INTRODUCTION TO MANAGEMENT

CHAPTER ONE
MANAGEMENT: AN OVERVIEW
This chapter is mainly concerned with giving answers to the following questions:
▪ What is management?
▪ Why is management important?
▪ What do managers do?
▪ Are all management jobs the same?
▪ If there are differences, what are they?
Chapter Objectives:
After completing this chapter the student is expected to:
▪ Explain the different meanings and definitions of management
▪ Describe the significances of management
▪ Discuss why management is both an art and science
▪ Identify the different classifications of managers
▪ Describe the roles managers play and the skills they need.
1.1. MEANING AND DEFINTION OF MANAGEMENT
Meaning:
The word “Management” has various meanings. The most important ones include the following:
i. Management refers to a group of people who are responsible for guiding and controlling
the organization (Managerial personnel).
ii. Management is the process of running an organization (planning, organization, staffing,
directing, and discipline).
iii. Management is a body of knowledge, a discipline
iv. Management is a factor of production, economic resource as land, labour and capital
Definitions of Management
Management is defined by different authorities in different ways. The following are some of the
common definitions given by different authorities in the field.
i. Management is the art of getting things done through and with people in a formally
organized group.
ii. Management is the art of knowing what you want to do in the best and cheapest way.

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 iii. Management is the art of securing maximum results with a minimum of efforts so as to
secure maximum prosperity and happiness for both the employer and employee, and give
the public the best possible service.
iv. Management is the process of planning, organizing, staffing, directing and controlling the
use of a firms resources to effectively and efficiently attain its objectives.
Why do the definitions of management differ?
Authorities agree that it is impossible to provide a single universally accepted definition of
management due to various reasons. Thus, the different orientations about the definition of
management emanate from the following reasons.
i. Management has various aspects, that cannot be represented by a single definition.
ii. The theorists who gave the definitions had different areas of interest or training, and all
defined management from their perspective (engineering, sociology, psychology,
mathematics, etc)
iii. Management as a discipline is young and there is a lack of clarity of concepts and
principles.
Nevertheless, despite all the above reasons for providing different definitions, the definitions are
not contradictory. In fact most of the definitions of management do share a common idea
“management is concerned with the accomplishment of objectives / goals through the efforts of
other people”.
Precise Definition of Management
Though management is defined in various ways as mentioned earlier, the following is the
commonly used precise definition of management:
“Management is the process of planning, organizing, directing and controlling to accomplish
organizational objectives through the coordinated use of human and material resources.” It is the
process of efficiently and effectively getting activities completed with and through other people.
It is the process by which human and non-human resources are coordinated to accomplish a set of
objectives.
Definition of Terms
Organization – is a group of two or more people coming together to achieve common objectives
(goals)
Resources – are inputs that will be utilized in order to perform a given task.

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Planning – is determining courses of actions that will be gone for, in order to achieve objectives.
Organizing – refers to integrating resources to their best efficiency and effectiveness.
Directing – refers to leading, motivating, and influencing people, so that they can behave in the
desired way.
Controlling – refers to ensuring whether objectives are efficiently and effectively achieved or not.
Effectiveness – doing the right thing.
Efficiency – refers to doing things right and performing something with the minimum possible
input (cost).
1.2. SIGNIFICNACE OF MANAGEMENT
As people began forming groups to accomplish activities that they could not achieve as individuals,
management has been essential to ensure the coordination of individual efforts. Thus, the task of
managers has been rising in importance, as society has come to rely increasingly on group effort,
and as many groups have become large.
Basically, an organization is a group of two or more persons that exists and operates to achieve
clearly stated and commonly held objectives. Each member of an organization is expected to do
part of jobs that are important to meet the organizational objectives. However, members may be
working in opposite directions. To prevent this from happening and to ensure the coordination of
work to accomplish the objectives set, management is needed. Therefore, management is essential
whenever and wherever human efforts are to be undertaken collectively to achieve specific goals.
Thus, the success of group activity is determined by management. The success and failure of a
given concern or firm depends on the competence of its manager. Every scientific and
technological development is result of organizations; and the achievements of organizations are,
obviously, the achievements of there managers.
1.3. IS MANAGEMENT A SCIENCE OR AN ART?
The question whether management is an art or a science has been an issue of debate for a long
period of time.
Science is defined “as a systematized knowledge derived from observation, study, and
experimentation carried on in order to determine the nature and principles of the subject under
study”. Similarly, management has a structured body of knowledge with its own distinct concepts
and principles that are developed with reference to the general truths underlying the management

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practice. From this point of view, management is termed as a science. However, although
management is recognized as a science, it should be noted that it is not as comprehensive or as
exact as the other pure sciences. The reason is that the variables with which managers deal differ.
Managers deal with the human elements. And the behavior of human beings is unpredictable. As
a result, they cannot be subject of controlled laboratory experiment.

According to Terry, “art is brining about of a desired result through the application of skill; it is
the application of knowledge and skills to accomplish results”. Art is grounded in the knowledge
or principles developed by science. Just as a doctor uses the science of medicine while diagnosing
and treating the patients, a manager uses the knowledge of management theory while performing
his managerial functions. Art is the application of knowledge that constitutes the science. Thus,
art needs the existence of science and science demands skillful application of knowledge.
However, art is not only based on a systematic body of knowledge based on evidence, but it derives
its creative power through intuition, inspiration and other purely subjective qualities.

Like all other practices management is an art. It is knowhow, it is the application of knowledge;
and it is doing things in the light of the realities of the situation. Management principles are not
developed for the sake of knowledge. But, their application for specific situation, Thus, in the art
side of management managers make decisions and try to solve problems based on their intuition
experience, instinct and personal insight. Management is therefore considered as both a science
and an art.

1.4. Levels of Management

Levels of management are hierarchical arrangement of managerial positions in an organization.

The number of levels of management may depend on the size of the organization. In general,
however, there are three managerial levels, which includes:

i. Top level management,

ii. Middle level management, and
iii. Fist level (operating level management)

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These levels of management can be presented graphically as indicated below

Top –
level
Management

Middle – level
Management

Operating – level
Management

Top – level Management

Top – level management includes that of board of directors, executive committee and chief
executive, or president, or general manger, etc. of an organization.
Functions of top level management include;
▪ Establishing broad objectives;
▪ Designing major strategies;
▪ Outlining Principal policies;
▪ Providing effective organizational structure that insures integration;
▪ Providing overall leadership and direction;
▪ Making overall control of the organization;
▪ Dealing with external parties such as the government, community, business, etc. by
representing the organization, and
▪ Analyzing the changes in the external environment and respond to it.

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Middle – level Management
Middle-level management includes heads of the different functional areas and their assistant:
divisional heads, department heads, section heads, plant managers, branch management, etc. The
major functions of middle-level management are:
▪ Acting as intermediary between top and operating level management;
▪ Translating long-term plans of top management into medium range plans;
▪ Developing specific targets in their areas of reasonability;
▪ Developed specific schedules to guide actions and facilitate control;
▪ Coordinating inputs, productivity and outputs of operating level management
Operating level management (First level management)
First – line management is found at the lowest level in the hierarchy.
The first – line managers comprise the largest managerial group in most organizations and they
are responsible for directly and managing operating employees and resources.
They direct small team of workers and keep a check on their performance so that short-term plans
and work target are achieved.
Specific functions of first line managers include the following:
▪ Plan daily and weekly activities based on the quarterly and yearly plans.
▪ Assign operating employees to specific tasks.
▪ Issue instructions at the workplace.
▪ Motivate subordinates to charge or improve their performance.
▪ Provide subordinates feedback about the ongoing performance.
▪ Take action to resolve performance problems.
▪ Identifying ways of improving communication among subordinates.
1.5. Functional and General Managers
We can distinguish or classify managers based on the scope of the activities they manage into:
i. Functional and
ii. General managers
i. Functional Managers
Functional managers are managers appointed to supervise single operations which require
specialized skills.
E.g. Accountants, personnel, marketing and production managers

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ii. General Managers
General Managers are responsible for the overall operations of a more complex unit, such as
company or division.
General Managers usually coordinate two or more departments and hold functional managers
accountable for their specialized areas.

1.6. Managerial Roles

Managerial functions are broad areas of activities that represent the ends for which management
is practiced. They are purposes that tell little about what managers actually perform. They simply
indicate the objectives of managers when they do their work. Thus, from the above definition, it
can be inferred that there must be the means to successfully accomplish managerial functions and
categories of actual managerial behaviors. These are managerial roles.
Managerial roles represent specific tasks that managers undertake to ultimately accomplish the
functions of planning, organizing, staffing, leading and controlling. They are an organized set of
activities belonging to an identifiable job that give realism and systematize managerial functions.
Beside the functional approach of management the other approach to study management is to
examine the roles that managers are expected to perform. Managerial roles are related to how
managers carry out their jobs in their day to day managerial life. Managerial functions are general
administrative duties that need to be carried out in all productive organizations. Managerial roles
are specific categories of behavior/managerial behavior. Managerial functions involve “desired
out comes”. These outcomes are achieved through the performance of managerial roles (actual
behavior). In other words, roles are the means and functions are the ends of the manager’s job.
Henery Mintzeberg developed ten managerial roles, which can be classified in to three broad
categories. These are interpersonal, informational and decisional roles.
1) Inter personal roles
These are the roles that the managers play in interacting with other people both within the
organization and outside the organization. Managers spend a lot of time with peers,
subordinates, suppliers, customers, government officials and community leaders because of
their formal authority, superiority and strategic position. Therefore, they are required to have

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an understanding of interpersonal relations. These roles again are classified in to three
categories.
a) Figurehead role: - when managers perform duties of social or legal obligations that
represent an organization at different occasions such as ceremonial and symbolic in nature
it is said to be Figurehead role. These duties include:-greeting visitors, signing legal
documents, taking important customers to lunch, attending social functional involving their
subordinates like wedding, funerals, Handing out merit certificates to works etc or speaking
at functions in schools and churches etc.
b) The leadership role:- the influence of a manager is clearly seen in his role as a leader of
the unit or organization. This involves directing and coordinating subordinates activities
such as hiring, training, motivating and guiding. He must be an example/role model leader
so that his subordinates follow his directions and guideline with respect and dedication.
c) Liaison role: - Managers must maintain a net work of outside contacts in order to asses
the external environment such as competition, social changes or changes in government
rules, regulation and laws that affect the organization interest. In this role the managers
build up their won external information system.
The Liaison with external sources of information can be developed by attending meetings
and professional conferences by personal phone calls, trade journals and by informal
personal contacts within outside agencies.
2) Informational Role
Managers emerged as a source of information about certain issues concerning the organization.
They play the role of central point for receiving and sending important information.
Informational roles describe the manager’s activities used to maintain and develop an
information network. In informational role managers perform the following three roles.
a) The monitor role:- in this role managers constantly monitoring and examining their
internal and external environment by collecting and studying information concerning
their organization. They seek information from various sources in order to make decision
and solve problems that would be achieved by reading reports and periodicals, by asking
their liaison offices etc.
b) The disseminator role: - Manager’s must transmit their information regarding changes
in policies or other matters to their subordinates, their peers and to other members of the

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 organization. He/she should provide important information to subordinates that they
might not ordinarily know about. This can be done through memorandums, phone calls,
individual meetings and group meetings. Managers do not put aside information rather
they pass it to peers. The type of information to be forwarded to organizational members
may include facts, opinions, interpretations and influences.
c) Spokes person role: - the manager represents his/her organization or unit to other
people internally or externally. A manager represents his organization in either sending
relevant information to people out side the firm or making some demand on behalf of the
firm. He transmits information to outsiders as official position of the organization.
Managers are also responsible to provide official statements to people outside the
organization about company policies, plans, actions or development. The information
can be transmitted to outsiders through a speech at the trade show, reports, holding a
press conference, giving public interview or through advertising media’s.
3) Decision making/Decisional role
On the basis of the managers interpersonal and information received, a manager must make
decisions and solve organization problem in that respect. These are manager’s activities to
make choices from alternatives. Managers are responsible to identify problems and
opportunities and then balance conflicting interests. In the decisional role the manager becomes
an entrepreneur, disturbance handler, resource allocator and negotiator.
a) Entrepreneurial role: - here managers are continuously involved in improving the
organization and facing dynamic technological changes and initiating and designing
of change in the organization by assuming the risk of change. They always look out
for new ideas for product improvement. They initiate feasibility studies, they arrange
capital for new products, they ask for suggestions from employees, how to improve
the organization. In general they take risks for investment.
b) Disturbance handler role: - managers have to work like a fire fighter. They must
seek solutions of various unanticipated problems such as strikes, complaints,
grievances, shortage of materials etc. the manager makes decisions or takes corrective
action to response to pressure beyond his/her control. They have to take corrective
actions during crises, disputes and sudden departure of subordinates, importance
customers or suppliers.

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 c) The resource allocator role:- the manager must divide work and delegate authority
among his subordinates. He/she must make decisions how to optimally allocate
scarce resources among the unlimited needs. This role of managers pertains to
decisions about how to allocate people, time, equipment, budget and other resources
to attain desired results. Managers decide exactly where the organization will expend
its resources according to the priorities of organizational objectives.
d) Negotiator role:- the manager deals or negotiates with individuals or groups about
certain issues in view of reaching agreement on certain problems. The manager also
bargains with units and individuals to obtain advantages for his/her unit or
organization.
1.7. Managerial Skills
A skill is an acquired and learned ability to translate knowledge into performance. It is an ability
or proficiency in performing a particular task. In order to be effective at all levels in which
managers perform; they must possess and continuously develop several essential skills.
Managerial skills are skills of a manageability of a manager to perform his duties and
responsibilities expertly. Modern business organizations are dynamic, complex and competition
in the market place is very high. Consequently managers must be highly skilled to succeed. The
major managerial skills that managers need to possess include: Technical skills, Human skills and
Conceptual skills. These essential skills briefly explained as follows.
Technical skills
Technical skill involves the use of knowledge, methods and techniques in performing a job
effectively. It is a specialized knowledge and expertise, which is utilized in dealing with day-to-
day problems and activities. This skill is acquired through education and training or formal studies
in colleges and institutions. Technical skill is more important at lower level management and as
one move to higher level management; the relative importance of technical skill will diminish.
E.g. engineers, accountants, computer programmers, program analysis etc.
Human skills
It is the ability to work with other people in a co-operative manner i.e. the ability to influence
others, to motivate, to lead and understand others. It involves understanding, patience, trust and
genuine practice in interpersonal relationships. Though there are some controversies, these skills
are equally important at all levels of management because all tasks in an organization are done

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with people. This skill includes effective communication, creation of positive attitude towards
others, development of co-operation among group members and motivation of subordinates.

Conceptual skill
It is ability of a manager “to see” the big picture of the organization, to view the organization from
a broad perspective. It is the ability to view the organization as a whole entity and as well as a
system comprised of various parts and subsystems integrated into a single unit. It is especially
important for top level managers ho keep the whole system under focus. They must understand
the complexities of the overall organization, to see the big picture and how each unit of the
organization contributes towards the success or achievement of organizational skills. Conceptual
skills are more important in strategic (long range) planning; therefore it is the top level
managers/executives who require more of these skills than middle level manages and supervisors.
1.8. UIVERSALITY OF MANAGEMENT
Is a manager’s job universal? Are the principles of management universally applicable? It is
already stated that managing is found in all types, functions, levels and sizes of organizations.
Management can be applied to all organized human efforts whether they are in business,
government, and educational, social, religious or other fields. Universality of management
suggests that the manager uses the same managerial skills and principles in each managerial
position held in various organizations. It means that management is generic in content and is
applicable to all types of organizations. Many professionals in the field of management agree that
“management is universal”. This is to mean that regardless of title, position or management level,
all managers do the same job. They all execute the five management functions and work through
and with others to set and achieve organizational goals.
These proponents argue the universality of management by stating that the functions of managers
are rarely the same whether the organization are private or public, profit making or not for profit,
manufacturing or service giving and small firms or industrial giants. This is because of the fact
that the basic principles and concepts of management are universally applicable to all types of
organizations.
Lawrence A. Appley declared that ‘He who can manage, can manage anything’. Accordingly an
industrial manager could manage a philanthropic organization, a retired army general could

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manage a University, a civil servant could manage an industrial organization, and so on. Let’s
discuss the factors that have contributed to the universal organization (arguments for universality)
• Managers perform the same functions irrespective of their level in the organization,
industry or country. The functions performed by the company president and the office
supervisor are the same. Regardless of the level, all managers plan, organize, lead and
control. The difference lies in such things as the breadth of the objectives, the magnitude
of the decisions taken and etc.
• Classical writers like Fayol, believed that there are certain principles in management
which are universally applicable. Such principles as one man one boss (unity of
command), division of work to improve speed and efficiency, limiting the number of
persons to be supervised, the principle of motivation etc. have found universal expression
irrespective of the nature and level of management in organizations.
• The fundamentals governing the management of a business, a church or a university are
the same; the difference lies in the techniques employed and the practices followed. All
managers are accountable for performance of other people; they plan, make decisions,
and organize work and so forth.
• The very fact that managers regularly move from public to private sector organizations
bears ample testimony to the fact that management concepts are universal across
organizational types. For example, D.D. Eisenhower went from a general in the US army
to President of Columbia University to President of the United States.
Nowadays, management has got rationalistic and quantitative approaches, which contribute for
the universality of management principles. One can say a best that management principles are
universal but their application is situational.
1.9. Basic Management Functions
The Basic Management functions include
▪ Planning
▪ Organizing
▪ Staffing
▪ Directing, and
▪ Controlling
Planning: -

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- It is the first function that all managers engage in.
- It lays the groundwork for all other functions.
- Planning usually:
- Identifies the goals of an organization
- It maps out courses of action
Length of time and scope of planning:
- Will vary according to the level in the company
Top-level management planning may cover a period of five or ten years. (Long –range planning)
The plans at the top management level may cover expansion of the business and how it will be
financed.
Lower level management planning is however concerned with planning today’s or tomorrow’s
actions.
A manager’s plans affect and are affected by, the plans of others and the requirements of
governments ruling
Organizing
Organizing is concerned with:
1. Assembling the resources necessary to achieve the organization’s objectives.
2. Establishing the activity-authority relationships of the organization
Planning has established the goals of the company and how they are to be achieved
Organizing is therefore concerned with developing the structure to reach these goals.
Staffing:
Staffing is concerned with locating prospective employees to fill the jobs created by the organizing
process.
Involves:
- Recruiting and selecting potential candidates for a job.
- Matching the job demands with the candidates’ abilities.
- Orienting new employees to the job environment
- Keeping employees qualified
- Appraising performance and providing feed-back
- Determining the proper pay and benefit for each job
Directing /leading:

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Directing is aimed at getting members of the organization to move in the direction that will
achieve its objectives.

