Module For Introduction To Management (ATLAS)

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UNIT ONE
FUNDAMENTALS OF MANAGEMENT
Dear Learners, this is the first chapter of the module, fundamentals of the management, entirely
deals with the basic concepts of management. The unit has been divided in to five major
sections. Hopefully, you will work hard on this unit since you know very well that understanding
the basic or fundamental concepts is a prerequisite to easily learn complex concepts and theories.
Objectives of the unit:
On the successful completion of this unit, you will be able
 To enable to define management;
 To describe the nature and scope of management;
 To know the difference between management and administration;
 To understand various levels of management; and
 To describe the various skills that is necessary for successful managers.
1. 1 NTRODUCTION
A business develops in course of time with complexities. With increasing complexities managing
the business has become a difficult task. The need of existence of management has increased
tremendously. Management is essential not only for business concerns but also for banks,
schools, colleges, hospitals, hotels, religious bodies, charitable trusts etc. Every business unit has
some objectives of its own. These objectives can be achieved with the coordinated effort s of
several personnel. The work of a number of persons is properly co-ordinate to achieve the
objectives through the process of management. Management is a vital aspect of the economic life
of man, which is an organized group activity. It is considered as the indispensable institution in
the modern social organization marked by scientific thought and technological innovations. One
or the other form of management is essential wherever human efforts are to be undertaken
collectively to satisfy wants through some productive activity, occupation or profession. It is
management that regulates man's productive activities through coordinated use of material
resources. Without the leadership provided by management, the resources of production remain
resources and never become production.
Management is the integrating force in all organized activity. Whenever two or more people
work together to attain a common objective; they have to coordinate their activities and
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cooperate each other. They also have to organize and utilize their resources in such a way as to
optimize the results. Not only in business enterprises where costs and revenues can be
ascertained accurately and objectively but also in service organizations such as government,
hospitals, schools, clubs, etc., scarce resources including men, machines, materials and money
have to be integrated in a productive relationship, and utilized efficiently towards the
achievement of their gals. Thus, management is not unique to business organizations but
common to all kinds of social organizations.
1.1.1 Definition of management
Dear learners, what do you think management is? (You can use the space left below to write your
responses)
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Many definitions have been given to the concept management by different scholars. Yet the
following are the most widely used definitions of management. Read these definitions carefully
and try to understand their essence.
 Management is the attainment of organizational goals in an effective and efficient manner
through planning, organizing, staffing, directing and controlling organizational resources.
 According Marry Parker, “Management is the art of getting things done through
others”.
 Management is the process of planning, organizing, staffing, directing and controlling
the use of a firm’s resources to effectively and economically attain its objectives.
 Management is the act of getting people together to accomplish desired goals and
objectives using available resources efficiently and effectively.
 Management refers to a group of people who are responsible for guiding and controlling
an organization.
1.1.2 Characteristics of Management
 Management is a distinct process.
 Management is an organized activity
 Management aims at the accomplishment of predetermined objectives.
 Management is both a science and an art.
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 Management is a group activity
 Management principles are universal in nature
 Management integrates human and other resources.
1.1.3 Significance of Management
Management is one of the most important human activities. Ever since people began forming
groups to accomplish activities they couldn‟t achieve as individuals, management has been
essential to ensure the coordination of individual efforts. As society has come to rely
increasingly on group effort and as many organized groups have become large, the task of
managers has been rising in importance.
Management is essential whenever and wherever human efforts to be undertaken collectively to
achieve specific goals. No group activities can succeed without management.
According to Peter Drucker, “Management is the organ of society that is charged with the
responsibility of making resources productive”. Thus, modern organization succeeds only when
there is a competent leadership in the form of management.
1. It helps in Achieving Group Goals: It arranges the factors of production, assembles and
organizes the resources, integrates the resources in effective manner to achieve goals. It
directs group efforts towards achievement of pre-determined goals. By defining objective
of organization clearly there would be no wastage of time, money and effort.
Management converts disorganized resources of men, machines, money etc. into useful
enterprise. These resources are coordinated, directed and controlled in such a manner that
enterprise work towards attainment of goals.
2. Optimum Utilization of Resources: Management utilizes all the physical & human
resources productively. This leads to efficacy in management. Management provides
maximum utilization of scarce resources by selecting its best possible alternate use in
industry from out of various uses. It makes use of experts, professional and these services
leads to use of their skills, knowledge, and proper utilization and avoids wastage. If
employees and machines are producing its maximum there is no under employment of
any resources.
3. Reduces Costs: It gets maximum results through minimum input by proper planning and
by using minimum input & getting maximum output. Management uses physical, human
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and financial resources in such a manner which results in best combination. This helps in
cost reduction.
4. Establishes Sound Organization: No overlapping of efforts (smooth and coordinated
functions). To establish sound organizational structure is one of the objective of
management which is in tune with objective of organization and for fulfillment of this, it
establishes effective authority & responsibility relationship i.e. who is accountable to
whom, who can give instructions to whom, who are superiors & who are subordinates.
Management fills up various positions with right persons, having right skills, training and
qualification. All jobs should be cleared to everyone.
5. Establishes Equilibrium: It enables the organization to survive in changing environment.
It keeps in touch with the changing environment. With the change is external
environment, the initial co-ordination of organization must be changed. So it adapts
organization to changing demand of market/changing needs of societies. It is responsible
for growth and survival of organization.
6. Essentials for Prosperity of Society: Efficient management leads to better economical
production which helps in turn to increase the welfare of people. Good management
makes a difficult task easier by avoiding wastage of scarce resource. It improves standard
of living. It increases the profit which is beneficial to business and society will get
maximum output at minimum cost by creating employment opportunities which generate
income in hands. Organization comes with new products and researches beneficial for
society.
1.1.4 Principles of Management
1. Division of Work: Specialization allows the individual to build up experience, and to
continuously improve his skills. Thereby he can be more productive.
2. Authority: The right to issue commands, along with which must go the balanced
responsibility for its function.
3. Discipline: Employees must obey, but this is two-sided: employees will only obey orders
if management plays their part by providing good leadership.
4. Unity of Command: Each worker should have only one boss with no other conflicting
lines of command.
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5. Unity of Direction: People engaged in the same kind of activities must have the same
objectives in a single plan. This is essential to ensure unity and coordination in the
enterprise. Unity of command does not exist without unity of direction but does not
necessarily flows from it.
6. Subordination of individual interest/to the general interest: Management must see that
the goals of the firms are always paramount.
7. Remuneration: Payment is an important motivator although by analyzing a number of
possibilities, Fayol points out that there is no such thing as a perfect system.
8. Centralization (or Decentralization): This is a matter of degree depending on the
condition of the business and the quality of its personnel.
9. Scalar chain (Line of Authority): A hierarchy is necessary for unity of direction. But
lateral communication is also fundamental, as long as superiors know that such
communication is taking place. Scalar chain refers to the number of levels in the
hierarchy from the ultimate authority to the lowest level in the organization. It should not
be over-stretched and consist of too-many levels.
10. Order: Both material order and social order are necessary. The former minimizes lost
time and useless handling of materials. The latter is achieved through organization and
selection.
11. Equity: In running a business a „combination of kindliness and justice‟ is needed.
Treating employees well is important to achieve equity.
12. Stability of Tenure of Personnel: Employees work better if job security and career
progress are assured to them. An insecure tenure and a high rate of employee turnover
will affect the organization adversely.
13. Initiative: Allowing all personnel to show their initiative in some way is a source of
strength for the organization. Even though it may well involve a sacrifice of „personal
vanity‟ on the part of many managers.
14. Esprit de Corps: Management must foster the morale of its employees. He further
suggests that: “real talent is needed to coordinate effort, encourage keenness, use each
person‟s abilities, and reward each one‟s merit without arousing possible jealousies and
disturbing harmonious relations.”
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1.2 FUNCTIONS OF MANAGEMENT
Planning: planning is the first function of that all managers engage because it lays the ground
work for all other functions. It identifies the goals and alternatives. It maps out the courses of
action that will commit individuals, departments and the entire organization for days, months and
years to come.
Organizing: organizing as a management function is concerned with:
 Assembling the resources necessary to achieve the organization objectives.
 Establish the activity authority relationships of the organization.
Planning has established the goals of the company and how they are to be achieved; organizing
develops the structure to reach these goals.
The activities necessary to achieve the objectives are grouped into working divisions, department
or other identifiable units primarily by clustering similar and related duties. The result is a
network of independent unit. Each unit should have clearly defined authority or a clearly defined
list of duties.
Staffing: is concerned with locating prospective employee to fill the jobs created by the
organizing process. Staffing initially involves the process of recruiting potential candidates for a
job, reviewing the applicant‟s credentials and trying to match the job demands with candidate‟s
abilities. After the employment decision has been made the position offered and accepted.
Directing: is aimed at getting the members of the organization to move in the right direction that
will enable to achieve its objectives. The challenge for a manager in directing is to create an
environment in which both the employee and organization will achieve their objectives. Here,
communication and motivation should be on going and personalized. Each person should be
encouraged to participate in the decision making process.
Controlling: Controlling deals with establishing standard for performance. Measuring
performances against established standards, and dealing with deviations from established
standards and corrective action. The bets controls ensure that work is performed to standards as
planned.
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1.3 LEVELS OF MANAGEMENT
Levels here refer to hierarchical arrangement of managerial function in an organization. The
number of levels of management depends on the size of the organization. In general there are
three managerial functions.
1.3.1 Top Level Management
In typical organization top level management includes that of BOD, CEO, Executive Committee,
President or General Managers etc.
Functions
 Establishing broad objectives.
 Designing major strategies.
 Outlining principal policies.
 Providing effective organizational structure that ensures integration.
 Providing overall leadership and direction.
 Making overall control of the organization.
 Dealing with external parties such as government, community etc by representing the
organization.
 Analyzing the changes in the external environment and responding to it
1.3.2 Middle Level Management
Middle level management includes Divisional Heads, Department Managers, Section Heads,
and Branch Managers etc. Managers in this level are specialists and their activities are limited to
a particular area operation or department.
Functions
 Acting as intermediary between top level and operating level management
 Translating long term plans top management into medium term plans.
 Developing specific targets in their areas of responsibilities
 Developing specific schedules to guide actions and facilitate control.
 Coordinating inputs, productivity and output of operating management.
1.3.3 Operating Level Management
The operating level management directs a small team of workers and keeps a check on their
performance, so that short term production and work targets are achieved. The typical titles in
this level are section chief, office manager, foreman, supervisor etc.
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Functions
 Planning daily and weekly activities and accomplishment based on the monthly,
quarterly and yearly plans.
 Assigning operating employees to specific task.
 Issuing instruction at the work place, following up, motivating and evaluating workers
and reporting to their superiors.
Types of Managers
Functional Manager: They supervise with specialized skills in a single area of operations such
as Accounting, Marketing, Finance, HR and Production. All these functions are necessary for the
