Unit 2 - 2023

DELHI SCHOOL OF PROFESSIONAL STUDIES AND RESEARCH
(DSPSR)
Management Process and Organisational Behavior (MPOB)
NOTES FOR UNIT - 2
1. What are the goals and objectives of planning in any organization? Discuss various types of
plans.
Planning means looking ahead and chalking out future courses of action to be followed. It is a preparatory
step. It is a systematic activity which determines when, how and who is going to perform a specific job.
Planning is a detailed programme regarding future courses of action.
It is rightly said “Well plan is half done”. Therefore, planning takes into consideration available & prospective
human and physical resources of the organization so as to get effective co-ordination, contribution & perfect
adjustment. It is the basic management function which includes formulation of one or more detailed plans to
achieve optimum balance of needs or demands with the available resources.
According to Urwick, “Planning is a mental predisposition to do things in orderly way, to think before acting and
to act in the light of facts rather than guesses”. Planning is deciding best alternative among others to perform
different managerial functions in order to achieve predetermined goals.
Goals and Objectives of Planning:
The need of planning is universally accepted in the business as well as in other aspects of life. The following
points justify the need of business planning/planning in business:
 Planning is needed for survival and growth of a business unit in an orderly manner.
 Planning is needed in order to face new problems/difficulties developed due to growth of markets,
market competition, changes in consumer expectations and so on.
 Planning is needed in order to face challenges created by changing environmental factors/forces.
 Planning is needed as it acts as a pre-requisite to good management. It is needed as it is the core of
the whole management process.
 Planning is needed in order to achieve the objectives decided by the management. It is also needed as
it ensures accuracy, economy and operational efficiency in busin6s management.
The importance of planning as an element in the management process is universally accepted. It plays a
positive role in the management of a business unit. Planning brings stability and prosperity to a business unit. It
brings unity of purpose and diverts all efforts in one direction for the achievement of certain well defined
objectives. Planning also improves the performance of a business unit. In fact, in the absence of planning there
will be disorder, confusion, inefficiency, wastage of human efforts and material resources. Planning is rightly
treated as the pre-requisite to efficient management. The fact that large majority of business units use planning
as a tool of management indicates its utility and importance. Planning brings safety to business operations. It is
the only way for survival in the competitive business world.
Planning is important as it is more than a mere theoretical exercise or paperwork. It has practical utility and
creative value. Planning is also a rational and intelligent activity. It is, now, rightly treated as a highly
professionalized aspect of business management.
Planning is important but planning alone is not adequate. It should be supplemented by suitable follow-up
actions on the part of managers. Planning may not be able to solve all managerial problems, but it certainly
helps the thoughtful managers in overcoming various managerial problems. A plan will remain on paper if
suitable follow-up steps are not taken at different levels for its execution. Thus, planning is a means and not
the end in itself
Types of Plans:
Three major types of plans can help managers achieve their organization's goals: strategic, tactical, and
operational. Operational plans lead to the achievement of tactical plans, which in turn lead to the attainment of
strategic plans. In addition to these three types of plans, managers should also develop a contingency plan in
case their original plans fail.
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Delhi School of Professional Studies and Research (DSPSR) Page 1
Operational plans
The specific results expected from departments, work groups, and individuals are the operational
goals. These goals are precise and measurable. “Process 150 sales applications each week” or “Publish 20
books this quarter” are examples of operational goals.
An operational plan is one that a manager uses to accomplish his or her job responsibilities. Supervisors,
team leaders, and facilitators develop operational plans to support tactical plans (see the next section).
Operational plans can be a single‐use plan or an ongoing plan.
 Single‐use plans apply to activities that do not recur or repeat. A one‐time occurrence, such as a
special sales program, is a single‐use plan because it deals with the who, what, where, how, and how
much of an activity. A budget is also a single‐use plan because it predicts sources and amounts of
income and how much they are used for a specific project.
 Continuing or ongoing plans are usually made once and retain their value over a period of years
while undergoing periodic revisions and updates. The following are examples of ongoing plans:
 A policy provides a broad guideline for managers to follow when dealing with important areas of
decision making. Policies are general statements that explain how a manager should attempt to handle
routine management responsibilities. Typical human resources policies, for example, address such
matters as employee hiring, terminations, performance appraisals, pay increases, and discipline.
 A procedure is a set of step‐by‐step directions that explains how activities or tasks are to be carried
out. Most organizations have procedures for purchasing supplies and equipment, for example. This
procedure usually begins with a supervisor completing a purchasing requisition. The requisition is then
sent to the next level of management for approval. The approved requisition is forwarded to the
purchasing department. Depending on the amount of the request, the purchasing department may
place an order, or they may need to secure quotations and/or bids for several vendors before placing
the order. By defining the steps to be taken and the order in which they are to be done, procedures
provide a standardized way of responding to a repetitive problem.
 A rule is an explicit statement that tells an employee what he or she can and cannot do. Rules are “do”
and “don't” statements put into place to promote the safety of employees and the uniform treatment and
behavior of employees. For example, rules about tardiness and absenteeism permit supervisors to
make discipline decisions rapidly and with a high degree of fairness.
Tactical plans
A tactical plan is concerned with what the lower level units within each division must do, how they must do it,
and who is in charge at each level. Tactics are the means needed to activate a strategy and make it work.
Tactical plans are concerned with shorter time frames and narrower scopes than are strategic plans. These
plans usually span one year or less because they are considered short‐term goals. Long‐term goals, on the
other hand, can take several years or more to accomplish. Normally, it is the middle manager's responsibility to
take the broad strategic plan and identify specific tactical actions.
A strategic plan is an outline of steps designed with the goals of the entire organization as a whole in mind,
rather than with the goals of specific divisions or departments. Strategic planning begins with an organization's
mission.
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Strategic plans look ahead over the next two, three, five, or even more years to move the organization from
where it currently is to where it wants to be. Requiring multilevel involvement, these plans demand harmony
among all levels of management within the organization. Top‐level management develops the directional
objectives for the entire organization, while lower levels of management develop compatible objectives and
plans to achieve them. Top management's strategic plan for the entire organization becomes the framework
and sets dimensions for the lower level planning.
Contingency plans
Intelligent and successful management depends upon a constant pursuit of adaptation, flexibility, and mastery
of changing conditions. Strong management requires a “keeping all options open” approach at all times —
that's where contingency planning comes in.
Contingency planning involves identifying alternative courses of action that can be implemented if and when
the original plan proves inadequate because of changing circumstances.
Keep in mind that events beyond a manager's control may cause even the most carefully prepared alternative
future scenarios to go awry. Unexpected problems and events frequently occur. When they do, managers may
need to change their plans. Anticipating change during the planning process is best in case things don't go as
expected. Management can then develop alternatives to the existing plan and ready them for use when and if
circumstances make these alternatives appropriate.
2. What do you mean by decision making? Discuss Bounded Rationality Model.
Introduction
Decision making is a daily activity for any human being. There is no exception about that. When it comes to
business organizations, decision making is a habit and a process as well.
Effective and successful decisions make profit to the company and unsuccessful ones make losses.
Therefore, corporate decision making process is the most critical process in any organization.
In the decision making process, we choose one course of action from a few possible alternatives. In the
process of decision making, we may use many tools, techniques and perceptions.
In addition, we may make our own private decisions or may prefer a collective decision.
Usually, decision making is hard. Majority of corporate decisions involve some level of dissatisfaction or
conflict with another party.
Steps of Decision Making Process