It involves motivating and encouraging employees, to participate in the decision-making process.

Controlling:
Controlling deals with:
• Establishing standards of performance
• Reassuring performances against established standards, and
• Dealing with deviations from established standards.
It attempts to:
• Prevent problems
• Solve the problems that occur
In general, controls ensure that work is performed to standards as planned.
CHAPTER TWO
THE PLANNING FUNCTION

2.1.Meaning and importance of managerial planning

2.1.1. The concept of planning

Planning is the most fundamental function of management. Different authorities define it in

different ways. The following is however, the commonly used definition of planning:
Planning is the process of deciding in advance about the short and long-run objectives of the
organization and selecting courses of action for accomplishing them.

The primary purpose of planning is to minimize the risk or obstacles surrounding future operations.
From this point of view, planning can be defined as the process of preparing for change and coping
with uncertainty by formulating the means for attaining goals. It is anticipatory decision making
that establishes organizational goals and specifies the methods of achieving them.

In general, planning involves determination of objectives, formulation of programmes and courses

of action for attaining them, developing of schedules and timing of action as well as assignment
of responsibilities for their implementation.

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Planning tries to answer the following basic questions:

a. Where are we now?

b. Where do we want to be?
c. What is the gap?
d. How can we get there?

The following figure can summarize the basic questions that address the function of planning

3) Gap?

[Current status] 4) How to bridge [Future image]

the gap?
1) Where are we now? 2) Where we want to be?

2.1.2. The Naturel characteristics of planning

i. Planning is the foundation (primacy) of management: Planning provides the entire basis
from which all future management functions arise.
ii. Planning is a continuous process: It is a never – ending activity of a manager. Plans tend to
be a statement of future intentions relating to objectives and means of attaining them.
iii. Planning is persuasive: Planning is the function of all mangers. It is needed and practiced
at all managerial levels. Every manger has a planning function to perform within his particular
areas of activities. Thus, planning is inherent in everything a manager does. Therefore,
planning is a persuasive function of management.
iv. Planning is participatory:
v. Plans are arranged in a hierarchy: Plans are first set for the entire organization. Such plans
are called corporate plans. The corporate plan provides the framework for the formulation of
divisional, departmental and sectional goals. The following figure demonstrates the
hierarchical arrangement of plans.

Corporate plans
Departmental / Divisional / Plans
Sectional plans
Unit plans

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 Hierarchy of plans

vi. Planning commits the organization into the future:

vii. Planning is the antithesis of status-quo:
viii. Planning is subject to flexibility:
ix. Planning is action oriented.
2.1.3. The Importance of Planning

i. Provides direction.
ii. Minimizes risk and uncertainty.
iii. Focuses attention on the organization’s goals.
iv. Facilitates control.
v. Leads to success.
2.2.Types of plans

Plans can be classified into various categories based on different dimensions. These dimensions
include:

▪ Repetitiveness
▪ Time dimension,
▪ Scope/ breadth dimension, and
▪ Flexibility dimension.

2.2.1. Classification of Plans Based on Repetitiveness

Based on repetitiveness plans can be classified into two; namely, standing plans and single use
plans.

A. Standing plans:

Standing plans are used again and again over a long period of time. Once established, standing
plans continue to apply until they are modified or abandoned. Standing plans help managers in
disposing of routine problems in predetermined and consistent manner.

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They include: polices, procedures, methods, rules and standards.

i. Policies – are general statements that serve as guides of administrative action or decision-
making. They direct the way in which activities are to be achieved. They are concerned with
“how” of administrative action.

ii. Procedure- show the sequence of activities. Procedures indicate the steps to be accomplished
as well as the required time and order of performance. They are series of steps to be used in
achieving certain objectives.

iii. Rules- are statements that either prescribe or prohibit action by specifying what an individual
may or may not do in a given situation. A rule is a very specific and detailed guide to action. It is
established to direct or restrict action in a fairly narrow manner. Compared to policies and
procedures, rules are narrow in scope, specific in their application, and allow few or no deviations
form a stated statement.

The drawback of rules is that they tend to limit flexibility and initiative. To avoid the
unpleasantness, members would follow the rules. They are only interested in meeting the rules
rather than achieving goals.

Methods- are sub-units of a procedure. They show clearly as to how a step of procedure should
be performed.

ii. Standards- are units for measuring performance. They are established to measure the time,
quantity, quality or wastage level, and cost of work. However, all kinds of jobs do not lend
themselves to quantitative measurement. It is worth-noting that standards are established and
used when performance can be measured.

B. Single – use plans

Single use plans are designed to accomplish objectives usually within a relatively short period of
time. They are non-recurring in nature and deal with problems that probably will not be repeated
in the same form in future. In general, single use plans are predetermined courses of action

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developed for relatively unique, non-repetitive situations. The three basic types of single use plans
are programmes, projects and budgets.
i. Programmes -are large-scale planned activities which have distinctive mission, time schedule,
and assignment of responsibility. Programmes consist of objectives, policies, procedures, and
methods so managed and designed to provide a course of action to achieve goals. Programmes
are means of achieving some designed results within the scheduled time.

ii. Projects – are usually a component part of a specific programme. They are less complex and
narrow in scope than programmes and require fewer resources.

iii. Budgets – are numerical plans that deal with the future allocation and utilization of various
resources to different activities in the organization. Budgets are primarily designed and used
to allocate and utilize the resources of an organization, which include: financial, human,
material and any other essential resources. As most people think, budgets are not defined in
monetary terms only. Thus, they are also used to control the allocation and utilization of
labour, raw materials the or space, machine hours and so on. To be more specific, some of the
common non-financial budgets include: sales, production-materials, manpower, time and
space budgets, etc. Budgets usually serve as a control device for feed-back and evaluation
purpose. They exercise control by allocating resources cross departments in advance, and by
specifying how these resources are to be utilized. They provide standards against which
planned performance can be compared to actual performance. It helps to preserve the
organization’s resources and promote efficiency.

2.2.2 The Time Dimension of Plans

Planning must encompass a sufficient period of time in the future to fulfill the commitments
resulting from current decisions. Accordingly, we can classify plans into three, based on the
typical time frames used indescribing planning periods as: (i) Long –range, (ii) Intermediate-range,
and (iii) Short-range, plans.

i. Long-range plans
Long range planning has longer time horizon. It is concerned with the distant future. The time
period of long-range plans is usually more than five years. Long-range plans are intended as

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 guidelines from which we can develop our intermediate range and short range plans with
specific commitments to action.

ii. Intermediate-range plans – are those plans, which provide a link between long-range and
short-range plans. They cover a time period usually between 1 – 5 years, though it may vary
with the type and scope of the enterprise.

iii. Short-range plans – are plans which specify what resources will be committed and what
actions will be taken in the immediate future. Short-range plans usually constitute the steps
toward the implementation of long-range plans. As a result, they will be more detailed and
specific than the intermediate and the long-range plans. Short-range plans usually cover a
period of one year or less, in most cases.

The following table shows the different planning time horizons with their corresponding example.
Time Horizon Examples
Short – range plans Annual plans like sales plan, production plan,
materials requirements plan, operating expense
budget, short-term training.
Intermediate – range plans - Modernization of production equipments and
office facilities.
- Development of employees
Long – range plans - Long-term leases of production equipment,
transport equipment, and warehouse facilities.
- Construction of new plants.
- New product development

2.2.3. Scope/Breadth Dimension of plans

The scope / breadth dimension of plans is a method of categorizing plans based on the range of
activities covered. Some plans are very broad and long-range, focusing on key organizational
objectives. Accordingly, plans are classified into three categories based on their scope or breadth.
These include:

(i) Strategic plans;

(ii) Tactical plans;
(iii) Operational plans.

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i. Strategic plans – Strategic plans determine the organization’s mission objectives, major
courses of action and the allocation of major resources necessary to achieve the organization’s
objectives. Strategic plans thus provide the organization with the overall long-range direction
and lead to the development of policies. Strategic planning is usually done taking into account
the environmental threats and opportunities and the internal strengths and weaknesses of the
organization.

Strategic plans are generally:

 performed by top level managers;

 mostly long-range in their time frame;
 expressed in relatively general non-specific term; and
 a type of planning that provides general direction to the organization.

ii. Tactical plans – focus on the process of developing action plans through which strategies are
executed. As mentioned earlier, strategic plans focus on what the organization will be in the
future; whereas tactical plans emphasize how this will be accomplished. Tactical plans refer
to the implementation of activities and the allocation of resources necessary for the
achievement of the organization’s objectives. They specifically focus on short-term
implementation of activities and resource allocations.

The following are typical examples of tactical planning:

 Developing annual budget for each department, division, project;
 Choosing specific means of implementing strategic plans;
 Deciding on course of actions for improving current operations.

iii. Operational Plans – are the most specific and detailed plans, focusing on the day-to-day and
week-to-week activities of the organization. Such plans include: Production schedules, sales
plans, lesson plans, etc.

2.2.4 Flexibility Dimension of Plans

Plans are also classified as variable plans, alternative plans, and supplementary plans, based
on the degree of their flexibility to respond to environmental uncertainties.

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i. Variable plans – state figures in terms of ranges to allow for the uncertainty of the
environment. For instance, the time estimated for a phase of a project might be stated as “three
months plus or minus one week.” The advantage of variable plans is that one can easily
estimate the tolerable limits for the organization.
ii. Alternative plans – are similar to variable plans in recognizing environmental uncertainties,
except that, in this case, the planner usually sets up two or more entirely separate plans.
iii. Supplementary plans – are used to reduce that constraining effects of the original plan by
providing a prearranged appeal channel.
2.3 Organizational Objectives

The management process begins with setting organizational objectives. Objectives give meaning
and purpose to the organization. Without objectives, without something to achieve, organizations
would be purposeless. Objectives determine the scope of future events. They serve as reference
points to concentrate resources and efforts. Therefore, objectives determine what action to take
today to obtain results tomorrow.

2.3.1 The Nature / Characteristics of Objectives

Like any other management function, objectives have certain basic features. Obviously, objectives
state end results, and overall objectives usually need to be supported by sub-objectives. Generally
speaking, objectives have the following features and/or characteristics.

i. Objectives Form a Hierarchy

In many organizations objectives are structured in a hierarchy of importance. Thus, there are
objectives within objectives. The hierarchy of objectives is a graded series in which organization’s
goals are supported by each succeeding managerial level down to the level of the individual. The
objectives of each unit contribute to the objectives of the next higher unit. Each operation has a
single objective which must fit in and add to the final objectives.

The following figure demonstrates the hierarchy of objectives ranging from top management to
individual objectives.
Means Ends

21
Overall
objectives
 Hierarchy of objectives in the form of a means-ends chain.

ii. Objectives Form a Network

Objectives interlock in a network fashion. They are inter-related and inter-dependent. The concept
of network of objectives implies that, once objectives are established for every department and
every individual in an organization, these subsidiary objectives should contribute to meet the basic
objectives of the total organization.
iii. Multiplicity of Objectives

Organizations pursue multifarious (many and various) objectives. At every level in the hierarchy,
goals are likely to be multiple. For example, the marketing division may have the objective of sale
and distribution of products. This objective can be broken down into a group of objectives for the
product, advertising, research, and promotion managers. The advertising manager’s goals may
include: designing product messages carefully, create a favorable image of the product in the
market, etc

2.3.2 Importance of Objectives

All organizations are goal seeking, that is, they exist for the purpose of achieving some goals,
efficiently and effectively. In general, objectives serve the following major functions:

i. Legitimacy – objectives describe the purpose of the organization so that people know what it
stands for and will accept its existence and continuance. Objectives thus help to legitimize the
presence of organization in its environment.

22
ii. Direction – objectives provide guidelines for organizational efforts. Once objectives are
formulated, every activity is directed toward their achievement, every individual contributes
to meet the goals.
iii. Coordination – objectives keep activities on their track. They make behavior in organizations
more rational, more coordinated and thus more effective, because every one knows the
accepted goals to work toward. In setting effective goals managers help members at all levels
of the organization to understand how they can best achieve their own goals by directing their
behavior toward the goals of the organization.
iv. Benchmarks for Success – objectives serve as performance standards against which actual
performance may be checked. They provide a benchmark for assessment. They help in the
control of human effort in an organization.
v. Motivation – Goals / objectives are motivators. The setting of a goal (objective) that is both
specific and challenging leads to an increase in performance because it makes it clear to the
individual what he is supposed to do. He can compare how well he is doing now versus how
well he has done in the past and in some instances how well he is performing in comparison to
others.

2.4. The Planning Process

The process of planning refers to the specific steps followed in developing organizational plans.
The following are the major steps that a planning process should follow.

a. Understanding the existing situation

The influence of the external environment is of great concern in planning. As a result, it is essential
to be aware of the external opportunities and threats that can affect the planning process. Thus,
the organization is required to analyze the following and other environmental situations while
involving in the planning process.

 Analyze the economic situation (competition, price, demand, supply, etc.).

 Analyze the political situation (government policies, taxation, peace and stability etc.).
 Analyze the social and cultural situations (culture of the society, direction of culture
change, attitude of the society towards different products etc).

23
Moreover, it is important to examine the internal situations and determine the existing strengths
and weaknesses of the organization. Thus, planning requires a realistic diagnosis of the existing
strength, weaknesses, opportunities and threats of the organization.

b. Forecasting

Planning is deciding about what is to be done in the future. As a result, it becomes essential to
have information about what the future would look like. Thus, the manager is required to make
certain assumptions based on forecasts of the future in order to plan properly.

c. Establishing objectives/goals

The next step of the planning process is to identify the objectives/goals of the organization. The
objectives fixed must clearly indicate what is to be achieved, where action should take place, who
is to perform it, how it is to be undertaken, and when it is to be accomplished. Objectives also
need to be measurable. Thus, scheduled completion dates, quantity standards, cost limitations,
quality specifications, should be established in advance while trying to achieve the objectives.

d. Determine and evaluate alternative plans (course of actions).

Next to the establishment of objectives, alternative plans are developed and thoroughly evaluated.
Thus, once alternative courses of action are determined, they must be evaluated. Usually,
alternative plans or course of actions are evaluated against such factors like cost, risks, benefits,
organizational facilities, etc. Compute oriented mathematical plans or techniques can also be used
to find out the best course of action.

e. Selecting the plan (course of action) and formulate derivative plans

This step of the planning process involves selection of the most desirable plan and the development
of derivative plans. Selection of one course of action to face future challenges introduces
inflexibility in the planning process. Once a choice is made and a master plan prepared, derivative
plans must be developed to support it.
f. Implementing the plan

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  After the optimum alternative plan or course of action has been selected, the manager is
required to develop an action plan to implement it.

g. Controlling and evaluating the results.

Once the plan is implemented, the manager is responsible to monitor and evaluate the progress
made. He may be required to make the necessary modifications based on the evolution results. It
is likely for plans to be affected by environmental factors. In such a situation, modification of
plans becomes very essential.

CHAPTER THREE
DECISION-MAKING

3.1. MEANING OF DECISION-MAKING

A decision is the selection of a course of action from among a set of alternatives. Decisions usually
imply alternatives. A decision problem demands two or more alternatives. Decisions are also
made to achieve goals.
In general, decision-making may be viewed as the process by which individuals select a course of
action from among alternatives to produce a designed result. It is a process made up of four
continuous interrelated phases which include:

 explorative (searching);
 speculative (analyzing);
 evaluative (weighing); and
 selective (commitment).

a. Explorative: The decision maker must find occasions for making a decision. He must make
a realistic appraisal of where the firm is, what are the current problems. Asking “What should
be done?” and “What are the challenges?” represents searching.