success of the organization.
General Managers: are responsible for the overall operations of the organization. General
Managers hold functional management accountable for their specialized areas and coordinate
them.
1.4 MANAGERIAL ROLES
Dear Learners, what do you think is the role of managers in their organizations? (Use the
following space for your answer)
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Managers perform the basic managerial functions by planning a variety of managerial roles. A
role is an organized set of behaviors. Henry Mintzberg, studied a variety of managerial jobs,
arrived ten most common roles of managers. They are classified under three categories.
I. Interpersonal Roles: which arise directly from a managers formed authority, involves
interpersonal relationship.
 Figure – Head Role: the manager represents the organizations at ceremonial and
symbolic functions.
 Leadership Role: It involves responsibility for directing and coordinating the activities of
subordinates in order to accomplish original objectives.
 Liaison Role: refers to dealing with people outside the organization such as clients,
government officials, customers and suppliers. Also dealing with departmental managers,
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staff specialists and employees. Here the manager seeks support from people who can
affect the organization success.
II. Informational Roles: Effective managers build networks of contacts for sharing
information.
 Monitor Role: involves seeking out, receiving and screening informational managers
must evaluate and decide whether to use this information or not.
 Disseminator Role: the manager shares information with subordinates and other
members of the organization.
 Spokes – Person Role: managers transmit information to others, especially those outside
the organization, as the official position of the company.
III. Decisional Roles: Managers use information to make decisions about when and how to
commit organizations to new objectives and actions.
 Entrepreneurial Role: involves designing and initiating planned change in order to
improve the organizations position. E.g. new project, launch a survey, new market or
enter a new business.
 Disturbance Handler Role: managers play the disturbance handler role when dealing
with problems and changes beyond their immediate control. Typical problems include
strikes, bankruptcy of major supplier, breaking contracts by customers.
 Resource Allocator Role: managers allocate resource according to their general return.
 Negotiator Role: managers must meet and discuss their differences with individuals or
groups for the purpose of reaching an agreement.
1.5 MANAGERIAL SKILLS
Skill is directly to do something expertly and well.
I. Technical Skills: Technical skills involve the ability to apply specific methods,
procedures and techniques in a specialized field. For example Musicians, Computer
Programmers and Engineers etc.
II. Interpersonal Skills: Includes the ability to lead, motivate, manage conflicts and work
with others.
III. Conceptual Skills: Involves the ability to view the organization as a whole and
recognizes its relationship to the larger environment. The conceptual skills are especially
important to managers in making decisions.
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IV. Communication Skills: It reflects a managerial ability to send and receive information,
thoughts, feelings and attitudes. It is classified into writing, oral and non – verbal (facial
expressions) etc. Communication skills are very crucial to all managers.
1.6 UNIVERSALITY OF MANAGEMENT
Although the type, objectives and problems of different organizations vary widely, the functions
performed by each manager are nearly the same.
a. In all kinds of organizations, the basic managerial functions are used to make individuals
contribute to group objectives.
 From small to large and complex.
 In profit making and non – profit making.
 In manufacturing and services giving.
b. Managers in all levels of organizational hierarchal perform the same basic managerial.
c. The principles of management are universal. They are applicable to any kind of
organization.
1.7 IS MANAGEMENT A SCIENCE OR AN ART?
Science may be defined as a systematized knowledge derived from observation, study and
experimentation carried out in order to determine the nature and principles of the subject under
study. Since management has a structured body of knowledge with its distinct concepts and
principles that are developed with reference to the general truth underlying the management
practice. Thus, management is a Science.
Like all other practices management is an art. It is the application of knowledge and doing things
in the light of the realities of the situation. Therefore, management is both a Science and an Art.
Management is a Profession
Management is independent of ownership, rank or power. Its objective functions and ought to be
grounded in the responsibility for performance. It is a function, a discipline, a task to be done and
mangers are the professionals who practice this discipline, carryout the functions and discharge
the task.
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Check your progress
1. "Management is both a science and an art". Discuss this statement, giving suitable
examples.
2. What do you understand by the term "Levels of Management"? Explain with reference to
an organization with which you are familiar.
3. Briefly discuss the nature and scope of Management.
4. What are the functions of a Manager? Is mere knowledge of Management enough to
become successful manager?
5. Discuss basic principles of Management along with their significance.
6. What is Management? Explain the principles of management with suitable illustrations.
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UNIT TWO
THE PLANNING FUNCTION
2.0 Aims and Objectives
Dear Learners, you may recall from unit one that firms need to plan to survive and this plan
must be communicated to those responsible for carrying them out. In this unit you will explore
the meaning of planning and the different concepts associated with it and finally you will study
about managerial decision making.
By the time you finish this unit you should be able to:
 explain the meaning and importance of planning;
 identify the basic principles underlying managerial planning;
 understand the different types of plans;
 identify the major steps of the planning process;
 explain the practical limitation of planning; and
 identify the elements of planning
2.1 INTRODUCTION
Dear students, have you ever been involved in any kind of planning activity before?
What is your perception about planning? (You can use the space left below to write your
response)
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Planning is the first managerial function that all managers perform at different levels. It is very
important because it lays down the groundwork for the other functions. In view of this, you are
required to study it having the above given objectives in mind.
Planning is a very interesting topic. You are therefore, strongly advised to see how your
organization plans its budget or other projects while reading this unit. Use your dictionary to find
the meaning of words which are not familiar to you. If you face any problem in the unit do not
hesitate to ask a person who is qualified.
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2.1.1 Meaning and Definition of Planning
What is planning?
“To plan is to produce a scheme for future action to bring about specified result, at specified
cost, in a specified period of time. It is a deliberate attempt to influence, exploit, bring about and
control the nature, direction, extent, speed and effect of change.” (Cyxil L. Hudson)
“Planning is a continuous process of making present entrepreneurial decisions systematically and
with best possible knowledge of their futurity, organizing the efforts needed to carry out these
decisions and measuring the results of these decisions against the expectation through organized
and systematic feedback.”(Peter Drucker)
Planning is a dynamic process of making decision today about future action and it is a selection
or choice among alternatives as to accomplish:
-What objectives should be achieved?
-What actions should be taken?
-When should it be taken?
-Who should do it?
-Where should it be done?
In general the planning activity involves defining the organization‟s objectives, establishing an
overall strategy for achieving these goals and developing comprehensive hierarchy of plans to
integrate or coordinate activities.
2.1.2 Nature or Characteristics of Planning
Planning has the following characteristics
a) The contribution of planning to purpose/objectives.
Objectives are the very important reason for the existence of any organization, so every
plan and its derivatives should facilitate the accomplishment of organizational objectives.
b) The primacy of planning.
Planning logically precedes the execution/implementation of all other managerial
functions. It involves establishing the objectives necessary for group effort; where as
other managerial functions are designed to support the accomplishment of enterprise
objectives. Even if planning precedes all other functions planning and controlling are
inseparable by their very nature, i.e. all plans are standards and are means for controlling.
c) Planning is pervasive/universal
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This means all managers from top to bottom carryout the planning function but at
different scope and depth. It is doubtful to call a person a manager if he does not plan.
d) Efficiency of plan
Planning is directed towards efficiency. We can measure the efficiency of a plan by its
contribution to our purpose and objectives offset by the cost and other factors required
formulating and operating it.
Plans are efficient if they achieve their purpose at a reasonable cost.
e) Planning concerns future activity.
A decision must be made as to what to do, how to do, who to do, when to do, where to do
and what to achieve before it is actually done.
f) Planning and information.
Basically there is no plan without information, for a plan to exist information is
necessary.
g) Planning is a means to an end.
Planning is not an end by itself, but a means to an end. It is an instrument that pushes
human effort towards the achievement of objectives.
2.1.3 Importance of Planning
Planning may be important for the following purposes in an organization.
a) To coordinate efforts.
Management exists because the work of individuals and groups in organizations must be
coordinated; and planning is one important technique to achieve coordinated effort.
By working towards planned objectives, the behavior of each part contributes to and is
compatible with goals for the entire organizing action; i.e. planning helps to focus
attention on objectives.
b) To prepare for change/to offset uncertainty.
An effective plan of action allows room for change. The longer time between the
completion of a plan and accomplishment of an objective, the greater the necessary to
include contingency plans.
c) To develop performance standards.
Plans define expected behavior, and in management terms they are performance
standards. As plans are implemented throughout an organization the objectives and
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course of actions assigned to each individual and groups are the bases for standards,
which can be used to asses actual performance. This facilitates control of actual
performance against expected performance.
d) To develop managers.
Good planning involves the art of making difficult things simple. This requires high level
of intellectual activity so that planners can be able to deal with complex, abstract ideas
and information.
Planners must think systematically about the present and the future because planning
implies that managers be proactive and make things happen rather than reactive and let
things happen. Through the act of planning, managers not only develop their ability to
think ahead of time about the future but to the extent that their plans are effective.
Check your progress.
a) Do you agree that “Planning is a bridge between the present and the future”? If so, why?
b) Discuss some of the reasons why planning is an important function of management.
c) Describe some of the characteristics of good planning.
d) Planning is a function of all managers at any level and in all business. Do you agree? Why or
why not?
2.2 PRINCIPLES OF PLANNING
A principle is a general rule of truth that may be expected to apply under similar conditions
anywhere to reach or get similar outcomes. The most important/essential guiding principles of
planning are the following.
a) Principle of contribution to objectives.
The purpose of every plan and all its supporting plans is to promote the accomplishment of
enterprise objectives.
b) Principle of efficiency of plans.
Efficiency of a plan is measured by the amount it contributes to purpose and objectives as offset
by the cost required to formulate and operate it and by unsought consequences.
c) Principle of planning premises.
The more thoroughly individuals are charged with planning premises, the more coordinated
enterprise planning will be.
d) Principle of strategy and policy framework.
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The more strategies and policies are clearly understood and implemented in practice, the more
consistent and effective will be the frame work of enterprise plans.
e) Principle of the limiting factor.
In choosing among alternatives, the more individuals recognize and solve those factors, which
are limiting or critical to the attainment of the desired goal, the more easily and accurately they
can select the most favorable alternatives.
f) The commitment principle.
Logical planning should cover a period of time in the future necessary to foresee as well as pass
through a series of action to the fulfillment of commitments involved in a decision made today.
g) Principle of flexibility
Building flexibility in to plans will decrease the danger of losses incurred through unexpected
events; but the cost of flexibility should be weighed against its benefit.
h) Principle of navigational change
It implies reviewing plans from time to time and redrawing them if that is required by changed
events and expectations. Unless plans have built-in flexibility, navigational change may be
difficult or costly.
i) Principle of communication.
The making of plan by itself is not enough; it should be conveyed to all concerned parties.
j) Principle of feasibility.
Plans should not be mere wishes, but things that can allow taking action and that are attainable or
realizable. In other words, planning involves a conscious determination of expected target and
projecting a course of action to meet the established target.
2.3 PROCESS OF PLANNING
The formal approach to the planning process depicted hereunder can serve as a general model
which can be applied, with some modification to the planning process of any organization,
whether it is large or small, profit-making or not for profit. The following are the steps.
A. Identifying and Defining the Real Problem/Being Aware of Opportunities
This step precedes actual planning and it is not strictly part of planning. But it is the real starting
