tenth Five Year Plan (2002-07):

The Tenth Five Year Plan is still continuing. This plan targets a
Gross Domestic Product (GDP) growth rate of eight per cent and the
growth target for industrial sector has been set at ten per cent.
Presently, Indian Industry, especially the manufacturing sector, is
recording a consistently high growth rate which shows robustness of
Indian Industry, particularly automobile/auto components and
pharmaceutical sub-sectors.

For sustaining pace of growth and investment, several initiatives

have been launched for modernising, technology upgradation,
reducing transaction costs, increased export thrust, so as to enhance
its global competitiveness and achieve balanced regional
development.

Further, in order to give export thrust, Department of Commerce

has launched major initiatives such as Assistances to States for
Infrastructure Development for Exports (ASIDE). Market Access
Initiatives (MAI), Special Economic Zones (SEZs) Policy,
Modernisation of Director General of Foreign Trade (DGFT), etc.

For a balanced industrial development, industrial policy packages

have been announced for special category states of Uttaranchal,
Himachal Pradesh, Jammu and Kashmir and North East states.
Social scarcity issues have been addressed through insurance cover
for workers in handloom, agro and rural industrial and processed
marine product sector.

Textile industry is a major employment intensive sector for which

special schemes/packages were introduced. Technology Upgrading
Funds Scheme (TUFS) is one such scheme which is expected to
improve the access for decentralized powerloom sector. Textile
Canter Infrastructure Development Scheme (TCIDS) will take care
of infrastructure development aspect of textile industry.

Manufacturing sector has a share of 79.36 per cent in the Index of

Industrial Production (IIP). During the year 2002-03, the IIP grew
at the rate of 5.8 per cent as compared to 2.1 per cent in 2001- 02.
Manufacturing sector registered a growth rate of 6.0 per cent as
against 2.8 per cent during 2001- 02. As per the use-based
classification, production of basic foods, capital goods, intermediate
goods and consumer goods exhibited higher increase during 2002-
03 as compared to 2001-02.

Principle of Management:

These principles of management serve as a guideline for decision-making

and management actions. They are drawn up by means of observations and analyses of

events that managers encounter in practice. Henri Fayol was able to synthesize

14 principles of management after years of study.

Definition of Management

Management has been defined by several theorists in their own

way. Henri Fayoldefined management as, “Management is to
forecast, to plan, to organize, to command, to coordinate and control
activities of others.” In simple terms, management is a means of
organizing and delegating the work that needs to be done among
people who can do it, and then ensuring that said work is done
diligently and timely.

You will see management in almost all walks of life. Sometimes you
will be managing things without actually realizing it. The simplest
example is, being the class representative. There are so many things a
class representative has to manage. An efficient class representative
is the one who knows how to delegate duties and take command of
the situation.

14 Principles of Management

In the corporate world, management has a very crucial role to play.

We have a proper chain of command which can only function if there
is an efficient management in place. The early scholars foresaw this
need and came up with the principles of management. These
principles are like basic guidelines for managers.
In order to be an efficient manager, an individual must be aware of
these principles. Henri Fayol gave us 14 principles of Management.
These 14 principles incorporate within them the rules and guidelines
with which a management should ideally function.

Key Roles in Management

Henri Fayol’s 14 principles of Management also segregated the

function of management into five distinct roles, these roles help
understand management better. They are as under:

 Forecasting and Planning

 Organizing
 Commanding, Leading
 Coordinating
 Controlling
Each of this role requires a distinct feature. The management ought to
have people who can execute these roles efficiently in order to run
the organization smoothly.

Importance of Principles of Management

Before we learn anything, it is always good to understand why is it

important to know it? Running an organization is a huge task. At
times it can be daunting if you do not know where to begin. The
principles of management help the organization create a coherent
management structure which is the backbone of running a successful
organization.

The principles work as a guidance and reference for the management

on how to handle certain situations or manage the organizational
structure and chain of command.