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b. Speculative: The decision maker must analyze various factors affecting a “decision problem”
so that an appropriate response can be obtained. “How to take advantage of the challenging
opportunities in the environment?” and “How to utilize the resources to get the maximum
possible benefit for the organization?” indicate analyzing.
c. Evaluative: The decision maker is expected to make a cost-benefit analysis of various
alternatives. Asking “what are the costs?” and “what are the potential benefits?” indicates
evaluating.
d. Selective: This is a question of making a choice among alternatives.

3.2 TYPES OF DECISIONS

The quality of decision-making skills is one of the critical factors in managerial success. Managers
are evaluated by the decisions they make and, more often, by the results obtained from their
decisions. As a result, it is useful to distinguish between decisions made by managers at different
levels in the organization. Managers are usually involved in making two types of decisions as
indicated below.

a. Programmed Decisions

A programmed decision is one that is routine and repetitive. Rules and polices are established well
in advance to solve recurring problems quickly. For example, a hospital establishes a procedure
for admitting new patients; a supervisor administers disciplinary actions against workers reporting
late for work etc. Thus, programmed decisions can be made in a routine way on the basis of pre-
established set of alternatives.

b. Non-programmed Decisions: usually deal with unique/unusual problems. In such cases, the
decision maker is forced to make decision in a poorly structured situation where there are no
readymade courses of action to resort. Deciding how to restructure an organization, to improve
efficiency, where to locate a new company warehouse, whom to promote to the vacant position of
Regional Manger, are examples of non-programmed decisions.

3.3. THE DECISION – MAKING PROCESS.

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 The decision-making process describes the elements of an organization that accepts and processes
information inputs and transforms them into useful conclusions. To make good decisions,
managers should invariably follow a sequential set of steps. If managers do not go through a
systematic and rational sequence, they are likely to make a decision that will solve the wrong
problem.

The decision making process can be described graphically as follows.

1 2 3 4 5 6
Awareness Diagnose Develop the Implement
of and state the Evaluate the
potential Select the best & follow-
problem problem alternatives
alternatives alternative up the
decision

Internal Environment
Feed-back
Problem
External Environment

Decision Making – the basic step

i. Awareness of the problem (Define the problem)

The first step in the decision-making process is recognizing a problem. The manager needs to
become aware that a problem exists and that is important enough for managerial action. Problems
generally arise because of disparity between what is and what should be.

ii. Diagnose and state the problem

❖ Once aware of a problem, the manager must state the real problem. He must try to solve
the problem, not the symptoms. What appears to be the problem initially, may turn out to
be superficial ultimately. It may not be the real problem at all.
iii. Developing Potential Alternatives

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The statement of the problem in clear, measurable terms, enables executives to develop
alternatives. Developing alternative solutions to the problem guarantees adequate focus and
attention on the problem. It helps managers to fully test the soundness of every proposal before it
is finally translated into action. Managers should encourage people to develop different solutions
for the same problem.

iv. Analyze / Evaluate the Alternatives

In this step, the decision maker tries to outline the advantages and disadvantages of each
alternative. The consequences of each alternative would also be considered.

v. Select the Best Alternative

In this step, the decision maker merely selects the most appropriate alternative or combination of
alternatives from the alternatives listed along with their correspondent advantages and
disadvantages. The following four criteria are commonly used for making the right choice among
available alternatives:

a. The risk
b. Economy of effort
c. Timing
d. Limitation of resources
vi. Implement and Verify / Follow-up the Decision

After making a decision, a manager is required to implement it.

. He must seek feed-back regarding the effectiveness of the implemented solutions and establish
follow-up procedures to evaluate the effects of the decision

3.4 THE DECISION-MAKING ENVIRONMENT (CONDITION)

Decision-making does not take place in a vacuum. There are various conditions that affect the
decision-making process and the decision maker as well. Consequently, decisions are made under
the conditions of certainty, risk, uncertainty and conflict or competition.

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i. Decision-making under certainty

Decision-making under certainty implies that all the information required to arrive at a final
decision is known with complete certainty. Thus, the decision-making under certainty model
assumes that manager taking decision has full knowledge of the certainty of the information, its
non-ambiguity and stability. This means that, a manager making decision under certainty relies
on a standing plan or policy, and in such a condition decisions are made routinely.

ii. Decision-making under risk

In the condition of risk, a decision maker (manager) knows what the problem is and is aware of all
possible outcomes and their probability of occurrences. He knows what the alternatives are. But
does not know how each alternative will work. Thus, the manager is faced with the dilemma of
choosing the best alternative available.

iii. Decision-making under uncertainty

This is the most difficult decision making condition for the manager. Hence, a manager cannot
develop probability estimates for various alternatives. Thus, in the situation of uncertainty the
manager is not able to determine the exact odds (probabilities) of the potential alternatives
available.

iv. Decision-making under conflict or competition

In this decision condition, there is a clash of interest of competitive firms and every decision maker
carefully considers the actions of his opponents and takes a decision that minimizes loss or
maximizes the gain.

3.5. MANAGEMENT BY OBJECTIVES

Management by objectives (MBO) is a system of managing in which managers work together with
subordinates to establish objectives and design plans to achieve them. It is a process by which

29
managers and subordinates work together in identifying goals, setting objectives, and designing
plans.
i. Central Goal Setting: Under this stage the top management sets different goals for the entire
organization with the help of other managers positioned at different levels. Once the
organizational goals are established, they should be made known to all the concerned members
of the organization and be clearly understood by them.
ii. Preparation of Departmental Divisional and Individual Goals: The step that follows after
the development of the organizational goals is preparing goals for the different departments,
divisions and individuals as well. These goals are usually prepared by a joint effort of the
subordinates and the concerned managers. The main concept here is that, everybody gets
involved in the goal setting activities and develops a sense of responsibility to work towards
the achievement of the jointly set objectives.
iii. Matching Goals and Resources: The objectives are not ends by themselves unless we make
available the required resources and the means to achieve them. Consequently, the concerned
manager is responsible to make sure that all the subordinates are provided with the necessary
tools and materials to achieve the intended goals effectively.
iv. Review and Appraisal of Performance: The manger is required to conduct periodic review
to monitor performance and check the progress made towards the achievement of the goals.
By doing so, he will be able to recognize any unanticipated problem encountered while
performing the actual task. Moreover, such a practice can improve the moral of the
subordinates.
Advantages of MBO

MBO has the following major advantages:

i. Sets clear goals

ii. Motivates (encourages) employees
iii. Develops managerial skill.
iv. Improves communication between management and subordinates
v. Reduces conflict.
vi. Facilitates control.
vii. Apart from the above-mentioned advantages, the usage of MBO system can ensure better
performance of the organization, provide coordinated effort to the organization, etc.

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 CHAPTER FOUR

THE ORGANIZING FUNCTION

4.1 An Overview of Organizing

• Specific Objective:
After completing this lesson, the trainee will be able to give a
general overview about the organizing function.

The management process starts through planning i.e. in planning, objectives that are going to be
achieved are identified, established and courses of actions are also determined. The managerial
functions of planning and organizing are intimately related. Organizing begins with and governed
by plans, then the manager continues his activity by:

- Giving practical shape to the activities/works to be performed

- Identifying the roles whereby workers are supposed to play in
- Making known to the group what their duties and responsibilities are. Therefore to design
& maintain such systems of roles is the managerial function of organizing. Some of the
definitions of organization and organizing managerial activities are given below.

A primary focus of organizing is determining both what individual employees will do in an

organization and how their individual efforts should best be combined to advance the attainment
of organizational objectives. The end result of the organizing process is an organization - a whole
consisting of unified parts (a system) acting in harmony to execute tasks to achieve goals
effectively and efficiently.
Organization: - can be defined as a group of individuals working together in a coordinated
manner to achieve the common stated objectives.
• Organizing is a function of management, which is concerned with developing a frame work of
how total work is divided into manageable components in order facilitate accomplishment of
objective.
• Organizing defines the part which each member of an enterprise is expected to perform and
the relation between such member in order to achieve objectives.

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• Organizing is a part of managing that involves establishing an intentional structure of roles for
people to fill in an organization.
4.2 Differences between Formal and Informal Organization

Formal Organization is a type of organization, which is established deliberately, or consciously

to achieve pre determined objectives. Some of the features of formal organizations are

 Formal organization is consciously brought into existence for the achievement of pre-
determined objectives.
 Clearly defined duties, responsibility and authority exist in the formal organization.
 Formalized line of communication (scalar chain) exists in the formal organization.
 In the formal organization duties are provided in writing to all the employees.
Informal Organization is an organization, which consists of small social groups and friendly
association of people. Some of the features of informal organizations are

 It is not deliberate, rather it is voluntary and spontaneous relation which is created based on
status, interest, belief, background etc.
 It is undocumented and officially unrecognized relationship between members.
 Informal organization can affect the organization positively or negatively.
 The management neither creates them nor destroys (abolish) informal organization.

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Differences between formal and informal organization

FORMAL INFORMAL
ORGANIZATION ORGANIZATION

Formation Consciously formed and Spontaneous and

tends to be stable dynamic based on
interest, belief,
background, etc

Goals Profit/service to the Members satisfaction

society

Communication Well defined flow of Unspecified channel

communication which is of communication,
usually slow, which is very fast.

Documentation Duties, responsibilities Commonly no such

of workers are given in formal document will
writings. be used.

Stability Usually formal org is There is high lack of

permanent and stable stability

Growth It may grow to bigger size It tends to remain

small

Membership & Formal Procedure to be a Members can join

Departure member and to depart and leave the
from membership association based on
their feeling

Motive To accomplish the To accomplish social

objective and friendly activities

Therefore the management must know that within the formal organization, there is also an informal
organization that will be created based on different terms. The informal organization is the result

33
of the need of people’s need for social interaction and friendly associations in which the formal
organization does not provide.

Finally, the management should always give proper attention about the informal organization that
exists in the enterprise. The management should know the effect of the informal organization on
the enterprise performance and how to influence the informal organization and how to direct their
activities to the accomplishment of the common objectives.

IMPORTANCE OF ORGANIZAING

• Facilitate growth and diversification: - If there is an existence of organized effort in an

organization, it creates a room for the growth and diversification of an organization because
of the coordinated group effort. Usually growth refers to increase in the scale of production
and diversification is starting production of new type of product.

• Facilitate administration: - poor organizing function leads to waste in motion and expensive
overlap in work. Important work may be subordinated or may be overlooked totally. Effective
organizing function allows management to relate resource to flow continually to overall
objectives, it provide an appropriate platform from where management can perform the
function of planning, directing and controlling etc in a smooth way.

• Provides optimum utilization of resources: - Organization identifies the right job or position
and assigns the right resources accordingly. Organizing eliminates overlapping and
duplication of work resources and human effort with in the organization.
• Identifying the activities of employees: -In a formal organization the employee will be given
a clearly defined duties and responsibilities to accomplish. Therefore each employee of the
enterprise will be able to accomplish his task easily. Every one will be in a position to know
what to do, what task and responsibility is expected from him, to whom to be accountable to,
etc which is clearly defined in organizing process

• Provides specialization: - Through the division of labor, the employee will be assigned in
their field of studies, therefore the employee gets the chance to specialize upon the job and

34
 specialization provides individual to use their talents profession and experience in an efficient
and effective way.

• Brings better performance of an organization and achievements of goal: - Under

organizing there will be coordinated group activity which provides a team spirit and better
performance of the enterprise through group activities.

• Stimulate creativity: - specialization provides individuals with well-defined duties, clear lines
of authority and responsibility. Sound organizing function and organizational structure
enables managers to turn over routine and repetitive jobs to supporting position and
concentrate on important issues where they can exploit their potential better.

The Organizing Process

• Specific Objective:

After studying this lesson, the trainee will be able to discuss the
basic steps in the organizing process.
Hence organizing function involves identifying, grouping, assigning various activities and
prescribing authority relationships to accomplish predetermined objective. As per the definition
managers perform the organizing process by:
1) Identifying the work: - we organize to achieve the objectives, so it is essential to identify the
total work necessary to achieve the goals. The wok must then be classified in a systematic way
so that each person in the organization gets a separate and distinct task. Work must be divided
and distributed because no one can handle the total work in an organization single-handed.
Identification of work enables managers to concentrate on important activities, avoiding
unnecessary duplications, overlapping and wastage of efforts.

2) Grouping of the work: - division of work creates the need for coordination. In order to provide
for a smooth flow of work, all closely related and similar activities must be grouped together.
Thus, departments and divisions are created under the direction of a manager.

35
3) Establishing formal reporting relationships: - in order to secure compliance to organizational
directives, reporting relationships must be specified. Once formal relationships are established,
it would help individuals to know what must be done, how it must be done, to whom the matters
must be referred and how particular jobs relate to one another etc. Without formal relationships
it would be difficult to process the total because there is no way to know how the work is
progressing, is supposed to handle the work, where the work has to be coordinated so as to
achieve enterprise objectives. As soon as the formal relationships are established, they would
provide a framework for assigning duties and responsibilities to individuals in an unambiguous
fashion.

4) Providing for measurement, evaluation and control: - finally, the manager should establish
signposts and control points in the organization so that the subordinates' performance can be
measured, evaluated and controlled at regular intervals. If deviations occur, they must be
spotted early and appropriate remedial actions taken immediately.

5) Delegating authority and responsibility: - authority is the right to act, to issue order and
exact obedience from others. Without authority a manager may not be able to perform the tasks
with confidence and show results. While assigning duties the manager should clearly specify
authority and responsibility limits. So that the subordinate know well in advance as to what
type of work is expected of him by the superior.

One result of organizing is to create structure for organizational participants where they can work
for organizational goals. Taken together, the concepts of structure and process can be viewed as
the static and dynamic features of the organization.

4.4 ORGANIZATIONAL STRUCTURE

Organizational structure is a formal pattern of interaction and coordination designed by

management to link the task of individuals and groups to achieve organizational goal. It is used as
a tool for creating a relationship among the various functions, which make up the organization.

36
Organization structure refers to the net work of relationship among individuals and positions in an
organization. Organization structure describes the organization's framework just as human beings
have skeletons that define their parameters, organizations have theirs. It is like the architectural
plan of a building. Just as the architect considers various factors like cost, space, special features
needed etc. while designing a good structure, the manager too must look into factors like benefits
of specialization, communication problem etc. some of the main concepts of organizational
structures are: -
• It is a purposive creation: - organizational structures are created deliberately to achieve specific
goals. Structure is the means for converting the disorganized resources of men, machine and
materials into useful, productive enterprise.

• Structures should be understood easily: - usually structure takes the shape of pyramid, it is
traditional but it works reasonably well. Preparation of organizational structure should be in a
motive of providing a clear idea about structures and flows.
• Structures tend to be relatively permanent, with continuous, gradual change, with major
changes occurring at strategic time. Usually existence of organizational structure is for a longer
period of time. So design of organizational structure must be taken after a careful examination
of all relevant factors.
• Structure has two dimensions, one horizontal and the other vertical. The horizontal aspects
define the basic departmentalization. Vertical aspects of structure relates to the creation for a
hierarchy of superiors and subordinates leading to the establishment of management structure.
Taken together, they set the formal structure of the organization.

• Organizational structure is a means to a given end- a toll by which selected goals are attained.
It is a method of reducing the variability in behavior of those who work for the organization.
It is a method of regulating behavior in order to achieve a common purpose in a coordinated
manner.

Specialization and coordination are the main issues in the design of organizational structure. The
term specialization includes division of labor and the usage of special machinery's, tools and
equipment. Co ordination means an orderly performance in operations to achieve organizational
objectives.

37
The organizational structure of an organization differs from an organization to another based on
the nature of work, the managerial activities, the human resource etc.

Major Organizational Concepts

Specific Objective:

After completing this lesson, the trainee will be able to describe the following
concepts as they apply to organizations: power and authority, unity of command,
delegation, span of control and centralization vs. decentralization.

4.5.1 DIVISION OF LABOR & SPECIALIZATION

Classicists advocated fragmentation and routinization of work to reap the advantages of

specialization. Specialization is glamorous term because it promises greater efficiency and
productivity.

Organization performs a wide variety of tasks. A fundamental principle is that work can be
performed more efficiently if employees are allowed to specialize. The essence of work
specialization is that, rather than an entire job being done by one individual, it is broken down into
a number of steps, each step being completed by a separate individual. In essence, individuals
specialize in doing part of an activity rather than the entire activity. Division of labor is the degree
to which organizational tasks are divided into separate jobs. Once the organizational tasks are
divided into parts, the professionals can be assigned to such parts according to their profession and
experience.

Division of labor allows for specialization of efforts and permits workers to perform a manageable
number of tasks. It creates groups of specialists. It improves one's skill at performing a task through
repetition. Division of labor allows for specialization of efforts and permits worker to perform a
manageable number of tasks. It creates a group of specialists.

38
Benefits of division of labor

- Employees become efficient when they perform well-defined manageable tasks.

- Employees can acquire expertise (specialize) in their tasks
- Employees with appropriate ability for tasks to be performed can be selected.
- The organization achieves standardization across tasks.
- Managers can easily have control over performance and detect problems,
- The employees will be in a position to exploit a new technique or way of performing
repetitive task in order to make simplifications.
- There will be less wastage of materials and time while performing the task. Etc

Disadvantages of division of labor

- Specialization makes workers to be unfit for other jobs, it produce workers who are mental
dull, frustrated, deprived and insecure.
- Performing repeated job will be very boring to the employees etc.
- The long-term proficiency of the employees will be decreasing and they usually become
passive.
Though division of labor is very necessary to an organization, but it should not be carried to such
an extreme that makes the employees bored and alienated. It should be used wisely with employee
motivation system.

