BUSINESS MANAGEMENT

G.M. RUGOHO 2020

Msc Strategic Management, CUT;
BComm Tourism and Hospitality Management, MSU;
PDGE, ZOU;
AdvDip Food Prep Supervision; City and Guilds;
Cert Food Safety, City and Guilds;
Cert Food Prep; City and Guilds.
INTRODUCTION
DEFINITION OF MANAGEMENT
Management can be defined as the process of administering and controlling the affairs of
the organization, irrespective of its nature, type, structure and size. It is an act of creating and
maintaining such a business environment wherein the members of the organization can work
together, and achieve business objectives efficiently and effectively.
Management is the act of engaging with an organization’s human talent and its resources to
accomplish desired goals and objectives. Management acts as a guide to a group of people working
in the organization and coordinating their efforts, towards the attainment of the common objective.

CHARACTERISTICS OF MANAGEMENT
 Universal: All the organizations, whether it is profit-making or not, they require
management, for managing their activities. Hence it is universal in nature.
 Goal Oriented: Every organization is set up with a predetermined objective and management
helps in reaching those goals timely, and smoothly.
 Continuous Process: It is an ongoing process which tends to persist as long as the
organization exists. It is required in every sphere of the organization whether it is production,
human resource, finance or marketing.
 Multi-dimensional: Management is not confined to the administration of people only, but it
also manages work, processes and operations, which makes it a multi-disciplinary activity.
 Group activity: An organization consists of various members who have different needs,
expectations and beliefs. Every person joins the organization with a different motive, but after
becoming a part of the organization they work for achieving the same goal. It requires
supervision, teamwork and coordination, and in this way, management comes into the picture.
 Dynamic function: An organization exists in a business environment that has various factors
like social, political, legal, technological and economic. A slight change in any of these
factors will affect the organization’s growth and performance. So, to overcome these changes
management formulates strategies and implements them.
 Intangible force: Management can neither be seen nor touched but one can feel its existence,
in the way the organization functions.
MANAGEMENT FUNCTIONS
Management Functions

According to the functions approach managers perform certain activities to efficiently and effectively coordinate
the work of others. They can be classified as

1) Planning – involves defining goals, establishing strategies for achieving those goals, and developing plans to
integrate and coordinate activities. It is the first and foremost function of management, i.e. to decide
beforehand what is to be done in future. It encompasses formulating policies, establishing
targets, scheduling actions and so forth.

2) Organizing – involves arranging and structuring work to accomplish the organization’s goals. Once the
plans are formulated, the next step is to organise the activities and resources, as in identifying the
tasks, classifying them, assigning duties to subordinates and allocating the resources.

3) Leading – involves working with and through people to accomplish organizational goals. It involves
hiring personnel for carrying out various activities of the organization. It is to ensure that the
right person is appointed to the right job. It is the task of the manager to guide, supervise, lead
and motivate the subordinates, to ensure that they work in the right direction, so far as the
objectives of the organization are concerned.

4) Controlling – involves monitoring, comparing, and correcting work performance. The controlling
function of management involves a number of steps to be taken to make sure that the
performance of the employees is as per the plans. It involves establishing performance standards
and comparing them with the actual performance. In case of any variations, necessary steps are
to be taken for its correction.

Since these four management functions are integrated into the activities of managers throughout the workday, they
should be viewed as an ongoing process and they need not the done in the above sequence.
 TYPES AND LEVELS OF MANAGEMENT

1. Top-Level Management: This is the highest level in the organizational hierarchy, which
includes Board of Directors and Chief Executives. They are responsible for defining the
objectives, formulating plans, strategies and policies.
2. Middle-Level Management: It is the second and most important level in the corporate ladder, as
it creates a link between the top and lower level management. It includes departmental and
division heads and managers who are responsible for implementing and controlling plans and
strategies which are formulated by the top executives.
3. Lower Level Management: Otherwise called as functional or operational level management. It
includes first line managers, foreman, and supervisors. As lower level management directly
interacts with the workers, it plays a crucial role in the organization because it helps in reducing
wastage and idle time of the workers, improving the quality and quantity of output.

The three management levels form the management hierarchy that represents the position and
rank of executives and managers in the chart.
MANAGEMENT SKILLS
Managers need certain skills to perform the challenging duties and activities associated with being a manager. Robert
L. Katz found through his research in the early 1970s that managers need three essential skills

1) Technical skills – are job-specific knowledge and techniques needed to proficiently perform
specific tasks. Specialized areas of knowledge and expertise and the ability to apply that
knowledge make up a manager’s technical skills. Preparing a financial statement, programming a
computer, designing an office building, and analyzing market research are all examples of
technical skills. These types of skills are especially important for supervisory managers because
they work closely with employees who are producing the goods and/or services of the firm.

2) Human skills – are the ability to work well with other people individually and in a group.
Human relations skills are the interpersonal skills managers use to accomplish goals through the
use of human resources. This set of skills includes the ability to understand human behavior, to
communicate effectively with others, and to motivate individuals to accomplish their objectives.
Giving positive feedback to employees, being sensitive to their individual needs, and showing a
willingness to empower subordinates are all examples of good human relations skills. Identifying
and promoting managers with human relations skills are important for companies. A manager with
little or no people skills can end up using an authoritarian leadership style and alienating
employees.

3) Conceptual skills – are the ability to think and to conceptualize about abstract and complex
situations. Conceptual skills include the ability to view the organization as a whole, understand
how the various parts are interdependent, and assess how the organization relates to its external
environment. These skills allow managers to evaluate situations and develop alternative courses
of action. Good conceptual skills are especially necessary for managers at the top of the
management pyramid, where strategic planning takes place.
MANAGEMENT ROLES
In the late 1960s, Henry Mintzberg conducted a precise study of managers at work. He concluded that managers
perform 10 different roles, which are highly interrelated. Management roles refer to specific categories of
managerial behavior. Overall there are ten specific roles performed by managers which are included in the following
three categories.

Interpersonal Roles

 Figurehead – includes symbolic duties which are legal or social in nature.

 Leader – includes all aspects of being a good leader. This involves building a team, coaching
the members, motivating them, and developing strong relationships.

 Liaison – includes developing and maintaining a network outside the office for information
and assistance.
Informational Roles

 Monitor – includes seeking information regarding the issues that are affecting the
organization. Also, this includes internal as well as external information.

 Disseminator – On receiving any important information from internal or external sources, the
same needs to be disseminated or transmitted within the organization.

 Spokesperson – includes representing the organization and providing information about the
organization to outsiders.
Decisional Roles

 Entrepreneur – involves all aspects associated with acting as an initiator, designer, and also
an encourager of innovation and change.

 Disturbance handler – taking corrective action when the organization faces

unexpected difficulties which are important in nature.

 Resource Allocator – being responsible for the optimum allocation of resources like time,
equipment, funds, and also human resources, etc.

 Negotiator – includes representing the organization in negotiations which affect the

manager’s scope of responsibility.

Although the functions approach represents the most useful way to describe the manager’s job, Mintzberg’s roles
give additional insight into managers’ work. Some of the ten roles do not fall clearly into one of the four functions,
since all managers do some work that is not purely managerial.
EVOLUTION OF MANAGEMENT – SCIENTIFIC MANAGEMENT

Prior to the early 1900s, there was no management theory as we think of it today. Work happened
as it always had—those with the skills did the work in the way they thought best (usually the way
it had always been done). The concept that work could be studied and the work process improved
did not formally exist before the ideas of Frederick Winslow Taylor. The scientific
management movement produced revolutionary ideas for the time—ideas such as employee
training and implementing standardized best practices to improve productivity. Taylor’s theory
was called scientific because to develop it, he employed techniques borrowed from botanists and
chemists, such as analysis, observation, synthesis, rationality, and logic. You may decide as you
read more about Taylor that by today’s criteria he was not the worker’s “friend.” However, Taylor
must be given credit for creating the concept of an organization being run “as a business” or in a
“businesslike manner,” meaning efficiently and productively.

Frederick W. Taylor - Frederick Taylor (1856–1915) is called the Father of Scientific

Management.

Before the Industrial Revolution, most businesses were small operations, averaging three or four
people. Owners frequently labored next to employees, knew what they were capable of, and closely
directed their work. The dynamics of the workplace changed dramatically in the United States with
the Industrial Revolution. Factory owners and managers did not possess close relationships with
their employees. The workers “on the floor” controlled the work process and generally worked
only hard enough to make sure they would not be fired. There was little or no incentive to work
harder than the next man (or woman). Taylor was a mechanical engineer who was primarily
interested in the type of work done in factories and mechanical shops. He observed that the owners
and managers of the factories knew little about what actually took place in the workshops. Taylor
believed that the system could be improved, and he looked around for an incentive. He settled on
money. He believed a worker should get “a fair day’s pay for a fair day’s work”—no more, no
less. If the worker couldn’t work to the target, then the person shouldn’t be working at all. Taylor
also believed that management and labor should cooperate and work together to meet goals. He
was the first to suggest that the primary functions of managers should be planning and training.
In 1909, Taylor published The Principles of Scientific Management. In this book, he suggested
that productivity would increase if jobs were optimized and simplified. He also proposed matching
a worker to a particular job that suited the person’s skill level and then training the worker to do
that job in a specific way. Taylor first developed the idea of breaking down each job into
component parts and timing each part to determine the most efficient method of working. Soon
afterward, two management theorists, Frank and Lillian Gilbreth, came up with the idea of filming
workers to analyze their motions. Their ideas have since been combined into one process (called
time and motion studies) for analyzing the most productive way to complete a task.

Scientific management has at its heart four core principles that also apply to organizations today.
They include the following:

 Look at each job or task scientifically to determine the “one best way” to perform the job.
This is a change from the previous “rule of thumb” method where workers devised their own
ways to do the job.

 Hire the right workers for each job, and train them to work at maximum efficiency.

 Monitor worker performance, and provide instruction and training when needed.

 Divide the work between management and labor so that management can plan and train, and
workers can execute the task efficiently.