Question for You

Question: Is management and art or a science?

Answer: As per the analysis, management seems to have the

characteristics of both art and science. While certain definite aspect
makes it a science, others involving the application of skills make it
an art.

Organizational structure: An organizational structure defines how activities

such as task allocation, coordination and supervision are directed toward the achievement
of organizational aims. ... The structure of an organization will determine the modes in
which it operates and performs.
Definition of Informal Organisation:
The informal organisation may be defined as “a network of
personal and social relationships that arise spontaneously
as people associate with one another in a work
environment. It is composed of all the informal groupings
of people within a formal organisation.” Over time there are
changes of memberships in most informal organisations.

Leadership :Leadership In many circles, there is continuous debate about whether leaders
are born or developed. If we reflect on our earlier discussion about motivation, we will see that
humans are very complicated and are made up of a number of traits. As with motivation, these
influences are both inherited and acquired from our environment and influences, and consequently,
leadership theories will continue to be debated in the future. We will continue this discussion on the
assumption that leadership can be developed. Furthermore, for the purpose of this unit, we will not
distinguish between leaders and managers, but will use the term leader to apply to any earned or
appointed role that carries with it the exercise of power and influence over others.

Leadership may be defined as: the influence that particular individuals (leaders) exert upon the goal
achievement of others (subordinates) in an organizational context. An earlier unit on Board
Governance addresses in a limited way, the impacts of leaders on performance. We stated that
leaders have an ability to see how different aspects of a situation fit together and influence each
other. They seek out alliances, opportunities, and approach goals in a proactive way. They have a
positive effect on others, which attracts support from those who have similar needs for
accomplishment. Their self confidence creates a belief in other people’s abilities, therefore,
emphasis is placed on empowerment and freedom. If we agree with these statements, then
leadership has two distinct aspects: i) the individual who exerts influence, and ii) those who are the
objects of this influence. Successful leadership depends, to a large extent, on the environment and
situation in which these dynamics exist. There are other issues that must also be acknowledged.
There are two types of leaders: emergent leaders - those who earn leadership positions through
their expertise, skills, abilities to influence others, or personal acceptability by the group; and
assigned leaders - those who are given power to exercise influence through appointment. In general
terms, both emergent and assigned leaders fulfil two different functions. They must be able to
provide social and emotional support to the group by listening, acknowledging, team building, and
supporting other members in the group. This is referred to as social-emotional support. The second
factor is to provide direction and assistance to the group in accomplishing their tasks. Successful
leaders have the ability to identify and apply the appropriate strategy at the right time. A group that
is confused about the goals of the organization, for example, will not respond well to a social-
emotional approach, nor will a group that is experiencing internal conflict and in need of team
building skills respond very positively to a request to improve individual performance. The Search for
Leadership What are the qualities that make successful leaders? The lack of able officers in both the
First and Second World War led to a search for leaders. This continued after the war to see if there
were personality traits that distinguished leaders from followers. While some general characteristics
of leaders emerged, there were no conclusions whether personality traits made up the leader or if
the opportunity for leadership produced the traits. The biggest weakness in the trait approach to
leadership identification is its failure to take into account the task, the subordinate, and the setting
or environment in which work is performed. The study of emergent leaders gives some good clues to
what qualities appointed leaders must have to be successful. Emergent leaders hold their position as
a consequence of their appeal to their subordinates. Their role is safe only as long as the group is
attracted to these attributes and conditions. Should these positions change, or the group finds other
influences, a lack of support or outside forces may undermine the leader’s role. The role, therefore,
is dependant on performance and any real or perceived faltering will quickly translate into lack of
support. The present incumbent after losing support becomes “dethroned” or replaced. This
fledgling type of leadership is what we most often observe in community groups and organizations,
politics, and citizen-led efforts. The leader is responsive to the group agenda and is secure only as
long as he or she remains responsive. Since most people are easily influenced and may change their
minds as a result of immediate or emerging needs, support is difficult to maintain. Leaders who find
themselves in this position tend to try and “ride out the storm” before subjecting themselves to any
formal leadership review. Assigned leaders draw their power and influence from sources outside the
group, and in most cases, have been given some power to assign tasks, and hand out rewards and
punishments based on performance. Rewards may include compliments, tangible benefits, and
deserved special treatment. When well thought out, with clear criteria rewards that compliment
individual needs can be very motivational. On the other hand, leaders who have no authority to
provide rewards may attempt to create them by giving compliments and praise and making promises
they can’t deliver. Over time, this tends to demotivate, leads to a loss of loyalty, creates dissension
and eventually causes the group to become dysfunctional. Punishments may include reprimands,
unfavorable task assignments, and withholding of raises, promotions, and other rewards. At best,
punishments seem to have minimal impact on satisfaction or productivity. At worst, punishments
are seen as random, not contingent on behaviour or performance and most often poorly
administered. Leaders who have access only to punishments often resort to identifying degrees of
unfavorable behaviour, and dole out punishment accordingly.