4.5.2 DEPARTMENTALZIATION

Departmentalziation is a part of organizing process, which divides and groups different activities
and employees of an enterprise into various departments. Departmenration is establishment of a
distinct area or sub-system with in the organization (system) over which a manger has authority
for performance of specified activities and results. In large-scale organization it is very necessary
to divide the overall operation into sub activities and working group. Therefore,

39
Departmentalziation is done through specifying responsibilities and delegating the necessary
authority to accomplish the objective. Departmentalziation makes an organization to expand and
to have a wide control over resources.

BASES OF DEPARTMENTALZIATION

There are several keyways in which an organization may decide about the pattern that will be used
in grouping the various, similar activities performed. The most common bases of department used
by organizations are

I. Functional Departmentaliation

Functional Departmentaliation is the most widely employed basis for organizing activities. The
basic aim of functionalization is to simplify complexity by grouping all the work to be done into
major functional departments. Few people can understand to be proficient in all aspects of
business. It is quite logical to group the activities in the organization into such typical departments
as production, marketing, finance etc. therefore, It is grouping of activities in accordance with the
function of the organization. It involves grouping together jobs that are similar in function.
Functional Departmentaliation is most commonly used bases in an organization. One responsible
person with sufficient authority to have control over the department activities heads each
department.

President

Vice president

Production Finance Personnel Marketing

Department Department Department Department

Advantages of functional Departmentaliation

40
 - It follows the principle of division of labor (specialization) i.e. specialists can work in their
field of training and skills.
- It makes supervision easier, since each manager is responsible to one function, it will be easy
to control the proper performance of the department.
- It makes easy to hire workers according to their profession
- The system is easy to understand
- It is simple to train workers on a specific function etc

Disadvantages of functional Departmentaliation

- Employees may tend to focus on the attainment of departmental goals and often to the
exclusion on organizational goals
- It does not create a good training ground for development of general managers. It makes the
manager to specialize in a single line. Functional Departmentaliation is not an ideal training
ground for top level mgrs.
- If there is profit or loss at the end of the period, it is difficult to identify the accountability
behind the result
- Because of specialization work might be routine and non-motivating.
II. Territorial/Geographical Departmentalziation

Territorial Departmentalziation is grouping of activities in area wise (geographical location) and

each area is in charge of a single person. This method of Departmentalziation may be suitable for
large companies that distribute on a massive scale nationally. It is difficult for them to co ordinate
all regions from the head quarter, because each region has distinct needs, tastes and facilities.
Geographic or territorial Departmentalziation or helps in exploiting the local advantages and
reduces the transport cost. Decision regarding product design, pricing and marketing may be left
to the discretion of the territorial manger who are close to customers and know their needs better,
territorial Departmentalziation reduces transport costs and provides an excellent opportunity to
build community good will.

41
 President

Vice
Vice president
president

Western Eastern Southern Northern

division division division division
(Gambella (DireDewa (Nazareth (Bahirdar
branch) branch) Branch) Branch)

Advantages of territorial Departmentalziation

- The firm will get the chance to have face to face communication with the local customer
- It reduces heavy transport cost
- It provides the manager to improve their skill in various fields
- Usage of regional resources at reasonable cost is possible
- Accounts are prepared in area-wise, so the profitability of each area is clearly known to the
management etc.

Disadvantages of territorial Departmentalziation

- Because of the distance, it is very difficult to have control over the branches from the head
quarter.
- It gives rise to the problem of communication
- Similar activities may be done in the various regional divisions, which leads to duplication
of works etc.
III. Departmetnation by product

Departmentalziation by product is adopted in the case of multi product enterprise. It is a way of

arranging activities associated with production and selling of a product under the direction of one

42
manager. Most of the time functional units for each product are created with in the general structure
of the organization.

President

Vice president
(Production Manger)

Product 1 manager Product 2 Product 3 Product 4

(Cadillac) manager manager manager
(Chevrolet) (GMC truck) (Pontiac)
Advantages of Departmentalziation by product

- It creates high brand establishment and product visibility.

- It enables an organization to develop executives who have broad managerial experience in
running the total organization.
- Attention can be directed towards specific product or service
- It is best well suited for large organization etc.

Disadvantages of Departmentalziation by product

- It requires large number of professional personnel and resources, and hence is costly.
- There is higher cost through duplication work and facilities. Sometimes machines and
equipment may not be used fully.
- Workers under each product line may tend to focus more on their product and forget the
other product of the organization etc.

IV. Departmentalziation by Customer

Under the Departmentalziation by customer, separate departments are created to serve the needs
of particular customer. The purpose is to respond and interact with specific customers or groups

43
of customer on an effective way. This type of Departmentalziation is preferred when the needs of
customers are different in nature, For example a bank or financial institution may divide its loan
section into number of heads and assign them to various departments, such as loans to the business
men, farmers, professionals and so on.

President

Vice president

Mortgage Commercial Agricultural Developmen

bank bank bank t bank
Advantages of Departmentalziation by customer

- It fulfills the expectations and needs of customers.

- It gives a great knowledge to the organization about the customers
- The organization can develop rapport (agreement) with attractive and resourceful customer
etc.

Disadvantages of Departmentalziation by customer

- It is almost impossible to consider all the customers, their interests, habits and customs
- Organization may discriminate the high potential buyer from the lower ones etc.

V. Departmentalziation by Process

Under the Departmentalziation by process of equipment, activities are grouped on the basis of
various manufacturing processes. Similar types of labor and equipment are brought together to
achieve a common goal. It permits intensive and economical usage of costly equipment.

President
44

Vice President
(Manufacturing
Advantages of Departmentalziation by product
- It is advantageous when machines or equipment used require special operating skills
- Highly advantageous to manufacturing companies.
- It allows specialization with in the organization.

Disadvantages of Departmentalziation by product

- Co ordination becomes difficult in the organization

- Efforts may only focus on the unit goals of the organization. Etc

VI. Mixed Departmentalziation

In practice, an organization may use one or more basis of Departmentalziation. For instance a
national multi product diversified corporation may adopt geographical and product wise
Departmentalziation at the same time. Within such division it may have functional base like
finance and marketing. This kind of Departmentalziation practice is known as mixed
Departmentalziation.

45
4.5.3 CENTRALIZATION AND DECENTRALIZATION

The concept of centralization and decentralization is more connected with decision making and
authority.

Centralization means that the authority to take for most decision is concentrated at the top of the
managerial hierarchy. Centralization is the systematic and consistent reservation of authority at
central points within the organization. In centralization little delegation of authority is the rule;
power and discretion are concentrated at the top level. The control and decision making resides at
the top. Most organization starts out with centralization of authority; such an arrangement helps
the manager to be in touch with all operations. Centralization is usually adopted by small scale
organizations but as the organization becomes more complex in terms of increasing size,
diversification of activity etc then there will be a need to move the decision making centers to the
operating levels. Thus the larger the size of an organization is the more urgent is the need for
decentralization. The advantages of centralization are power and prestige is provided to the
executives, uniformity of policies, practices and decisions are fostered. Full utilization of the main
office and information specialists is promoted, due in large part to their proximity to the top
management level, highly qualified specialists can be utilized, the danger of actions and drifting
and getting off course is reduced etc.

Decentralization refers to the degree to which authority is delegated to the lower level.
Decentralization is an extension of the concept delegation and cannot exist unless authority is
delegated. The centers of decision-making are dispersed throughout the organization.
Decentralization in recent years has come to be accepted as a golden calf of management
philosophy. In decentralization a great deal of authority is delegated and more decisions are made
at the lower level management. “Every thing that goes to increase the subordinates role is
decentralization and everything which goes to reduce is centralization”.

Absolute cent (pure cent) is not practical except in very small firms. Absolute power would mean
that subordinates have no duties and authority.

ADVANTAGES OF DECENTRALIZATION

46
- Reduce the workload on overburdened executives: - the executive need not bury himself in
an endless routine, as he is not expected to look into the affairs of a division from close
quarters. Decentralization relives the top managers from routine duties and enables them
to concentrate on other important issues of the organization.

- Decentralization creates a room for developing general managers: - if the organization

system allows decentralized performance, in the near future the organization will be having a
kind of employees equipped with managerial ability of decision making and analyzing their
surrounding.

- Helpful in adaptation to fast changing environment: - if an organization becomes more

centralized, by it self it creates delay of performance, in our dynamic environment the
organization cannot afford loosing valuable resource of an organization which is time.

- It is a motivational method: - Decentralization gives an individual an opportunity to learn

by doing. When employees of an organization are provided with an authority to take a
decision, it creates self-esteem and sense of belongings.

- For the purpose of making quick decision on the spot: - Decentralization brings the decision
making process closer to the action area. Since decision do not have to be referred up
through the hierarchy. Acquaintance with local conditions enables divisional heads to
decide to solve problems more quickly and more effectively than the higher level
executives.

- It facilitates diversification and expansion: - it may be extremely difficult for a multi

product enterprise to provide a balanced and proportionate emphasis on its profitable product
line through centralization. In order to provide a better service to the community
decentralization is the only key.

47
DISADVANTAGES OF DECENTRALIZATION

- It results in duplication of effort and resources.

- It allows lack of uniformity of standards among organizational units because different
decisions will be taken by different managers at each division based on different skills
- Creates problem of coordination among different departments and units and makes it more
difficult to have a uniform policy.
- It becomes difficult for the head quarter to control the different division.
- It increases the chances that the lower level manager will take undesirable action

4.5.4 DELEGATION OF AUTHORITY

All of us have lived with the concept of authority since birth. First our parents were authority
figures, then schoolteachers, principals finally employers (bosses) all remind us that we live in a
society with distinct authority relationships exists.

Authority is the right to give orders and the power to exact obedience. It is the right to command
others to act or not to act in a manner deemed by the possessor of the authority.
Authority is vested in organizational position, not to individual, managers have authority because
of the position they hold, and if other people in the same position would have the same position.
Authority flows down the vertical hierarchy; positions at the top of in the organizational structure
are vested with more formal authority.

Power and Authority

Many scholars argue that the concept of power and authority are synonymous, while others
contend that they are distinctly different. Authority may be viewed as the right to do something. It
is the formal right of decision and command. The manager's authority turns him into a decision-
maker on issues affecting the business. Power is a broader concept than authority.

Power is a measure of a person's potential to get others to do what he or she wants them to do, as
well as to avoid being forced by others to do what he or she does not want to do. Power can be
derived from many sources. Not necessarily from job position. Power can be intentional or

48
unintentional. Power can be thought of as a strong influence on the direction of an individual's
behavior. Some of the sources of power are

1) Legitimate Power: - which is derived from a person's official position in an organization or

person's position in the organizational hierarchy For example a captain in the military has a
power over lieutenants, sergeants and the soldiers.

2) Coercive power: - which is derived from a person's ability to create fear in another individual
and is based on the individual's expectation that punishment will be received for not agreeing
or complying with the superior's commands or beliefs. The personal characteristics of an
individual that make other people want to associate with the person.

3) Reward power: -is the opposite of coercive power in that it is derived from the ability to grant
rewards for compliance with the superior's wishes .e. good grade,

4) Expert power: - is derived from the perception of belief of an individual that the superior
possesses outstanding skill, knowledge and expertise in certain areas. Therefore the
subordinate desires to fulfill the wishes and directions of the superior for example, subordinate
will want to follow the directions of a manager with an impressive track record of project
successes, high profitability and good communication skills.

5) Referent power: - is based on the identification of an individual with a leader who is held in
high esteem. Often this leader is a person who is older and perceived as wise, honest and
consistent.

Fig: Differences between Authority and Power

Authority Power

• Right to do something • Ability to do something

• Legitimate power given by an • Derived from many formal and informal
organization to members holding sources
position

49
 • Narrow them, authority is one of the • Broad concept which creates action
major sources of power when authority fails to achieve results.

To promote the effective functioning of the formal organization, a number of authority

relationships are needed. The reasoning is different managers need different decision making
power, in both type and amount to make the formal group's efforts meaningful and effective in
attaining specific goals. The types of authority that commonly exist in a formal organization are

Line authority: - is a form of authority in which individuals in management positions have the
formal power to direct and control immediate subordinates. It is represented by the chain of
command, which links superiors and subordinates. It is the superior-subordinate relationship
whereby a superior makes decisions and tells them to a subordinate, who in turn makes decisions
and tells them to the subordinate and so on, forms a line from the very top to the very bottom level
of the organizational structure.

Line authority is easily understood by the members of an enterprise. A superior has a direct
command over subordinates; this is the essence of line authority. Each member knows from whom
he/she receives orders and to whom he/she reports. A person with line authority has charge of and
is responsible for the work of a unit and its direct contribution to the goals of the enterprise.

Staff authority: - is the authority/rights to advise recommend and counsel in the staff specialists,
areas of expertise. Or staff authority is the authority originally meant to be used as a support
provider to the line authority. This concept exists today and is valid. Whereas a line officer has
direct authority over other individuals and can command that ideas be used, a staff person must
usually sell his or her ideas to the line personnel on the bases of their merit. Staff authority is of
many types like

Advisory staff authority: - they provide specialized counseling to line managers. Advisories staff
manager studies problems, offers suggestions and prepares plans for the use and help of the line
manager. For example personnel department role include giving suggestions for interviewing
format, performance evaluation, special bonus plan, company benefit etc.

50
Service staff authority: -these staff members have a service relationship with the line members.
Service units perform a service consisting of activities, which have been separated from the line
job. For example the maintenance department are service department who will be providing
services (e.g. to the production department) when the need arises.

Functional staff authority: -is an authority delegated to an individual or department over specific
activities undertaken by personnel in other departments. Staff departments may be given a
functional authority to control their systems.

Responsibility: - Responsibility is the obligation to perform the task or an activity. It is the

obligation of an individual to perform certain activities, which are assigned to him. If an individual
accepts the job or responsibility he should see that the job is well completed to the best of his
ability. Managers in organizations possess authority and are therefore responsible for other people,
money and resources. It is what one is expected to do in order to carry out one's prescribed job.
Responsibility may be continuing or it may terminate with the accomplishment of a single action.

Responsibility comes into existence when a person with authority or a manager, accepts the
obligation to perform work and starts to use authority. The viewpoint taken here is that authority
is the essential management entity in organizing. To achieve goals, the use of authority gives rise
to the acceptance of obligations for these goal attainments and it is these obligations that give rise
to responsibility.

Authority and Responsibility

It is common in organizations today to violate the parity principle. Which suggest that the authority
and responsibility of any manager should be equal. Marketing managers are given the
responsibility for increased sales, but they don't have the authority to spend for advertising,
promotion or training etc. office managers are given the responsibility for smooth operations, but
they have no authority to hire or fire key personnel or purchase important equipment. A manager's
authority should provide him or her with the power to make and enforce decisions concerning
assigned or defined duties. Responsibility places the obligation on the person to perform these
duties by using this authority.

51
Authority without responsibility has no ultimate purpose or justification for existing; likewise,
responsibility without authority to carry out the assigned duties has a no meaning. A manager
cannot perform assigned duties when the necessary authority is lacking to see that the work is
accomplished.

Therefore it should be noted that authority must be carefully tailored to fit the responsibilities
involved. Failure to strike a happy balance between the two may be frustrating to superiors and
subordinates as well.

Accountability: - means that the people with authority and responsibility are subjected to reporting
and justifying task outcomes to those above them in the chain of command. It is a mechanism at
which authority and responsibility brought into alignment. Subordinates must be aware that they
are accountable for a task and must accept the responsibility and accountability for performing.

Delegation of authority: - delegation is the assignment of authority to others in order to carry out
certain tasks. To delegate means to grant authority from the superior to subordinates to accomplish
a particular assignment. It is a delivery by one individual to another of the right to act, to make
decisions, and to request resources and to perform other tasks in order to fulfill job responsibilities.

Every manager must delegate some tasks or duties to subordinate, since management means
getting work done through others. Organization becomes operational through delegation only.
Effective managers will normally delegate as many operating tasks as possible to subordinates and
concentrate their efforts on (exceptional) management tasks.

Delegation is a two-sided relationship. It is a demanding function: it requires sacrifices from both

the assignor and the assignee. The superior must be willing to sacrifice a portion of his authority
and the subordinate must be prepared to shoulder additional responsibilities. The major reasons
why managers do not delegate are Tendency of desiring to do things personally, fear of being
exposed, unconscious acceptance of power, desire to dominate, unwillingness to accept risks,
attitude that subordinate is incapable of using authority properly etc.

The process of Delegation

52
The process of delegation consists of three steps

1) Allocation of work duties to subordinates: - the first step in this process is to determine
clearly what the subordinates are supposed to do. Then the capabilities of subordinates should
be considered to match them with the assigned duties. This would ensure the optimal utility of
human resources. However, the distribution and allocation of duties among subordinates must
be fair and well balanced. The tasks should be distributed in such a manner that the
subordinates are not unnecessarily overburdened and that each one is capable of efficiently
completing it. The total task can be divided into identifiable parts so that the manager can
handle some parts himself and other parts can be handled either by skilled workers only or by
any worker. This way, the coordination and supervision would become easier.