Following are the important steps of the decision making process. Each step may be supported by different
tools and techniques.
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Step 1: Identification of the purpose of the decision
In this step, the problem is thoroughly analysed. There are a couple of questions one should ask when it
comes to identifying the purpose of the decision.
 What exactly is the problem?

 Why the problem should be solved?
 Who are the affected parties of the problem?
 Does the problem have a deadline or a specific time-line?
Step 2: Information gathering

A problem of an organization will have many stakeholders. In addition, there can be dozens of factors
involved and affected by the problem.
In the process of solving the problem, you will have to gather as much as information related to the factors
and stakeholders involved in the problem.
Step 3: Principles for judging the alternatives

In this step, the baseline criteria for judging the alternatives should be set up. When it comes to defining the
criteria, organizational goals as well as the corporate culture should be taken into consideration.
As an example, profit is one of the main concerns in every decision making process. Companies usually do
not make decisions that reduce profits, unless it is an exceptional case. Likewise, baseline principles should
be identified related to the problem in hand.
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Step 4: Brainstorm and analyse the different choices
For this step, brainstorming to list down all the ideas is the best option. Before the idea generation step, it is
vital to understand the causes of the problem and prioritization of causes.
For this, you can make use of Cause-and-Effect diagrams and Pareto Chart tool. Cause-and-Effect diagram
helps you to identify all possible causes of the problem and Pareto chart helps you to prioritize and identify the
causes with highest effect.
Then, you can move on generating all possible solutions (alternatives) for the problem in hand.
Step 5: Evaluation of alternatives

Use your judgement principles and decision-making criteria to evaluate each alternative. In this step,
experience and effectiveness of the judgement principles come into play. You need to compare each
alternative for their positives and negatives.
Step 6: Select the best alternative

Once you go through from Step 1 to Step 5, this step is easy. In addition, the selection of the best alternative
is an informed decision since you have already followed a methodology to derive and select the best
alternative.
Step 7: Execute the decision

Convert your decision into a plan or a sequence of activities. Execute your plan by yourself or with the help of
subordinates.
Step 8: Evaluate the results

Evaluate the outcome of your decision. See whether there is anything you should learn and then correct in
future decision making. This is one of the best practices that will improve your decision-making skills. When it
comes to making decisions, one should always weigh the positive and negative business consequences and
should favour the positive outcomes. This avoids the possible losses to the organization and keeps the
company running with a sustained growth. Sometimes, avoiding decision making seems easier; especially,
when you get into a lot of confrontation after making the tough decision. But, making the decisions and
accepting its consequences is the only way to stay in control of your corporate life and time
Bounded Rationality Model
Bounded rationality is a term first coined by Herbert Simon. Simon challenged the concept of a rational man
in classical and neoclassical economic theories and argued that the rationality of man is bounded by certain
limitations. He opined that even though rational thinking, deductive reasoning and logic are good for solving
theoretical problems.
They are not so good for practical problem solving where the behavior of the decision-maker and his
intellect, information about the problem at hand and the time to solve such a problem may create a scenario
where the decision-making may happen under a rationality that is bounded by certain conditions. He argued
that in real situations people take decisions on the basis of heuristics rather than rule based optimization
methods. He argued that decision-making is bounded by the following limitations.
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 Information
Lack of information or incomplete information leads to sub optimal decisions as the decision-maker is not fully
aware of the pros and cons of a decision due to lack of information. Hence, lack of information creates a
boundary and hinders the rational choice of the decision-maker.
 Intellectual Ability/Cognitive Ability
The problem at hand may be so complex that the decision-maker may not be able to comprehend the true
nature and complexity of the problem, leading to a sub optimal decision. If the problem would have been
comprehensible, the decision-maker would have made a rational choice. This creates a boundary on the
otherwise rational choice of the decision-maker.
 Lack of Time to take Decisions
The lack of time may also lead to suboptimal decisions as in this case the decision-maker does not have time
to evaluate all the choices and come to a rational choice. On the contrary, lack of time leads to improper and
sub optimal decisions, as one does not have the required time to process the information available.
3. Short notes
 Formal vs. informal organizations
An organization is a collection of people who work together to attain specified objectives. There are two types
of organization structure, that can be formal organization and informal organization. An organisation is said to
be formal organisation when the two or more than two persons come together to accomplish a common
objective, and they follow a formal relationship, rules, and policies are established for compliance, and there
exists a system of authority.
On the other end, there is an informal organisation which is formed under the formal organisation as a
system of social relationship, which comes into existence when people in an organisation, meet, interact and
associate with each other.
Comparison Chart
BASIS FOR
FORMAL ORGANIZATION INFORMAL ORGANIZATION
COMPARISON
Meaning An organization type in which the job of An organization formed within the formal
each member is clearly defined, whose organization as a network of interpersonal
authority, responsibility and relationship, when people interact with each
accountability are fixed is formal other, is known as informal communication.
organization.
Creation Deliberately by top management. Spontaneously by members.
Purpose To fulfill, the ultimate objective of the To satisfy their social and psychological
organization. needs.
Nature Stable, it continues for a long time. Not stable
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BASIS FOR
FORMAL ORGANIZATION INFORMAL ORGANIZATION
COMPARISON
Communicatio Official communication Grapevine

n
Control Rules and Regulations Norms, values and beliefs

mechanism
Focus on Work performance Interpersonal relationship
Authority Members are bound by hierarchical All members are equal.