Leadership theories:

Considering leadership reveals school of thought giving different leadership theories

such as Great Man theory, trait theory, behaviourist theory, situational leadership
theory, contingency theory, transactional theory and transformational theory.

Great man theory is the one proposed before twentieth century where it says that
leaders are born with the talent and leader should be a man this lead to the next
theory trait theory.

Trait theory:

The trait theory rose from the concepts of the ‘Great Man ‘approach. This theory
leads to identify the important characteristics of a successful leader. The people who
got the characters as defined by the traits approach are isolated or shortlisted and
those are recruited as leaders. This type of approach was mostly implemented in
military and still used in some of the area.

According to the trait theory the person who got the following skills is said to be a
trait.

 Ambitious and success oriented

 Adaptable to all kinds of situations
 Co operative to all the members in the organization
  Highly active or energetic
 Dominative
 Good decision making ability
 Self-confident
 Adaptable to stress conditions and
 Dependable.

These are the characters which make a person trait and they should posses some
skills which are

 Skills

 Intelligent
 Skilled conceptually
 Creative
 Fluent in speaking
 Tactful
 Self motivated and self belief
 Skilled socially

When these kinds of skills and characters are identified in the person, the person is
recruited in the team.

Behavioural theory:

The trait study doesn’t give any conclusive results and it was hard to measure some
more critical issues such as honesty, integrity and loyalty. This leaded the attention to
be diverted on to the behaviour theories. The behaviour theory focuses on human
relationship and success performance as well.

According to behavioural theory the manager believes that the working environment
should be like an entertainment place where the expenditure of mental and physical
efforts is treated to be play and rest. The idea of manager is an average person not
only learns to accept but also seek responsibility. The people will automatically learn
to exercise self-control and self direction to achieve the goal or target. The
organizational problems can become imaginative and creative.

Contingency theory model:

This theory illustrates that there are many ways for the manager to lead the team to
get best outcome. According to the situation the manager can find a best way to get
the best outcome.
Fiedler worked on contingency theory according to that he looked for three
situations which define the condition of a managerial task.

 Leader and team member relationship

 Work structure or project structure
 Position and power

The manager should maintain relation with their team members to get along and
create confidence and make them feel free to think about the task and give their
ideas to help the task to be finished. Project structure is the job highly structured or
unstructured or in between. The power shows how much authority a manager does
posses.

This theory rates the manager whether the manger is relationship oriented or task
oriented. The task oriented managers gets success in such situations where there is
good leader and team member relationship and structured projects or tasks doesn’t
matter whether the position power is weak or strong. And get success when the
project is unstructured and does have any sort of good vision by having a strong
power and position. The variables which affect the task such as environmental
variables are combined in a heavy some and differentiated as favourable and
unfavourable situations. The task oriented management style depends on the
favourable and unfavourable environment variables but the relationship
management style stays in the middle by managing or changing the variables to
accumulate with their style.