Taylor designed his approach for use in places where the work could be quantified, systemized,
and standardized, such as in factories. In scientific management, there is one right way to do a
task; workers were not encouraged (in fact, they were forbidden) to make decisions or evaluate
actions that might produce a better result. Taylor was concerned about the output more than worker
satisfaction or motivation. Taylor’s work introduced for the first time the idea of systematic
training and selection, and it encouraged business owners to work with employees to increase
productivity and efficiency. And he introduced a “first-class worker” concept to set the standard
for what a worker should be able to produce in a set period of time. Scientific management grew
in popularity among big businesses because productivity rose, proving that it worked.
 BENEFITS OF SCIENTIFIC MANAGEMENT

a. Replacement of traditional rule of thumb method by scientific techniques.

b. Proper selection and training of workers.
c. Incentive wages to the workers for higher production.
d. Elimination of wastes and rationalization of system of control.
e. Standardization of tools, equipment, materials and work methods.
f. Detailed instructions and constant guidance of the workers.
g. Establishment of harmonious relationship between the workers.
h. Better utilization of various resources.
i. Satisfaction of the needs of the customers by providing higher quality products at lower prices.

LIMITATIONS OF SCIENTIFIC MANAGEMENT

a. Speeding up of workers: Scientific Management is only a device to speed up the workers
without much regard for their health and well-being.
b. Loss of individual worker's initiative: Scientific Management reduces workers to automatic
machine by taking away from them the function of thinking.
c. Problem of monotony: By separating the function of planning and thinking from that of doing,
Scientific Management reduces work to mere routine.
d. Reduction of Employment: Scientific Management creates unemployment and hits the
workers hard.
e. Weakening of Trade Unions: Under Scientific Management, the important issues of wages
and working conditions are decided by the management through scientific investigation and the
trade unions may have little say in the matter.
f. Exploitation of workers: Scientific Management improves productivity through the agency of
workers and yet they are given a very small share of the benefit of such improvement.
g. Heavy Investment: It requires too heavy an investment. The employer has to meet the extra
cost of the planning department though the foreman in this department do not work in the
workshop and directly contribute towards higher production.
h. Loss due to re-organization: The introduction of Scientific Management requires a virtual
reorganization of the whole set-up of the industrial unit. Work may have to be suspended to
complete such re-organization.
i. Unsuitable for small scale firms: various measures like the establishment of a separate
personnel department and the conducting of time and motion studies are too expensive for a
small or modest size industrial unit.
CLASSICAL ORGANISATIONAL THEORY BY HENRI FAYOL (1841 – 1925)

Functions relating to activities such as production, purchase, sales, advertising, finance, and
accounting differ from one enterprise to another. But functions of management are common to
all business units and non-profit organizations.

Henri Fayol (1949), the founder of modern management theory, divided all activities of
organizations into six groups:
1. Technical:
Production and manufacturing activities.

2. Commercial:
Buying, selling, and exchange activities.

3. Financial:
Capital optimization activities.

4. Security:
Protecting mutual interest of employees and employers.

5. Accounting:
Book keeping (recording) of profits, costs, liabilities, and preparing reports such as balance
sheets.

6. Managerial:
Planning, organizing, directing, coordinating, and controlling.

Fayol distinguishes between the principles and elements of management. Principles are the rules
and guidelines, while elements are the functions of management. He has grouped the elements
into five managerial functions — planning, organizing, commanding, coordinating, and
controlling. His classification is widely accepted.
Henri Fayol's management theory is a simple model of how management interacts with personnel.
Fayol's management theory covers concepts in a broad way, so almost any business can apply his
theory of management. Today the business community considers Fayol's classical management
theory as a relevant guide to productively managing staff.

The management theory of Henri Fayol includes 14 principles of management.

1. Division of Work – When employees are specialized, output can increase because they
become increasingly skilled and efficient.
2. Authority – Managers must have the authority to give orders, but they must also keep in mind
that with authority comes responsibility.
3. Discipline – Discipline must be upheld in organizations, but methods for doing so can vary.
4. Unity of Command – Employees should have only one direct supervisor.
5. Unity of Direction – Teams with the same objective should be working under the direction of
one manager, using one plan. This will ensure that action is properly coordinated.
6. Subordination of Individual Interests to the General Interest – The interests of one
employee should not be allowed to become more important than those of the group. This
includes managers.
7. Remuneration – Employee satisfaction depends on fair remuneration for everyone. This
includes financial and non-financial compensation.
8. Centralization – This principle refers to how close employees are to the decision-making
process. It is important to aim for an appropriate balance.
9. Scalar Chain – Employees should be aware of where they stand in the organization's
hierarchy, or chain of command.
10. Order – The workplace facilities must be clean, tidy and safe for employees. Everything
should have its place.
11. Equity – Managers should be fair to staff at all times, both maintaining discipline as necessary
and acting with kindness where appropriate.
12. Stability of Tenure of Personnel – Managers should strive to minimize employee turnover.
Personnel planning should be a priority.
13. Initiative – Employees should be given the necessary level of freedom to create and carry out
plans.
14. Esprit de Corps – Organizations should strive to promote team spirit and unity.
From these principles, Fayol concluded that management should interact with personnel in five
basic ways in order to control and plan production.
1. Planning. According to Fayol's theory, management must plan and schedule every part of
industrial processes.
2. Organizing. Henri Fayol argued that in addition to planning a manufacturing process,
management must also make certain all of the necessary resources (raw materials, personnel,
etc.) came together at the appropriate time of production.
3. Commanding. Henri Fayol's management theory states that management must encourage and
direct personnel activity.
4. Coordinating. According to the management theory of Henri Fayol, management must make
certain that personnel works together in a cooperative fashion.
5. Controlling. The final management activity, according to Henri Fayol, is for the manager to
evaluate and ensure that personnel follow management's commands.
MAX WEBER (1864 – 1920) THEORY TO BUREAUCRATIC MANAGEMENT

Weber visited the United States in 1904 to study the U.S. economy. It was here that he observed
the spirit of capitalism. He noted that capitalism in the United States encouraged competition and
innovation. He also realized that businesses were run by professional managers and that they
were linked through economic relationships. He contrasted this with capitalistic practices in
Germany where a small group of powerful people controlled the economy. In Germany, tradition
dictated behaviors. People were given positions of authority based on their social standing and
connections, and businesses were linked by family and social relationships. Weber was
concerned that authority was not a function of experience and ability, but won by social status.
Because of this, managers were not loyal to the organization. Organizational resources were used
for the benefit of owners and managers rather than to meet organizational goals. Weber was
convinced that organizations based on rational authority, where authority was given to the most
competent and qualified people, would be more efficient than those based on who you knew.
Weber called this type of rational organization a bureaucracy.

Weber thought bureaucracy would result in the highest level of efficiency, rationality, and
worker satisfaction. In fact, he felt that bureaucracy was so logical that it would transform all of
society. Unfortunately, Weber did not anticipate that each of the bureaucratic characteristics
could also have a negative result. For example, division of labor leads to specialized and highly
skilled workers, but it also can lead to tedium and boredom. Formal rules and regulations lead to
uniformity and predictability, but they also can lead to excessive procedures and “red tape.” In
spite of its potential problems, some form of bureaucracy is the dominant form of most large
organizations today. The “pyramid” organizational structure, with responsibility split into
divisions, departments, and teams, is based on principles of bureaucracy. It is used by nearly all
large corporations. Weber’s idea that hiring and promotion should be based on qualifications, not
social standing, is built into U.S. labor laws. Today, the term “bureaucracy” has taken on
negative connotations. It is associated with excessive paperwork, apathy, unresponsiveness, and
inflexibility. This is unfortunate, as Weber’s ideas have spread throughout the industrial world
and transformed the way organizations are run and structured. Your school is probably structured
as a bureaucracy. If you have shopped at a department store, it is a bureaucracy, and your city
government is also a bureaucracy.
Weber identified six characteristics or rules of a bureaucracy. They are summarized in the
following table.

Six Rules of a Bureaucracy

Characteristic of the
Description
Bureaucracy

Hierarchical Management Each level controls the levels below and is controlled by the level above.

Structure Authority and responsibilities are clearly defined for each position.

Tasks are clearly defined and employees become skilled by specializing in

Division of Labor
doing one thing. There is clear definition of authority and responsibility.

Employee selection and promotion are based on experience, competence,

Formal Selection Process and technical qualification demonstrated by examinations, education, or

training. There is no nepotism.

Management is separate from ownership, and managers are career

Career Orientation
employees. Protection from arbitrary dismissal is guaranteed.

Formal Rules and Rules and regulations are documented to ensure reliable and predictable behavio
Regulations Managers must depend on formal organizational rules in employee relations.

Rules are applied uniformly to everyone. There is no preferential treatment

Impersonality
or favoritism.
Advantages of Bureaucracy
Weber’s bureaucracy theory has been widely applied in the era of the 1900s by the business
entities, government organizations and political associations.
The benefits of this approach are explained in detail below:

Specialization or Expertise: In bureaucracy management, the work is divided among the

employees according to their skill, capabilities and expertise, which results in job specialization
in the organization.
Skill-Based Recruitment: The employees are recruited by matching their skills and experience
with that required for the vacant job position to ensure that the right person is placed at the right
job.
Predictability: When there is a systematic hierarchy and defined rules and methods of
performing the complicated tasks in the organization, actions in similar situations become
somewhat predictable for the management.
Equality: The management remains unbiased towards the employees and ensures a fair-
judgement at the time of any issue or problem in the organization.
Structure: A systematic organizational structure can be developed through bureaucracy where
the rules, regulations, methods and procedures are pre-defined.
Systematic Record Keeping: This approach focuses on systematically recording all the business
transactions and operations in documents to be used by the other employees in future.
Rationality: The recording of operations brings rationality, i.e., framing the laws, rules,
regulations and procedures for future, based on the experience.
Disadvantages of Bureaucracy
When we talk of bureaucratic management, there are numerous drawbacks of purely adopting
this theory to run any organization.
Let us now elaborate over each of such shortcomings below:

One Way Communication: The bureaucracy theory emphasizes on the passing of information,
i.e., tasks, orders, rules and regulations, from the top-level management to the bottom level;
however, feedback concerning the operational issues and other suggestions are not taken from
the employees.
The exploitation of Power: In a bureaucracy, managers have a higher authority which can be
misused by them to meet their interest or to dominate their subordinates.
Wastage of Time, Efforts and Money: It involves the recording of all the business transactions
and operations to create documents which require a lot of time, money and efforts of the
personnel.
Delay in Business Decision-Making: The top-level management keeps the decision-making
authority with itself. Therefore, the lower-level managers have to rely upon the top-level
managers, even in the case of any emergency or situations demanding immediate action.
Hinders Innovation and Creativity: The supervisor controls every activity of the employees,
which ultimately restrict the subordinates to apply creativity and innovation to their work.
Inflexible and Rigid Methods: The bureaucracy theory does not entertain any change or
modification in the management system, which makes it quite rigid.
MARY PARKER FOLLETT
Mary Parker Follett was touted as one of the first management theorists to give recognition to the
importance of involving workers in solving problems and that management is a dynamic, not static,
process. She defined management as “getting things done through people” and noted that: (i)
people closest to the action make the best decisions; (ii) subordinates should be involved in the
decision-making process; (iii) coordination is vital to effective management; (iv) communication
between managers and employers improves decisions; and (v) managers should find ways to
resolve the interdepartmental conflict.