structure.
Size Large Small
a. mage builders of the enterprise because they are in direct contact with the workers.
 Strategic and operational decisions
The success of a business depends on the decisions made by key personnel in the organization. However,
these individuals can make poor decisions that will be detrimental to the organization. Strategy and operational
decisions address different aspects of the organization. Strategy influences the overall direction of the
organization, whereas operational decisions affect its day-to-day operations.
Strategic Decisions
Strategic decisions consider the entire organization and represent a complex aspect of business planning.
Strategy entails making major changes for the organization and recognizing that the business environment is
not static and will continue to evolve. The goal of making strategic decisions is to implement policy that aims to
move the organization toward its long-term goals. Strategy takes into account an organization's resources,
threats to it and available opportunities.
Risk of Strategic Decisions
A business always assumes risk when deciding to change its methods. Strategic decisions always represent a
risk because these decisions deal with the future. While a company can make strategic decisions based on
relevant information, the organization can never predict the future with certainty. Because of this, a business
must take precautions when implementing strategic decisions.
Operational Decisions
Operational decisions relate to the daily operations of an organization. The countless interactions that take
place on a daily basis represent the result of operational decisions. These decisions, therefore, can bog down
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an organization and make it ineffective. To prevent this, operational decisions should be consistent with
strategic decisions. Good operational decisions will have measurable results such as higher revenues,
increased profits, increased productivity and customer satisfaction.
4. Explain the elements of planning process.
It is rightly said “Well plan is half done”. Therefore planning takes into consideration available & prospective
According to Koontz &O’Donell, “Planning is deciding in advance what to do, how to do and who is to do it.
Planning bridges the gap between where we are to, where we want to go. It makes possible things to occur
which would not otherwise occur”.
Important Elements of Planning
A plan has the following elements:-
i. Aim:
Any organisation should have definite aim. The aim should be clearly defined so that it can guide and direct the
activities of the enterprise. The main aim of a cooperative organisation is to do service and to improve the
economic conditions of members. Calvert's definition of cooperation clearly exhibits this aim.
ii. Objectives:
Webster's Dictionary defines objectives as "that towards which effort is directed or end of action or goal".
Hence objectives or goals may be described as the ends towards which the group activities are aimed.
People say "Effective management is management by objectives". A cooperative organisation can have sub-
objectives for each department or sections and they can be united to have board based objective.
iii. Policies:
A policy is a verbal, written or implied basic guide that provides direction to a manager for action. Policies
guide the actions of an organization's performance and its objectives in the various areas of operation.
iv. Procedures:
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Procedures spell out the actions to be taken out in practice to achieve the organizations objectives as stated in
the policies. Procedures may be static or changed often. Organizations have set procedures for procuring raw
materials, recruitment of personnel etc.
v. Methods:
Methods are work plans, since they provide the manner and order, keeping the objectives, time and facilities
available. Methods involve only one department and one person. They contribute to the efficiency in working
and help work planning and control. Methods are used in manufacturing, marketing and office work.
vi. Rules:
Rules are different from procedures and policies. A rule requires a specific and definite action be taken or not
taken with respect to a situation. Rules do not allow any discretion in their application. Also they do not allow
any leniency to come in the way of their application.
vii. Budget:
Budget is essentially a plan expressed in quantitative terms. Budgets involve both planning and control
element. Like the plan, budget is flexible, realistic and operates within a framework. A budget is differentiated
from other plans in the following respects:-
a. It is a tool for planning and control.
b. A budget covers specific period.
c. Budget is expressed in financial terms.
viii. Programmes:
Programmes show the way and lay down procedure for activities to take place within a time limit for
accomplishing, the stated objectives. The constituents of a programme are objectives, policies, procedures,
rules, methods and resources to be made use for obtaining the objectives. Programmes enable the
management to anticipate and prepare them ahead to meet future eventualities.
ix. Strategics:
Koontz and O'Donnell consider this as an important planning element. "Strategy concerns the direction in
which human and physical resources will be deployed and applied in order to maximize the chance of
achieving a selected objective in the face of difficulties".
In corporate planning strategy serves as a master plan which the company adopts for the realization of the
objectives. It provides skill and judgment to the management to predict and foresee what difficult and complex
situations are likely to arise and they can take timely action to avert them or at least to minimize the risk and
uncertainty.
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5. Planning is equally important even in rapidly changing business environment. Discuss it.
It is rightly said “Well plan is half done”. Therefore, planning takes into consideration available & prospective
According to Koontz &O’Donell, “Planning is deciding in advance what to do, how to do and who is to do it.
Planning bridges the gap between where we are to, where we want to go. It makes possible things to occur
which would not otherwise occur”.
Importance of Planning in rapidly changing business environment
Planning is the first and most important function of management. It is needed at every level of management. In
the absence of planning all the business activities of the organisation will become meaningless. The
importance of planning has increased all the more in view of the increasing size of organisations and their
complexities in changing environment.
Planning has again gained importance because of uncertain and constantly changing business environment. In
the absence of planning, it may not be impossible but certainly difficult to guess the uncertain events of future.
The following facts show the advantages of planning and its importance for a business organisation:
 Planning Provides Direction:

Under the process of planning the objectives of the organisation are defined in simple and clear words. The
obvious outcome of this is that all the employees get a direction and all their efforts are focused towards a
particular end. In this way, planning has an important role in the attainment of the objectives of the
organisation.
For example, suppose a company fixes a sales target under the process of planning. Now all the departments,
e.g., purchase, personnel, finance, etc., will decide their objectives in view of the sales target.
In this way, the attention of all the managers will get focused on the attainment of their objectives. This will
make the achievement of sales target a certainty. Thus, in the absence of objectives an organisation gets
disabled and the objectives are laid down under planning.
 Planning Reduces Risks of Uncertainty:

Planning is always done for future and future is uncertain. With the help of planning possible changes in future
are anticipated and various activities are planned in the best possible way. In this way, the risk of future
uncertainties can be minimised.
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For example, in order to fix a sales target a survey can be undertaken to find out the number of new
companies likely to enter the market. By keeping these facts in mind and planning the future activities, the
possible difficulties can be avoided.
 Planning Reduces Overlapping and Wasteful Activities:

Under planning, future activities are planned in order to achieve objectives. Consequently, the problems of
when, where, what and why are almost decided. This puts an end to disorder and suspicion. In such a situation
coordination is established among different activities and departments. It puts an end to overlapping and
wasteful activities.
Consequently, wastages moves towards nil, efficiency increases and costs get to the lowest level. For
example, if it is decided that a particular amount of money will be required in a particular month, the finance
manager will arrange for it in time.
In the absence of this information, the amount of money can be more or less than the requirement in that
particular month. Both these situations are undesirable. In case, the money is less than the requirement, the
work will not be completed and in case it is more than the requirement, the amount will remain unused and
thus cause a loss of interest.
 Planning Promotes Innovative Ideas:

It is clear that planning selects the best alternative out of the many available. All these alternatives do not come
to the manager on their own, but they have to be discovered. While making such an effort of discovery, many
new ideas emerge and they are studied intensively in order to determine the best out of them.
In this way, planning imparts a real power of thinking in the managers. It leads to the birth of innovative and
creative ideas. For example, a company wants to expand its business. This idea leads to the beginning of the
planning activity in the mind of the manager. He will think like this:
 Should some other varieties of the existing products be manufactured?

 Should retail sales be undertaken along with the wholesales?
 Should some branch be opened somewhere else for the existing or old product?
 Should some new product be launched?
In this way, many new ideas will emerge one after the other. By doing so, he will become habituated to them.
He will always be thinking about doing something new and creative. Thus, it is a happy situation for a company
which is born through the medium of planning.
 Planning Facilitates Decision Making:

Decision making means the process of taking decisions. Under it, a variety of alternatives are discovered and
the best alternative is chosen. The planning sets the target for decision making. It also lays down the criteria
for evaluating courses of action. In this way, planning facilitates decision making.
 Planning Establishes Standards for Controlling:

By determining the objectives of the organisation through planning all the people working in the organisation
and all the departments are informed about ‘when’, ‘what’ and ‘how’ to do things.
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Standards are laid down about their work, time and cost, etc. Under controlling, at the time of completing the
work, the actual work done is compared with the standard work and deviations are found out and if the work
has not been done as desired the person concerned are held responsible.
For example, a labourer is to do 10 units of work in a day (it is a matter of planning), but actually he completes
8 units. Thus there is a negative deviation of 2 units. For this, he is held responsible. (Measurement of actual
work, knowledge of deviation and holding the labourer responsible falls under controlling.) Thus, in the
absence of planning controlling is not possible.
6. What do you understand by environmental analysis also explain their techniques
An environmental analysis, also called an environmental scan, is a strategic tool used to identify and assess all external
and internal elements in a business environment. It examines organizational and industry factors that can positively or
negatively affect the business. By anticipating short-term and long-term impacts, the organization can readily respond to
them when they appear.
An environment analysis assists organizations in defining factors that can influence their business operations. By
weighing these elements, they can foresee the trajectory of their business given the circumstances. This approach allows
them to develop a strategy that takes advantage of opportunities and reduces threats.
Incorporating an environmental analysis in the strategic planning sessions helps businesses systematically approach their
decision-making process. This way, organizations can achieve their business goals and propel their performance to new
heights.
An environmental analysis consists of two major components: internal factors and external factors.
Internal Factors: These components ask organizations to look inward. They examine the organization’s strong and weak
points based on its mission and vision. These factors also allow businesses to reflect on their direction and plans in a set
period—say, in five or ten years.
External Factors: On the other hand, external factors refer to high-level considerations that exist outside the
organization. Businesses must examine the threats and opportunities present in the following matters:
 Industry and market trends
 Competition—their advantages and weak points
 Customers—your customer base and customer service
 Economy—economic activities that can impact the organization
 Technology—technological advancements that can streamline operations
 Labor supply—labor markets in areas of operation
 Political and legal circumstances
The two common types of environmental analysis methods are the PESTLE analysis and SWOT analysis. These
approaches help organizations assess their strategic positions based on a wide range of internal and external factors.
Read on to learn about these methods.
The PESTLE analysis, or its shorter form PEST analysis, examines the factors which can influence a business on a larger
scale outside the organization. It provides organizations with insights into the market status based on high-level trends
concerning the market, customers, technology, and more.
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The PESTLE method consists of six key elements for a comprehensive picture of the business’ macro-environment:
PESTLE Analysis
 Political – local, state, and federal government policies, trade rules, tax regulations, and so on
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 Economic – unemployment rates, economic growth rates, foreign exchange rates, inflation, interest rates, and more
 Social – demographic trends, consumer buying patterns, wealth distribution, attitudes and opinions, brand recognition, and
so on
 Technological – new technological discoveries and products, research and development areas, incentives for technology,
and so on
 Legal – health and safety regulations, employment laws, product regulations, tariffs, and more
 Environmental – climate and weather conditions, energy consumption regulations, environmental policies, and more
SWOT Analysis
The SWOT analysis evaluates a business’ strategic standing based on internal (strengths, weaknesses) and external
(opportunities, threats) factors. It uncovers a company’s advantages and disadvantages based on its strong and weak
points. In doing so, companies can devise a strategy that maximizes their opportunities while mitigating potential risks.
The SWOT method takes the shape of a 2 x 2 matrix containing the following elements:
 Strengths – What does the company do best? What is your company’s unique selling point?
 Weaknesses – What areas does your organization need to improve? What resources do you lack?
 Opportunities – What opportunities can you take advantage of based on your strengths?
 Threats – What threats do your weaknesses expose you?
Environmental Analysis Process
An environmental analysis follows a systematic process of uncovering factors that affect your business and its operations.
While there’s no hard and fast rule on doing an environmental scan, these steps can guide you into making the most out
of this process.
Identify the environmental factors.
An environmental analysis, first and foremost, needs a list of the factors to evaluate. These factors will depend on your
organization’s industry and geographical location.
This list should include both micro and macro-environmental factors that have short-term and long-term impacts on their
operations. For example, a mining company can outline the latest trends in their industry and environmental regulations in
their locality.
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Collect information about these factors.
After outlining the environmental factors, the next step is to gather data related to them. You can utilize various sources to
make sure the information is relevant and up to date.
For example, customer satisfaction surveys inform you about how your product or service performs in the market and
what improvements you can make. Meanwhile, government websites work best if you’re following updates on relevant
regulations.
Check the competitors.
When doing an environmental scan, your research doesn’t stop at your organization’s business standing. It’s also
necessary to scope out how your competitors are performing. A competitor analysis can help you determine any threats
that can weaken your business and opportunities that set you apart from the competition.
Determine the impacts on the organization.
Once you’ve collected sufficient environmental information, you can now use them to predict how it can affect your
business. This step sets your expectations, so you can prepare for the possible outcomes should these factors come your
way. In assessing risks and their impacts, it’s vital to ask the following questions:
 What are the consequences of this factor on your business?
 How long will this last?
 How will this affect the business (positively, negatively, or no impact)?
 How important is this factor in the overall business operations?
Devise a strategic plan.