point for planning. It is a process of being aware of opportunities in light of the market,
competition, what customers want, and organizational strengths and weaknesses.
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B. Establishing Clear-cut Objectives
Objectives specify the expected results and indicate the end points of what is to be placed and
what is to be accomplished by the network of strategies, policies, procedures, rules, budgets and
programmers. Thus, every organization has to establish its goals or objectives.
In the absence of this step, the energies of the people or the non-human resources may be wasted
and may be unutilized.
C. Establishing the Planning Premises and Constraints
Premises are assumptions about the environment in which the plan is to be carried out.
Knowledge of the organization‟s goals and existing conditions provide a framework for defining
which aspects of the environment will have the greatest influence on the organization‟s ability to
achieve its objectives.
The more thoroughly individuals charged with planning understand and agree to utilize
consistent planning premises, the more coordinated enterprise planning will be. Forecasting is
important in premising, because the future is so complex; it would not be profitable or realistic to
make assumptions about every detail of the future environment of plan.
D. Identifying Alternative Courses of Action
There is seldom a plan for which reasonable alternatives do not exist and quite often an
alternative that is not obvious proves to be the best. The more common problem is not in finding
alternatives, but in reducing the number of alternatives so that the most promising way to be
analyzed requires the assessment of their probable consequences. Thus, the planer must usually
make a preliminary examination to discover the most fruitful possibilities.
E. Evaluation of Alternative Courses of Action
Having sought out alternative courses and examined their strong and weak points, the planner
must next evaluate them by weighting them in the light of premises and goals. Then an
adjustment for the forecast plan if any must be made; see if the cost, time and quality
requirements are satisfied and if mechanization expedites the work or the achievement of the
desired end in terms of each possible course of action.
F. Choosing the Proposed Plan
Selecting the course of action is the point at which the plan is adopted-the real point of decision-
making. Here one has to make sure that if the plan possesses flexibility to adjust to varying
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conditions, acceptance of the plan by operating personnel as well as the existing capacity of the
firm and need for new equipment, space, personnel training and supervision.
G. Arranging Detailed Sequence and Timing for the Proposed Plan
At this point decision will be made that support the basic plan of chosen action chosen; that is,
identification of the derivative plans that support the major plan of action, the sequence of the
activities necessary to accomplish the desired aim and other details required to implement the
plan should be ascertained.
H. Numbering Plans by Making Budgets
After decisions are made and plans are set, the final step is to give them meaning by numbering
plans, i.e. budgeting to establish verifiable targets of achievement to facilitate controls.
I. Implementing the Plan into Action
So far, all activities are related to mental and paper works. This practice/activity alone would
bring about nothing to the planner. Therefore, they must be tested in action; the plans must be
implemented.
J. Monitoring the Implementation
The planner/manager should monitor/supervise how the implementation is going on and should
be certain that the plan is implemented as it was intended.
K. Evaluating the Implementation
When the planner/manager plans, he/she sets a result to be attained at a specific period of time in
the future. Therefore, she/he should compare/check the actual results with the expected results.
To facilitate this, proper records and sufficient reports must be collected over a reasonable period
of time and must be reported to management members to measure results as well as what
remedial or correcting action could be proposed if results indicate weakness when plans are in
action.
a) List the factors, which you consider would limit planning.
b) Is there any relationship between the principle of flexibility and navigational change? Discus
c) Define planning premise and give an example for it.
d) How does numbering plan help?
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2.4 Elements of Planning
The planning function requires managers to make decisions about four fundamental elements of
plans.
Objectives
Objectives specify future conditions that a manager hopes to achieve. The following are the
characteristics of sound objectives.
a) Priority of objectives
This implies that at a given time, accomplishing one objective is more important than
accomplishing others. Priority of objectives also reflects the relative importance of certain
objectives regardless of time.
b) Hierarchy of objectives
Objectives are arranged in hierarchy from overall companywide objectives to individual
objectives.
c) Organizational objectives should be stated in writing
Objectives should be specific and communicated clearly to all so that all members of the
organization are aware of what is expected from them. This eliminates ambiguity and confusion.
d) Objectives should be specific and measurable.
General objectives are difficult to interpret and measure.
e) Objectives should be realistic and attainable
Over optimistic but unrealistic objectives serve as moral deflators and hence are ineffective.
There are two objective setting approaches.
a) A Cascade Approach from Top to Lower Organizational Units.
i) The objective setting processes begin at the top with a clear and concise statement
of central purpose of the organization.
ii) Long-range organizational goals are formulated for this statement.
ii i) The long-range goals lead to the establishment of more short-range performance
objectives for the organization.
iv) Derivative objectives are then developed for each major division or department.
v) Objectives are then established for the various sub units in each major division.
vi) The process continues down through the organizational hierarchy.
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b) Management by Objectives (MBO)
It is a system of management whereby managers work in conjunction with subordinates to
identify goals and make plans for achieving them. MBO involves the following four steps.
i) The manager explains the rationale and methodology of MBO to subordinates.
ii) The superior and subordinate meet to set objectives for the coming plan period.
ii i) One or more intermediate review of performance is conducted to determine if the
individual is making satisfactory progress towards attaining the established goals.
iv) At the conclusion of the time period set for the achievement of the objectives, a
final review is conducted. In the review the manager should attempt to determine
“What went wrong?” “What went right?”
2.5 Courses of Action
Courses of action are the means or specific activities planned to achieve the objectives.
E.g. if increasing productivity is the objective of the organization, the alternative course of action
would be: improved technology, employee training, management training, improved work
conditions, etc.
Managers should select the least cost but the most effective strategy, policies, procedures,
programs, rules, budgets and projects which are part of the action.
Resources
The third phase in the planning function is budgeting resources for each important plan. Shortage
of resources could be constraints on the course of actions, and therefore planning should be
based on available resources.
Implementation of Plans
Implementation involves the assignment and direction of personnel to carry out the plan.
Authority and enabling employees to understand and accept organization policy are the
manager‟s means of implementing plans.
2.6 Types of Plans
Plans can be classified on the bases of different factors:
2.6.1 Plans Based on Formality/Status
a) Informal Plans - are unwritten plans which are made in the daily life of individuals.
b) Formal Plans - are written, documented plans developed through an identifiable process.
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2.6.2 Plans Based on Scope/Breadth Dimension.
These types of plans refer to the level of management; i.e. they are related to the hierarchy of
plans at the three levels of management. Therefore, based on where (in the organization‟s
hierarchy of management) the plans are formulated, determines the classification of the plans
into: strategic plans, tactical (intermediate) plans, and operational plans.
a) Strategic Plans: -
Strategic plans are defined as plans that determine the major objectives of an organization and
the policies and strategies designed by top-level management to govern the acquisition, use and
disposition of resources to achieve organizational objectives. The following are distinguishing
characteristics of strategic plans.
i) Strategic plans require looking outside of the organization at the external
environment of the organization for threats and opportunities.
ii) They take longer period of time.
iii) They tend to be top management responsibility
iv) They address such issues as:  How to allocate resources; and  What the business
is and what it should be.
The above three types of plans can be summarized as indicated in the following table.
Type of Plan Scope Level of Management Time Detailed-ness
Strategic plan Wide TLM* More than 5 Years Less
Tactical plan Medium MLM* 1 to 5 Years Medium
Operational plan Narrow LLM* Less than 1 Year More
b) Tactical Plans: -
Tactical plans are the means to achieve strategic plans and their usual span is one year. They
usually center on translating the broad objectives set by top-level management into more specific
goals.
c) Operational Plans: -
Operational plans are concerned with the day-to-day activities of the organization and are made
and/or developed by lower level managers.
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2.6.3 Plans Based on Time Dimension
These plans show how long they stay in operation. Based on time frame or length of them, we
can classify plans into three; these are
a) Long-term Plans: - These plans establish long-term goals and work out strategies, policies
and programs to achieve the goals. They extend beyond five years.
b) Medium-term Plans: -These plans are usually made to support long-term plans. They cover a
period of more than one year, but less than five years. Here the length of time may vary from one
business to another depending on the nature, risk and other factors.
c) Short-term Plans: - Generally such types of plans are made to achieve short-term goals and
are instrumental in implementing long-term plans. These plans are action-oriented and the
responsibility of lower level managers.
2.6.4 Plans Based on Use Dimensions
Use-based plans indicate whether we can use the plans repeatedly for uniformity or for a single
period. Based on use dimension, plans could be further classified in to single-use plans and
standing use plans. Let us see each one by one
a) Single-Use Plans: - These types of plans focus on relatively unique situations within the
organization and are used only once. These plans can be subdivided into:
i) Programs: Programs are a complex of goals, policies, procedures, rules, task assignments,
steps to be taken, resources to be employed and other elements necessary to carry out a given
course of action. They are ordinarily supported by budgets. A primary program may call for
many supporting programs.
E.g. The Ethiopian airlines may have a major program of acquiring a $500 million fleet of jets
within a period of two years.
ii) Projects: A project is a small and separate portion of a plan. Each project has limited scope
and distinct directives concerning assignments and time. Projects are characterized by the
following
i) They are a one-time activity or a unit activity with a well-defined set of desired end results.
ii) They can be accomplished in order to achieve the project goals.
iii) A project must often be coordinated with other projects being carried out by the same
parent organization.
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iii) Budget: Budgeting is the formulation of plans for a given future period in numerical or
financial terms. A budget is a financial plan outlining how funds will be spent in a given period
of time and how these funds will be obtained. Budgets have to be based on past experience
present realities and an accurate assessment of future events.
b) Standing-Use Plans: - These are plans which remain roughly the same for a long period of
time and are used in organizational situations that occur repeatedly. The most common kinds of
standing plans are:
i) Policies: Policies are broad and general guides to action that constrain or direct and facilitate
objective attainment. They do not tell organizational members exactly what to do but they do
establish the boundaries within which they must operate and ensure that decision will be
consistent with and contribute to an objective. Policy is a general statement or understanding
which guides or channels thinking in decision making.
Requirements for a sound policy:
They should be consistent with strategies and objectives.
They should be renewed frequently and amended as needed.
Policies should be in writing.
- Written policies are more precise than unwritten ones.
- They can be transmitted quickly to those who must implement them.
- Written policies are easier to understand and less time-consuming to communicate to new
managers and management trainees.
Advantages of policies
Policies help to save time.
Policies help to prevent managerial mistakes.
Policies help to improve the consistency of managerial performance.
ii) Procedures: A procedure is a series of related steps or tasks expressed in chronological order
for a specific purpose. Procedures are defined in step-by-step fashion through which policies are
achieved. They are guides to action rather than to thinking and they give the details of the exact
manner in which certain activities must be accomplished.
The following are some of the requirements for sound procedures.
Procedures should be simple enough to be understood by those who implement them.
They should be in writing.
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They should be tested prior to full adoption.
They should be well communicated so that they may be thoroughly understood by those who
are required to follow them.
iii) Rules: Rules are statements that a specific action must or must not be taken in a given
situation. Rules leave little doubt about what is to be done. They permit no flexibility and
deviation. Unlike procedures, rules do not have to specify sequence. Procedures and rules are
subsets of policies. Example of a rule: Employees must wear safety clothes and equipment
while operating their machines.
a) Discuss the basic elements of planning.
b) How important is strategic planning? Is long range planning that extends for more than 5 years
necessary in this dynamic and ever changing environment?