CHESTER BARNARD
Chester Barnard was an early organisational theorist who authored “Functions of the Executive”,
an influential twentieth century management book which presents a theory of organisation and the
functions of executives in organisations. Barnard remarked that social systems require employee
cooperation if they are to be effective, and introduced the idea of examining the organisation’s
external environment and adjusting its internal structure to balance the two. He observed that the
manager’s main roles are: (i) to communicate with employees; (ii) to motivate them to work hard
to help achieve the organisation’s goals; and (iii) successful management depends on maintaining
good relations with people outside the organisation with whom managers deal regularly.

BEHAVIOURAL SCHOOL OF MANAGEMENT

Body of management thought based on the belief that use of psychological techniques in
motivating employees’ works better than rules and regulations proposed by classical school of
management.

The behavioral school of management thought developed, in part, because of perceived

weaknesses in the assumptions of the classical school. The classical school emphasized
efficiency, process, and principles. Some felt that this emphasis disregarded important aspects of
organizational life, particularly as it related to human behavior. Thus, the behavioral school
focused on trying to understand the factors that affect human behavior at work.
The behavioral management theory is often called the human relations movement because it
addresses the human dimension of work. Behavioral theorists believed that a better
understanding of human behavior at work, such as motivation, conflict, expectations, and group
dynamics, improved productivity. The theorists who contributed to this school viewed
employees as individuals, resources, and assets to be developed and worked with — not as
machines, as in the past. Several individuals and experiments contributed to this theory.

Advantages

 It is easy to put into practice

 It is simple to understand
 The results are usually quick
 It uses small steps to shape the behavior
 It doesn't require a specialist to implement it - anyone can use the approach
 It is based on the principle that reinforced (rewarded) behavior will be repeated
 The results can be measured and demonstrate progress
 It is suitable for any age and ability

Dis-advantages

 Not always easy to get people to change their mind

 The client may rebel against being told what to do
 Older people may resent being 'treated like a child'
 It doesn't consider the client's thoughts or feelings
 It may be seen as dogmatic and a punishment
 Punishment is often used more frequently than rewards
 Could be seen as de-humanizing - reducing our behavior to responses to a stimuli
PLANNING
Planning is the process of thinking about and organizing the activities required to achieve a desired
goal. Planning involves the creation and maintenance of a given organizational operation. This
thought process is essential to the refinement of objectives and their integration with other plans.
Planning combines forecasting of developments with preparing scenarios for how to react to those
developments. An important, albeit often ignored, aspect of planning is the relationship it holds
with forecasting. Forecasting can be described as predicting what the future will look like, whereas
planning predicts what the future should look like.

Planning is also a management process, concerned with defining goals for a company’s future
direction and determining the missions and resources to achieve those targets. To meet objectives,
managers may develop plans, such as a business plan or a marketing plan. The purpose may be
achievement of certain goals or targets. Planning revolves largely around identifying the resources
available for a given project and utilizing optimally to achieve best scenario outcomes.

CHARACTERISTICS OF PLANNING
1. Managerial function: Planning is a first and foremost managerial function provides the base for
other functions of the management, i.e. organising, staffing, directing and controlling, as they are
performed within the periphery of the plans made.
2. Goal oriented: It focuses on defining the goals of the organisation, identifying alternative courses
of action and deciding the appropriate action plan, which is to be undertaken for reaching the goals.
3. Pervasive: It is pervasive in the sense that it is present in all the segments and is required at all the
levels of the organisation. Although the scope of planning varies at different levels and
departments.
4. Continuous Process: Plans are made for a specific term, say for a month, quarter, year and so on.
Once that period is over, new plans are drawn, considering the organisation’s present and future
requirements and conditions. Therefore, it is an ongoing process, as the plans are framed, executed
and followed by another plan.
5. Intellectual Process: It is a mental exercise at it involves the application of mind, to think,
forecast, imagine intelligently and innovate etc.
6. Futuristic: In the process of planning we take a sneak peek of the future. It encompasses looking
into the future, to analyse and predict it so that the organisation can face future challenges
effectively.
7. Decision making: Decisions are made regarding the choice of alternative courses of action that
can be undertaken to reach the goal. The alternative chosen should be best among all, with the
least number of the negative and highest number of positive outcomes.

Planning is concerned with setting objectives, targets, and formulating plan to accomplish them.
The activity helps managers analyse the present condition to identify the ways of attaining the
desired position in future. It is both, the need of the organisation and the responsibility of
managers.
IMPORTANCE OF PLANNING

 It helps managers to improve future performance, by establishing objectives and selecting a

course of action, for the benefit of the organisation.

 It minimises risk and uncertainty, by looking ahead into the future.

 It facilitates the coordination of activities. Thus, reduces overlapping among activities and
eliminates unproductive work.

 It states in advance, what should be done in future, so it provides direction for action.

 It uncovers and identifies future opportunities and threats.

 It sets out standards for controlling. It compares actual performance with the standard
performance and efforts are made to correct the same.

Planning is present in all types of organisations, households, sectors, economies, etc. We need to
plan because the future is highly uncertain and no one can predict the future with 100% accuracy,
as the conditions can change anytime. Hence, planning is the basic requirement of any organization
for the survival, growth and success.

LEVELS OF PLANNING

I. Strategic Plan

A strategic plan is a high-level overview of the entire business, its vision, objectives, and value.
This plan is the foundational basis of the organization and will dictate decisions in the long-term.
The scope of the plan can be two, three, five, or even ten years.

Managers at every level will turn to the strategic plan to guide their decisions. It will also influence
the culture within an organization and how it interacts with customers and the media. Thus, the
strategic plan must be forward looking, robust but flexible, with a keen focus on accommodating
future growth.
The crucial components of a strategic plan are:

1. Vision
Where does the organization want to be five years from now? How does it want to influence the
world?

2. Mission
The mission statement is a more realistic overview of the company’s aim and ambitions. Why does
the company exist? What does it aim to achieve through its existence? A clothing company might
want to “bring high street fashion to the masses”, while a non-profit might want to “eradicate
polio”.

3. Values
“Inspire. Go above & beyond. Innovate. Exude passion. Stay humble. Make it fun”

II. Tactical Plan

The tactical plan describes the tactics the organization plans to use to achieve the ambitions
outlined in the strategic plan. It is a short range (i.e. with a scope of less than one year), low-level
document that breaks down the broader mission statements into smaller, actionable chunks. If the
strategic plan is a response to “What?”, the tactical plan responds to “How?”.

Creating tactical plans is usually handled by mid-level managers.

The tactical plan is a very flexible document; it can hold anything and everything required to
achieve the organization’s goals. That said, there are some components shared by most tactical
plans:

1. Specific Goals with Fixed Deadlines

Suppose your organization’s aim is to become the largest shoe retailer in the city. The tactical plan
will break down this broad ambition into smaller, actionable goals. The goal(s) should be highly
specific and have fixed deadlines to spur action – expand to two stores within three months, grow
at 25% per quarter, or increase revenues to $1mn within six months, and so on.

2. Budgets
The tactical plan should list budgetary requirements to achieve the aims specified in the strategic
plan. This should include the budget for hiring personnel, marketing, sourcing, manufacturing, and
running the day-to-day operations of the company. Listing the revenue outflow/inflow is also a
recommended practice.

3. Resources
The tactical plan should list all the resources you can muster to achieve the organization’s aims.
This should include human resources, IP, cash resources, etc. Again, being highly specific is
encouraged.

4. Marketing, Funding, etc.

Finally, the tactical plan should list the organization’s immediate marketing, sourcing, funding,
manufacturing, retailing, and PR strategy. Their scope should be aligned with the goals outlined
above.

III. Operational Plan

The operational plan describes the day to day running of the company. The operational plan charts
out a roadmap to achieve the tactical goals within a realistic timeframe. This plan is highly specific
with an emphasis on short-term objectives. “Increase sales to 150 units/day”, or “hire 50 new
employees” are both examples of operational plan objectives.

Creating the operational plan is the responsibility of low-level managers and supervisors.

Operational plans can be either single use, or ongoing, as described below:

1. Single Use Plans

These plans are created for events/activities with a single occurrence. This can be a one-time sales
program, a marketing campaign, a recruitment drive, etc. Single use plans tend to be highly
specific.
2. Ongoing Plans
These plans can be used in multiple settings on an ongoing basis. Ongoing plans can be of different
types, such as:

 Policy: A policy is a general document that dictates how managers should approach a
problem. It influences decision making at the micro level. Specific plans on hiring
employees, terminating contractors, etc. are examples of policies.
 Rule: Rules are specific regulations according to which an organization functions. The
rules are meant to be hard coded and should be enforced stringently. “No smoking within
premises”, or “Employees must report by 9 a.m.”, are two examples of rules.
 Procedure: A procedure describes a step-by-step process to accomplish a particular
objective. For example: most organizations have detailed guidelines on hiring and training
employees, or sourcing raw materials. These guidelines can be called procedures.

Ongoing plans are created on an ad-hoc basis but can be repeated and changed as required.