The final step allows you to brainstorm and formulate strategies for the possible changes from these factors. It includes
assessing current strategic plans and adjusting them based on the information you have gathered about your business
environment. Aside from this, you can also enumerate steps to maximize opportunities and minimize threats.
7. What are the steps of organizing process? Explain in detail.
Organizing is the function of management which follows planning. It is a function in which the synchronization
and combination of human, physical and financial resources takes place. All the three resources are important
to get results. Therefore, organizational function helps in achievement of results which in fact is important for
the functioning of a concern. According to Chester Barnard, “Organizing is a function by which the concern is
able to define the role positions, the jobs related and the co-ordination between authority and responsibility.
Hence, a manager always has to organize in order to get results.
A manager performs organizing function with the help of following steps:-
1. Identification of activities - All the activities which have to be performed in a concern have to be
identified first. For example, preparation of accounts, making sales, record keeping, quality control,
inventory control, etc. All these activities have to be grouped and classified into units.
2. Departmentally organizing the activities - In this step, the manager tries to combine and group
similar and related activities into units or departments. This organization of dividing the whole concern
into independent units and departments is called departmentation.
MPOB Notes (Unit 2)
3. Classifying the authority - Once the departments are made, the manager likes to classify the powers
and its extent to the managers. This activity of giving a rank in order to the managerial positions is
called hierarchy. The top management is into formulation of policies, the middle level management into
departmental supervision and lower level management into supervision of foremen. The clarification of
authority help in bringing efficiency in the running of a concern. This helps in achieving efficiency in the
running of a concern. This helps in avoiding wastage of time, money, effort, in avoidance of duplication
or overlapping of efforts and this helps in bringing smoothness in a concern’s working.
4. Co-ordination between authority and responsibility - Relationships are established among various
groups to enable smooth interaction toward the achievment of the organizational goal. Each individual
is made aware of his authority and he/she knows whom they have to take orders from and to whom
they are accountable and to whom they have to report. A clear organizational structure is drawn and all
the employees are made aware of it.
Process of Organising – The steps:

The process of organising involves the following steps:
1. Identification and enumeration of activities:
At the first stage of organising process, a manager identity and determines those activities that are to be
performed for achieving common goals. Those activities are determined on the basis of common goals.
For example, an organisation producing and distributing washing machines has to perform large number of
activities that may be related to production, distribution, finance, purchase and personnel, etc.
2. Division of activities:
After determining and enumerating activities, these are to be divided and sub-divided into small components
known as jobs and tasks.
3. Grouping-up of activities:
Once the activities have been broken into small elements, these can be easily put into various groups on the
basis of their relationship and similarities. For example, each job and task related to production is to be
grouped up into production group, and elements that are related to marketing, finance and purchase are to be
grouped-up in the respective groups.
4. Assignment of group of activities:

After putting various activities into several groups, these are to be assigned or allotted to the various
departments created for this purpose, or to the employees if the activities are limited. At the time of making
such assignment, it is ensured that the department has required competence and resources for performing that
group of activities.
5. Granting necessary rights:

Assignment of group of activities among various departments is followed by giving them adequate rights so
that they can perform assigned work in a satisfactory manner.
The rights are granted through the process of delegation. In this process higher level manager gives away
some of his right in favour of other who becomes his subordinate and it continues till the last level of
management.
MPOB Notes (Unit 2)

6. Coordinating the functioning of various departments:
In the process of organising, attempts are also made for coordinating working of individual with respective
department, and finally to coordinate functioning of various departments towards the achievement of common
goals.
Need and Importance of Organising:

The organising process creates a network of roles and relationships and provides a framework within
which each employee performs the activities that have been assigned to him.
His role becomes more meaningful and he contributes effectively for achieving predetermined objectives.
Therefore, organising is regarded as a mechanism or means to achieve planned objectives. Its importance can
be outlined as under:
1. Provides framework to perform management functions:

Organisational structure provides a framework within which various management functions can be performed
by the managers more efficiently. It is only through relationship of superior and subordinate, which is created
by organising process that the manager plans, directs and controls activities of his subordinates.
2. Facilitates coordination:
Organising process may also be used as a device of maintaining and achieving coordination. In organising, the
activities performed by an individual employee are related to the functioning of his department, and then
functioning of various departments is harmonised for seeking common goals.
3. Leads to specialisation:
Organising is based on the concept of division of work that ultimately leads to specialisation. Through it,
activities are divided, grouped-up and assigned to the concerned department having requisite competence,
and resources, and the department develops as a specialised centre for those activities.
4. Helps in achieving efficiency:

Organising process aims at achieving higher efficiency because it helps in making efficient utilisation of both
human as well as physical resources.
5. Promotes Employee development:

In a highly decentralised organisational structure, each position is strengthened by delegating required
authority. As a result of it, each manager makes decisions, solves problems and tackles the situation that
ultimately leads to overall development in his personality.
6. Increases clarity of authority and responsibility:
Division of work and delegation of authority among employees, through the process of organising, gives them
a precise idea of what they are expected to perform and within what limits of authority they have to perform. It
helps in boosting an employee’s morale and he feels comfortable in the work- setting.
7. Facilitates adaptation:
Organisational structure also provides a useful means to cope with changing environment. In the event of
change, necessary modification may be made in the organising process, organisational structure and
organisational goals, so as to bring them in conformity with the change. It may be done by maintaining
flexibility in the structureand making it adaptive to changes.
MPOB Notes (Unit 2)