Both styles of managements got their sides to be good when all the performance
and team work well in the tasks. There is no good or bad management in these two
managements. Task motivated management style leaders do best when the team
performs well and they are good in achieving good sales record and performance
better than their competitor where as the relationship oriented leaders are helpful to
gain positive customer service and build a positive image to the organisation.

Transactional and transformational leadership:

Transformational leadership “is a relationship of mutual simulation and elevation that

converts the followers in to leaders and may convert leaders into moral agents”

Transformational leadership is communicating with the leaders and the team

members to take them to higher level something like a leader can become a moral
agent and the follower can become a leader.

Transactional leadership technique builds the person to finish the certain task such as
job done for the time being.
Some of the differences between transactional and transformational leadership are

Transactional style of leadership builds a man to complete a certain task where as

transformational styles builds a member to become a leader.

This focuses on task completion and tactical style of management where as

transformational leadership focus on strategies and missions.

These are some theories of the leadership which shows how a leader act on different
situations and how different leaders behave to get success in the organization.

Motivation :Motivation can be defined as “the extent to which persistent effort is directed
toward a goal” (Campbell, Dunnette, Lawler &Weick).

Effort: The first aspect of motivation refers to the amount of effort being applied to the job. This
effort must be defined in relation to its appropriateness to the objectives being pursued. One may,
for example, apply tremendous effort to inappropriate tasks that do not contribute to the
achievement of the stated goals.

Persistence: The second characteristic relates to the willingness of the individual to stay with a task
until it is complete. For example, an important task that gets accomplished with effort but allows the
person to rest on their laurels for an extended period does not display persistence.

Direction: Is the effort directed towards the organization’s goals or related to the individual’s self-
interest? Direction is therefore measured in terms of how persistent effort is applied in relation to
the goals being pursued.

Goals: There are two different kinds of goals being pursued simultaneously. They are individual goals
and organizational goals which may produce quite different results if they are not compatible.

Next we should distinguish between motivation and performance. While there may be little doubt
about the motivation of the individual in terms of effort, persistence, and direction, there may be a
lot of questions about the individual’s performance as it relates to the organizational goals. The
worker may be really busy and factors such as skill levels, task understanding, and aptitude may
negatively impact performance. On the other hand, self-interest may create its own motivation not
related to the organizational goals. People may be motivated by factors in the external environment
such as pay, supervision, benefits, and job perks. This is referred to as extrinsic motivation. They may
also be motivated by the relationship between the worker and the task. This type of motivation is
called intrinsic motivation. These factors often exist simultaneously, but we will distinguish between
them as they relate to specific levels of motivation. We will explore three theories of motivation that
are based on human needs. In assessing these theories, we will try and identify what motivates
people.
Motivational Theories-

Maslow’s Hierarchy of Needs:

Abraham Maslow developed a theory that humans have five sets of needs that are arranged in a
hierarchy. He contends that people start by trying to satisfy their most basic or compelling needs
and progress toward the most fulfilling. These needs are as follows:

1. Physiological needs: These include the need for food, water, shelter, clothing and money. Until an
individual has access to these necessities, there can be no further progress. These needs are very
basic, and for the most part, society and our social network have ensured that they are present.
Intrinsic values include personal comfort and satisfaction, while the extrinsic values are most often
provided by the organization, the community, or society.

2. Safety needs: These include security, stability, and a structured environment. Here, the individual
expects and pursues job security, a comfortable work environment, pension and Leadership and
Motivation Unit 11 4 insurance plans, and freedom to organize in order to ensure continuation of
these benefits. Individual’s main objective is to ensure that benefits are protected or employment
needs are being met rather than contributing to long-term organizational goals. Again, we see a
dependance on the external environment to provide these supports. Personal motivation may
include the peace of mind that can be provided as a result of these needs being secured.