2) Delegation of authority and extent of delegating: - the second step is to give authority to
subordinates to make and implement decisions regarding procurement of resources and
supervision of activities that are relevant to the duties assigned to them. This authority must be
clearly stated and if possible in writing so that there is no ambiguity or indecision. This
authority should also be related to tasks so that, if the tasks change, so would the authority.
The subordinates have the authority to make decisions relative to their tasks and implement
them except those decisions that are not with in the scope of their domain, then these should
be referred to the higher authority.

3) Creation of obligation: - the third aspect is the obligation on the part of the subordinates to
perform their duties satisfactorily. The person assigned the task is morally responsible to do
his best since he has willingly accepted these tasks. Obligation is a personal concern for the
task. Even if the subordinate gets part of the task done through other people, the obligation and
the accountability still lies with the subordinate. According to Newman, Summer and Warren
"By accepting an assignment a subordinate in effect gives his superior a promise to do his best
in carrying out his duties. Having taken a job, he is morally bound to complete it. He can be
held accountable for results".

Advantages of delegation are:

53
 It reduces burden on the manager, It provides the manager with more time, which can be spend
in the external environment, It enables the manager to be relieved from the operational work
and to concentrate and expertise on other important activities, It frees the top manager from
operational issues

 Subordinate will get a chance to participate in managerial issues, Motivates the subordinate,
Creates sense of belongings and job satisfaction, It enlarges the subordinate understanding and
develop the capacity

 Delegation leads to better decision since the subordinates are closer to the situation they have
clear and complete information

 Delegation speeds up decision making. Decision taken by the lower lever managers are more
timely than those that go through the formal scalar chain process.

4.5.5 SPAN OF MANAGEMENT

Span of management refers to the number of people who are supervised by a single manager
effectively. It also shows the number of people who report directly to a single manager. Span of
management is also known as span of control, span of supervision, span of authority etc.
How many subordinates will have to report directly to each manager? This is the span of
management question. Obviously, a manager cannot supervise unlimited number of employees.
There is a limit to one’s capacity to control the work of different subordinate. A manager’s ability
to supervise a large number of subordinates depends upon different factors like knowledge, time,
energy etc.
A wide span of control (organization) results in a large number of workers reporting to one
supervisor. Wide spans or a manager who has a relatively large number of immediate subordinates
usually results in few organization levels and a "flattening out" of the structure. Usually wide span
or management are challenging to a manager and requires special consideration before assigning
a manger over large number of individuals.
A narrow span result in small number, therefore the principle of span of management is a
statement of the limitation of the number of people that a manager can efficiently manage. Narrow

54
spans, expedite more personalized manager-subordinate relationships, which results "tall
organizational structure" i.e. one with relatively many levels.

It states that no single executive should have more people looking to him for guidance and
leadership than he can reasonably be expected to serve. To overcome the biological limitations,
every manager has to delegate work to as many subordinates as he can effectively manage. Thus,
span of management is the reason for Departmentalziation and delegation of authority. It is not
how many people report to a manager that matters, but it is how many subordinates a single
manager can effectively control and handle, it is how many people report to a manager, how many
people who have to work with each other to report to a manager, the number of relationships etc.

From this relationship it can be seen that with just three subordinates there are 18 relationships and
with four subordinates, these relationship number 44, and these relationships jump to 100 when
the number of subordinates is increased to five. Therefore, no executive should attempt to control
over large number of subordinates whose work interlocks.

Factors to be considered in determining the span of control (factors affecting the span of

management)

Different attempts and formulas were made in order to determine the span of control but the
modern approach has shifted away the finding of universally acceptable magic formula. The
current view is that span is more flexible, the number of employees, which has to work under a
manager, depends upon different factors. Therefore in order to determine the span of control under
a manager these common factors should be considered.

✓ Nature of the work: - if the subordinates are involved in performing the same or similar
activities, then it is possible for the manager to supervise more subordinates. In addition, if the
work is standardized, the span of management may be increased. But if the subordinates perform
diversified and complex operations, it will be more difficult for the manager to be effective in
managing large number of individuals.

✓ Capacity of the manager (supervisor

55
 ✓ Capacity of the employees: - if the subordinates are well trained and developed and
experienced with the principle of division of labor (specialization) the manager can supervise large
number of employees.

✓ Geographical closeness of subordinates:- if all the people assigned to a manager are located
in one area and are with in eyesight, the manager can supervise relatively more people than if the
employees are dispersed at different locations

✓ Availability of time for supervision: - if the manager spend too much time in planning and
organizing, then he will not be having enough time to supervise large number of employees under
him. Beside the above the degree of interaction required, the extent of standardized etc should be
considered while fixing the span of control.

CHAPTER FIVE
STAFFING
Introduction
After jobs are identified, grouped and the organization structure created, the next managerial task
is staffing. It is the process of identifying human resource needs, procuring the necessary
employees, training, utilization, and separation of those employees. It is a separate field by itself
and known as human resource management. Human resource refers to the sum total of the inherent
abilities, acquired knowledge, andskills represented by the aptitudes, and talents of an organization
work force.
Staffing is efforts designed to attract, hire, train, develop, reward, and retain the people needed to
accomplish an organization’s goals and promote job satisfaction. The major objective of staffing
function is to enable an organization to attract, maintain, and utilizeefficient and effective
workforce.
The major elements of staffing are procurement, training and development, maintenance and
utilization, and separation.
THE PROCUREMENT FUNCTION
It is concerned with determining and obtaining the proper kind of personnel both in quality and in
quantity. It is specifically deals with:
a) The determination of human resource requirements both in quality and quantity
b) Their recruitment, selection and placement

56
 The staffing process involves the following steps:
1. Human resource/ Manpower planning
2. Recruitment
3. Selection
4. Orientation and induction
5. Training and development
6. Performance appraisal

1. HUMAN RESOURCE/MANPOWER PLANNING:

Human resource planning is the process by which managers ensure that they have the right number
and kind of people who are capable to effectively and efficiently perform their tasks, at the right
time and place.
While estimating the manpower requirement, the management generally keeps in mind the
available infrastructure including the technology, production schedule, market fluctuation, demand
forecasts, government’s policies and so on. It tentatively decides the kinds of staff as well as the
number of staff needed for the organization. The focus of the manpower planning is to get right
number of qualified people at the right time.
Reasons for human resource planning
o Scarcity of personnel in some specialized areas
o High expenses involved in hiring, developing, and maintaining employees.
o Rapid technological changes and
o Need for new skills

The process of human resource planning

1. Analyzing organizational objective and plans: This is to provide the organization with people
needed to achieve organizational objectives.Thebases for personnel planning are such corporate
plans. All organization plans entail need for human resource.
2. Determining over all human resource needs: This is predicting the need for and availability of
people to perform the present and future job.
3. Taking inventory of existing personnel: It is important to take inventory of the available
personnel.Know with their qualifications to know to what extent of organization can meet its

57
 personnel needs from within. As the plan is for future, the inventory has to take in to consideration
expected changes like promotions, transfers, retirements, deaths, quit, resignation, and others.
4. Determining net new personnel requirements: It requires comparing overall personnel
requirement with personnel inventory where the difference is net new requirement.
5. Developing action plan: Once the supply and demand of human resource is estimated adjustments
may be needed. For human resource surplus, internal supply of workers exceeds firms demand and
it is responded by hiring freeze, voluntary departure and lay off. Other method includes early
retirements, out replacement etc.
For human resource shortages, if internal supply cannot satisfy, external sources will be used
through vacancies. Generally, part of action plans includes recruitment, retention, promotion,
training, transfer, downsizing and so on.

The following aspects should be considered in this stage:

Job analysis:It is the process of collecting, analyzing, and coordinating information about jobs.
Primary purpose of job analysis is to
- Determine the duties and responsibilities of the job.
- Determine the kind of person needed to fill each job
- The outcomes of job analysis are job description and job specification.
Aspects of Job Analysis:
I. Job description
- It is a written statement of what jobholder does, how it should be done, and why it is done.
- It describes the content of the job.
- It is a written document of the duties and responsibilities of a job.
Eg. Job description of a marketing manger may read:
▪ Duties include, hiring, training, and supervising sales staff responsibilities for the overall
performance of the department and report to zonal manger.
II. Job specification
Focuses on the person
- It states the minimum acceptable qualification and experience that a jobholder must possess
to perform a given task effectively and efficiently.
- It identifies the knowledge, skills and abilities needed to do the job effectively.
Eg. A job specification for a marketing manager might read:

58
 - The position requires: MBA (specialization in marketing)
- Eight years experience in sales and minimum of three years supervisory experience,
- Achievement motivated and dynamic individual with well developed inter personal
skills.
2. RECRUITMENT
- It is the process of locating, identifying and attracting capable applicants.
- It is also making potential candidates interested in particular job positions and apply for it.
Sources of recruitment
- There are two sources of recruitment
i. Internal sources
ii. External sources
i. Internal source – includes the existing work force of the organization.
Methods of Internal recruitment
The methods of internal recruitment include the following:
a. Reviewing of personnel records
b. Job posting and bidding system
c. Inside moon lighting, i.e. – paying bonuses of different types for internal workers assigned
to perform a certain job for a short period of time.
Merits of Internal sources:
▪ Motivational and job satisfaction advantage (provision of continuity employment)
▪ Enhancing morale and creation of a sense of security among workers
▪ Less expensive – minimizes training or orientation cost
▪ Easy to apply – performance of employees can be easily evaluated, etc.
Demerits of Internal sources
▪ Limits the pool of talent available to the organization
▪ Discourages new blood from entering the organization
▪ Successful people are promoted until they finally reach a level in which they are unable to
perform adequately
ii. External source of recruitment
It is used:
➢ When an organization has exhausted internal sources;

59
 ➢ When internal sources are found to be unsuitable; or
➢ When it becomes necessary to fill vacant positions with new employees
Major alternative external sources:
a) Employees’ referrals (word of mouth): It refers to encouraging employees to recommend
capable and skilled persons to fill the available vacancies. Its drawback is however, clique
may develop within the organization.

b) Advertising: vacancies can be advertised in daily newspapers, employment newsmagazine,

etc.
c) Educational institutions: New employees can be recruited from colleges and universities.
d) Employment agencies: Employment agencies maintain a detailed record of job seekers and
refer the candidate with appropriate qualification to the required employers.
e) Unsolicited Application: Those looking for jobs often apply on their own initiative. They
assume that certain vacancies are likely to arise, and apply without references to any job
advertisement. Managers keep a record of such applications and contact the suitable candidates
when they need them.
f) Recruitment at the Factory gate: This is found mainly in case of factory workers to be
recruited on daily wages. Such workers gather in the morning at the factory gate to serve as
casual workers.

3. SELECTION
➢ When an adequate number of applications/names of interested candidates have been collected
through the recruitment exercises the selection process starts. Selection is the process of
deciding which candidates out of the pool of applicants have the abilities, skills, and
characteristics that adequately match the job demands.
➢ The entire process goes through a number of steps, which may be called as selection procedure.
SELECTION PROCEDURE
As stated above, the selection procedure consists of a number of steps in logical order to identify
the candidates who are to be finally appointed. These steps are:
(a) Screening the applications
(b) Holding tests
(c) Selection interview

60
 (d) Checking references
(e) Medical examination of the candidates
(f) Issue of appointment letter

Let us discuss all the steps in brief.

(a) Screening the Applications: After receiving the applications from the candidates through
recruitment process, the same must be examined to decide which ones deserve to be considered
and followed up. Normally, the candidates are asked to apply in their own handwriting on a plain
paper. Sometimes the job advertisement mentions the particulars to be given in the application. In
many cases the candidates are required to apply in the prescribed form of the company, containing
particulars of name, address, nationality, religion, mother tongue, date and place of birth, marital
status, education and training, employment history, references etc. Screening exercise involves
checking the contents of the applications so as the ascertain whether or not the minimum eligibility
conditions in respect of age, experience, qualifications and skills are fulfilled by the candidates
who have applied for the job. Screening is usually done by a senior officer of the company or by
a screening committee. The purpose of screening is to prepare a list of eligible candidates who are
to be evaluated further. Candidates not eligible are thereby excluded from further consideration.
(b) Holding Tests: After screening the applications, eligible candidates are asked to appear for
selection tests. These tests are made to discover and measure the skill and abilities of the candidates
in terms of the requirements of the job. For instance, if the job of a typist requires a minimum
typing speed of 40 words per minute, a test is given to see whether the candidates applying for the
job have the required typing speed. Passing the test by a candidate does not mean that he will be
employed. It implies that all those who have passed the test are qualified for further processing
and those who have failed are not to be considered.
(c) Selection Interview: Interview is the most important part of the selection procedure. It serves as
a means of checking the information given in the application form and making an overall
assessment of the candidate’s suitability for the job. In an interview, the candidate has a face-to-
face interaction with the employer or representatives of the employer, where they try to judge the
ability of the candidate. They also get an opportunity to go into the details of the candidate’s
background that helps a lot in assessing the candidate’s suitability.

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(d) Checking of References: In addition to the requisite educational qualification, skill, and
experience, it is expected that the candidates who are to be considered for employment must have
other qualities like balanced temperament, honesty, loyalty, etc. These qualities cannot be judged
on the basis of any test. Therefore, information is obtained and verified from the heads of
educational institutions where the candidates have studied, or from the persons whose names are
given by the candidates as referee, or from their previous employers. For certain jobs, like the job
of a cashier or a security guard, reliability is a very important job requirement. Therefore,
references are required to be contacted to ensure that persons can be relied upon. In case of
experienced employees, their previous employers can also be contacted for this purpose.
(e) Medical Examination: Candidates finally selected for the job are asked to undergo medical
examination to see whether the selected candidates are physically fit for the job. A proper medical
examination ensures higher standard of health of the employees and their physical fitness which,
in turn, reduces the labor turnover, absenteeism and accidents. The medical examination would
also reveal whether he/she suffers from any illness which can be cured e.g., poor eyesight etc.
Medical test is essential for certain types of jobs as in the case of police and army, where physical
fitness is very important. For certain categories of jobs like the job of driver, proper eyesight is
very much essential.
(f) Issue of Appointment Letter: Candidates finally selected are offered to join the organization for
which a formal appointment letter is issued containing the nature of job, the remuneration, pay
scale, and other terms and conditions relating to employment. Usually a reasonable time is given
to the candidates to join the organization.
Though a number of steps in the selection procedure have been listed, all the steps need not be
followed in all cases. For example, for employing casual workers on daily wages, simply an
interview by a company’s officer is sufficient, whereas for the job of a typist or clerk, screening
of applications, holding tests and interview will be essential. Similarly, for the job of a cashier,
checking of references may also be needed.

4. ORIENTATION AND INDUCTION

Induction is the process of introducing new employees to his/her job and the organization. A proper
induction program is likely to reduce his anxiety on how to cope with the work and how to become

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part of the organization and helps in development of a favorable attitude towards the organization
and the job.
Objectives of Orientation/ Induction:
✓ To reduce the initial anxiety
✓ To familiarize new employees with the job, the work unit and the organization as a
whole
✓ To facilitate the outsider-insider transition
✓ To familiarize the employee with the goals and his/her new co-workers
✓ To introduce the employee with the relevant policies, rules and regulations

5. TRAINING AND DEVELOPMENT

Helping the employees to improve their knowledge and skill to be able to perform their tasks
more efficiently is known as training. It is an organized activity for increasing the knowledge
and skills of people for a specific purpose.
The term ‘development’ refers to the process of not only building up the skill and abilities
for specific purpose but also the overall competence of employees to undertake more difficult
and challenging tasks. It is generally used with reference to the training of managers and
executives.
Training is necessary for new employees as well as the existing employees for improving
their performance at work. For new employees, training is necessary to help them be
acquainted with the method of operation and skill requirement of the job. For existing
employees, training at periodical intervals is helpful for learning better ways of doing the
work, and as and when they have to undertake new jobs. Thus, training helps employees to
improve their knowledge and skill and make them perform their tasks more efficiently. It
also helps them in promotion and improves their attitudes and confidence levels.
The following are some of the factors that should be considered when planning training
programs:

1. Training must be based on organizational and individual needs.

2. Training should address problems that need to be solved
3. Training programs should be based on sound theories of learning

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 4. Training must be evaluated and modifications in training programs must be made
whenever necessary.
Purposes of Training
▪ Improving the quantity and quality of output
▪ Lowering staff turnover and absenteeism
▪ Increasing job satisfaction
▪ To provide the knowledge, skills and abilities or attitudes for individuals to undertake their
current job effectively
▪ To help employees became capable of assuming responsibilities within organization
▪ To reduce waste and increase efficiency
▪ To help employees to adapt to changing circumstance facing organization such as new
technologies, new products and so on
▪ To minimize inputs use and maximize output
▪ To relieve supervisors from close supervision and gets time for other duties
Methods of Training
The methods of training can be classified into two broad categories:
I. On-the-job training
- It is letting the employees learn while doing.
- The employeeis shown to perform the jobs and allowed to do under the supervisor’s
supervision.
The following are the common approaches used in arranging on-the-job training.
a. Coaching – Refers to the assignment of a specific person to act as either an instructor or
resource person for the trainee.
b. Apprenticeship: It is a methodology of allowing the trainee to learn and practice by
performing the actual task on the job (frequently used to train personal in some skilled trades
– electrician, mechanics, tailors, carpenters etc.).
c. Job rotation (cross training): It is a process of training employees by rotating them through
a series of related tasks.
d. Vestibule training: Equipment and procedures similar to those used in the actual job are set
up in a special working area (vestibule school).The trainee is then taught in this school how
to use the machinery and perform the required job.