c) Explain in detail the following concepts:
 Policies
 Procedures
 Rules
 Programs
 Budgets
Limitations of Plans
Though planning function is a primary function of management and it facilitates other functions
of management, it suffers from certain limitations. Most of the limitations are related to the
uncertainties of the future. Planning should be based on reliable information about the future. If
reliable information is not available, planning loses its importance. Here the controversy is not
on planning or not planning; but on the context of planning techniques. Planning is a must for
every organization because unplanned operations produce chaos and disorder universally without
any exception.
Major planning limitations are classified into two categories.
Internal Inflexibilities
Internal inflexibilities are those that exist within an organization. Major internal inflexibilities
that may limit planning are related to human psychology, policies and procedures and capital
investment.
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a) Psychological Inflexibility
Managers and employees in an organization may develop patterns of thought and behavior that
may be hard to change. Managers instituting a new plan are often frustrated solely by the
unwillingness or inability of people to accept change. Therefore, it requires patient selling of
ideas, careful spreading of information, aggressive and intentional development of a tradition of
change among the members of the organization.
b) Policy and Procedural Inflexibility
Closely allied to psychological inflexibilities are those internal rigidities that are built into
policies and procedures. Once established policies and procedures become ingrained in an
enterprise and changing them becomes difficult. This problem is common in most organizations
as they get older.
They develop procedures that seem to work; people get accustomed to them and cling to old
ways even after new situations arise; new people are trained in old ways and almost explosive
forces may be required to effect changes. One of the most convincing evidences of bureaucracy
whether in business or government is the existence of complicated procedures designed to avoid
mistakes.
Effective planning requires an environment of change, with some reasonable degree of freedom
and willingness to assume the risks of mistakes. This cannot happen in an enterprise bound by
the strait jacket of inflexible policies and procedures.
c) Capital Investment
In most cases, once money is invested in a fixed asset the ability to switch courses of future
action becomes rather limited and the investment itself becomes a planning premise.
Inflexibilities also exist where investment sunk in items other than what are normally regarded as
fixed assets. An investment in training of a particular kind or in building up a certain customer
reaction product-through advertising, packing or otherwise may become a fixed asset.
Unless an organization can reasonably liquidate its investment or change its course of action or
unless it can afford to write off the investment, these conditions may block the way of change.
External or Imposed Inflexibilities
These inflexibilities usually emerge from sources outside of the organization. Some of the major
external inflexibilities include:
a) Political Climate
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Every enterprise, to a greater or lesser degree is faced with the inflexibilities of the political
climate existing at a given time. If the local government or the state activity regulates business,
managers must take this into account in planning.
b) Labor Unions
The existence of strong unions, particularly those organized on a national basis, tends to restrict
in planning. The numerous wages and working condition provisions of union contracts and the
influence of union policies on employee productivity and attitudes must be taken into account. In
addition to being important governmental influences, they often give rise to definite
inflexibilities. But this trend is less in socialist socio-economic formation because of the nature
or form of ownership (social ownership of property).
c) Technological Change
The role and nature of technology change also present very definite external limitations up on
planning. There are perhaps few things as unyielding as the state of technological development at
a given time. At any given time the status of technological progress is relatively inflexible.
d) Sociological and Cultural Factors
The important sociological and cultural factors which are relevant in relation to the enterprise
include inter-organizational and individual cooperation or conflict. Class structure and labor
mobility, view towards authority, responsibility and delegation, view towards change and risk
taking, etc. are also some of the inflexibilities that restrict the freedom of planning.
e) Educational Variables
Under this factor the important conditions that tend to restrict the scope of planning include,
literacy level and attitude toward education, type of education, scope of the education, and
educational match with the skill requirements of industry and manpower utilization, etc.
Summary
Planning has been defined previously as one of the fine major functions of management.
However, since planning is a bridge between the present and future, it has been called the
primary management function.
Planning is a future oriented and determines on organizations direction. It is a rational and
systematic way of making decision today that will affect the future of the company. It involves
the predicting of the future as well as attempting to control the event. It also involves the ability
to foresee the effects of current action in the long future.
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An effective planning program incorporates the effect of both external as well as internal factors.
The external factors are shortages of resource, capital and material, dynamic technological
advancement, government regulation etc. The internal factors that affect planning are limited
growth opportunities due to saturation, changing pattern of work force, more complex
organizational structure, decentralization etc…
Even though planning and plans are so important to organizational success, a recent study
revealed that most managers are very reluctant to actively participate in the planning process.
Sometimes, even top managers show likewise support for the process thus serving as poor role
models for lower management. Planning should be an integral part of the organizational routine
and not as a special activity that would severely test a manager‟s skill and ability.
Model Questions
In answering the following questions
a) Define the following
i) Planning
i) MBO v) Programs ix) Strategies
ii) Objectives vi) Project x) Budget
iii) Policies vii) Procedure
iv) Procedures viii) Rule
b) List and describe the characteristic of planning.
c) Write short notes regarding any 3 principles of planning.
d) What are the two basic approaches to set objectives?
e) Identify the steps in the planning process.
f) Identify at least two advantages of policies.
g) What are the characteristics of a sound objective?
h) What are the requirements for a sound policy?
i) Write a short note on the limitations of planning.
j) What are the four elements of planning?
k) Resistance to change is considered to be one of the major problems in implementing any
plan. What are the possible causes for this resistance and how can this be overcome?
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UNIT THREE
The Decision-Making Process
Dear Students, how do you make personal decisions? Are there some steps that you consider
before making decisions? (You can use the following space to write your response)
______________________________________________________________________________
______________________________________________________________________________
______________________________________________________________________________
______________________________________________________________________
3.1. DEFINITION OF DECISION MAKING
Decision-making can be defined as a solution selected after examining several alternatives
chosen because the decider foresees that the course of action he selects will be more than others
to further his goals and will be accompanied by the fewest possible objectionable consequences.
It is a process including information, choice of alternative actions, implementation and
evaluation that is directed to the achievement of certain stated goals.
Decision-making is:
a) a selection process;
b) the end process;
c) the application of intellectual abilities to a great extent;
d) a dynamic process;
e) situational; and
f) taken to achieve the objectives of an organization
Decision-making includes the evaluation of available alternatives through critical appraisal
methods. A decision may be both negative and positive. A decision may direct others to do or
not to do something.
Decision making is an integral part of human life, because one has to decide in his daily life what
to do, where to do, when to do, how to do, etc. Managers should also make decisions while
planning, organizing, staffing, directing and controlling.
Effective decision-making requires a rational selection of a course of action. Managers‟ goals
can be reached under existing circumstances and limitations. They must also have the
information and the ability to analyze and evaluate alternatives in the light of the goal sought.
And finally, they must have a desire to come to the best solution by selecting the alternative that
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most effectively satisfies goal attainment. Thus, rationality implies making decisions based on
facts, experience, experimentation or research and analysis with distinct procedures.
The following is a simple process followed in making decision in normal situations.
3.2 DECISION MAKING PROCESS
A. Ascertain the Need for a Decision
The decision making process begins by determining/identifying a problem. Problem arises due to
difference between what is and what should be. So the manager should define what the problem
is. Then, the manager should find the causes of a problem. A well-defined problem is half
solved.
B. Establish Decision Criteria
Once the need for a decision has been determined, there comes the need to establish decision
criteria which requires identifying those characteristics that are important in making the decision
C. Allocate Weights to Criteria
The list of criteria must now be prioritized. Since some are obviously more important than
others, there is a need to weight each criterion to reflect its importance in the decision.
D. Develop Alternatives
This includes developing a list of alternatives that may be viable in dealing with the stated
problem. Creative thinking is necessary to develop or discover many alternative courses of
action. If there is no alternative, there is no need of deciding. It is advisable to the manager that
he should discover a number of alternatives. The problem of limiting factors is also considered
by the manager. Some alternatives cannot be selected due to limiting factors. Time and cost are
the probable limiting factors of an organization.
E. Evaluate Alternatives
The strengths and weaknesses of each alternative will become evident as they are compared
against the criteria and weights established.
As we compare alternative courses of actions to achieve objectives, we should consider both
quantitative factors and intangible or qualitative factors. To evaluate and compare qualitative
factors, one should first recognize them and determine whether a reasonable quantitative
measurement can be given to them. If not, one should try to find out as much as possible about
them, perhaps rate them in terms of their importance, compare their probable influence with the
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results disclosed from evaluation of the quantitative factors, and then come to decision. Such a
procedure is in effect, deciding up on the weight of the total evidence.
Tangible factors include profits earned, time taken, money invested, rate of returns on
investment, rate of depreciation, etc.
Intangible factors include public relations, good will of the company, loyalty of employees,
quality of labor relations, the risk of technological changes, international political climate, etc.
Peter. F. Drucker has suggested the following criteria to evaluate the available alternative
courses of action:
a) Risk- Degree of risks is included in each alternative.
b) Economy of efforts- Cost, time and efforts are included in each alternative.
c) Timing or situation- Whether the problem is urgent has to be considered.
d) Limitations or resources- Physical, financial and human resources available in
the organization need consideration.
F. Select the Best Alternative
The decision maker can select the best alternative after careful evaluation an alternative which
gives maximum benefits to the organization is selected. At the same time, the selected alternative
should fit with the organizational objectives. The following approaches may be adopted while
selecting an alternative.
a) Experience: Select an alternative on the basis of past experience. Past decisions may be
rationally amended to suit the present situation, because situations change.
b) Experimentation: Each alternative is put into practice and the results are observed under this
approach. An alternative which gives best results will be selected. The approach which is
expensive and time consuming should be used rarely.
c) Research and Analysis: This approach is also rarely adopted.
G. Putting Decision into Action
The future course of action is scheduled on the basis of selected alternative or decision. Here, the
manager has to consider the policy of management. The decision is communicated to concerned
persons. This communication facilitates easy implementation of decision. The language of
decision should be simple and easily understandable.
Next, the manager has to implement the decision to achieve desired goals. Decision making
process comes to an end with the actual implementation of the decision.
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H. Follow ing up Decisions
It is the duty of every manager to see whether the decision is properly implemented or not. The
selected alternative may be ill-chosen on (due to many reasons) and might cause loss to the
organization. This can be measured with the help of verifying the decision with the actual
performance. If the manager feels that the selected alternative is not the best one, and
amendment may be made to achieve desired goals.
These six main steps and the two additional steps in decision-making, of course, represent a
simplification of the process.
3.3 TYPES OF DECISIONS
Several authors believe that there are two types of decision situations. These are programmed
and non-programmed decisions.
Programmed Decisions
Programmed decisions are the decisions managers make in response to repetitive and routine
situations. If a particular situation occurs too often, managers will develop a routine procedure
for handling it. Managers in this case have a repetitive and routine solution. Routine situations
are handled by using rules, standard operating procedures, and specific policies.