Operational plans align the company’s strategic plan with the actual day to day running of the
company. This is where the macro meets the micro. Running a successful company requires paying
an equal attention to now just the broad objectives, but also how the objectives are being met on
an everyday basis, hence the need for such intricate planning.
CATEGORIES OF PLANNING
Strategic and Functional Planning.
In strategic or corporate planning, the top management determines the general objectives of the
enterprise and the steps necessary to accomplish them in the light of resources currently available
and likely to be available in the future. Functional planning, on the other hand, is planning that
covers functional areas like production, marketing, finance, and purchasing.
Long-range and short-range planning.
Long-range planning sets long-term goals of the enterprise and then proceeds to formulate
specific plans for attaining these goals. It involves an attempt to anticipate, analyze and make
decisions about basic problems and issues which have significance reaching well beyond the
present operating horizon of the enterprise.
Short-range planning, on the other hand, is concerned with the determination of short-term
activities to accomplish long-term objectives. Short-range planning relates to a relatively short
period and has to be consistent with the long-range plans. Operational plans are generally related
to short periods.
Adhoc and Standing Planning.
Adhoc planning committees may constitute for certain specific matters, as for instance, for project
planning. But standing plans are designing to use over and over again. They include organizational
structure, standard procedures, standard methods, etc.
Administrative and Operational Planning.
Administrative planning is finishing by the middle-level management which provides the
foundation for operative plans. Operative planning, on the other hand, is finishing by the lower-
level managers to put the administrative plans into action.
Formal and Informal Planning.
Various types of planning discussed above are of formal nature. They are carrying on
systematically by the management. These specify in black and white the specific goals and the
steps to achieve them.
STEPS INVOLVED IN PLANNING
i. Establishing Objectives:
The first step in planning is the statement of objectives to be achieved by the concern. It should be
known to every member of the concern as to what are its purposes and objectives. Objectives
indicate what basically is to be done. Where the preliminary stress is to be placed and what is to
be accomplished by the network of policies, procedures, rules, strategies, budgets and
programmes.
ii. Establishing Planning Premises:
It is to establish, obtain agreement to use and disseminate critical planning premises. There are
forecast data of a factual nature, applicable basic policies and existing company plans. Premises
then are planning assumptions, the future setting in which planning takes place in other words, the
environment of plans.
iii. Determining Alternative Courses:
In planning it is to search for and examine alternative courses of action especially those not
immediately clear. There is seldom a plan for which reasonable alternatives do not exist.
iv. Evaluating Alternative Courses:
Having sought out alternative courses and examined their strong and weak points the other step is
to evaluate them by weighing the various factors in the light of premises and objectives.
v. Selection from the Alternatives:
Selecting the course of action, is the point at which plan is adopted … the real point of decision
making. An analysis and evaluation of alternative courses will disclose that two or more courses
are available, and the manager may decide to follow several courses rather than one best course.
vi. Formulation of Derivative Plans:
As soon as the best programme is decided upon, the next task is to work out its details, formulate
the steps in full service to break it down for each section or department, for each product and
component of a product and for each month, quarter, week ultimately, the manager will get the
final plan of action in concrete terms.
vii. Effective Communication of Plans:
It is necessary that the plans are properly and effectively communicated to all the managers
concerned.
PRINCIPLES OF PLANNING
Planning requires scientific thinking and it should spell out in clear terms the definition of the
purpose, analyse the problem and make a careful and diligent search for all the facts bearing
upon it. The task of planning will be well-accomplished if some fundamental principles are
followed in the process.

The important principles may be stated as follows:

1. Principle of Commitment:
This means that certain resources must be committed or pledged for the purpose of planning.
Planning is not an easy task. So, necessary help is to be taken from experts. The enterprise must
be ready to exhaust the available resources for the achievement of a plan.

2. Principle of the Limiting Factor:

A plan involves varied factors of different importance. This principle implies that more emphasis
has to be put on that factor which is scarce or limited in supply or extremely costly. This will
help in selecting the most favourable alternative.

3. Principle of Reflective Thinking:

Planning, being an intellectual activity is based on rational considerations. These involve
reflective thinking which signifies problem-solving thought process—a process by which past
experiences are superimposed on the facts of the present situation and possible future trends.
None can be a planner whose mind is not active, who does not possess any deliberate power and
whose sense of judgement is not strong.

4. Principle of Flexibility:
Though a plan is prepared after reflective thinking, this does not mean that no departure can be
made in the course of its operation. The plan should be so prepared that there is sufficient scope
for changing it from time to time. Changes must necessarily be effected in the plan for taking
into account new developments that may take place in the course of the operation of the plan.

5. Principle of Contribution to Enterprise Objectives:

A major plan is prepared and it is supported by many derivative plans. But all plans must
contribute in a positive way towards the achievement of the enterprise objectives.

6. Principle of Efficiency:
A plan should be made efficient to attain the objectives of the enterprise at the minimum cost and
least effort. It must also achieve better results with the minimum of unexpected happenings.
Therefore, it is to be seen that what is expected is likely to be achieved.

7. Principle of Selection of Alternatives:

Planning is basically a problem of choosing. The essence of planning is the choice among
alternative courses of action. There is no need for planning if there is only one way for doing
something. In choosing from alternatives, the best alternative will be that which contributes most
efficiently and effectively to the accomplishment of a desired goal.

8. Principle of Planning Premises:

A plan is prepared against some foundations or backgrounds known as ‘Planning Premises’.
There must be complete agreement among the managers in respect of planning premises over
which the structure of plan is to be framed.

9. Principle of Timing and Sequence of Operations:

Timing and sequence of operations determine the starting and finishing time for each piece of
work according to some definite schedule and give practical and concrete shape and form to
work performance.
10. Principle of Securing Participation:
To secure participation of the employees with whole-hearted co-operation in execution of the
plan, it is necessary that the plan must be communicated and explained to them for their full
understanding. This understanding provides the basis for additional knowledge about new facts
and matters to the employees. This is needed for improvement in the quality of planning. It also
ensures an obligation of the personnel of the enterprise to execute the plan by individual and
joint participation.

11. Principle of Pervasiveness:

Though major planning function is entrusted to the top management, it is not restricted to the top
level only. It is a function of every manager at every level in the organisation.

12. Principle of Strategic Planning:

Strategic planning is essential where there is competition. It is prepared in the light of what the
competitors are intending to do. Planners must take into account the strategies of the rival
organisations, otherwise the planning projection may land them in trouble.

13. Principle of Innovation:

A good system of planning should be responsive to the opportunities for innovation. Innovation
consists in creating something new for increasing satisfaction of the consumers. This may also be
stated as an important strategy of business. Innovation is a necessity for its sustaining growth in
this dynamic world. Innovation is achieved through research and development and planning is
required to provide such scope.

14. Principle of Follow-up:

In the course of execution of a plan, certain obstacles may crop up in midway and planning may
require revision, alteration or correction. This is why there must be a follow-up system in the
planning process itself. This allows timely changes in the planning and makes it more effective.
LIMITATIONS/BARRIERS OF PLANNING:
The main limitations of planning are given below:
i. It has been thought as a time-consuming and expensive device. The framing of plans involves
money, energy and also, risk without giving any guarantee as to the realisation of assured goals.

ii. Smaller business concerns which are short of capital and which expect quick results cannot
afford to have a planning programme.

iii. It leads to possible results and not assured gains.

iv. It makes the entire organisational set-up rigid.

v. Forecasting methods, statistical data supplied are all inaccurate and the results of operations
research cannot be applied to all cases that come under planning.

By planning process, an organisation not only gets the insights of the future, but it also helps the
organisation to shape its future. Effective planning involves simplicity of the plan, i.e. the plan
should be clearly stated and easy to understand because if the plan is too much complicated it
will create chaos among the members of the organisation. Further, the plan should fulfil all the
requirements of the organisation.
ORGANISING

Organising is the process of defining and grouping the activities of the entire process and
establishing the authority and relationship among them” Organising in management refers to the
relationship between people, work and resources used to achieve the common objectives.

Organising is the managerial function of making sure there are available resources to carry out a
plan, determining the tasks to be performed in order to achieve objectives, grouping jobs into
departments, specifying reports and authority relationships, delegating of authority necessary for
task accomplishment, and also dividing tasks into specific jobs.

Organizing is the next important function of management after the planning. In case of planning
the management decides what is to be done in future. In case of organizing, it decides on ways and
means through which it becomes easier to achieve what has been planned. Hence, organizing refers
to the following process.

 Identifying and grouping of the work to be performed.

 Defining and determining responsibility and authority for each job position.

 Establishing relationship among various job positions.

 Determining detailed rules and regulations of working for individuals and groups in
organization.

Organizing creates and maintains rational relationships between human, material, financial, and
information resources by indicating which resources are to be used for the specified activities and
also when, where, and how they are to be used. The organizing function leads to an organizational
structure which defines precisely the authorities and the responsibilities. Organization structure is
the pattern of relationships among various components or parts of the organization which
prescribes the relations among various activities and positions. It defines the system of relations
between elements, factors, and activities within the organization. The organizational structure is
to be designed for some concrete conditions and objective needs of the organization.
Organizing is the function of management that involves developing an organizational structure
and allocating human resources to ensure the accomplishment of objectives. The structure of the
organization is the framework within which effort is coordinated. The structure is usually
represented by an organization chart, which provides a graphic representation of the chain of
command within an organization. Decisions made about the structure of an organization are
generally referred to as organizational design decisions.

Organizing also involves the design of individual jobs within the organization. Decisions must be
made about the duties and responsibilities of individual jobs, as well as the manner in which the
duties should be carried out. Decisions made about the nature of jobs within the organization are
generally called “job design” decisions.

Organizing at the level of a particular job involves how best to design individual jobs to most
effectively use human resources. Traditionally, job design was based on principles of division of
labor and specialization, which assumed that the more narrow the job content, the more
proficient the individual performing the job could become.

Organizing at the level of the organization involves deciding how best to departmentalize, or
cluster, jobs into departments to coordinate effort effectively. There are many different ways to
departmentalize, including organizing by function, product, geography, or customer. Many larger
organizations use multiple methods of departmentalization.