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 e. Self-improvement programs: Refer to acquiring knowledge through additional reading and
self-improvement programs.
II. Off the job training
- It is training conducted away from the actual work setting.

Common methods ofoff-the-job traininginclude thefollowing:

a. Lecture and classroom instruction
b. The conference method
c. Group discussion
d. Role playing (psychodrama, social-drama):It is a type of training where the trainees act out a
given role as they would be performing in a stage play
e. Case studies:It is a method of training where the trainees are given cases and are given to
identify basic problem and suggest solution.
f. Programmed instruction:It is a method, which involves breaking information into meaningful
information and rearranging them in a proper sequence to form a learning package. It consists
of three functions: -
▪ Presenting questions, facts, or problems to the learner
▪ Allowing the trainee to respond
▪ Providing the necessary feedback on the accuracy of his answer
g. T-group training (sensitivity training):It is a process in which several individuals work together
for several days for the purpose of building self-awareness, understanding of group processes,
and greater understanding of interpersonal relationships.

PERFORMANCE APPRAISAL
- Job performance refers to the degree of accomplishment of task that makes an individual’s
job.
- It is measured in terms of results.
- It is periodic and impartial

Benefits of performance appraisal

▪ Assists managers to observe their subordinates more closely and do a better job coaching.
▪ Motivates employees by providing feedback on job performance
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▪ Achieves better operational results - improved work performance
▪ Identifies development needs.
▪ To provide data for management for judging job assignments, promotions and compensation
▪ Reduces favoritism in making managerial decisions about employees
▪ To provide information to wards strengths and weakness of employees in their job performance
Problems of appraisal methods:
• Vagueness of criteria and standard of performance
• Raters lack of knowledge, experience and skills
• Allowing past performance appraisal rating to un justly influence current ratings
• Raters observing and documenting performance

Aspects of Performance Appraisal

Transfer, Promotion, Demotion and Separation
▪ Transfer: is a movement of an employee from one job, section, department staff, place, or
position to other place where salary, status, and responsibility are the same. It is movement
from one job to the other.
▪ Promotion: Moving an employee to a job involving higher pay, status, and thus higher
performance requirements.
▪ Demotion: Shift of an employee to a lower position in the hierarchy, salary, and responsibility
due to inefficiency and incompetence to fulfill assigned tasks. It causes frustration and leads
to a defensive or even aggressive behavior.
▪ Separation: Separation- is the voluntary or involuntary departure of employees from a
company, it is initiated by mandatory retirement, dismissal, lay-off; by employees like
resignation, voluntary retirements; quit-by agreements when contract end; or can also caused
by things outside the will of employer and employee (accidents, death)

MAINTENANCE AND UTILIZATION

Procured and trained or developed employees should be maintained and utilized utmost. This
requires adequate and equitable remuneration of personnel, the creation of opportunities for
progress, and a mechanism of evaluating their contribution. Compensation and performance
appraisal are at the heart of the maintenance and utilization functions of human resource
management.

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Compensation
It is an adequate and equitable remuneration of personnel for their contribution to the achievement
of organizational objective.
The term ‘compensation’ refers to a wide range of financial and non-financial rewards to the
employees for services rendered to the organization. It includes wages, salaries, allowances, and
other benefits, which an employer pays to his employees in consideration for their services and it
is the major means of attracting and retaining employees.
Factors affecting compensation decisions:
1. External factors
a) The government influence through wage controls and guidelines
b) Unions influence demanding for better pay and working conditions
c) Economic conditions of the industry
d) The labor market
2. Internal factors
a) The size and age of the organization
b) The labor budget or resource allocation
c) Managerial philosophy and strategy
Methods of payment of employees can be computed based on:
a. The time they worked e.g. Salaries
b. The output they produced and a combination of both

Fringe Benefits (Supplementary Compensation)

These are extra benefits given to employee in addition to salary or wages. A benefit meaning it is
legally required or voluntary compensation provided to employees in addition to their salaries or
wages.

Fringe benefits are classified into two types:

a) Time off pay: these are payments for the time not worked and include paid vacation, paid
holidays, paid sick leave and others.
b) Non-pay benefits: these are not paid in cash but include expenditure on items such as
medical service, cafeteria service, and education programs and so on.

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 Chapter Six
The Leading Function
6.1 Meaning and the Need for Leadership
Different writers define leadership in different ways. Some are:
• Leadership is the process of influencing others towards the achievement of organizational
objectives. This definition recognizes that leadership is typically an on going activity, is oriented
toward having an impact on the behaviors of others, and is ultimately focused on realizing the
specific aims of the organization.
• Leadership is the process of influencing a group or individual to set a goal or achieve a goal. It is
a process involving the leader, the led (group or individual), and a practical goal or a situation. It
is behavioral in nature and involves personal interaction.
• Leadership is the art or process of influencing people so that they will strive willingly and
enthusiastically toward the achievement of organizational or group goals.
• Leadership is the ability to secure desirable actions from a group of followers voluntarily without
the use of coercion or force.
• Leadership is defined as the process of influencing group activities toward the accomplishment of
goals in a given situation. In this context the leader is viewed as the person in the group who is
capable of influencing group activities with regard to goal formation and goal accomplishment.
As you can see from the above definitions, leadership has three ingredients: leader, led (follower)
and organizational environment.
Leader – is the one with the ability/capacity to understand others’ motivation and to inspire them
with the ability to create a climate for motivation.
Follower (led) – the individuals being led or influenced.
Environment – the working environment in which the leader interacts with the followers.
Leading is the management function aimed at setting the members of an organization move in the
direction that will achieve its objectives. Directing builds a climate, provides leadership and
arranges the opportunity for motivation. Leading is not deriving or pushing from behind; it is
placing oneself before the group and facilitating progress and inspires followers to accomplish
organizational (group) objectives.

THE NEED FOR LEADERSHIP

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 The need for leadership can be explained by the fact that organizations will never be successful
unless they have effective and efficient leaders. The effectiveness and efficiency of leaders is
nothing but to create conducive environment in the organization. Whatever amount of capital
invested and technology an organization has, without effective leadership the organization will not
be successful.
The importance of the directing function in the organization can be presented as follows:
• Directing initiates actions by giving directives and guidance to employees.
• It integrates employees’ effort by coordinating actions of the members and leading toward the
objectives.
• It attempts to get the maximum output of individuals by providing ways to fully utilize the
potentials and capabilities of employees.
• It provides stability by balancing the different parts of the organization so that it exists for a long
period and its parts work in a harmonious ways.
The directing function enables subordinates to contribute their best to attain the goal of the
organization. Thus, managers should try to integrate both organizational and individual objectives
in order to get the work done by subordinates. Managers must be good leaders (by providing
effective leadership) to guide, council, and influence subordinates so as to win their confidence
and acceptance.
6.2 Leadership Theories
The systematic study of personal characteristics and traits of leaders began as a consequence of
the need for military officials during World War I. Many business and governmental organizations
also began to attempt to discover the characteristics that distinguished their most effective
managers from the least effective ones.
1. Trait Theory
Trait are distinctive/personal qualities or characteristics of an individual, such as physical (height,
weight, appearance, health, etc.), personal (self-confidence, dominance, adaptable, sociability,
etc.) and mental (intelligence, creativity, knowledge, technical competence etc.). A leader trait is
a physical or personality characteristics that can be used to differentiate leaders from followers.
Trait theory attempts to find traits that make a leader. It is the old approach theory, which focused
on identifying the personal traits that differentiate leaders from followers. Trait theory originated

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 from an ancient theory called “great Man” theory that assumes “leaders are born not made”- a
belief dating back to the ancient Greeks and Romans.
The idea in trait theory was to see whether certain traits would predict the individuals who would
emerge (be identified by members of the group) as leaders. In searching for measurable leadership
traits, researchers took two approaches:
i) They attempt to compare the traits of those who emerged as leaders with the traits of those who
did not.
ii) They attempted to compare the traits of effective leaders with those of ineffective leaders.
Studies that were conducted on both the first and second category have failed to
distinguish/uncover any traits that clearly and consistently distinguish leaders from followers and
to isolate traits that are strongly associated with successful leadership.
Generally, the effort to identify universal leadership traits ran into difficulties for the following
reasons:
• Not all leaders possess all the traits and many non-leaders may possess most of the traits.
• It gives no guidance as to the magnitude of each trait for a person to be leader.
• No agreement has been reached as to what their relationships are to the actual instances of
leadership.
• Traits tend to be a chicken-and-egg proposition i.e. successful leaders may display traits such
as good vocabulary, education, and self confidence after they have assumed leadership
positions.

In general the study of leader traits has not been a very fruitful approach to explaining leadership.
Clear cut results have just not been forthcoming. Traits are important, but they are only one part
of the picture. This theory ignores situational factors in the environment that influence the
effectiveness of leadership. All these short comings undoubtedly accounted for the decline in the
importance of trait theory.
2. Behavioral Theories
When it becomes evident that effective leaders did not seem to have distinguishing traits or
characteristics, researchers tried to isolate the behaviors that made leaders effective. In other
words, rather than try to figure out what effective leaders were, researchers tried to determine what
effective leaders did, how they delegate tasks, how they communicated with and tried to motivate

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their subordinates, how they carried out their tasks, and so on. This tries to answer the questions
“what do effective leaders do? What ineffective leaders don’t do? How do subordinate react
emotionally and behaviorally to what the leader does?”
Two major dimensions of leader behavior emerged from this body of research; one deals with how
leaders get the job done and the other deals with how leaders treat and interact with their
subordinates. Some of the major studies conducted on the area of behavioral leadership theories
include the following.
I. The University of Michigan Studies
After studying numerous industrial situations the Michigan University research identified two
leadership styles which include:
▪ Employee-centered, and
▪ Production-centered task oriented
- Production-centered/Task-oriented leadership style: emphasizes more on the technical
aspects of job, work standard, close supervision, considering employees as tools in the
production process.
- Employee-oriented/people-centered leadership style: focuses more on treating subordinates
as human beings, encouraging them in goal setting, and shows concern for their wellbeing.
- The Michigan research prescribed employee-oriented style of leadership to increase
productivity.
- They contended that supervisory controls and production–centered leadership style will be
frustrating to the employees; affects their morale leading to unsatisfactory performance on the
job.
II. The Ohio State University studies:
- The Ohio State University studies identified two leadership behaviors, which include:
▪ Initiating structure, and
▪ Consideration
a) Initiating structure (IS) refers to the extent to which the leaders structure and define the
activities of subordinates so that organizational goals are accomplished.
b) Consideration on the other hand, refers to the ability of the leader to establish rapport, mutual
respect and two-way communication with employees. The leader is friendly, approachable,
and listens to the problems of employees and allows them to suggest.

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 The relationship of these two leadership dimensions is plotted in the following figure.

High
Consideration High consideration High consideration
Low structure High structure
2 3
Low consideration Low consideration
Low Low structure High structure
1 4

Low High
Initiating structure
- The Ohio State University researchers hypothesized that the most effective leadership style
would be the one that gave high concern for both consideration and structure.
- Thus, a high consideration and high structure style was associated with high performance and
employee satisfaction.
- Some studies however, revealed that this style resulted in excessive absenteeism, low
employee satisfaction and poor performance.
3. The Contingency/Situational Leadership Theory
Situational leadership theory grows out of an attempt to explain the inconsistent findings about
traits and style/behaviors. Situational theory proposes that the effectiveness of a particular style of
leader behavior depends on the situation. As situations change, different styles become
appropriate. In other words, the contingency/situational theory holds that appropriate leader traits
or behaviors are contingent or dependent on relevant situational characteristics. More specifically,
the contingency leadership theory states that, leadership is the result of the interaction of:
• Leaders: behavior and competence.
• Followers: behavior and competence.
• Situations: situational variables such as job characteristics, organizational policies, leader-
member relations, and position power.
According to this theory, there are situational factors or dimensions which are finite in number and
vary according to the leader’s personality; the requirements of the task; the expectations, needs
and attitudes of the followers; and the environment in which all are operating.

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 6.3 LEADERSHIP STYLES
Leadership style implies the way in which the leader exercises leadership; it is the way in which
the functions of leadership are carried out or way how leaders behave towards their subordinates
in the accomplishment of the work. These ways of behaving towards subordinates are influenced
by a management philosophy towards work and people. Behind every managerial decision or
action is a set of implicit assumptions concerning the nature of work and the nature of human
beings.
1. Autocratic (Authoritarian) Leadership Style
It is closely associated with the classical approach to management. The manager who follows this
style is dogmatic and leads with the ability to withhold or give rewards and punishment, i.e.
Motivation is through incentives and fear. In this style, decision-making is solely by the manager,
in other words, the leader retains all authority and responsibility. In the extreme case, the manager
makes the decision and announces it to the work group. There is no opportunity for input into the
decision making process by the subordinates and communication is primarily downward. The
autocratic leader is task-oriented and places little value on showing consideration to subordinates
as a leadership technique. The autocratic manager uses Theory X assumption as his philosophical
base for leadership.
The common characteristics of autocratic leaders include the following:
i) The leader is highly conscious of his/her position.
ii) He/she has little trust and faiths in subordinates.
iii) The leader believes that pay is just a reward for working and the only reward that will
motivate employees.
iv) Orders are issued to be carried out with no questions allowed and no explanations.
v) Subordinates are expected to do what they are told.
vi) Production is good when the leader is present, but poor in the leader’s absence.
There are situations where managers are forced to use this leadership style. Some are:
• When there is a need to influence subordinates in favor of organizational objectives which has
an effect on individuals.
• When subordinates are new, they need to be directed.
• When the situation calls for unilateral decision-making; perhaps there is no enough time for
quality input from subordinates or the subordinates may lack information.

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 Limitations
• Employees’/subordinates’ ideas will not be used to solve organizational problems, which in
some cases subordinates may have better ideas than the superior about a particular problem.
• Subordinates would be demotivated, i.e. it may suppress individual initiative.
• Poor implementation of decisions.

2. Democratic/Participative Leadership Style

In this leadership style, the manager involves subordinates in making organizational decisions,
shares problems with them and shares authority to reach a decision. Subordinates take part in the
decision-making process through consultation. The leader delegates a great deal of authority while
retaining ultimate responsibility. Active two-way communication (upward and downward) exists.
The democratic leader uses Theory Y assumption as his/her philosophical base for leadership.
Democratic leadership has the following characteristics:
• Decision making is shared by the leader and the group
• If forced to make a decision alone the leader explains his/her reason to the group.
• Objective criticism and praise is given
• New ideas/change proposed by a group are respected
• Develops a feeling of responsibility within the group
• Increases the quality of work and productivity.
• The group feels successful
Limitations
• Subordinates may be too involved to influence the manager even when there is no need.
• The manager may not be able to influence the subordinates to the extent needed.
However, the major advantage of this leadership style is that, it enhances personal commitment
through participation.

3. Laissez-Fair/Free-Rein Leadership Style

In this leadership style, leaders generally give the group complete freedom, provide the necessary
materials, participate only to answer questions, and avoid decision-making whenever possible. The
leader either sets limits and the followers work out their own problems, or the individuals set their

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own goals. In this style, leaders depend largely on subordinates to set their own goals and the
means of achieving them, and they see their role as one of aiding the operations of followers by
furnishing them information and acting primarily as a contact with groups external environment,
i.e. the leader’s role is to serve as a logistics specialists or representative of the group to outside
groups. The leader denies responsibility and abdicates authority to the group.
The application of Laissez-Fair style can be found with individuals or groups that the manager
views as being knowledgeable, independent, or motivated. Additionally, if the work group is
composed of high activities, or is highly research oriented, this style has potential benefits.
Primarily horizontal communication among peers exists. This is applicable to highly professional
personnel and work.
Laissez faire/Free – rein leadership style has the following major characteristics:
▪ The leader does not set goals to the group
▪ Decisions are made by who ever in the group willing to do if.
▪ Individuals may have little interest in their work.
▪ Morale and teamwork are generally low.
▪ Usually productivity is low and work is sloppy (messy)

Limitations
• Group may drift aimlessly in the absence of direction from leader.
• It may make things out of control.