8. Difference between decentralization and delegation of authority.
In an organization, it is not possible for one to solely perform all the tasks and take all the decisions. Due to
this, delegation and decentralisation of authority came into existence. Delegation means the passing of
authority by one person who is at a superior position to someone else who is subordinate to him. It is the
downward assignment of authority, whereby the manager allocates work among subordinates.
On the other hand, Decentralization refers to the dispersal of powers by the top level management to the
other level management. It is the systematic transfer of powers and responsibility, throughout the corporate
ladder. It elucidates how the power to take decisions is distributed in the organizational hierarchy.
These two terms are often used interchangeably, but they are not alike. So, here we have compiled a detailed
difference between delegation and decentralization of authority.
Comparison Chart
BASIS FOR DELEGATION DECENTRALIZATION
COMPARISO
N
Meaning Delegation means handing over an Decentralization is the final outcome achieved,
authority from one person of high level when the delegation of authority is performed
to the person of low level. systematically and repeatedly to the lowest level.
What it is? Technique of management Philosophy of management.
Accountability Superiors are accountable for the acts Department heads are accountable for the acts
done by subordinates. of the concerned department.
Requirement Yes, for all organization delegation of No, it is an optional philosophy which may or
authority is very necessary. may not be adopted by the organization.
Liberty of Work Subordinates do not have full liberty. A substantial amount of freedom is there.
Control The ultimate control is the hands of The overall control vests with top management
superior. and delegates authority for day to day control to
departmental heads.
Relationship Creates superior-subordinate A step towards creation of semi-autonomous
relationship. units.
Definition of Delegation
The assignment of authority or decision-making power or duty of a person who is at a higher level to an
individual who is below his level is known as Delegation. It is a requirement of the all the organisation, for its
growth and development.
A delegation of authority refers that the senior is handing over the decision-making powers to his junior.
Although, the senior cannot pass on an authority which he does not possess. With the help of delegation, the
workload can be divided to different individuals as well as the responsibility is also shared among them. The
person who delegates the authority is known as Delegator while the person who is delegated the authority is
known as Delegatee.
MPOB Notes (Unit 2)

There are three major elements of Delegation:
 Authority: The rights and powers which are delegated.

 Responsibility: The duties and tasks which are to be performed are delegated.
 Accountability: Reporting on the discharge of responsibility or use of authority is accountability which cannot
be delegated.
Definition of Decentralization
The transfer of authorities, functions, rights, duties, powers and accountability of the top level management to
the middle or low-level management is known as Decentralization. It is nothing but the delegation of authority,
in the entire organisation or it can be said that decentralization is an improvement over delegation. When there
is decentralization, the considerable authority, responsibility and accountability are vested to the lower levels of
the organisational hierarchy.
Many organisations take decisions regarding the diffusion of authority from a higher level to other levels of
management like departments, divisions, units, centres, etc. This dissemination of authority is known as
delegation, but when it is exercised in the whole entity, on a large scale, it is decentralization. So here it must
be noted that the extent to which the right, duties and powers are disseminated is important.
This is the greatest advantage of decentralization that the top management gets unburden, and timely
decisions can now be taken on different matters. Moreover, it will lead to better supervision and motivation of
the employees.
Key Differences Between Delegation and Decentralization
The following are the major differences between delegation and decentralization:
1. When an authority or responsibility is entrusted to the subordinate by a superior is known as Delegation.

Decentralization refers to the final result which is attained when the authority is delegated to the lowest level, in
an organised and consistent manner.
2. Delegation is the technique of management. On the contrary, decentralisation is the philosophy of
management.
3. In delegation, only authority and responsibility are transferred but not the accountability. However, in
decentralization, all the three are transferred.
4. In delegation, there is less liberty of work to the subordinates whereas, in the decentralization, a substantial
amount of liberty can be seen.
5. Delegation of authority creates superior-subordinate relationship in the organization. conversely,
decentralisation is a step towards creation of semi-autonomous units.
6. A delegation of authority is a must for every organisation, as no person can alone do each and every task.
Conversely, Decentralization is discretionary, in the sense that top management may or may not disperse
authority.
MPOB Notes (Unit 2)

Conclusion
Delegation and Decentralization both have its merits and demerits. They are not similar terms, but the
decentralization is the result of the delegation of authority. So there is no competition between them as they
both complete each other.
They are helpful to the success and progress of the organisation, but there is a precondition for the delegation
that there should be a desire of the manager to give freedom of work to the persons whom work is assigned.
Let them choose the methods and solutions for their problems, in order to guide them and let them learn from
their mistakes. In this way, they will get the training and development.
Another prerequisite is that the juniors should communicate with the seniors freely. However, this is a demerit
of decentralization, which due to no control of top level management over the middle or low-level management,
the absence of coordination and leadership is felt.
8. Discuss Staff and Line Function of an organization. How do they

complement each other?
LINE AUTHORITY: The most fundamental authority within an organization, reflects existing superior-
subordinate relationships. It consists of the right to make decisions and to give order concerning the
production,sales or finance related behaviour of subordinates. In general, line authority pertains to matters
directly involving management system production, sales, finance etc., and as a result with the attainment of
objectives. People directly responsible for these areas within the organization are delegated line authority to
assist them in performing their obligatory activities.
STAFF AUTHORITY: Staff authority consists of the right to advise or assist those who possess line authority
as well as other staff personnel. Staff authority enables those responsible for improving the effectiveness of
line personnel to perform their required tasks.
Line and Staff personnel must work together closely to maintain the efficiency and effectiveness of the
organization. To ensure that line and staff personnel do work together productively, management must make
sure both groups understand the organizational mission, have specific objectives, and realize that they are
partners in helping the organization reach its objectives. Size is perhaps the most significant factor in
determining whether or not an organization will have staff personnel. The larger the organization, the greater
the need and ability to employ staff personnel. As an organization expands, it usually needs employees with
expertise in diversified areas. Although small organizations may also require this kind of diverse expertise, they
often find it more practical to hire part time consultants to provide it is as needed rather than to hire full time
staff personnel, who may not always be kept busy.
LINE – STAFF RELATIONSHIPS: e.g. A plant manager has line authority over each immediate subordinate,
human resource manager, the production manager and the sales manager. However, the human resource
manager has staff authority in relation to the plant manager, meaning the human resource manager has staff
authority in relation to the plant manager, meaning the human resource manager possesses the right to advise
the plant manager on human resource matters.
MPOB Notes (Unit 2)