Non-programmed Decisions
Non-programmed decisions are decisions for novel and unstructured problems. When a
recognized problem has not happened in exactly the same manner before and is not to the
experience of managers, it may require a non-programmed decision. Non-programmed decisions
require more time and effort and involve more uncertainty than programmed decisions.
Government and business organizations constantly make non-programmed decisions, but
unfortunately, modern management techniques for such type of decisions are much less
developed than for programmed decisions. Non-programmed decisions are usually handled by
general problem solving process, judgment, intuition and creativity.
3.4 THE DECISION MAKING ENVIRONMENT
There are many factors in the environment that affect the process and the decision maker. In
other words, the degrees of certainty at which managers make decisions differ. In some
situations, the manager has perfect knowledge of what to do and what the consequences of the
action will be. In other situations, the manager has no such knowledge. Generally, decisions are
made under the conditions of certainty, risk and uncertainty.
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Decision making under conditions of certainty: Under such condition, the manager has what is
known as perfect knowledge. The manager had these decisions to make before, i.e., the
alternatives are known, and the consequences of each alternative are fully understood.
Decision making under conditions of risk: This one is a more difficult decision making
environment than the previous one. In this situation, the manager knows what the problem is,
knows what the alternatives are, but does not know how each alternative will work out even if he
or she knows the probabilities of possible outcomes.
Decision making under conditions of uncertainty: This is the most difficult decision making
environment for a manager. In this situation, the manager is not able to determine the exact odds
(probabilities) of the potential alternatives available. It is like being a pioneer or perhaps there
are too many unknown facts.
3.5 MANAGEMENT BY OBJECTIVES (MBO)
MBO is a management philosophy and systematic process through which managers of all levels
communicate with subordinates in terms of goals and how specific activities of the subordinates
can contribute to reaching these goals. It is one of the terms related to the planning process.
MBO is based on the assumption that employees at all levels of the organization must be
involved in goal setting and development and implementation of plans in order for the
organization to most effectively conduct its business. MBO goes beyond setting annual
objectives for organizational units to setting performance goals for individual employees. It does
not stop by goal setting but continues through performance review which helps managers to
exercise common goal performance appraisal. Prospective steps in the MBO process include:
 Statement of mission
 Determination of strategic goals
 Identification of tactical plans
 Development of operational goals
Model Questions
a) What does decision making mean?
b) Discuss the concept of “Management By Objectives”
c) Mention some factors that differentiate programmed decisions with non-programmed
decision
d) Discuss the environments in the decision making process
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UNIT FOUR
THRE ORGANIZING FUNCTION
4.0 Objectives
After successful completion of this unit, you will be able to:
 define organizing, organization and organization structure;
 know the difference between organizing and organization;
 identify formal and informal organizations;
 know the different bases of departmentalization with their respective advantages
and disadvantages;
 describe the span of control, delegation of authority and decentralization; and
 Know the basic principles of organizing.
4.1 Introduction
Organizing is one of the key functions of management. It is explained in this unit in terms of
its three elements: departmentalization, span of management and delegation. The discussion
that deals with delegation focuses on centralization and decentralization as well. Since
organizing implies arranging people, group dynamics and committees are also taken care of
in this unit.
4.2 Meaning of Organizing
Dear learner, what does organizing mean? (You can use the space left bellow to write your
response)
______________________________________________________________________________
___________________________________________________________________________
“Organizing involves the establishment of an intentional structure of roles through determination
and enumeration of the activities required to achieve the goals of an enterprise and each part of
it; the grouping of these activities, the assignment of such groups of activities to the manager, the
delegation of authority and informational relationship horizontally and vertically in the
organization structure” (Harold Koontz and O‟Donnell, 1985) are important aspects of the
organizing function.
As we can see from the above definition and many other definitions given by other authors,
organizing is a process and it involves the following activities.
- Identification of key activities necessary to achieve objectives
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- Grouping of these activities in a manageable manner
- Assignment of each group of activities to a manager who has the authority and
responsibility to manage
- Delegation of authority to managers so as to accomplish their duties efficiently
- Coordination of different groups of activities horizontally or vertically.
It is also possible to see that organizing is a process of creating a coherent whole
(organization), whereas organization is any human association created to achieve some
common objectives of members of the group. In other words, organizing is the process and
organization is a social grouping.
4.3 Nature/Characteristics of Organizing
Organizing possesses the following characteristics.
4.3.1 Division of Labor: -The total work of an organization can be divided into many parts
for effective performance of the work. The division of labor results in the creation of
specialized persons, because a person does the same work again and again.
Specialization in turn has the following advantages.
a) It eliminates waste of time, energy and resources. Efficient utilization of resources
is made possible.
b) It increases quality of output, and
c) It increases quantity of product without any additional capital. It increases
productivity.
4.3.2 Co-ordination: -Each and every department or section of the organization should
have relationship with each other to get mutual co-operation. This will result in sharing
resources and experiences, which will help them to tackle problems and increase
productivity.
4.3.3 Objectives: -The objectives of the organization should be defined clearly. The
objectives cannot be achieved without the existence of a good organizational
structure. In turn, the organization cannot exist without objectives for a long
period. Hence, objectives are the inherent characteristics of organizations.
4.3.4 Authority-Responsibility Structure: -An organization means an arrangement of
position of executives by adopting rank system. The position of each of the
executives is defined with regard to the extent of authority delegated and
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responsibility assigned to him/her to discharge the duties. This structure indicates
who has authority over whom and the responsibility of each person at different
ranks of the structure.
4.3.5 Communication: - Every organization has its own communication systems and
methods. The channels of communication may be divided into formal, informal, downward,
upward or horizontal. It is through communication that organizations achieve mutual co-
operation.
4.4 Importance of Organizing
Organizing creates the relationship between top-level executives and lower level staff
members. The following are achieved through the process of organizing.
4.4.1 Facilitate administration: -Duplication of work, wrong planning, inefficient
personnel, lack of motivation, improper allocation of duties and responsibilities,
absence of coordination, communication gap, improper instructions are the
ingredients of ineffective administration. This ineffective administration can be
removed by having a sound organization.
4.4.2 Facilitates growth and diversification: -The growth of business means an increase in
the scale of operation; diversification means starting of production of a new type of product.
For both growth and diversification, organization identifies the necessary activities, raises the
necessary resources and determines how and when to use it.
4.4.3 Increases the efficiency of management: -Under good organization, there is division
of work and specialization, which are the tools:
a) For optimum utilization of workers‟ ability, resources, materials, technology, etc
in full;
b) For placing proportionate importance on the various activities of the enterprise.
Money and efforts are spent in proportion to the contribution made by each and
every department. More money and time are given to a department that
contributes more than others.
c) For avoiding confusion, delay and duplication of work through dividing and
regrouping of activities into a manageable whole.
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4.4.4 Improves the efficiency and quality of work through synergism
It facilitates co-ordination. Through coordination it helps parts to contribute their
roles more efficiently and effectively, as every part is a specialist for its duties. No
part is working alone in order to get more results as the theory of synergism states. “A
whole is greater than the sum of the parts” all parts should be coordinated properly.
4.4.5 Encourage creativity and initiative
A sound organizational structure will give an opportunity for the staff to show their
hidden talents, which will help the enterprise to achieve the business goals and earn
higher profits. It provides opportunities for training new staff members and give
refresher courses to existing employees.
The spirit of constructive and creative approach in management will be developed
through clear distribution of authority and responsibility incentives can be offered for
specialized work and freedom can be given to personal work. This will be possible
through a properly worked out organization.
3.4.5 Establishes lines of authority /-vertical division of labor/
As it is already stated, organization is the arrangement of position of executives by
adopting rank system. This represents who in the organization reports to whom and
who has authority over whom. This creates order within the group. Its absence
almost always leads to chaotic situations where everyone tends to tell everyone else
what to do.
3.4.6 Improves communication
A good organization structure clearly defines channels of communication among the
members of the organization. This develops transparency among members and
improves flow of information. A good organization structure also develops morale,
honesty, devotion to duty and loyalty to the business firm. This will help remove
corruption, secretiveness and unjustified influence.
4.5 Types of Organization
Organizations can be classified on the basis of legality authority delegated and responsibility
assigned to the personnel and their relationship with each other. On the basis of this, an
organization can be either formal or informal.
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4.5.1 Formal Organization
It is the intentional structure of roles in a formally and legally organized enterprise. It is
flexible enough in structure as to furnish an environment in which individual
performance, both present and future, contributes most effectively to group goals; it
allows for discretion, for taking advantage of creative talents and for recognition of
individual likes and capacities in the most formal organizations. The establishment of
effective formal organization must be based on the principles that pertain to the unity of
objectives and organizational efficiency. Developing a responsive organizational
structure committed to quality is another important task in the establishment of formal
organization.
Organizational structure is the framework of jobs and departments that directs the
behavior of individuals and groups toward achieving the objectives of the organization
(Ivancevich et al., 1994, p. 254).
a) Characteristics of Formal Organization
i) It is properly planned.
ii) It is based on delegated authority.
iii) It is deliberately impersonal.
iv) The responsibility & accountability at all levels of organization are clearly defined
v) Unity of command is normally maintained.
vi) It provides for division of labor.
b) Advantages of Formal Organization
i) The definite boundaries of each worker are clearly fixed and this avoids conflict
among the workers.
ii) Overlapping of responsibility is easily avoided.
iii) Shifting responsibility is very difficult.
iv) A sense of security arises from classification of the task
v) There is no chance for favoritism in evaluation and placement of the employee.
vi) It makes the organization less dependent on one man.
c) Disadvantages of Formal Organization
i) In certain cases, the formal organization may reduce the initiatives of
employees.
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ii) Sometimes authority is used for the sake of convenience of the employee
without considering the need for using the authority.
iii) It does not consider the sentiments and values of the employees in the social
organization.
iv) It may reduce the speed of information communication.
The following arrangements or organizational structures are commonly used in most firms
and enterprises.
a) Pure Line Organization Structure
It is an arrangement in which all authority flows in a direct and vertical line from the
board of directors to the president, to the manager of key line functions, to subordinate
managers and down to operative personnel. Each individual reports to only one other
person. The following chart shows the structure of pure line organization.
Board of Director
President
Top
Manager
1 2 3
1.1 1.2 1.3 2.1 2.2 2.3 3.1 3.2 3.3
Key:
1. Production Manager
1.1 Production First Level Manager or Supervisor
39
2. Marketing Manager
2.1 Marketing First Level Manager or Supervisor
3. Finance Manager
3.1 Finance First Level Manager or Supervisor
b) Line –and-Staff Organization Structure
It is a form of organization that applies mainly to complex enterprises where handling
all the activities becomes difficult for line managers. This requires the assignment of
some specialized staff to advise line managers on certain issues. It means, in this case,
it becomes necessary to organize both line and staff personnel.
Staff personnel cannot command or issue orders, but act in a strictly advisory capacity,
because of their technical and professional skills in areas such as law, accounting,
auditing, data processing, advertising or publicity, engineering, etc. The following chart
shows the structure of line-and-staff organization.
40
General Manager
Legal
2
Advisor
Audit
1
Service
Production Marketing
Finance manager
Manager finance
Manager
3 4 5
Quality Procurement Budget