ORGANISATIONAL STRUCTURES:
Organizations can be structured in various ways, with each structure determining the manner in
which the organization operates and performs. An organization’s structure is typically
represented by an organization chart, a diagram showing the interrelationships of its positions.
This chart highlights the chain of command, or the authority relationships among people working
at different levels. It also shows the number of layers between the top and lowest managerial
levels. Organizational structure also dictates the span of control or the number of subordinates a
supervisor has. An organization with few layers has a wide span of control, with each manager
overseeing a large number of subordinates; with a narrow span of control, only a limited number
of subordinate’s reports to each manager. The structure of an organization determines how the
organization will operate and perform.
Line organization structure
It is the simplest and oldest form of organizational structure. The line of authority flows
vertically from top most executive to the lowest subordinate throughout the organization. Where,
managers have direct authority over their respective subordinates through the chain of command.
Authority flows directly from top to bottom through various managerial positions. It is simple
form of organization. Only one form of authority that is line authority exists in this form of
organization. Line authority refers to the direct authority of a manager over his subordinates. The
authority responsibility relationship is clearly established. All managers in line organization have
full authority to decide things and act with respect to their related functions. in line organization
department are created for basic activities and departmental heads are responsible for all
activities performed in the department.
Merits of line organization:
1. It is very simple to establish.
2. It clearly defines the authority, responsibility and accountability of a job
3. It can be easily adapted to the requirement of the organization.
4. Managers have exclusive authority over their unit, so they can easily make changes in the
functioning of the unit when required
5. There is definite authority at every level so that everyone can take decisions quickly.
6. Every employee knows to whom he/she is responsible and from whom they receive their
orders.
Demerits of line organization
1. The line executives are generalists and not specialists.
2. The top-level managers are overloaded with work.
3. There is concentration of authority at top-level only. If top-level managers are not capable
there may be failure.
4. All managers and supervisors handle their job on their own ways independently with grow the
line organization my find it difficult to maintain effective coordination between different
departments and units.
5. There is only one way communication i.e. from top to bottom
6. It is not suitable for large organization
Line and staff organization structure
In this type of organization structure two type of authority relationship exists. They are staff and
line authority. Staff authorities’ means authority to advice, support and serve the line managers.
All managerial functions are practiced by line authority with the help of specialized skill of staff
authority. It is modification of line organization and is more complex than it. Staff managers and
line managers are distinguished on the basis of their role. There is more specialization and
division of work. However, conflict may arise between line and staff authority.
Merits of line and staff organization structure:
1. The line executives are generalists and staff executives are specialists and they work together
with coordination
2. The top-level managers are not overloaded with work. Staff specialists give relief in critical
matters.
3. There is no concentration of authority at top-level only. Even if top-level managers are not
capable there is no failure because staff managers can help to overcome the problematic issues
through proper decisions and specialization.
4. All problems are handled with care and are tries to solve with the help of staff specialists..
5. There is two-way communications i.e. from top to bottom and bottom to top. There can be
feedback and suggestion with orders too.
Demerits of line and staff organization
1. It is difficult to establish and is costly too.
2. There is possibility of conflict between the line managers and staff managers. Line managers
may ignore staff’s advice and complain that staff doesn’t give right type of advice. Staff
managers can complain that their advice is not properly implemented.
3. The allocation of authority and responsibility between the line and staff official I generally not
clearly defined.
4. Line managers may be too much dependent upon the staff authority. Staff authority however is
not accountable for the result. Sometimes when staff authority do no perform well there may be
failure
5. There is wide difference between the approach of line managers and staff managers.
6. There can be reduction of initiative power o line authority.
Functional organization
In functional organization all business activities of an enterprise are divided into number of
fractions and each function is entrusted to a specialist, each specialist is known as functional
specialist and authority delegated to him is known as functional authority. One of the main
features of this organization is that a functional manager can exercise functional authority over
his own sub-ordinate but also over all sub ordinates in all other functional departments. The
principle of unity of command is not applied in his type of organizational structure. The sub-
ordinate may be confused by the multiple command system. The functions are divided into units
like marketing, production, research and development, human resource etc.

Merits of functional organization structure:

1. It provides benefits of specialist. Every manager is expert in his own field of knowledge.
There is advantage of the best managerial decisions
2. Here each department is given under supervision of specialist. All decisions about the
departments are also taken with the help of specialists.
3. There is no concentration of authority at top-level only. Even if top-level managers are not
capable there is no failure because functional managers can help to overcome the problematic
issues through proper decisions and specialization.
4. Functional organization provides preference for growth and expansion of business activity.
5. There is separation of mental and manual work.
6. It is suitable for large organization

Demerits of functional organization

1. Subordinates are always in confusion to obey the orders due to multiple command system.
2. No formal relationship among the departmental specialist.
3. there is lack of mutual understanding and coordination of activities of different department
4. There is delay in decision-making.
5. Narrow vision of departmental specialist creates problems in functional organizational.
6. There is weak discipline among the employees.
7. There is lack of fixed responsibility.
LINE AUTHORITY AND FUNCTIONAL AUTHORITY
Functional authority is the right that is delegated to an individual or a department to control
specified processes, practices, policies, or other matters about activities undertaken by persons in
other departments.
Line authority is the power given to someone in a supervisory position to mandate actions by
subordinates. This authority is given so that an organization can attain its stated goals and
objectives.

Functional Authority is different from Line Authority because line authority is given only for one
particular department. For e.g. A Production manager is given line authority only for the
production department. However, Functional Authority may be given for a particular department
or for the full organisation.

IMPORTANCE OF ORGANISING:

Organizing function follows the planning function. Plans prepared under the function of planning
govern all aspects of organizing function. Since the organizing follows planning it is closely
related to it. The organizing begins after the plans are prepared and is governed by the prepared
plans. While the plans state where the organization is to go, organizing helps the organization
how to get there. Organizing function shows the management how the organization is to be built
or how the existing one is modified to ensure that the goals set in the plans are achieved.

Organizing is essential because it facilitates administration as well as operation of in the

organization. By the proper grouping of the work and the employees, production increases,
overload of work is checked, wastage is reduced, duplication of work is restricted and effective
delegation becomes possible. Organizing also facilitates growth and diversification of activities
through clear division of work. It helps in developing a proper organization structure and the
extent and nature of decentralisation can be determined.

In addition to the above, it becomes possible through organizing to provide for the optimum use
of technical and human resources. Besides organizing also encourages creativity and enhances
interaction among different levels of management which leads to unification of efforts of all.
PRINCIPLES OF ORGANISING:

Organizing function is effective only if the management follows some guiding principles in order
to make important decisions and act upon them. For an efficient organizing function the
following are the guiding principles.

 Principle of specialization – According to the principle, the entire work of the

organization is to be shared among the subordinates based on their qualifications, abilities
and skills. Hence, effective organization can be achieved through specialization of
sharing or dividing work.

 Principles of supervision or span of control – The principle states that the span of control
shows the number of employees that a single manager can handle and control efficiently.
Hence, the management is to decide the number of employees that a manager can handle
and this decision can be chosen from either a wide or narrow span of employees. There
are two types of span of control namely (i) wide span of control in which a manager can
easily supervise and effectively handle a big group of subordinates independently, and
(ii) narrow span of control in which a manager does not have to supervise and control a
large group of employees as the work and authority is shared among many subordinates.
Hence, the manager needs to supervise only a selected number of employees at one time.

 Principle of scalar chain – It is that chain of command or authorization in which there is

minimum wastage of resources, communication is unaffected, overlapping of work is
prevented, and this facilitates effective organization. The flow of authorization from the
top level to the bottom level enables the managers to understand their positions of
authority and this helps in an effective organization.

 Principle of unity of command – As per this principle, one subordinate is accountable to

only one superior at one time. This helps in preventing lack of communication and
feedback and also brings about quick response. Hence, the principle of unity of command
leads to effectively combine both physical and financial resources which in turn aids in
effective coordination and organization.
COORDINATION
According to Mooney and Reelay, “Co-ordination is orderly arrangement of group efforts to
provide unity of action in the pursuit of common goals”. According to Charles Worth, “Co-
ordination is the integration of several parts into an orderly hole to achieve the purpose of
understanding”.

Management seeks to achieve co-ordination through its basic functions of planning, organizing,
staffing, directing and controlling. That is why, co-ordination is not a separate function of
management because achieving of harmony between individuals efforts towards achievement of
group goals is a key to success of management. Co-ordination is the essence of management and
is implicit and inherent in all functions of management. Co-ordination is an integral element or
ingredient of all the managerial functions as discussed below: -

a. Co-ordination through Planning - Planning facilitates co-ordination by integrating the

various plans through mutual discussion, exchange of ideas. e.g. - co-ordination between
finance budget and purchases budget.
b. Co-ordination through Organizing - Mooney considers co-ordination as the very
essence of organizing. In fact when a manager groups and assigns various activities to
subordinates, and when he creates department’s co-ordination uppermost in his mind.
c. Co-ordination through Staffing - A manager should bear in mind that the right no. of
personnel in various positions with right type of education and skills are taken which will
ensure right men on the right job.
d. Co-ordination through Directing - The purpose of giving orders, instructions &
guidance to the subordinates is served only when there is a harmony between superiors &
subordinates.
e. Co-ordination through Controlling - Manager ensures that there should be co-
ordination between actual performance & standard performance to achieve organizational
goals.

From above discussion, we can very much affirm that co-ordination is the very much essence of
management. It is required in each & every function and at each & every stage & therefore it
cannot be separated.
TECHNIQUES FOR EEFECTIVE DELEGATION
1. Delegate early and select the right person
Make an effort to delegate the task early to avoid unnecessary pressure. This allows the person to better
plan the task. Ensure that the person has the time to take on the responsibility. Assess the skills and
capabilities of your staff and assign the task to the most appropriate person. Make sure the person has the
training and resources to succeed.

3. Communicate the rationale and benefit.

Identify the reason for the task and how it will contribute to the goals of the company or department or
team. Also, point out how the delegated task could benefit the person. For example, develop a specific
skill. Remember a routine task to you may be a new challenging task to your subordinate.

4. Delegate the entire task to one person.

This gives the person the responsibility, increases their motivation and avoids ambiguity in
accountability. Otherwise, different people will have different ideas about who does what when.

5. Set clear goals and expectations.

Be clear and specific on what is expected. Give information on what, why, when, who and where. You
might leave the “how” to them. Be prepared to accept input from subordinates. Confirm and verify task
goals and expectations.

6. Delegate responsibility and authority.

Ensure that the subordinate is given the relevant responsibility and authority to complete the task. Let the
subordinate complete the task in the manner they choose, as long as the results are what you specified. Be
willing to accept ideas from the subordinate on task fulfillment.