Advantages
• It gives quite freedom for subordinates.
• It gives much responsibility and self guidance for subordinates.
• It permits self-starters to do things as they see fit without leader.
The following figures demonstrate the features of the leadership styles described above:

L L L
Autocratic Participative Laissez-Fair

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4. Situational Leadership Style
It is now recognized that the effectiveness of one or the other leadership style depends on the
situation. The situational leadership style states that for a manager to be a democrat, autocratic or
laissez-fair, situations force him/her. The manager, in developing his own style of leadership need
not restrict his choice from among a limited class of style or approaches. The style a manager
chooses may depend upon the following situations.
• Forces in the manager such as his value system, his confidence in subordinates.
• Forces in subordinate, example, subordinates expectations.
• Forces in situations, example, type of organization, the nature of the problem, the pressure of
time, etc.
For example, an autocratic leader may behave democratically when the success of a change,
program, policy, or decision is critically dependent on employee acceptance and cooperation. A
democratic leader may find it wiser to behave autocratically when a decision is associated with a
high degree of risk and uncertainty, or when he is facing a crisis or an emergency situation, etc.
Nevertheless, leadership behavior should be viewed along a continuum from work centered to
people centered.
Qualities of an Effective Leader
Some authorities in the field point out that an effective leader is required to possess the following
basic qualities.
a) Ability to understand human behavior.A leader should be able to understand employees’
needs and problems so as to make them work with willingness and enthusiasm.
b) Social skill.An effective leader should and know the strengths and weaknesses of people
working with him/her. If he/she is helpful friendly, encourages other to succeed, and
appreciates the group members’ viewpoints, people will certainly cooperate with him/her and
work their / oral best towards the achievement of the organizational goals.
c) Teaching ability (being model). The best way to lead is guiding practically. A leader should
not be in a position to push his subordinates from behind.
d) Readiness to accept responsibility / criticisms and to take appropriate corrective measures –
An effective leader or manager should understand that error is human but repeat is a mistake.
What so over a leader tries to be systematic, mistakes are created but he should be able to take
remedial measures and take control over the situation.

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e) Emotional stability and fairness – The effective leader poses resolutions indiscriminately after
gathering sufficient information and investigating the possible causes. Moreover, he is
relatively free from bias and prejudice and takes consistent actions.
6.4 MOTIVATION
6.4.1 The Concept of Motivation
The term motivation derived from the Latin word movere meaning “to move.” In the present
context, motivation represents “those psychological processes that cause arousal, direction, and
persistence of voluntary actions that are goal oriented. Managers need to understand these
psychological processes if they are to successfully guide employees toward accomplishing
organization objectives.
Motivation is an internal force that energizes behavior, gives direction to behavior, and underlies
the tendency to persist. This definition of motivation reactivation recognizes that in order to
achieve goals, individuals must be sufficiently stimulated and energetic, must have a clear focus
or end in mind ,and must be willing able to commit their energy for a long enough period of time
to realize their aim. Since the leading function of management involves influencing others toward
their aim. Since the leading function of management involves influencing others to work toward
organizational goals, motivation is an important aspect of that function.
Because motivation is an internal force, we cannot measure the motivation of others
directly.Instead, we typically infer whether or not other individuals are motivated by watching
their behavior. As managers analyze their work forces, they can always see some people who
outperform others of equal skill. A closer look might reveal instances in which a person with out
sanding talents is consistently outperformed by someone having lesser talents. Why? These latter
employees appear willing to exert more effort, to try harder, to accomplish their goals, often these
hard workers are described by their bosses as “motivated employees.” Motivated individuals work
hard, persist and are goal oriented.
Motivators
Motivators are things, which induce an individual to perform. They are also the means by which
conflicting may be one need heightened so that it will be given priority over another. A motivator
is something that influences an individual’s behavior. It makes a difference in what a person will
do.
The Motivation Cycle

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The starting point in this cycle is a need or a deficiency or a state of felt deprivation an individual
experience at a particular time. This deficiency causes tension (physiological or psychological in
balance) which will be modified by one’s culture and personality to cause certain wants leading
motivating the individual to some kind of goal directed behavior. This leads to satisfaction and
one cycle of motivation will be completed.
Deficiency triggers a drive for need satisfaction ,which causes an individual to take a certain of
action that will alleviate a need and reduce a drive, the need for food, for example, will result
hunger and hunger will drive or drive or motivate the individual to take action (eating food ),
which will achieve the goal. This goal attainment will restore the physiological or psychological
balance and reduce or cutoff the drive for food.
Motivation Vs Satisfaction
Motivation refers to the drive and efforts to satisfy a want or a goal. Satisfaction refers to the
contentment experienced when satisfied. In other words, motivation implies a drive toward an
outcome & satisfaction is the outcome already experienced.
Motivation and Performance
All too often motivation and performance are assumed to be one same.This faulty assumption can
lead to poor managerial decisions. The following formula for performance helps put motivation
into proper perspective;
Performance= Ability x Motivation x Environmental conditions
Thus, we see motivation is a necessary but insufficient in one factor can negate the other. The
above relationship between performance and motivation clearly shows us that managers should
hire individuals who have the ability to do what is required. After that, the management challenge
is providing environmental conditions that nurture and support individual motivation to work
toward organizational goals. Keeping other variables constant, motivation and performance have
neither positive nor negative relationship. As motivation increases, job performance increases,
reaches it’s maximum and then decreases. After the optimal point further motivation brings about
anxiety, tenseness, fretfulness, and the anxiety eventually decreases performance.
Characteristics of Motivation
Motivation is characterized by the following features

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 ▪ Motivation is an unending process. As man has a number of wants and all wants cannot be
satisfied at one time, motivation becomes a continuous task of managers. Human needs are
infinite.
▪ Motivation is a psychological concept. It deals with the psychology of the workers
▪ Motivation is total and not partial. An individual is fully motivated and not partly because
motivation is related to the needs and psychological states of people.
▪ Motivation may be financial or non-financial.Motivation includes increasing wages,
allowances, recognition, and praise, giving more responsibility and inducing to participate in
the decision-making process. The appropriateness of motivation depends on the situations and
individual characteristics.
▪ Motivation is determined by human needs. In order to motivate, knowing the need of an
individual is mandatory. A need that is already satisfied cannot be a motivator. The purpose of
motivation is to induce an individual to put forth all his capacities to his job through satisfying
his needs.
▪ Motivation cannot be applied to a frustrated man.
▪ Motivation may be positive or negative.

Importance of Motivation
Motivation provides the following advantages to an organization.
• Through motivation, an organization can utilize the factors of production to the maximum.
• When people are motivated there is willingness to work.
• When people are highly motivated absenteeism would be less.
• Labor turnover would be low. If employees are motivated positively, there is a tendency on
their part to stay in the organization.
• Efficient personnel would be attracted to the organization.
• If there is positive motivation in the organization, there will be good labor relations.
• The knowledge and skill of employees can be developed and improved.
• Motivation develops a sense of belongingness.
• Motivation serves as a basis of co-operation.
6.4.2 Theories of Motivation
A. Carrot and Stick approach

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 The Carrot and Stick metaphor relates to the use of rewards and penalties in order to induce desired
human behavior. It comes from the old story that to make a donkey move one must put a carrot in
front of it and if it does not move beat it with stick from behind. Carrot represents rewards (money,
bonus, salary increase, employment, promotion etc.) while stick implies penalty, punishment, fear
of loss of job, income, demotion, etc.
Despite many new theories of motivation, reward and punishment are still considered strong
motivators. For centuries, however, they were too often thought of as the only forces that motivate
the people. At the same time, in all theories of motivation, the inducement of some kind of “carrot”
is recognized. For example, money, even though, it is not the only kind of motivating force, has
been and will continue to be an important one.
Failures of carrot and Stick approach
Carrot can be obtained by any member of the organization without differentiation in performance
through such practices as salary increases and promotion by seniority, executive bonuses not based
on individual manager performance, etc. So such person will not be motivated by some kind of
carrot. Hence, it will be some what difficult to motivate people through material incentives. It is
difficult to motivate white-collar people with such material incentives and motivating people by
ways of financial incentive will be costly to the organization.
The stick in the form of penalty has been and continues to be strong motivator. Yet it is admittedly
not the best kind (negative motivator). It often gives rise to defensive or refectory behavior, such
as militant union organization, poor quality work, executive indifference, failure of a manager to
take any risk in decision-making, or even dishonesty.
B. Maslow’s Need Hierarchy

One of the most widely mentioned theories of motivation is the hierarchy of needs theory put forth
by psychologist Abraham Maslow. Maslow proposed that motivation is a function of needs, and
he also proposed that human needs are arranged hierarchically (in a form of hierarchy). The
hierarchy of needs is based on four premises:
1. Only an unsatisfied need can influence behavior; a satisfied need is not a motivator. What
motivates a person is what s/he does not have but what s/he has.
2. A person’s needs are arranged in a priority order of importance. Thus, the priorities (hierarchy) go
from the most basic needs to the most complex.

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3. As the person’s needs are meet on one level, the person advances to the next level of needs. S/he
will focus on the first level need until it is minimally satisfied before moving to the next level.
4. If satisfaction is not maintained for a once-satisfied need, it will become a priority need again.

Based on the above premises, Maslow proposed that human needs form a five-level hierarchy.
1. Physiological Needs
These are the basic needs for sustaining human life itself, such as food, water, air, shelter, sleep,
etc. Maslow took the position that until these needs are satisfied to the degree necessary to maintain
life, other needs will not motivate people. In other words, as Maslow points out, a person lacking
food, love and esteem wants food more than s/he wants acceptance or prestige. These other needs
would be unimportant. In the working environment, management tries to satisfy these needs
primarily through salary and by eliminating threats to physical safety.

Self-actualization
Needs

Esteem Needs

Social Needs

Safety Needs

Physiological Needs

Fig 7.1 Maslow’s Hierarchy of Needs

2. Safety/Security Needs

When physiological needs are satisfied, safety needs become a priority as a motivator. Safety needs
include freedom from fear and anxiety, job security, desires for retirement and insurance programs
and so on. As with physiological needs, management attempt to satisfy safety needs primarily
through salary.
3. Social/Affiliation Needs

Once we feel reasonably safe and secure, we turn our attention to relationships with others in order
to fulfill our belongingness needs, which involve the desire to affiliate with and be accepted by
others, i.e. the need for friendship, companionship, and a place on a group. Love needs include
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 both giving and receiving. These needs are meet by frequent interaction with fellow workers and
acceptance by others.
4. Esteem Needs
5. Esteem needs include the desire for both self-esteem (self respect) and public esteem, and
recognition by others. These needs take two different forms. First, we have a need for competency,
confidence and independence. We also want the prestige, status, recognition and appreciation that
others give on us. Satisfying esteem needs produce self worth pride, self confidence, and true sense
of importance; not satisfying them produces feelings of inability and inadequacy-feeling of
inferiority, weakness and helpless. Attaining goals leads to feelings of self-respect, strength and
confidence. In satisfying these needs, people seek opportunities for achievement, promotion,
prestige, and status that will provide recognition of their competence and worth.
6. Self-Actualization Needs

These are needs for personal growth, self-fulfillment, and the realization of person’s full potential.
For athlete, it may be breaking a world’s record; and for the research scientist, it may be finding a
cure for HIV/AIDS.
Maslow’s theory suggested that people must satisfy lower-level physiological needs before
working toward higher-level needs. Maslow’s hierarchy, although intuitively appealing and
frequently used in management training, has not found widespread support from management
researchers. Beyond the first two basic needs, people vary in their need emphasis. Some may seek
social need satisfaction, while others may emphasize esteem needs or self-actualization needs.
Thus, each individual may respond differently to organizational characteristics. Moreover, the
steps in Maslow’s hierarchy may not be necessarily experienced in a sequential manner. People
may have more than one need at the same time. Situations detect which needs are most important.
However the significance of this theory to management is to apply different motivators to different
employees found in the hierarchy.
C. Herzberg’s Motivation

Herzberg developed a theory known as the two-factor theory of motivation. Herzberg believed that
two entirely separate sets of factors contribute to an employee’s behavior at work. He labeled the
factors that produced job satisfaction as Motivators. His analysis indicated these factors are
directly related to job content. The absence of motivational factors may not result in dissatisfaction,

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but their presence is likely to motivate employees to excel. When motivators are absent, workers
are neutral toward work, but when motivators are present, workers are highly motivated and
satisfied. Herzberg labeled the factors that led to job dissatisfaction as hygiene and found they are
related more to the work setting, or job context, than to job content. These factors do not
necessarily motivate employees to excel, but their absence may be a potential source of
dissatisfaction, low morale, and high turn over. When hygiene factors are poor, work is
dissatisfying. However, good hygiene factors simply remove the dissatisfaction; they do not by
them selves cause people to become highly satisfied and motivated in their work.
• Motivating factors leading to job satisfaction include: achievement, personality, recognition,
advancement, creative and challenging work, growth on job, etc.
• Hygiene’s leading to dissatisfaction include; company policies, quality of supervision,
interpersonal relations, working condition, job security, salary, employee benefits, etc.

6.5 Concept and Meaning of Communication

Communication is the process of transmitting information among two or more people. It is the
glue that holds organizations together. Communication assists organization member to accomplish
both individual and organizational goals, implement and respond to organizational change,
coordinate organizational activities, and engage in virtually all organizational relevant behaviors.
It would be extremely difficult to find an aspect of a manager’s job that does not involve
communication. In other words communication is unavoidable in an organization’s functioning.
By its very nature a manager’s job requires communication. The success of every manager and
every organization depends on communication because in any undertaking involving two or more
persons, it is essential for the coordination of individual activities.
There is no agreeable single definition for communication but a number of scholars define it in the
following manner.
• Communication is the transfer of information from the sender to receiver, with the
information being understood by the receiver.
• Communication is the process by which information is transmitted between individuals
and organizations so that an understanding response results.
• Communication is an exchange of facts, ideas, opinions or emotions by two or more people.
• Communication is the exchange of messages in writing, speaking or images.

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 • Communication is sharing information of providing entertainment through works or speech
or other methods.
• Communication is the process whereby one person transmits a message through a channel
to another person, with some effect.
• Communication is an intercourse by words, letters, symbols or messages and is a way that
one organization member shares meaning and understanding with another.
• Business communication is a process which involves the transmission and accurate
replication of ideas ensured by feedback for the purpose of eliciting actions which will
accomplish organizational goals.
Each definition has elements of truth or utility, but no one of them is complete. Managers, rarely,
spend their time alone at their desks thinking, planning or contemplating alternatives. In fact
managerial time is spent largely in face-to-face electronic or telephone communication with
subordinates, peers, supervisors, suppliers or customers. They transmit and receive ideas, reports,
data and other forms of information needed to make an enterprise function. The success achieved
by an organization reflects the effectiveness of its communication.

The Communication Process

The major variables in the communication process include:
a) Stimulus and motivation.
b) Encoding
c) Choosing media/channel
d) Decoding
e) Feedback

a) Stimulus and motivation; a body of or mental activity has to be stared in order to be need of
communicating an idea. Doubts, ambitions, curiosity, etc stimulate thoughts and then that
trigger communication. The stimulated person has to be motivated communicate.
b) Encoding: After being stimulated and motivated to communicate, the sender must decide how
best to convey a message. Encoding is the process of putting a message in to a form in which
it ids to be transferred. It is translating an idea in to a message.

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 c) Choosing media/channel: The channel is an important factor for the success of
communicating a message. Face-to-face discussion, memorandum, magazines, radio,
newspaper, telephone, television, are among important media of communication. Which
channel or media to use is determined by: the need for an immediate feedback, degree of
importance of the message, need for a permanent record, need for formality, required degree
of accuracy, cost of the medium, etc.

If the message is urgent and the receiver requires immediate feedback the sender will use face
to face communication if the receiver is close to him/her.
Ifkeeping the record of the conversation is required the parties will use telephone conversation
or video conference.
d) Decoding: when the encoder’s message is picked up, the receiver tries to make sense out of it;
that is to decode it. This is a process by which the receiver assigns meaning to the symbols
transmitted by the sender. It is a process of translating a message into an idea.
e) Feedback: Feedback is the reaction that receiver has to a message. It helps to evaluate the
effectiveness of communication. That is, it shows whether the message has been transmitted
accurately and completely. Feedback helps to improve future communication process because
it helps to understand existing problems.

Characteristics of Communication
The following are some of the characteristics of communication
• Communication is a process.
• Communication is symbolic-gestures, sounds, letters, numbers and words represent an idea
meant to communicate.
• Communication is contextual-the meaning may vary depending on contexts
• Communication is purposive- it is done to share meaning, to impart information or
influence.
• Communication is two way
• Communication involves people.

Types of Communication

Formal and Informal Communication

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A. Formal Communication
This is a communication, which is intentionally designed by the organization. Information flows
through the formally established channel and is concerned with work related matters. Formal
communication includes; Vertical communication (downward and upward communication),
Horizontal communication, and Diagonal communication.
i. Vertical communication is a communication that involves a message exchange between two
or more levels of the organization hierarchy. Vertical communication can involve a manager
and a subordinate or can involve several layers of the hierarchy. It includes downward and
upward communications.
• Downward communication occurs when information is transmitted from higher to lower
levels in an organization. Downward communication starts with top level management and
flows down through the management levels to line workers and non-supervisory personnel.
The major purposes of downward communication are to provide organization members with
information about organizational goals and policies. The kind of media used for downward
communication include instructions, speeches, meetings, the telephone, grapevine,
memoranda, letters, handbooks, pamphlets, policy statements, procedures, etc.
• Upward communication- in such situations, the communicator is at a lower level in the
organization than the receiver. In other words, information flows from the subordinates to
the superior. The main function of upward communication is to supply information to the
upper levels about what is happening at the lower levels. It includes the flow of opinions,
ideas, complaints, progress, reports, suggestions, explanations, and request for aid or
decisions and other kind of information from subordinates up to managers. Typical means
for upward communication besides the chain of command are suggestion systems, appeal
and grievance procedures, compliant systems, counseling sessions, group meetings, etc.
ii. Horizontal communication is lateral message exchange either within work unit boundaries,
involving peers who report to the same supervisor, or across work unit boundaries, involving
individuals who report to different supervisors. It takes place among departments or people
on the same level of hierarchy. It is useful to coordinate activities. Horizontal communication
can take many forms, including meetings, reports, memos, telephone conversations, and
face-to-face discussion between individuals.