3. Relationship needs: Relationship needs include socialization, affection, love companionship, and
friendship. The individual at this level participates for personal or intrinsic rewards. Since no person
can live for extended periods without interaction with other people, the individual may be drawn to
participate simply to fulfill this need. Organizations that provide these opportunities include social
clubs, singles clubs, seniors clubs and service clubs, depending on the level of personal need. The
organization can assist by ensuring that the opportunity for social and relationship expectations are
created and met.

4. Esteem needs: These include feelings of adequacy, competence, independence, confidence,

appreciation, and recognition by others. Again, the individual is driven more by internal or intrinsic
needs. The external environment is needed more to provide recognition than to provide material
rewards. At this point, the intrinsic value is more important than that which can be provided by
outside influences. The ego seems to take over here and the need is to ensure that it is satisfied.

5. Self-actualization: This area is the most difficult to define and therefore, may be the most difficult
to explain. Why does the successful business person need to pursue further wealth when they have
already accumulated more than they will ever need? The answer may lie in the fact that motivation
is more internal and therefore, even more individualistic. Different people have different ideas about
what they need to achieve in order to obtain true happiness. For the wealthy person, money may no
longer be the motivator, it may now be a need to exercise power or the adventure and adrenalin
rush created as a result of playing “high stakes games”. This becomes the intrinsic motivation.
People who pursue self-actualization are more accepting of reality, themselves, and others.
Organizational requirements may include the opportunity for creativity and growth. Frequently,
individuals aspiring to this level often operate outside existing organizations and instead build their
own structures to suit their individual needs.

In discussing this theory, it appears that the further up the scale an individual moves, the more the
rewards or motivators move from the external environment to an internal need. It also becomes
more difficult to influence motivation, since material rewards become less relevant and internal
Leadership and Motivation Unit 11 5 rewards become more difficult to identify and address. In order
to enhance organizational performance, it is important that the organization recognize the individual
need and provide opportunities for satisfaction.

Alderfer’s ERG Theory:

Clayton Alderfer developed another needs-based theory that supports in many ways, the theory
developed by Maslow, but consists of three rather than five basic needs. Alderfer also sees his three
levels which includes existence, relatedness, and growth (ERG) needs as being hierarchical, and thus,
influenced by personal growth and extrinsic and intrinsic rewards.

1. Existence needs: These include needs that are satisfied by material substances or conditions. They
correspond closely to the physiological needs identified by Maslow and those safety needs that can
be satisfied by material rather than interpersonal rewards or conditions. They include the need for
food, shelter, pay, and safe working conditions.

2. Relatedness needs: These are needs that may be satisfied by communication, or exchange and
interaction with other individuals. There is a dependance on feedback from other organizational or
community members to fulfill these needs. Thus, the motivation is provided by a combination of
intrinsic and extrinsic rewards. These rewards include accurate and honest feedback, which may
involve direction and advice rather than unconditional pleasantness or agreement.

3. Growth needs: These are needs that are fulfilled by strong personal involvement that fully utilizes
our skills, abilities, and creativity. They include Maslow’s self- actualization as well as esteem needs
that rely on intrinsic rewards.

Both theories are also similar because they are hierarchical, and individuals will concentrate on the
achievement of the lowest level of need that is not fully satisfied. Maslow contends that the lowest
level of need must be satisfied before an individual can proceed to the next higher level. Alderfer
theorizes that if a higher level need is unsatisfied, the individual will regress to a desire to satisfy
lower-level needs. Maslow believes that once a need is met, it is no longer motivational. Alderfer
theorizes that while an individual may have met a higher-level need in one’s personal life, for
example, they may still be operating much lower on the scale where skills, aptitude, and knowledge
may affect performance and confidence.