Still final decisions concerning human resource matters are in the hands of the plant manager, the person
holding the line authority.
ROLE OF STAFF PERSONNEL: Harold Stieglitz has pinpointed 3 roles that staff personnel typically perform to
assist line personnel:
1. The Advisory or Counseling Role: In this role, staff personnel use their professional expertise to solve
organizational problems. The staff personnel are, in effect, internal consultants whose relationship with
line personnel is similar to that of a professional and a client.
2. The Service Role: Staff personnel in this role provide services that can more efficiently and effectively
be provided by a single centralized staff group than by many individuals scattered throughout the
organization. This role can probably best be understood if staff personnel are viewed as suppliers and
line personnel as customers.
3. The Control Role: Staff personnel help establish a mechanism for evaluating the effectiveness of
organizational plans.
The role of staff in any organization should be specifically designed to best meet the needs of that
organization.
Line and staff organization is a modification of line organization and it is more complex than line
organization. According to this administrative organization, specialized and supportive activities are
attached to the line of command by appointing staff supervisors and staff specialists who are attached to
the line authority. The power of command always remains with the line executives and staff supervisors
guide, advice and council the line executives. Personal Secretary to the Managing Director is a staff official.
Features of Line and Staff Organization
 There are two types of staff:

o Staff Assistants- P.A. to Managing Director, Secretary to Marketing Manager.
o Staff Supervisor- Operation Control Manager, Quality Controller, PRO
 Line and Staff Organization is a compromise of line organization. It is more complex than line
concern.
 Division of work and specialization takes place in line and staff organization.
 The whole organization is divided into different functional areas to which staff specialists are
attached.
 Efficiency can be achieved through the features of specialization.
 There are two lines of authority which flow at one time in a concern:
o Line Authority
MPOB Notes (Unit 2)
o Staff Authority
 Power of command remains with the line executive and staff serves only as counselors.
CONFLICT IN LINE – STAFF RELATIONSHIP:
From the view point of line personnel, conflict is created because staff personnel tend to
 Assume Line Authority

 Do not give Sound Advice
 Steal Credit for Success
 Fail to Keep line personnel informed of their activities
 Do not see the whole picture.
From the view point of Staff Personnel, conflict is created because line personnel do not make proper use of
staff personnel, resist new ideas and refuse to give staff personnel enough authority to do their jobs.
Staff Personnel can often avert line-staff conflicts if they strive to emphasize the objectives of the organization
as a whole, encourage and educate line personnel in the appropriate use of staff personnel, obtain any
necessary skills they do not already possess, and deal intelligently with the resistance to change rather than
view it as an immovable barrier.
Line personnel can do their part to minimize line staff conflict by sing staff personnel wherever possible,
making proper use of the staff abilities, and keeping staff personnel appropriately informed.
9. Discuss nature of Delegation and Decentralization. How do these principles

help the organization in decision making?
Characteristics of Delegation of Authority:
1. It involves transfer not surrendering of authority.

2. It is a process of sharing work, granting authority and creating accountability.
3. Delegation takes place at all the levels, where superior – subordinate relationship exists.
4. Delegation is possible only when the delegator has the authority.
5. No delegate is permitted to delegate the granted authority’ further.
6. A manger never gets total authority delegated; otherwise he won’t be a manger any more.
7. Delegation is not abdication, ultimately the responsibility for proper discharge of authority and completion of
task remains of the manager or delegator.
8. Authority once delegated can be withdrawn or revoked by the delegator.
Need / Importance / Reasons of Delegation of Authority:
1. Higher Efficiency (A superior being able to concentrate on non-routine jobs (delegated to subordinates)
multipolices his efficiency)
2. Motivation (since delegation indicates confidence of manager, the subordinate feels self-importance,
recognition, etc. he feels motivated)
MPOB Notes (Unit 2)

3. Develops subordinates (Making decisions and solving problems enables them to develop their
managerial skills)
4. Better Distribution of work in the Group (since every employee gets adequate authority to act, it also
leads to prompt decision making)
5. Foundation of Decentralisation (the delegation may be made permanent, only if it works well
temporarily, in the organisation chart)
Obstacles / Barriers to / Problems in Effective Delegation of Authority:
The obstacles may come from
1. Superiors
2. Subordinates
3. Organisation
Problems with Superiors: The superiors may be reluctant to delegate because of:
i. Being disorganised cannot plan what to delegate;

ii. I can do it better myself;
iii. No trust and confidence in subordinate’s ability;
iv. Threat to his position, if subordinate does it better than him; and
v. Lack of ability to direct the subordinates.
Problems with the Subordinates: Subordinates do not accept responsibility because of:
i. Love of spoon feeding

ii. Habit of over dependence on the superior (asking a boss all the time);
iii. Fear of failure and consequent reprimand or criticism;
iv. Absence of reward for accepting additional responsibility;
v. Being already overburdened with his own work; and
vi. Lack of commensurate authority required.
Problems with the organisation:Organisations also impede the delegation of authority because
i. There is no precedent of delegation so far;
MPOB Notes (Unit 2)

ii. Management believes in a centralisedorganisation philosophy; and
iii. The size of business is very small
Guidelines (How) to make Delegation of Authority Effective:
i. Identify the person suitable for the job (being capable for creating mutual trust and confidence)
ii. Explain the job and the objectives clearly (Principle of functional definition and principle to limits of authority)
iii. Leave space for experimentation and creativity (Principle of individual initiative)
iv. Grant the necessary authority (Principle of delegation to be consistent with results expected and principle of
parity of authority and responsibility)
v. Keep in touch with the delegate for support and monitoring progress (Communication, training and control)
vi. Acknowledge a job done well (Principle of reward – Promote the person doing job better than you)
vii. Instil the confidence among subordinates (Those who do, only commit mistakes).
Centralisation and Decentralisation of Authority: While delegation is concerned with one to one relationship, the
pattern of authority across the different positions and departments is related to centralisation – decentralisation
procures. In should be very clear that centralisation of activities and centralisation of authority are two different
concepts. Also important to note is that on the delegation continuum centralisation and decentralisations are the two
ends.
There is no question of absoluteness of any of the two. If there is 100% centralisation, then it must be only one-man
organisation and it is beyond our study; and if there is total decentralisation, it would be anarchy and again beyond the
realm of our study. The conclusion is that the two go together and are relative.
Concept of Decentralisation:Decentralisation is a conscious process of systematic distribution of authority by the top