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iii. Diagonal communication involves the flow of information among departments or
individuals on different levels of hierarchy. This occurs often in the case of line and staff
departments, in which the staff has functional authority. It is also common to find diagonal
communication among line departments, again in which one of them has functional authority.
The use of diagonal channel would minimize the effort extended by the organization (upward
and hen horizontal).

B. Informal communication
It is a communication, which is not deliberately designed by the organization. It is rather created
by informal groups in order to satisfy their need to interact and share information among
themselves. In the informal communication, information flows in unstructured and unpredictable
ways. In other words, it is a structure less network. Informal communication channel is
commonly termed as grapevine because of its structure less direction of flow. Normally the
information flow in grapevine is considered to be secret or confidential.
Informal communication includes, cluster chain communication ,gossip/rummer and single
chain communication.
Barriers to Effective Communication

Any factor that impels the exchange of information between a sender and receiver is a barrier to
communication. The following are some of the most common barriers of effective communication:

▪ Differing perceptions:-Individual variation is one common source of communication barriers.

People who have different backgrounds of knowledge and experience often perceive the same
phenomenon from different perspectives.
▪ Language differences:- For a message to be properly communicated, the words used must
mean the same thing to the sender and the receiver. The same symbolic meaning must be
shared. Jargons must be avoided. Jargons are words,phrases and sentences that are used in a
specific organization.
▪ Noise:-Any factor that disturbs confuses or otherwise interferes with communication. Noise
leads to information distortion. E.g. poor handwriting,poor telephone conversation,novelity…

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▪ Emotionality:- Emotional reactions such as Unger, love, defensiveness, hate, jealousy, fear,
and embarrassment influence how we understand others messages and how we influence others
with our own messages.
▪ Inconsistent Verbal and Nonverbal Communication:- The message we send and receive are
strongly influenced by such nonverbal factors as body movements, clothing, the distance we
stand from the person, we are taking to, our posture, gestures, facial expression, eye movement
and body contact.
▪ Distrust: - The credibility of a message is to a large extent a function of the credibility of the
sender in the mind of the receiver. A sender’s credibility is in turn determined by a variety of
factors.
▪ Filtering: - Is the act of interpreting information only having better conditions.

Overcoming Barriers to Communication

Overcoming barriers is a two-step process. First one must learn to recognize the various types of
barriers that can occur. Second, one must act to overcome the barriers.
a. Overcoming differing perception-The message should be explained so that it can be
understood by those with different views and experiences.
b. Overcoming differences in language-The meanings of unconventional or technical terms
should be explained; single, direct and natural language should be used.
c. Overcoming noise-Noise is best dealt with by eliminating it. As a whole it is good to avoid
distracting environments. When noise is unavoidable, increase the clarity and strength of the
message.
d. Overcoming emotionality-Before a crisis, try to understand your subordinate’s emotional
reactions and prepare yourself to deal with receivers. Also think about your own moods and
how they influence others.
e. Overcoming inconsistent verbal and nonverbal communication-Gestures, clothes, posture,
facial expression and other powerful nonverbal communications should agree with the
message.
f. Overcoming distrust-Overcoming distrust is to a large extent the process of creating trust.
g. Redundancy-Being redundant purposefully might be necessary. Repeating or restating a
message ensures its perception or reinforces its impact.

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 CHAPTER SEVEN
THE CONTROLLING FUNCTION

7.1 MEANING AND NEED FOR CONTROL

MEANING OF CONTROL
• Controlling is the process through which managers assure that actual activities conform to planned
activities.
• Controlling is the process of regulating organizational activities so that actual performance conforms
to expected organizational standards and goals. It is checking current performance against
predetermined standards contained in the plans.

• It is accomplished by comparing actual performance to predetermined standards or objectives

and then taking action to correct any deviations from the standard.
• Controlling exists at every management level.
• It involves keeping the organizational activities and functions on the right track and aligned
with plans and goals.
IMPORTANCE OF CONTROLLING
o Controlling guides behavior – Controlling system helps in guiding and integrating
employees’ behavior towards broader organizational goals.
o Controlling allows the organization to cope with uncertainty – It directs the organization
to modify its product/service to meet the requirements of the customers, when deemed
necessary.
o Controlling prevents crises – If a manager knows what is going on, he can easily solve any
potential problem before it turns into crises.
o Controlling standardizesoutputs – products/services can be standardized in terms of quality
and quantity through the use of effective controlling mechanisms.
o Controlling appraises employees’ performance – proper and effective controlling can
provide the manger with objective information about employees’ performance.
o Controlling updates plans – Controlling allows the manger to compare what is deepening
with what was planned, and update the plans.

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o Controlling protects an organization’s assets – It can help in protecting assets from waste
or underutilization.
o Adapting to changing condition- in today’s dynamic and unpredictable business environment
control plays a crucial role than ever. A properly designed control system allows manager to
effectively anticipate, monitor, and respond to often constantly changing conditions.
o Control is the final link in the functional chain of management; and it is essential to
maintain the efficiency and effectiveness of an organization.

7.2 Control Process

Although controls systems must be tailored to specific situations, such systems generally follow
the basic.The controlling process has five major steps.
1. Determine Areas to control: The first Major step in the control process is determining the
major areas to control i.e. identify critical control points include the areas of an organization’s
operations that directly affect the success of its key operations,areas where failures not be
tolerated and costs in time and money are greatest.Managers must make choices because it is
expensive and virtually impossible to control every aspect of an organization’s activities. In
addition, employees often resent having their every move controlled. Managers usually base
their major controls on the organizational goals and objectives developed during the planning
process.
2. Establishing standards: Standards are units of measurements established by management to
serve as benchmarks for comparing performance levels. They spell out specific criteria for
evaluating performance and related employee behavior. The exact nature of the standards to
be used depends on what is being monitored.

Standards, if possible, must be;

• Specific and quantitative as much as possible.
• Flexible to adopt the changes that may occur over the future.
• Challenging and should aim for improvement over past performance.
Generally, standards serve three major purpose related to employee behavior. For one thing,
standard enables employees to understand what is expected and how their work will be
evaluated. This helps employees do an effective job. For another; standards provide a basis for
detecting job difficulties related to personal limitations of organization members. Such

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 limitations can be based on a lack of ability, training, or experience or on any other job related
deficiency that prevents an individual from performing properly on the job. Timely
identification of deficiencies makes it possible to take corrective action before the difficulties
become serious and possibly irresolvable. Finally, standards help reduce the potential negative
effects of goal incongruence. Goal incongruence is a condition in which there are major
incompatibilities between goals of an organization member and those of the organization. Such
incompatibilities can occur for a variety of reasons, such as lack of support for organization
objectives (e.g. an employee views the job as temporary and attempts to do minimum), and
often result in behaviors that are incompatible with reaching organizational goals. One
common manifestation of goal incongruence is employee theft, which includes wasting an
organization´s resource, as well as taking equipment, materials and money.
3. Measuring Actual Performance: Once standard are determined, the next step is measuring
performance. For a given standard, a manager must decide both how to measure actual
performance and how often to do so. The means of measuring performance will depend on the
standards that have been set. The period of measurement generally depends upon the
importance of the goal to the organization, how quickly the situation is likely to change, and
the difficulty and expense of rectifying a problem if one were to occur. Direct attention to the
exception and by doing so, managers can save time and effort.
The common techniques used in measurement of performance include the following:

a) Personal observation – A manager/supervisor is able to judge output by observing the pace

of his workers.The drawback of this technique is that it is time consuming and accuracy cannot
be assured.
b) Sampling – to have a check on all of the items produced is a formidable task.Picking certain
samples for supervision therefore eases the task of the manger. However, because one pick
might not represent all the others, if errors are found at the first sample, another sample should
be picked to check the outcome before making a decision on the work.
c) Written/oral report: Performance measurement data or information is required to be reported
to the concerned immediate manager.

4. Comparing Performance against standards: This is a step where comparison is made

between the “what is” and the “what should be”. Managers often base their comparisons on

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 information provided in reports (oral and written) that summarize planned versus actual results,
and by working ground work areas and observing conditions, a practice sometimes referred to
as Management by Wondering Around (MBWA). The purpose of comparing actual
performance against intended performance is, of course, to determine if corrective action is
needed.
Consequently, the comparison result may show that the actual performance exceeds (positive
deviation), meets (zero deviation), or falls below (negative deviation) expectations (standards).
Accordingly, if performance fulfills expectations (meets standards), no control problem exists.
However, if performance exceeds or fails to meet expectations, further investigation is required
to determine the causes. Performance that exceeds expectations may mean either superior
talent or inappropriately set standards. Performance that fails to meet expectation may likely
mean inappropriately set standards, poor talent or improper use of resources. The key question
in both cases will be, “How much variation from standards is acceptable before action is
taken?” The answer to this question will lead to the development of ranges defining upper and
lower limits and performance outside of acceptable range servers as a red flag calling for taking
the necessary corrective action.
The managerial principle of exception states that control is enhanced by concentrating on
exceptions, or significant deviations from the expected result or standard. Therefore, in
comparing performance with standards managers need to direct attention to the exception, and
by doing so, managers can save time and effort.
5. Taking corrective Action (on time): The corrective action to be taken depends up on the type
of deviation that exists. When performance exactly meets (deviation of Zero) or exceeds (positive
deviation) the standards set, usually no corrective action is necessary. However managers do need
to consider recognizing the positive performance. The type of recognition given can vary from a
verbal “well done” for a routine achievement to more substantial rewards, such as bonuses,
training opportunities, or pay raises, for major achievements or consistently good work. Yet,
favorable deviations should be examined to understand such success. When standards are not
meet, managers must carefully assess the reason why and take corrective action. During this
evaluation, managers often personally check the standards and the related performance measures
to determine whether these are still realistic. Sometimes, managers may conclude that the
standards are, in fact, inappropriate- usually because of changing conditions- and that corrective

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 action to meet standards is therefore not desirable. More often, though, corrective actions are
needed to reach standards. The standards may have been based on historical data which may be
inappropriate to current conditions. In such instances, the past is a poor basis on which to predict
the future. Similarly, the use of comparative standards may prove to be problematic since no two
organizations are alike. In taking corrective actions, managers must carefully avoid two types of
errors: taking corrective action when no action is warranted and failing to take corrective action
when it is clearly needed.

7.3 TYPES OF CONTROL

In addition to determining the areas to control, managers need to consider the types of controls
that they wish to use. Based on the time period in which control is applied in relation to the
operation being performed, or the stage of productive cycle in which controlling is carried out,
there are three basic types of controls: preventive, concurrent, and feedback. Thus, an
organization’s performance can be monitored and controlled at three points: before, during, or
after an activity is completed.
1. Preventive/steering/preliminary/Input Control: Preventive control focuses on the
regulation of inputs to ensure that they meet the standards necessary for the transformation
process. It attempts to monitor the quality and/or quantity of resources (financial, physical,
human, and information) takes place before the operation begins. It focuses on prevention in
order to preclude later serious difficulties in the production process – its aim is to prevent
problems before they arise. Nevertheless, since preventive control cannot cover every possible
contingency, other type of controls may also be needed. Entrance exams for colleges and
universities, policies, rules, procedures, proper selection and training of employees, inspection
of raw materials, the implementation of induction and orientation programs-save trial and error
cost, frustration of employee. Preventive control comes from an old saying “A gram of
prevention is worth a kg of cure.”
2. Concurrent/Screening/Yes-No/Checking Control: Concurrent control involves the
regulation of ongoing activates that are part of he transformational process to ensure that they
conform to organizational standards. It is designed to detects and anticipate deviations from
standards at various points throughout the process, i.e. the controlling is carried out during the
actual transformation process. The emphasis here is on identifying difficulties in the productive

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 process that could result in faulty outputs.Because concurrent controls involve the monitoring
of ongoing activities, they are the only controls that can cope with contingencies (unexpected
events) that cannot be anticipated. When contingencies arises involving activities in a
transformation process, a yes/no decision are required. That is, decision must be made whether
to continue as before or follow an alternative course, or take corrective action, or stop work
altogether. In this way, concurrent controls allow adjustments to be made while work is being
done.E.g. On the job training, on the spot observation, exams, tests, quizzes, Performance
evaluation, financial statement analysis, final exams etc…
3. Feedback Controls: Feedback controls are post action controls and focus on the end results
of the process. The information derived is not used for corrective action on a project because
it has been completed. The feedback control provides information for a manager to examine
and apply to future activities that are similar to the present one. The purpose is to help prevent
mistakes in the future. At the end of the year, for example, a manager should carefully review
the analysis of the budget control report. What accounts were overdrawn? Why? Were there
any accounts with a surplus? Why? Could funds that were not spent have been allocated to
other accounts? Were all priorities met by the budget? At this time, the manager can not modify
budget expenditures or allocations for the previous year. But this information can provide a
head start as the manager develops the budget plans for the forthcoming year.

7.4 EFFECTIVE CONTROL SYSTEM

Controls are effective if they do what they where designed to do and do not create organizational
problems. The following are some of the characteristics of effective controls systems:
o Future-Oriented:to be effective, control systems need to help regulate future events, rather
than fix blame for past events. A well designed control system focuses on letting managers
know how work is progressing toward unit objectives, pinpointing unforeseen opportunities
that might be developed- all aids to future action
o Multidimensional:in most cases, control systems need to be multidimensional in order to
capture the major reliant performance factors, such as, quality, quantity, overhead, etc

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o Economically Realistic/Cost Effective: the cost of implementing a control system should be
less, or at most, equal to the benefits derived from the control system. The benefits received
from controls should off-set their expenses.
o Accurate:since control systems provide the basis for future action, accuracy is vital. Control
data that are inaccurate may be worse than no control at all, since managers may make poor
decisions based on faulty data they believe to be accurate. An inaccurate data from a control
system can cause the organization to take action that will either fail to correct a problem or
create a problem when none existent. Evaluating the accuracy of the information they receive
is one of the most important control tasks that manages face.
o Acceptable to organization members’:control systems operate best when they are accepted
by the organization members who are affected by them. Otherwise, members may take actions
to override and undermine controls; i.e. controls will not work unless people want them to.
Too many, arbitrary, too few and too rigid controls often cause the satisfaction and motivation
of employees to decline.
o Timely:control systems are designed to provide data on the state of a given production cycle
or process as of a specific time. In order for managers and employees to respond promptly to
irregularities, control systems must provide relevant information soon enough to allow
corrective action before there are serious repercussions or consequences.
o Reliability and Validity:controls not only must be dependable (reliable), but also must
measure what they intend to measure (must be valid). When controls can’t be relied on and are
invalid, they are unlikely to be trusted and can lead to very bad consequences.
o Monitorable:another desirable characteristic of control system is that they can be monitored
to ensure that they are performing as expected. One way of checking a control system is to
deliberately insert an imperfection, such as a defective part, and then observe how long it takes
the system to detect and report it to the correct individual.
o Organizationally Realistic: the control system has to be compatible with organizational
realities. All standards for performance must be realistic. Status differences between
individuals have to be recognized. Individuals have to be able to see a relationship between
performance levels they are asked to achieve and rewards that will follow.
o Flexible:just as organizations must be flexible to respond rapidly to changing environments,
control systems need to be flexible enough to meet new or revised requirements. Accordingly,

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 they should be designed so that they can be changed quickly to measure and report new
information and track new endeavors.
o Focus on Critical Control Points:critical control points include all the areas of an
organization’s operations that directly affect the success of its key operations. The focus should
be on those areas where failures cannot be tolerated and where that costs in time and money
are the greatest.
o Easy to understand:complexity often means lack of understanding. The simpler the control,
the easier it will be to understand and apply. Controls often become complex because more
than one person is responsible for creating, implementing or interpreting them.
o Emphasis on Exception:a good system of control should work on the exception principle, so
that only important deviations are brought to the attention of management. In other words
management does not have to bother with activities that are running smoothly. This will ensure
that managerial attention is directed towards error and not towards conformity. This would
eliminate unnecessary and uneconomic supervision, marginally beneficial reporting and waste
of managerial time.
o Over control versus under control:since excessive amount of control can make the
occurrence of dysfunctional aspects of control systems more likely, managers need to avoid
over control. Over control is the limiting of individual job autonomy to such a point that it
seriously inhibits effective job performance. At the same time, managers need to avoid going
too far in the other direction, which results in a situation of under control. Under control is the
granting of autonomy to an employee to such a point that the organization loses its ability to
direct the individual’s efforts toward achieving organizational goals.
Determining the appropriate amount of control that should exist in organizations is a significant
management decision. With the appropriate amount of control, a manager can be reasonably
certain that no major unpleasant surprises will occur and that employees will achieve
organizational goals.

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