7. Provide support, guidance and instructions.

Point subordinates to the resources they may need to complete the task or project. That could be people
they need to coordinate with, crucial information or Be willing to be a resource yourself.

8. Take personal interest in the progress of delegated task.

Request to be updated on the progress of the task, provide assistance when necessary. Be careful not to be
intrusive; giving the perception that you do not trust the subordinate. Keep communication lines open,
regular meetings on large tasks can provide this ongoing feedback.

9. If you’re not satisfied with the progress, don’t take the project back immediately.
Rather, continue to work with the employee and ensure they understand the project to be their
responsibility. Give advice on ways to improve. This ensures accountability and dependability.

10. Evaluate and recognize performance.

Evaluate results more than methods. Analyze cause of insufficient performance for improvements and
recognize successes as soon as possible.
CENTRALISATION AND DECENTRALISATION
Centralization is said to be a process where the concentration of decision making is in a few
hands. All the important decision and actions at the lower level, all subjects and actions at the
lower level are subject to the approval of top management. According to Allen, “Centralization”
is the systematic and consistent reservation of authority at central points in the organization.

The implication of centralization can be :-

1. Reservation of decision making power at top level.

2. Reservation of operating authority with the middle level managers.
3. Reservation of operation at lower level at the directions of the top level.

Under centralization, the important and key decisions are taken by the top management and the
other levels are into implementations as per the directions of top level. For example, in a business
concern, the father & son being the owners decide about the important matters and all the rest of
functions like product, finance, marketing, personnel, are carried out by the department heads and
they have to act as per instruction and orders of the two people. Therefore in this case, decision
making power remain in the hands of father & son.

On the other hand, Decentralization is a systematic delegation of authority at all levels of

management and in all of the organization. In a decentralization concern, authority in retained by
the top management for taking major decisions and framing policies concerning the whole
concern. Rest of the authority may be delegated to the middle level and lower level of management.

The degree of centralization and decentralization will depend upon the amount of authority
delegated to the lowest level. According to Allen, “Decentralization refers to the systematic effort
to delegate to the lowest level of authority except that which can be controlled and exercised at
central points.

Decentralization is not the same as delegation. In fact, decentralization is all extension of

delegation. Decentralization pattern is wider is scope and the authorities are diffused to the lowest
most level of management. Delegation of authority is a complete process and takes place from one
person to another. While decentralization is complete only when fullest possible delegation has
taken place. For example, the general manager of a company is responsible for receiving the leave
application for the whole of the concern. The general manager delegates this work to the personnel
manager who is now responsible for receiving the leave applicants. In this situation delegation of
authority has taken place. On the other hand, on the request of the personnel manager, if the general
manager delegates this power to all the departmental heads at all level, in this situation
decentralization has taken place. There is a saying that “Everything that increasing the role of
subordinates is decentralization and that decreases the role is centralization”. Decentralization is
wider in scope and the subordinate’s responsibility increase in this case. On the other hand, in
delegation the managers remain answerable even for the acts of subordinates to their superiors.

Implications of Decentralization

1. There is less burden on the Chief Executive as in the case of centralization.

2. In decentralization, the subordinates get a chance to decide and act independently which
develops skills and capabilities. This way the organization is able to process reserve of
talents in it.
3. In decentralization, diversification and horizontal can be easily implanted.
4. In decentralization, concern diversification of activities can place effectively since there is
more scope for creating new departments. Therefore, diversification growth is of a degree.
5. In decentralization structure, operations can be coordinated at divisional level which is not
possible in the centralization set up.
6. In the case of decentralization structure, there is greater motivation and morale of the
employees since they get more independence to act and decide.
7. In a decentralization structure, co-ordination to some extent is difficult to maintain as there
are lot many department divisions and authority is delegated to maximum possible extent,
i.e., to the bottom most level delegation reaches. Centralization and decentralization are
the categories by which the pattern of authority relationships became clear. The degree of
centralization and de-centralization can be affected by many factors like nature of
operation, volume of profits, number of departments, size of a concern, etc. The larger the
size of a concern, a decentralization set up is suitable in it.
LEADING
Leading is another of the basic function within the management process "Leading is the use of
influence to motivate employees to achieve organizational goals" (Richard Daft). Managers must
be able to make employees want to participate in achieving an organization's goals.

Three components make up the leading function:

 Motivating employees

 Influencing employees

 Forming effective groups.

The leading process helps the organization move towards goal attainment.

DECISION MAKING PROCESS

Quite literally, organizations operate by people making decisions. A manager plans, organizes,
staffs, leads, and controls her team by executing decisions. The effectiveness and quality of those
decisions determine how successful a manager will be.

Managers are constantly called upon to make decisions in order to solve problems. Decision
making and problem solving are ongoing processes of evaluating situations or problems,
considering alternatives, making choices, and following them up with the necessary actions.
Sometimes the decision‐making process is extremely short, and mental reflection is essentially
instantaneous. In other situations, the process can drag on for weeks or even months. The entire
decision‐making process is dependent upon the right information being available to the right
people at the right times.
The decision‐making process involves the following steps:

1.Define the problem.

2.Identify limiting factors.

3.Develop potential alternatives.

4.Analyze the alternatives.

5.Select the best alternative.

6.Implement the decision.

7.Establish a control and evaluation system.

Decision-making under Certainty:

A condition of certainty exists when the decision-maker knows with reasonable certainty what
the alternatives are, what conditions are associated with each alternative, and the outcome of
each alternative. Under conditions of certainty, accurate, measurable, and reliable information on
which to base decisions is available.

The cause and effect relationships are known and the future is highly predictable under
conditions of certainty. Such conditions exist in case of routine and repetitive decisions
concerning the day-to-day operations of the business.

Decision-making under Risk:

When a manager lacks perfect information or whenever an information asymmetry exists, risk
arises. Under a state of risk, the decision maker has incomplete information about available
alternatives but has a good idea of the probability of outcomes for each alternative.

While making decisions under a state of risk, managers must determine the probability
associated with each alternative on the basis of the available information and his experience.
Decision-making under Uncertainty:
Most significant decisions made in today’s complex environment are formulated under a state of
uncertainty. Conditions of uncertainty exist when the future environment is unpredictable and
everything is in a state of flux. The decision-maker is not aware of all available alternatives, the
risks associated with each, and the consequences of each alternative or their probabilities.

The manager does not possess complete information about the alternatives and whatever
information is available, may not be completely reliable. In the face of such uncertainty,
managers need to make certain assumptions about the situation in order to provide a reasonable
framework for decision-making. They have to depend upon their judgment and experience for
making decisions.

DECISION TREES
Decision Trees are excellent tools for helping you to choose between several courses of action.
They provide a highly effective structure within which you can lay out options and investigate
the possible outcomes of choosing those options. They also help you to form a balanced picture
of the risks and rewards associated with each possible course of action.

You start a Decision Tree with a decision that you need to make. Draw a small square to
represent this towards the left of a large piece of paper.From this box draw out lines towards the
right for each possible solution, and write that solution along the line. Keep the lines apart as far
as possible so that you can expand your thoughts.

At the end of each line, consider the results. If the result of taking that decision is uncertain, draw
a small circle. If the result is another decision that you need to make, draw another square.
Squares represent decisions, and circles represent uncertain outcomes. Write the decision or
factor above the square or circle. If you have completed the solution at the end of the line, just
leave it blank.

Starting from the new decision squares on your diagram, draw out lines representing the options
that you could select. From the circles draw lines representing possible outcomes. Again make a
brief note on the line saying what it means. Keep on doing this until you have drawn out as many
of the possible outcomes and decisions as you can see leading on from the original decisions.
An example of the sort of thing you will end up with is shown in figure 1:

Once you have done this, review your tree diagram. Challenge each square and circle to see if
there are any solutions or outcomes you have not considered. If there are, draw them in. If
necessary, redraft your tree if parts of it are too congested or untidy. You should now have a good
understanding of the range of possible outcomes of your decisions.

Now you are ready to evaluate the decision tree. This is where you can work out which option has
the greatest worth to you. Start by assigning a cash value or score to each possible outcome.
Estimate how much you think it would be worth to you if that outcome came about.
CONTROLLING
Management control can be defined as a systematic effort to compare performance to
predetermined standards and address deficiencies.

Control can also be defined as “that function of the system that adjusts operations as needed to
achieve the plan, or to maintain variations from system objectives within allowable limits.” The
control subsystem functions in close harmony with the operating system. The degree to which they
interact depends on the nature of the operating system and its objectives. Stability concerns a
system’s ability to maintain a pattern of output without wide fluctuations. Rapidity of response
pertains to the speed with which a system can correct variations and return to expected output.

Characteristics of Control

Control has several characteristics. It may be described as being:

 A continuous process.

 A management process.

 Embedded in each level of organizational hierarchy.

 Forward-looking.

 Closely linked with planning.

 A tool for achieving organizational activities.

 An end process.
Importance of Controlling

Control is an indispensable function of management without which the controlling function in an

organization cannot be accomplished and the best of plans which can be executed can go away. A
good control system helps an organization in the following ways:

1. Accomplishing Organizational Goals

The controlling function is an accomplishment of measures that further makes progress towards the
organizational goals & brings to light the deviations, & indicates corrective action. Therefore it helps
in guiding the organizational goals which can be achieved by performing a controlling function.

2. Judging Accuracy of Standards

A good control system enables management to verify whether the standards set are accurate &
objective. The efficient control system also helps in keeping careful and progress check on the
changes which help in taking the major place in the organization & in the environment and also helps
to review & revise the standards in light of such changes.

3. Making Efficient use of Resources

Another important function of controlling is that in this, each activity is performed in such manner so
an in accordance with predetermined standards & norms so as to ensure that the resources are used in
the most effective & efficient manner for the further availability of resources.

4. Improving Employee Motivation

Another important function is that controlling help in accommodating a good control system which
ensures that each employee knows well in advance what they expect & what are the standards of
performance on the basis of which they will be appraised. Therefore it helps in motivating and
increasing their potential so to make them & helps them to give better performance.
5. Ensuring Order & Discipline

Controlling creates an atmosphere of order & discipline in the organization which helps to minimize
dishonest behavior on the part of the employees. It keeps a close check on the activities of employees
and the company can be able to track and find out the dishonest employees by using computer
monitoring as a part of their control system.