6 7 8
Control Unit Unite Unite
Key
1. Staff official
2. Staff official
3. Line official (middle level manager)
6. First level manager or supervisor
c) Matrix organization Structure
It is a form of organization in which some managers could report to two bosses rather
than to the traditional single boss as in the case of pure line or line-and-staff
organization.
41
Every matrix contains three unique and critical roles:
 The top manager-heads and balances the dual chains of command;
 The matrix bosses or functional production managers who share subordinates;
 The managers who report to two different matrix bosses.
Top Manager
Manager Manager
Project A Production Marketing

Manager Group Group
Project B Production Marketing

Manager Group Group
Project C Production Marketing

Manager Group Group
The chart above shows that the production manager is in charge of three groups of
subordinates, each of which is also assigned to either project A, B, or C. Therefore, the
groups of subordinates report to both their functional manager and to their project managers.
In turn, the functional managers and the project managers report to the top manager, who
oversees the organization.
42
Matrix Organization is used:
 When it is absolutely necessary that the groups be highly responsive to two sectors
at the same time, such as markets and technology;
 When the bosses face uncertainties that generate very high information processing
requirements;
 When they must deal with strong financial and/ or human resources.
The following are some of the common disadvantages of matrix organization.
 It violates the unity of- command principle because the subordinates are
accountable to two managers.
 It may lead to power struggles. One manager may compete with another manager
for the services of a joint subordinate.
This weakness can be minimized if senior managers stress that harmony and cooperation are
absolutely essential.
d) The Functional Organization Structure
This is a structure that is most widely used because of its simple logical and common
since appeal. It is the module from which other forms are built. In its simple form, the
functional structure consists of the three major areas of business: production, marketing
and finance.
This organizational structure is characterized by the following features:
 Specialization by function.
This structure orients employees toward a special activity, and helps them to
concentrate competence in particular ways.
 Sub-goal emphasis.
This structure forces departmental heads to concentrate on sub-unit goals to meet the
standards and achieve the targets.
 Pyramidal growth.
Added positions and departments are made part of the existing functional structure.
Each function grows by adding layers to be the base of the pyramid. The span of
supervision and the number of levels reporting to each manager within the functional
pyramid are the results of the growth of each function.
 Line-and- Staff division
43
The distinction between line and staff activities is observed in all functional
structures. In fact, functional organization is a modified form of line-and-staff
structure. Line functions have direct responsibility for achieving the basic purpose of
the organization. They command while the staff gives support and advice.
 Functional relationship.
When the need arises some managers are made to supervise multiple departments.
Departmentalization can take place with all the three types of authority: line, staff and
functional authority. Functional authority is subordinate to line authority and is a way
of relating specialists to work in the organization. Functional specialists have a
limited scope of command authority.
 Centralization and decentralization.
In a functional organizational structure one person heads all of one kind of work.
Authority is centralized to a great extent. As a result, coordination within function is
simplified.
 Span of control.
In functional structures, the span of management is limited. So there is a tendency for
these structures to be tall. Managers exercise close supervision and rely on
impersonal rules and procedures to manage individuals in organization.
The following figure shows functional organization structure.
44
General Manager
Public Personnel Finance Personnel Research

Relations
Purchase Sales
Metal Plast ic
M1 M2 M3 P1 P2 P3 MP1 MP2 MP3 MS1 MS2 MS3
Key:
 M1, M2 and M3 stand for Metal Production Supervisors
 P1, P2 and P3 stand for Plastic Production Supervisors
 MP1, MP2 and MP3 stand for Marketing purchase supervisors
 MS1, MS2 and MS3 stand for Marketing Sales supervisors
45
4.5.2 Informal Organization
It is a network of personal and social relations not established or required by the formal
organization, but arising spontaneously as people associate with one another on the basis of the
likes and dislikes of members without considering the rules, regulations and procedures of the
organization. The relationship does not appear on an organization chart.
Informal organizations are influenced by the number of people in the group, the actual personnel
involved what the group is concerned with its changing leadership and the continuing process of
change.
a) Characteristics of Informal Organization
i) It arises without any external causes, i.e. voluntarily.
ii) It is a social structure formed to meet personal needs.
iii) It has no place in the organization chart.
iv) It acts as an agency of social control.
v) It can be found on all levels of organization within the managerial hierarchy.
vi) Its rules and traditions are not written but are commonly followed.
vii) It develops from habits, conduct, customs and behavior of social groups.
viii) It is one of the parts of the total organization.
ix) There is no structure and definiteness to the informal organization.
b) Advantages of Informal Organization
The advantages of informal organization are:
i) It fills up the gaps and deficiency of the formal organization.
ii) It gives satisfaction to the workers and maintains the stability of work
iii) It is a useful channel of communication.
iv) Its presence encourages the executives to plan to work correctly and act accordingly.
v) It also fills up the gaps among the abilities of the managers.
c) Disadvantages of Informal Organization
The disadvantages of informal organization are:
i) It has the nature of upsetting the morality of the workers.
ii) It indirectly reduces the efforts of management to promote greater productivity.
iii) It spreads rumors among the workers regarding the functioning of the
organization unnecessarily.
46
a) Define the organizing. (3.1)
b) What are the characteristics of organizing? (3.3)
c) Why is organizing important? (3.4)
d) What is formal organization? (3.5.1)
e) What are the characteristics of formal organization?
f) What is informal organization? What are its characteristics?
g) What is the difference between a pure line organization and a staff organization?
h) State three unique and critical roles contained in a matrix organization.
i) What are the uses of a matrix organization?
j) State two disadvantages of a matrix organization.
k) What is a functional organization? State at least five of its characteristics.
l) What are some of the disadvantages of formal organization?
m) What are some of the disadvantages of an informal organization?
4.6 Process of Organizing
Organizing as a function of management follows these steps.
4.6.1 Determination of Activities
This includes the identification of the required activities and the division of these activities to
achieve the objectives of the organization in to homogenous groups.
4.6.2 Grouping of Activities
The tasks to be done are grouped into reasonably homogenous or similar activities and are
arranged under one individual or department. Eg. Finance department.
4.6.3 Allotment of Duties to Specified Persons /Departmentalization/
The grouped activities are allotted to specified persons. In other words:
a) Sales activities are assigned to the sales manager.
b) Purchasing activities are assigned to the purchasing manager.
c) Production activities are assigned to the production manager.
Besides, adequate staff members are appointed under the specified persons. The specified
persons are specialized in their respective fields.
47
4.6.4 Delegation of Authority
Assignment of duties or allotment of duties to specified persons is followed by delegation of
authority. It will be very difficult for a person to perform the duties effectively if there is no
authority to do it. While delegating authority, responsibilities are also fixed. Authority and
responsibility should be in parity with each other.
 Authority: - represents the legitimate exercise of power. It is a power derived from