9 common leadership styles:

Which type of leader are you?
9 common leadership styles: Which type of
leader are you?
There is never a one-size-fits-all leadership style for every business – all companies operate
differently and certain traits will be more successful in some environments than others.

However, having a thorough understanding of various leadership styles enables senior

executives to not only adopt the correct characteristics for themselves, but also choose better
managers throughout the organisation.

Here is a list of nine common leadership styles and a brief summary of their advantages and
disadvantages.

Transformational leadership

Often considered among the most desirable employees, people who show transformational
leadership typically inspire staff through effective communication and by creating an environment
of intellectual stimulation.

However, these individuals are often blue-sky thinkers and may require more detail-oriented
managers to successfully implement their strategic visions. For more information on
transformational leadership traits, please click here.

Transactional leadership

Transactional leadership is focused on group organisation, establishing a clear chain of

command and implementing a carrot-and-stick approach to management activities.

It is considered transactional because leaders offer an exchange; they reward good

performances, while punishing bad practice. While this can be an effective way of completing
short-term tasks, employees are unlikely to reach their full creative potential in such conditions.

Servant leadership

People who practice servant leadership prefer power-sharing models of authority, prioritising the
needs of their team and encouraging collective decision-making.

Research by Catalyst has claimed this style, described as altruistic leadership by the company,
can improve diversity and boost morale. However, detractors suggest servant leaders lack
authority and suffer a conflict of interest by putting their employees ahead of business objectives.

Autocratic leadership
A more extreme version of transactional leadership, autocratic leaders have significant control
over staff and rarely consider worker suggestions or share power.

Ruling with an iron fist is rarely appreciated by staff, which can lead to high turnover and
absenteeism. There can also be a lack of creativity due to strategic direction coming from a
single individual.

This leadership style is best suited to environments where jobs are fairly routine or require limited
skills. It is also common in military organisations.

Laissez-faire leadership

More commonly used to describe economic environments, laissez-faire literally means “let them
do” in French. This is typically translated to “let it be”. As such, laissez-faire leaders are
characterised by their hands-off approach, allowing employees to get on with tasks as they see
fit.

This can be effective in creative jobs or workplaces where employees are very experienced.
However, it is important that leaders monitor performance and effectively communicate
expectations to prevent work standards slipping.

Democratic leadership

Also known as participative leadership, this style – as the name suggests – means leaders often
ask for input from team members before making a final decision.

Workers usually report higher levels of job satisfaction in these environments and the company
can benefit from better creativity. On the downside, the democratic process is normally slower
and may not function well in workplaces where quick decision-making is crucial.

Bureaucratic leadership

Bureaucratic leadership models are most often implemented in highly regulated or administrative
environments, where adherence to the rules and a defined hierarchy are important.

These leaders ensure people follow the rules and carry out tasks by the book. Naturally, this
works well in certain roles – such as health and safety – but can stifle innovation and creativity in
more agile, fast-paced companies.

Charismatic leadership

There is a certain amount of overlap between charismatic and transformational leadership. Both
styles rely heavily on the positive charm and personality of the leader in question.
However, charismatic leadership is usually considered less favourable, largely because the
success of projects and initiatives is closely linked to the presence of the leader. While
transformational leaders build confidence in a team that remains when they move on, the
removal of a charismatic leader typically leaves a power vacuum.

Situational leadership

Developed by management experts Paul Hersey and Ken Blanchard in 1969, situational
leadership is a theory that the best leaders utilise a range of different styles depending on the
environment.

Factors such as worker seniority, the business process being performed and the complexity of
relevant tasks all play an important role in what leadership style to adopt for any given situation.
For example, situational leaders may adopt a democratic leadership style when discussing
commercial direction with senior executives, but switch to a bureaucratic strategy when relaying
new factory protocols to workers.

However, many people have a natural leadership style, which can make switching between roles
challenging. It can also be difficult to gauge what style is most suitable for certain circumstances,
holding up decision-making processes.