6. Facilitating Coordination in Action

The last important function of controlling is that each department & employee is governed by such
pre-determined standards and goals which are well versed and coordinated with one another. This
ensures that overall organizational objectives are accomplished in an overall manner.

CONTROL TECHNIQUES IN MANAGEMENT

Controlling helps the managers in eliminating the gap between organizations actual performance
and goals. Controlling is the process in which actual performance is compared with the company
standards. Comparing it gives the visibility that activities are performed according to strategy or not.
If it is not performed then necessary corrective action should be taken.

Budgetary Control

Budgeting simply means showcasing plans and expected results using numerical information. As a
corollary to this, budgetary control means controlling regular operations of an organization for
executing budgets. A budget basically helps in understanding and expressing expected results of
projects and tasks in numerical form. For example, the amounts of sales, production
output, machine hours, etc. can be seen in budgets.

Standard Costing

Standard costing is similar to budgeting in the way that it relies on numerical figures. The difference
between the two, however, is that standard costing relies on standard and regular/recurring costs.
Under this technique, managers record their costs and expenses for every activity and compare them
with standard costs. This controlling technique basically helps in realizing which activity is
profitable and which one is not.
Financial Ratio Analysis

Every business organization has to depict its financial performances using reports like balance
sheets and profit & loss statements. Financial ratio analysis basically compares these financial
reports to show the financial performance of a business in numerical terms. Comparative studies of
financial statements showcase standards like changes in assets, liabilities, capital, profits, etc.
Financial ratio analysis also helps in understanding the liquidity and solvency status of a business.

Internal Audit

Another popular traditional type of control technique is internal auditing. This process requires
internal auditors to appraise themselves of the operations of an organization. Generally, the scope of
an internal audit is narrow and it relates to financial and accounting activities. In modern times,
however, managers use it to regulate several other tasks.

Break-Even Analysis

Break-even analysis shows the point at which a business neither earns profits nor incurs losses. This
can be in the form of sale output, production volume, the price of products, etc. Managers often use
break-even analysis to determine the minimum level of results they must achieve for an activity.
Any number that goes below the break-even point triggers corrective measures for control.
STEPS IN THE CONTROL PROCESS

The four steps in the control process are: Establishing Standards and Methods for Measuring
Performance; Measuring the Performance; Determination of Whether the Performance Matches
the Standard, and Taking Corrective Action.

Establishment of Standards and Methods for Measuring Performance, a company must develop,
document and explain clear standards and methods for measuring particular performances. These
must be specific and understood so effective measuring of tasks and responsibilities can take
place. In this way, an enterprise can gain a good understanding of who is performing according
to company objectives. Proper standards and methods for measuring performance helps a
company tweak their processes as required for better results. Performance measurement helps
them see where their processes and procedures need improvement.

Measuring the Performance, this must be done in a consistent, regular manner to facilitate proper
data acquisition to make informed decisions concerning performance. This regular measuring
gives management substantial information so they can again make adjustments as necessary to
their protocols.

Determining Whether the Performance Matches the Standard, company management compares
measured results with the standards they previously established. Therefore, they can determine if
performance is up to their expectations - or not. With this comparing, they can decide to abandon
certain policies, procedures or tasks, modify them, or leave them in place.

Taking Corrective Action, a company must use the information gathered from the control
process. Not taking action based on revealed information (which shows inefficiencies and/or
poor employee performance) means they wasted their time and resources instituting the control
process. They must take action that gives solutions to problems. They must then measure these
corrective actions some time down the road to see if they are performing up to corporate
expectations. Consequently, the control process is something that is ongoing in organizations to
make sure that the business is performing optimally.
MOTIVATION
‘Motivation’ is the process of inspiring people in order to intensify their desire and willingness
for executing their duties effectively and for co-operating to achieve the common objectives of
an enterprise.’

“Motivation is a general inspiration process which gets the members of the team pull their
weight effectively to give their loyalty to the group, to carry out properly the tasks they have
accepted and generally to play an effective part in the job that the group has undertaken.”

The state of motivation is further comprised of four different states, which takes place in an
organism to drive him towards each action. Each action is first initiated because of a
particular need. The need drives the person into taking actions. Positive results, caused due to the
actions, further acts as an incentive motivating a person towards the goal. But the individual can
never stop after achieving a certain goal, and this phenomenon continues on and on. This
phenomenon has been termed as Motivational Cycle.
IMPORTANCE OF EMPLOYEE MOTIVATION
1. Motivation helps change negative attitude to positive attitude:
Without motivation the employees try to perform minimum activities in the organisation. But the
motivation fills in the desire to perform to their maximum level. All the resources of the
organisation are of no use unless and until the employees use these resources. The motivated
employees make best use of the resources.

2. Motivation improves performance level of employees:

The motivation improves the efficiency level of employees which means the employees start
performing the job to the best of their ability with minimum wastage of time and resources because
motivated employees always go for best utilisation of resources. The motivation bridges the gap
between the ability to work and willingness to work and willingness always improves efficiency.

3. Helps in Achieving the Organisational Goal:

The motivated employees always try to achieve the organisational goal and contribute their best
efforts for the realisation of organisational goal as they know with the achievement of
organisational goal only they can achieve their personal goal. All the employees contribute their
efforts in one direction of accomplishment of goal.

4. Motivation creates Supportive Work Environment:

In motivation the relations between superior and subordinates are always improved. When the
employees get their need satisfied or get the recognition and respect in the organisation then they
always offer a supportive hand to superiors. There is more cooperation and co-ordination in the
organisation and all the employees work with the team spirit.

5. Motivation helps the managers to introduce changes:

The motivated employees show less resistance in accepting the changes according to changes in
the business environment because they know if the changes are not implemented in the
organisation, not only the organisation will lose by this but the employees also will find it difficult
to get their needs fulfilled. Motivated employees are always supportive and co-operative in
accepting changes in the organisation.

6. Reduction in Employees’ Turnover:

The motivation creates confidence in the employees to get their needs satisfied in the organisation
itself. They always select the alternative to remain in the organisation and increase their earning
rather than leaving the organisation and increasing their earnings. With motivation the turnovers
are less because the satisfied employees never leave the job
ORGANISATIONAL DESIGN
SPECIALISATION AND DIVISION OF WORK
Job specialization makes an employee skilled in a specialized job, productivity is fast and in high
numbers as time isn't wasted. Job specialization saves time and leads to less wastage of materials.
Machinery can also be equipped along with specialized and skilled workers which further enhances
productivity.
Advantages
 Workers become quicker at producing goods (more productive)
 An increase in productivity causes the cost if production to decrease (lower average
costs)
 Production levels are increased
 Specialised workers tend to get higher pay
 Workers' specific skills will be improved
 More motivation from job satisfaction
Disadvantages
 Greater cost of training workers
 Quality may suffer if workers become bored by the lack of variety in their job
 More expensive workers
 Boredom for the worker as they do the same job everyday
 Workers' skills may suffer as they are only doing one job
 Workers may eventually be replaced by machinery

JOB DESIGN

Job design is the process of deciding on the contents of a job in terms of its duties and
responsibilities, on the methods to be used in carrying out the job in terms of techniques, systems
and procedures, and on the relationships that should exist between the job holders and his
supervisors, subordinates and colleagues. The main objectives of job design are to integrate the
needs of the individuals and the requirements of the organisation. Needs of the employees
include job satisfaction in terms of interest, challenge and achievement? Organisational
requirements are high productivity, technical efficiency and quality of work.
Job enlargement
Job enlargement is a job design technique wherein there is an increase in the number of tasks
associated with a certain job. In other words, it means increasing the scope of one’s duties and
responsibilities. The increase in scope is quantitative in nature and not qualitative and at the same
level. Job enlargement is a horizontal restructuring method that aims at increase in the workforce
flexibility and at the same time reducing monotony that may creep up over a period of time. It is
also known as horizontal loading in that the responsibilities increase at the same level and not
vertically. Many believe that since the enlargement is horizontal in nature there is not a great
need for training! Contrary to this, job enlargement requires appropriate training especially on
time and people management. Task related training is not required much since the person is
already aware of the same or doing it for some time.
Job Enrichment
Job enrichment means a vertical expansion of a job. It is different from job enlargement. Job
enlargement means a horizontal expansion of a job. Job enrichment makes the job more
meaningful, enjoyable and satisfying. It gives the workers more autonomy for planning and
controlling the job. It also gives the workers more responsibility. Job enrichment gives the
workers opportunities for achievement, recognition, advancement and growth. So, the workers
are motivated to work harder.

Job Enrichment and Job Enlargement

The difference between job enrichment and job enlargement is essentially of quantity and
quality. Whereas job enlargement means increasing the scope of job quantitatively by adding up
more tasks, job enrichment means improvement in the quality of job such that employees are
more satisfied and fulfilled. Through job enrichment an employee finds satisfaction and
contentment in his job and through job enlargement employee feels more responsible and
worthwhile in the organization. Job enrichment entails the functions of planning and organizing
and enlargement involves execution of the same. Both complement each other, in that job
enrichment empowers and enlargement executes. Job enrichment depends upon job enlargement
for success and the reverse in not true. Job enrichment means a vertical expansion in duties and
responsibilities and span of control whereas in job enlargement the expansion is horizontal in
nature.
 CHARACTERISTICS OF ORGANISATIONAL STRUCTURES

Important characteristics of an organization's structure include span of control,

departmentalization, centralization, and decentralization.

 Span of control refers to the number of subordinates a supervisor has; it is used as a means of
ensuring proper coordination and a sense of accountability among employees.
 Departmentalization is the basis by which an organization groups tasks together. There are five
common approaches: functional, divisional, matrix, team, and network.
 Centralization occurs when decision-making authority is located in the upper organizational
levels. Centralization increases consistency in the processes and procedures that employees use
in performing tasks.
 Decentralization occurs when decision-making authority is located in the lower organizational
levels. With decentralized authority, important decisions are made by middle-level and
supervisory-level managers, thereby increasing adaptability.