the rights that come with a position.
 Responsibility:-is accountability for the attainment of objectives, the use of
resources and the adherence to organizational policy.
 Power: - is the ability to influence, command, or apply force. It is usually derived
from the control of resources.
4.6.5 Defining Relationship
When a group of persons are working together for a common goal, it becomes necessary to
define the relationship among them in clear terms. If it is done, each person will know who his
boss is, from whom he has to receive orders, or to whom he is answerable. In other words, each
boss should know what authority he has and over which person.
4.6.6 Co-ordination of Various Activities
The delegated authority and responsibility should be co-coordinated by the chief managerial
staff. The reason is that there must be a separate and responsible person to see whether or not all
the activities are going on to accomplish the objectives of the organization.
4.7 Key Elements of Organizing
4.7.1 Departmentalization
Departmentalization is a process by which similar activities of a business are grouped into units
for the purpose of facilitating smooth administration at all levels. It is one of the key concepts of
organizing.
"Departmentalization is a process of dividing the large monolithic functional organization
into small and flexible administrative units” (Koontz & O'Donnell).
4.7.1.1 Need and Importance of Departmentalization
Departmentalization contributed to the success of the organization in a number of ways given
below.
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a) Departmentalization increases the operating efficiency of the employees. It facilitates the
grouping of activities, which are of similar nature.
b) There is a fixation of responsibilities to various executives of the organization.
Executives will be alert and efficient in their duties.
c) The departmental heads (managers) are given certain powers and are allowed to make
their own decisions. By doing so, the prestige and skills of the departmental heads are
increased.
d) The workings of the various departments are evaluated by the top management and the
departments which are not managed properly are identified. This makes the departmental
heads efficient, responsible and accountable.
e) There is a possibility of the expansion of the organization because of fixing of the
responsibilities to the executives.
f) Besides, departmentalization gives other advantages such as facilitating budget
preparation, effective control of expenditure, attaining specialization, better co-ordination
among the managerial personnel, etc.
4.7.1.2 Factors Considered in Departmentalization
The following factors are to be taken into consideration in departmentalization.
a. Specification: Departmentalization is concerned with identifying and specifying
organizational activities as coherent whole. Departmentalization should yield the advantages of
specialization. Specialization may be functional such as sales, finance, production and personnel.
b. Control: As a general rule, there should be scope for automatically checking the activity of
one person by another person. There should be a proper control under departmentalization and
simplification of control process.
c. Co-ordination: The whole business activities are grouped department wise and it requires co-
ordination in order to direct organizational activities in the same direction.
One department should be organized so that it can support the other department and vice-versa.
No department is independent but is interdependent with other departments of the same
organization.
d. Securing Attention: Sometimes, certain functions emerge within a unit that desires a special
treatment. Hence, the activity may be entrusted to a separate division or a higher level of
49
organization according to its importance. Even an unusually important activity of the business
could be given recognition in the organization.
e. Recognition of Local Conditions: The departmentalization should take into consideration the
local conditions of the place concerned. These may include such factors as the area dispersion,
diversity of customers‟ needs, types of product and availability of specialized man power
f. Economy: The departmental arrangement will be effective if the departmentalization is done
with minimum expenses. Cost of departmentalization should not exceed benefits generated from
departmentalization.
4.7.1.3 Bases or Patterns or Types of Departmentalization
There are certain basic methods of dividing the duties and responsibilities within an organization
structure. They are:
a) Departmentalization by functions
b) Departmentalization by products or service
c) Departmentalization by regions (area or location) or territory
d) D Departmentalization by customers
e) Departmentalization by process
f) Departmentalization by time
g) Departmentalization by numbers
h) Departmentalization by marketing channels
a) Departmentalization by Enterprise Function
Functional departmentalization is perhaps the most logical and basic form of
departmentalization. It is a form of departmentalization in which everyone engaged in one
functional activity, such as marketing or finance, is grouped into one unit. It works best when the
organizational environment is stable and tight control over processes and operations is desired.
It is used mainly (but not only) by smaller firms that offer a limited line of products, because:
 it makes efficient use of specialized resources;
 it makes supervision easier;
 It makes it easier to mobilize specialized skills, and bring them to bear where they are
most needed.
i) Advantages: The following are the advantages of functional departmentalization.
 It is a logical reflection of functions.
50
 It maintains power and prestige of major functions
 It follows the principle of occupational specialization fosters dev‟t of expertise.
 It simplifies training
 It furnishes means of light control at the top.
 It requires little internal coordination.
 It requires fewer interpersonal skills.
ii) Disadvantages
Functional departmentalization
 Reemphasizes overall company objectives.
 Overspecializes and narrows viewpoints of key personnel.
 Reduces coordination between functions.
 Responsibility for profits is at the top only.
 Slows adaptation to changes in environment.
 Limits development of general managers.
 Slows response time in large organization.
 Causes bottlenecks due to sequential task performance.
 does not encourage innovation; has narrow perspective
 Fosters conflicts over products priorities.
 Does not foster development of general managers.
 Obscures responsibility for the overall task.
b) Departmentalization by Product or Service
This type of departmentalization comes as a result of organizing a company by divisions that
bring together all those involved with a certain type of product or service. This type of
departmentalization is made by the large multi-product companies. Each department is
responsible for a product or related family /product line/.
It is a logical pattern to follow when a product type calls for manufacturing technology and
marketing methods that differ greatly from those used in the rest of the organization.
i) Advantages of Product Departmentalization:
 Places attention and effort on product line.
 Facilitates use of specialized capital, facilities, skills and knowledge.
51
 Permits growth and diversity of products and services.
 Improves coordination of functional activities.
 Places responsibility for profits at the product level.
 Furnishes measurable training round for general managers.
 Flexible strategy could be developed for different products.
ii) Disadvantages of Product Departmentalization
 Requires more persons with general managerial abilities.
 It is expensive.
 Presents increased problem of top management control.
 There is a danger of duplication of work.
 Creates conflicts between divisional tasks and corporate priorities.
c) Departmentalization by Region or Area or Territory (Geographical)
This brings together in one department all activities performed in the region where
the unit conducts its business. This arrangement follows logical pattern when a plant
must be located as close as possible to:
 its sources of raw materials - mining and oil producing companies;
 its major markets;
 its major sources of specialized labor.
Territorial departmentalization is especially attractive to large-scale firms or other enterprises
whose activities are physically or geographically dispersed and its customers‟ needs and
characteristics vary greatly.
It is most often used in sales and in production; it is not used in finance, which is usually
concentrated at the headquarters.
i) Advantages of Geographical Departmentalization
 It makes possible effective span of control.
 It reduces the cost of operation and gains saving in time.
 The sales may be increased with the help of intimate knowledge about the tastes and
preferences of the customers in the local market.
 Regional managers could win the confidence of customers and remove the competitors
from the market.
52
 Accounts are prepared area-wise. So, the profitability of each area is known to the
management.
 It provides opportunities to mangers to improve their skill in various fields.
 Control process is very easy to manage.
ii) Disadvantages of Geographical Departmentalization
 It increases the number of personnel and involves high cost of operation.
 The control of head office is a less effective one.
 It may also involve duplication of work.
 A small business concern cannot manage the high cost of operation.
Geographical or territorial and product departmentalization can be structured according to the
chart shown below:
President
Vice President Vice President Vice President Vice President

Marketing Finance Production Human Resource
Marketing Finance Production Human Resource
and Development
Vice President Vice President Vice President

North America Latin America Europe, Africa
Product A and Far East and Middle East
Product B
Product B Product C
53
d) Departmentalization by Customers
It occurs when a division sells most or all of its products to a particular class of customers. This
type of departmentalization is preferred when the various needs of customers are different in
nature. For example a bank may divide its loan section into a number of heads and assign them
to various departments.
- loan to businessmen
- loan to farmers
- Loan to professionals, and so on.
i) Advantages of Departmentalization by Customers
 It fulfills the expectations and needs of customers.
 It develops specialization among the organizational staff.
 It gives customers a feeling that they have an understanding supplier.
 Customers will get better service and the supplier can boost its sales by understanding
customers‟ needs.
ii) Disadvantages of Departmentalization by Customers
 May be difficult to coordinate operations between competing customer demands
 Requires managers and staff experts in customers' problems
 Customer groups may not always be clearly defined
 There is wastage of available resources and facilities
 There may be duplication of activities.
The chart below shows an organizational structure of departmentalization by customers.
President
Vice President Vice President

Industrial Consumer Vice President
Products Products Military
Products
54
e) Departmentalization by Process or Equipment
In this kind of departmentalization, people and materials are brought together in order to carry
out a particular operation. This type of departmentalization is followed when the production
activities are carried on in many places.
For example, a textile factory may have many departments such as Ginning, spinning, weaving,
dyeing and printing, packing and sales distribution. Textile, sugar, beverage and many other
factories also follow these kinds of departmentalization.
i) Advantages
 Process or equipment departmentalization has economic advantages.
- The costlier machines can be used effectively.
- There is no duplication of activities.
 It uses specialized technology.
 It utilizes special skills.
 It simplifies training.
 It helps top managers to have effective performance control.
 It is used in processing industrial products.
ii) Disadvantages of Departmentalization by process or Equipment
 Coordination of departments is difficult.
 Responsibility for profit is at the top.
 Is unsuitable for developing general managers.
 More specialists are essential for each process.
 Heavy cost of operation - separate rooms for operation and other facilities should
be provided for all the process.
f. Departmentalization by Time
Business activities can be grouped together on the basis of the time of performance. If the work
is not completed within the normal working hours, extra time can be given to help it get
completed. Whatever may be the work performed after the normal working hours, a separate
department will be in charge of this type of activity.
For example: - University extension programs have their coordinator. Hospitals, fire
departments, steel furnaces etc. use same methods.
55
i) Advantages
 Services can be rendered beyond the typical 8-hour day.
 It enables activities/ processes not to be interrupted.
 Expensive capital equipment can be used for more hours (more than 8 hours a day)
 It is convenient for employees to work at any shift
ii) Disadvantages
 Supervision may be lacking during the night shift.
 There is the fatigue factor, i.e., it is difficult for most people to switch from day to night
shift and vice versa.
 The changing of the shifts may cause problems in coordination and communication.
 The payment of overtime rates can increase the cost of the product or service.
g) Departmentalization by Numbers
It was once an important method in the organization of tribes, clans and armies. The essential
fact is not what these people do, where they work or what they work with, but that the success of
the undertaking depends only upon the number of people involved in it. Its usefulness has
declined with each passing century. Because:
 technology has advanced, demanding more specialized and different skills;
 groups composed of specialized personnel are frequently more efficient than those based
on mere number;
 it is useful only at the lowest level of the organization structure.
Departmentalization by number is still used in the army where soldiers are grouped into squads,
battalions, companies, brigades, and regiments. The principles that govern span of management
or span of control or span of supervision are used in this type of departmentalization.
h) Departmentalization by Marketing Channels
This type of departmentalization is adopted on the basis of the channel of distribution chosen by
the particular business unit. Normally the channel of distribution is selected by the business unit
on the basis of nature of goods and marketability of the product.
4.7.2 Span of Management
4.7.2.1 Definition
Span of management is the number of subordinates who report directly to a given manager or the
number of people managed efficiently by a single officer in an organization. Span of
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management may be narrow or wide. The alternative names for span of management are span of
control, span of supervision, span of authority and span of responsibility.
A narrow span of control is where the number of subordinates under a given supervisor are very
few. A narrow span of supervision has the following characteristics:
a) The organizational structure is tall, i.e., there is a long distance between top level
management and supervisors.
b) There are many managerial levels between top and lower level management.
c) The number of employees supervised by a manager will be very few.
The following chart shows an organizational structure with a narrow span of control.
a) Advantages of Narrow Span of Supervision