management down the line to create operative levels and to make them autonomous in there functioning. In a highly
decentralisedorganisation, the top management restricts itself to major decisions in areas like policy making,
coordination and control. The lower level managers have enough decision making authority and support to introduce
innovativeness in their work.
Characteristics of Decentralisation of Authority:
 Decentralisation is both a philosophy of management (to prepare inside people for future positions) and a
technique of organising (creating number of centres of initiative).
MPOB Notes (Unit 2)

 Decentralisation of authority is different from dispersal of activities (dispersal of activities in different
geographies is a strategic decision; decentralisation is concerned with distribution of authority, not the
activities).
 Decentralisation is extension of Delegation: There may be delegation without decentralisation, but no
decentralisation is possible without delegation.
 Degree of decentralisation can be measured through number of decisions, more important decisions, the scope
of decisions, and lesser the controls on lower-level mangers. The decision making would be situated nearer to
the point of execution.
 Decentralisation is just opposite to centralisation but centralisation and decentralisation are mutually
dependent in a large organisation.
Need / Advantages / Importance / of Decentralisation:
 Improves decision making at the top level

 Development of managerial personnel through exposure which provides the opportunity to grow.
 Increases motivation and morale which is reflected in performance.
 Quicker and better decisions, since decisions are not to be refreshed.
 Creates healthy competition between different autonomous operative levels.
 Adaptation to dynamic change is faster in a decentralised structure.
Problems / Drawbacks / Limitations of Decentralisation:
 Problem of coordination because of independent work units.

 Increased operating cost due to duplication of management functions in each unit.
 It may lead to inconsistencies as uniform policies may not be followed for same type of work in different
divisions.
 Introduction in small concerns may not be practicable.
 During a crisis decentralisation creates its own problems.
 Managers, having worked in centralised systems, find uncomfortable to work in a more decentralised form.
Concept of Centralisation:Centralisation means a conscious and systematic process of retention of authority in the
hands of top-level managers.
Advantages / Merits of Centralisation:
 Facilitates coordination as all the decisions are taken at one central point.
 There is no duplication of efforts and resources.
 Decisions are consistent, because they are made by same set of people each line.
 Top management while deciding, keeps the balance among functions and departments.
 Centralisation helps in maintaining confidentiality.
Disadvantages / Problems / Draw backs / Limitations of centralisation:
MPOB Notes (Unit 2)

 Decreases efficiency as top management is generally removed from the facts and realities of the actual
situations.
 Middle and lower level managers feel frustrated and hesitant to take any initiative.
 Concentration of authority is always fraught with misuse of authority for personal gains.
 In case of death, leaving the organisation, organisational growth is hampered as there is no immediate
replacement.
Factors Influencing Centralisation and Decentralisation:
Factors influencing Centralisation and Decentralisation:
Basis More Centralisation More Decentralisation

Environment It is less volatile Is complex and uncertain
Capability and Lower level managers not Lower level managers capable &
Experience capable as top level managers experienced to take decisions
Voice inDecisions Lower management does not Lower level management wants
want totake decisions avoice in decisions
Importance of Significant like investment and Relatively minor decisions
Decisions strategies.
Crisis Suitable for facing crisis or risk
Corporate culture is open
Geographic Dispersion Not visible Yes, freedom is allowed to local
units
Size and complexity of Smaller the size more the Larger the size greater the
organisation centralisation degree of decentralization
Management Attitude Conservative Progressive
Uniformity of Action Required Not required
MPOB Notes (Unit 2)

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DELHI SCHOOL OF PROFESSIONAL STUDIES AND RESEARCH

Management Process and Organisational Behavior (MPOB)

NOTES FOR UNIT - 2

Goals and Objectives of Planning:

MPOB Notes (Unit 2)

MPOB Notes (Unit 2)

2. What do you mean by decision making? Discuss Bounded Rationality Model.

Steps of Decision Making Process

MPOB Notes (Unit 2)

 What exactly is the problem?

Step 2: Information gathering

Step 3: Principles for judging the alternatives

MPOB Notes (Unit 2)

Step 5: Evaluation of alternatives

Step 6: Select the best alternative

Step 7: Execute the decision

Step 8: Evaluate the results

Bounded Rationality Model

MPOB Notes (Unit 2)

Creation Deliberately by top management. Spontaneously by members.

Nature Stable, it continues for a long time. Not stable

MPOB Notes (Unit 2)

Communicatio Official communication Grapevine

Control Rules and Regulations Norms, values and beliefs

Focus on Work performance Interpersonal relationship

Authority Members are bound by hierarchical All members are equal.

Size Large Small

 Strategic and operational decisions

MPOB Notes (Unit 2)

4. Explain the elements of planning process.

Important Elements of Planning

A plan has the following elements:-

MPOB Notes (Unit 2)

a. It is a tool for planning and control.

b. A budget covers specific period.

c. Budget is expressed in financial terms.

MPOB Notes (Unit 2)

Importance of Planning in rapidly changing business environment

 Planning Provides Direction:

 Planning Reduces Risks of Uncertainty:

MPOB Notes (Unit 2)

 Planning Reduces Overlapping and Wasteful Activities:

 Planning Promotes Innovative Ideas:

 Should some other varieties of the existing products be manufactured?

 Planning Facilitates Decision Making:

 Planning Establishes Standards for Controlling:

MPOB Notes (Unit 2)

6. What do you understand by environmental analysis also explain their techniques

MPOB Notes (Unit 2)

Environmental Analysis Process

Identify the environmental factors.

MPOB Notes (Unit 2)

Check the competitors.

Determine the impacts on the organization.

Devise a strategic plan.

7. What are the steps of organizing process? Explain in detail.

A manager performs organizing function with the help of following steps:-