DETERMINANTS OF ORGANISATION STRUCTURE

OBJECTIVES AND STRATEGY
Organizational goals influence the way an organization is designed. The high value placed on
productivity and quality as well as shareholder value had a major influence on the redesign of
Westinghouse as a more diversified and decentralized firm. Indeed, goals are the prime
determinants of structure of an organisation.
SOCIAL CUSTOMS
Social customs at the time of an organization’s birth helps to determine how it is to be structured.
This has been very important in the history of business. For example, the organizational
structures adopted by the first companies in the automobile industry are not the same as the
structures being adopted now. Earlier, production was structured around the assembly line. Some
workers always built chassis, which were then sent down the assembly line to other workers,
who did such jobs as putting axles and engines onto those chassis. Currently, many automakers
are adopting work-group or team concept in which a group of workers is responsible for more
than just one portion of the car. At the time the auto industry began, no one thought about using a
group approach to building cars, given that it was not consistent with the existing values about
manufacturing.
ENVIRONMENTAL CONSTRAINTS
Environmental constraints include legislation, government regulation, court orders, market
characteristics, social issues, and societal norms etc. Laws concerning entry into or exclusion
from certain businesses, the imposition or removal of regulations, and such court-ordered actions
as the breakup of American Telephone and Telegraph Company affect the structure of
organizations. The birth of People Express and other air carriers was direct result of the Airline
Deregulations Act of 1978, which enabled new carriers to enter the airline business for the first
time in decades.
TECHNOLOGY CONSTRAINTS
Technology is another determining factor that will affect the new forms organizations will take.
Rapidly changing telecommunications technology and removal of certain regulations are opening
new market niches in which the regional telephone companies can compete. Another example is
robotics and other modern production methods. As these technologies have developed, they have
changed the American automobile industry as significantly as did foreign competition. Some
research demonstrates that the technological change offers occasions for restructuring.
SIZE
There are several criteria to determine size of an organisation such as number of persons
employed, amount of capital invested, volume of turnover etc. As an organisation grow in size its
structure naturally becomes complex. Therefore size though an element of organisation structure
is a factor that determines type of organisation structure.
STRATEGY, POLICY AND PLANNING
STRATEGY,

Strategy is an action that managers take to attain one or more of the organization’s goals. Strategy
can also be defined as “A general direction set for the company and its various components to
achieve a desired state in the future. Strategy results from the detailed strategic planning process”.
A strategy is all about integrating organizational activities and utilizing and allocating the scarce
resources within the organizational environment so as to meet the present objectives. While
planning a strategy it is essential to consider that decisions are not taken in a vaccum and that any
act taken by a firm is likely to be met by a reaction from those affected, competitors, customers,
employees or suppliers.

Strategy can also be defined as knowledge of the goals, the uncertainty of events and the need to
take into consideration the likely or actual behavior of others. Strategy is the blueprint of decisions
in an organization that shows its objectives and goals, reduces the key policies, and plans for
achieving these goals, and defines the business the company is to carry on, the type of economic
and human organization it wants to be, and the contribution it plans to make to its shareholders,
customers and society at large.

POLICY

A policy in Management is a general statement which is formulated by an organization for the

guidance of its personnel. The objectives are first formulated and then policies are planned to
achieve them. Policies are a mode of thought and the principles underlying the activities of an
organization or an institution.

According to Koontz & O ‘Donnel, “Policies were identified as guides to thinking in decision-
making. They assume that when decisions are made, these will fall within certain boundaries.”
Policies do not require action, but are intended to guide managers in their decision commitments
when they do not make decisions. In the words of George Terry, “Policy is a verbal, written or
implied overall guide setting up boundaries that supply the general limits and direction in which
managerial action will take place.” Policies provide a framework within which a person has
freedom to act.
Strategic Planning

Strategic planning is an organization’s process of defining its strategy or direction and making
decisions about allocating its resources to pursue this strategy. To determine the direction of the
organization, it is necessary to understand its current position and the possible avenues through
which it can pursue a particular course of action. Generally, strategic planning deals with at least
one of three key questions:

 What do we do?

 For whom do we do it?

 How do we excel?

Strategic Planning Process

The key components of strategic planning include an understanding of the firm’s vision, mission,
values, and strategies. (Often a “vision statement” and a ” mission statement ” may encapsulate
the vision and mission. )

1. Vision: This outlines what the organization wants to be or how it wants the world in which
it operates to be (an “idealized” view of the world). It is a long-term view and concentrates
on the future. It can be emotive and is a source of inspiration. For example, a charity working
with the poor might have a vision statement that reads “A World without Poverty.”
2. Mission: It defines the fundamental purpose of an organization or an enterprise, succinctly
describing why it exists and what it does to achieve its vision. For example, the charity above
might have a mission statement as “providing jobs for the homeless and unemployed.”
3. Values: These are beliefs that are shared among the stakeholders of an organization. Values
drive an organization’s culture and priorities and provide a framework in which decisions
are made. For example, “knowledge and skills are the keys to success,” or “give a man bread
and feed him for a day, but teach him to farm and feed him for life.” These example values
place the priorities of self-sufficiency over shelter.
4. Strategy: Strategy, narrowly defined, means “the art of the general”—a combination of the
ends (goals) for which the firm is striving and the means (policies) by which it is seeking to
 get there. A strategy is sometimes called a roadmap, which is the path chosen to move
towards the end vision. The most important part of implementing the strategy is ensuring
the company is going in the right direction, which is towards the end vision.

Tools and Approaches

There are many approaches to strategic planning, but typically one of the following is used:

 Situation-Target-Proposal: Situation – Evaluate the current situation and how it came about.
Target – Define goals and/or objectives (sometimes called ideal state). Path/Proposal – Map
a possible route to the goals/objectives.

 Draw-See-Think-Plan: Draw – What is the ideal image or the desired end state? See – What
is today’s situation? What is the gap from ideal and why? Think – What specific actions
must be taken to close the gap between today’s situation and the ideal state? Plan – What
resources are required to execute the activities?

Among the most useful tools for strategic planning is a SWOT analysis (Strengths, Weaknesses,
Opportunities, and Threats). The main objective of this tool is to analyze internal strategic factors
(strengths and weaknesses attributed to the organization) and external factors beyond control of
the organization (such as opportunities and threats).

SWOT ANALYSIS
A SWOT analysis is an incredibly simple, yet powerful tool to help you develop your business
strategy, whether you’re building a startup or guiding an existing company.

SWOT stands for Strengths, Weaknesses, Opportunities, and Threats.

Strengths and weaknesses are internal to your company—things that you have some control over
and can change. Examples include who is on your team, your patents and intellectual property,
and your location.

Opportunities and threats are external—things that are going on outside your company, in the
larger market. You can take advantage of opportunities and protect against threats, but you can’t
change them. Examples include competitors, prices of raw materials, and customer shopping
trends.
 Strengths
Strengths are internal, positive attributes of your company. These are things that are within your
control.
 What business processes are successful?
 What assets do you have in your team, such as knowledge, education, network, skills, and
reputation?
 What physical assets do you have, such as customers, equipment, technology, cash, and patents?
 What competitive advantages do you have over your competition?
Weaknesses
Weaknesses are negative factors that detract from your strengths. These are things that you might
need to improve on to be competitive.
 Are there things that your business needs to be competitive?
 What business processes need improvement?
 Are there tangible assets that your company needs, such as money or equipment?
 Are there gaps on your team?
 Is your location ideal for your success?
Opportunities
Opportunities are external factors in your business environment that are likely to contribute to
your success.
 Is your market growing and are there trends that will encourage people to buy more of what you
are selling?
 Are there upcoming events that your company may be able to take advantage of to grow the
business?
 Are there upcoming changes to regulations that might impact your company positively?
 If your business is up and running, do customers think highly of you?
Threats
Threats are external factors that you have no control over. You may want to consider putting in
place contingency plans for dealing them if they occur.
 Do you have potential competitors who may enter your market?
 Will suppliers always be able to supply the raw materials you need at the prices you need?
 Could future developments in technology change how you do business?
 Is consumer behavior changing in a way that could negatively impact your business?
 Are there market trends that could become a threat?
UPPER CRUST PIES SWOT ANALYSIS
UPer Crust Pies, a specialty meat and fruit pie cafe in Michigan’s Upper Peninsula. They sell
hot, ready-to-go pies and frozen take-home options, as well as an assortment of fresh salads and
beverages. The company is planning to open its first location in downtown Yubetchatown and is
very focused on developing a business model that will make it easy to expand quickly and that
opens up the possibility of franchising.

Here’s what their SWOT analysis might look like:

COMPETITIVE STRATEGIES
A firm's relative position within its industry determines whether a firm's profitability is above or
below the industry average. The fundamental basis of above average profitability in the long run
is sustainable competitive advantage. There are two basic types of competitive advantage a firm
can possess: low cost or differentiation. The two basic types of competitive advantage combined
with the scope of activities for which a firm seeks to achieve them, lead to three generic strategies
for achieving above average performance in an industry: cost leadership, differentiation, and focus.
The focus strategy has two variants, cost focus and differentiation focus.
1. Cost Leadership
In cost leadership, a firm sets out to become the low cost producer in its industry. The sources of
cost advantage are varied and depend on the structure of the industry. They may include the pursuit
of economies of scale, proprietary technology, preferential access to raw materials and other
factors. A low cost producer must find and exploit all sources of cost advantage. if a firm can
achieve and sustain overall cost leadership, then it will be an above average performer in its
industry, provided it can command prices at or near the industry average.

2. Differentiation
In a differentiation strategy a firm seeks to be unique in its industry along some dimensions that
are widely valued by buyers. It selects one or more attributes that many buyers in an industry
perceive as important, and uniquely positions itself to meet those needs. It is rewarded for its
uniqueness with a premium price.

3. Focus
The generic strategy of focus rests on the choice of a narrow competitive scope within an industry.
The focuser selects a segment or group of segments in the industry and tailors its strategy to serving
them to the exclusion of others.
The focus strategy has two variants.
(a) In cost focus a firm seeks a cost advantage in its target segment, while in (b) differentiation
focus a firm seeks differentiation in its target segment. Both variants of the focus strategy rest on
differences between a focuser's target segment and other segments in the industry. The target
segments must either have buyers with unusual needs or else the production and delivery system
that best serves the target segment must differ from that of other industry segments. Cost focus
exploits differences in cost behaviour in some segments, while differentiation focus exploits the
special needs of buyers in certain segments.