i) Close supervision of employees or work is possible.
ii) Close control is simple.
iii) Fast communication between subordinates and superiors is possible.
b) Disadvantages of Narrow Span of Supervision
i) Superiors tend to get too involved in subordinates‟ work.
ii) There are many levels of management, and therefore the cost is high.
iii) The distance between the lowest level and the top level is long.
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A wide span of control is an arrangement where the number of subordinates under a given
supervisor is many. A wide span has the following characteristics
a) The organizational structure is flat.
b) There are few managerial levels between the top and lower level managers.
c) There are few middle level managers.
d) There is short distance between the top-level management and the supervisors.
The following chart shows an organizational structure with a wide span of control.
a) Advantages of Wide Span of Supervision

i) Superiors are forced to delegate authority.
ii) Clear policies are required.
iii) Subordinates are carefully selected.
b) Disadvantages of Wide Span of Supervision.
i) There is a tendency of becoming decision bottlenecks on the part of overloaded superiors.
ii) There is a danger of losing control on the part of superiors.
iii) A wide span requires exceptionally qualitative managers.
The appropriate span of control must be determined by the management of the respective
organization, because the span of management affects the efficient utilization of managers
and effective performance of their subordinates. If the span of control is too wide, managers
will be overextended. The subordinates will get little guidance or control, and this will lead
to frustration. On the other hand, if the span of control is too narrow managers can be
underutilized. Subordinates can also be:
- Under too close supervision by superiors;
- Dependent because of very close and frequent supervision.
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4.7.2.2 Factors Affecting Span of Management
No formula exists for determining the ideal span of control. The ideal number of people that one
person can supervise depends on a variety of factors. The following are some of the factors
which influence the span of management.
a) Subordinate Training or Quality of Subordinates
The better the training of subordinates the lesser need for superior-subordinate relationships.
Well-trained subordinates require not only less of their managers‟ time but also fewer contacts
with them.
b) Clarity of Delegation of Authority
As managers delegate their authority, they have to clearly define the delegation. To undertake a
well-defined task, a well-trained subordinate can get it done with a minimum of the superiors'
time and attention.
c) Clarity of Plans
If plans are well defined, workable, if the authority to undertake them has been delegated, and if
the subordinate understands what is expected, little of a supervisors time will be required.
If policies are clear, consistent with the operation and goals of a department, and if the
subordinate understands them, there will certainly be fewer demands on the superior‟s time and
attention.
d) Use of Objective Standards
Good objective standards:
i) Reveal with ease any deviations from plans.
ii) Enable managers to avoid many time-consuming contacts.
iii) Enable managers to direct attention to exceptions at points.
iv) Enable the successful execution of plans
e) Rate of Change
The rate of change is an important determinant of the degree to which policies can be formulated
and the stability of policies maintained
- Rapid rate of change/ Narrow span of management
- stable and durable/ Wider span of management
59
f) Variety of Tasks
This refers to the number of different types of jobs being managed. The greater the variety of
jobs supervised by a manager, the higher time it requires. As the number of subordinates
increases the contact required will be more.
g) Proximity
Physical dispersion of jobs being managed affects span of management. If organizational
activities are geographically dispersed, subordinates performance will be out of their supervisor‟s
sight. Besides, as the number of subordinates increases the problem becomes more.
h) Communication Techniques
Methods of communication may be divided into two, i.e. oral and written. Oral communication
requires more time and energy and these can be avoided by the written communication. Clear
and concise communication increases span of control.
Easy style of leaders may create wide span if it is properly handled.
i) Complexity of Jobs
Complexity of jobs refers to the scope and depth of jobs. Job scope is the number of different
types of operations performed in the job. Job depth is the freedom of employees to plan and
organize their work to work at their own pace and to move around and communicate as desired.
j) Quality of a Manager
A competent and trained manager can effectively supervise more than one subordinate that do
not have specialization. Other factors include the amount of personal contact needed or the
degree of interaction required, the utilization of technology, non-managerial responsibilities of
the manager, and the size of personnel that exist at the different management levels of
organization.
4.7.2.3 Graicuna’s Theory of Span of Management
V.A. Graicuna identified the relationship prevailing between the superior and the subordinates.
The relationships are classified into three categories.
a) Direct Single Relationship
This is a relationship in which a supervisor has direct contact with his subordinates individually.
The figure below shows that the supervisor has direct contact with subordinate A and
subordinate B.
60
Supervisor

Subordinate A Subordinate B
b) Direct Group Relationship
In this case a supervisor has direct relationship with his subordinates jointly. The figure below
shows that the supervisor consults with two of his subordinates, A and B.
Supervisor

Consultation with
Subordinates A and B
c) Cross Relationship
In cross relationship, a subordinate has relationship with another subordinate mutually. The
figure below shows that subordinates A and B have cross relationship with each other.
Supervisor

Subordinate A  Subordinate B
Relationships
The number of direct group and cross-interpersonal relationships increases geometrically as the
number of subordinates under the supervisor increases arithmetically.
2n
Formula: - Number of relationships = n ( + n – 1)
2
Where: n = the number of subordinates
2n
=n( + n – 1)
2
When n = 5
61
25
= 5( + 5 – 1)
2
 32 
= 5x   4 
 2 
= 5 x (16 + 4)
= 5 x 20
= 100
Check your progress by answering the following questions on your notebook.
a) What are the steps that are followed in the organizing process? (3.6)
b) What are the three most important elements of organizing? (3.7)
c) Why is departmentalization important? Give six reasons. (3.7.1.1)
d) What are some of the factors that need to be considered in the process of
departmentalization?
e) State seven bases of departmentalization.
f) State at least three advantages of departmentalization by enterprise function.
g) State at least six disadvantages of functional departmentalization.
h) What are the advantages of product or service departmentalization? What are the
disadvantages?
i) What are the advantages of geographical departmentalization? What are its disadvantages?
j) What are the advantages of geographical departmentalization by customers? What are the
disadvantages?
k) What are the advantages of departmentalization by process or equipment? What are its
disadvantages?
l) What are the advantages and disadvantages of departmentalization by time?
m) What does span of management mean? What other alternative names can we use for span
of management?
n) What is a narrow span of management? What are its characteristics?
o) What are the advantages and disadvantages of a narrow span of management?
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p) What is a wide span of management? What are its characteristics?
q) What are the advantages and disadvantages of a wide span of management?
r) What are the factors that affect span of management? Identify at least ten.
s) According to V.A. Graicuna, what are the three categories of relationship that prevail
between a superior and subordinates in an organization?
2n
n(  n  1)
t) What does the formula 2 indicate?
4.7.3 Delegation of Authority
It is the act of entrusting formal authority and assigning responsibility to a subordinate for
completion of specific activities. Just as no one person in an enterprise can do all the tasks
necessary for accomplishing a group purpose, it is also impossible, for one person to exercise all
the authority for making decisions as the enterprise grows.
4.7.3.1 The Steps Followed in the Delegation process
The delegation of authority involves the following key activities
a) Analyze how time is spent.
b) Decide which task can be delegated and the expected results Authority and tasks
delegated must be clearly stated, and should be modified when necessary for
accomplishing these tasks.
c) Decide who should get the assignment. The right person should be selected from members
based on merit or effective performance of job.
d) Delegate the authority. Assign the task with the right authority to the right person.
e) Create an obligation (responsibility)
f) Establish a feedback system
g) Follow unity-of-command and chain-of-command principles as you delegate.
4.7.3.2 Factors That Determine the Delegation of Authority
Most of the factors that affect delegation lie in the personal attitudes of both superiors and
subordinates towards delegation. Some of them are discussed as follows.
a) Personal Attitudes of Superiors
i) Receptiveness/ Avoidance of Risk
Decision-making always involves some discretion, and a subordinate's decision is not likely to
be exactly the one a superior would have made. Therefore, managers who delegate authority
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must be willing to give other people's ideas a chance and be ready to take the risk, due to the
possible mistake that could be committed by the subordinate. One has to give up the old saying,
“If you want something done right, do it yourself.”
ii) Willingness to let Authority Go
A manager who is ready to effectively delegate authority must be willing to release the right to
make decisions to subordinates. If the manager has an autocratic attitude, delegation will not be
effective. Some managers fear that a subordinate who looks so good might replace him/her.
iii) Perfectionism/Unwillingness to let Others Make Mistakes
Since superiors cannot delegate responsibility for performance, they should not delegate
authority unless they are willing to find means of getting feedback; that is, of assuring them that
the authority is being used to support enterprise or department goals and plans. If superiors target
to be perfect in their job and if they fear subordinates may not be as perfect as them, they avoid
delegation.
iv) Willingness to Trust Subordinates/Confidence in Subordinates
Superiors have no alternative to trusting their subordinates, for delegation implies a trustful
attitude between them. Some people do not like to delegate and argue that it is easier for a
manager to do a task than to teach a subordinate how to do it.
b) Attitudes of Subordinates
Subordinates may refuse accepting delegation of authority because of any of the following
reasons.
i) Love of spoon-feeding. They want superiors to do the job or show them how to do it.
ii) Fear of criticism.
iii) Lack of information or resource.
iv) Lack of self-confidence.
v) Too much workload.
vi) Inadequate incentives.
vii) Fear of failure.
4.7.3.3 Guides for Overcoming Weak Delegation
The five practical guidelines of delegation are:
i) Define assignments and delegate authority in the light of results expected.
ii) Select the person in the light of the job to be done.
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iii) Maintain open lines of communication to avoid misunderstanding among and between
organizational members.
iv)Establish proper controls because responsibility cannot be abandoned by the superior.
v) Reward effective delegation and successful assumption of authority.
4.7.3.4 Advantages of Delegation
i) Delegation allows for promptness in action.
ii) It enables managers to perform higher-level work and get enough time to pursue other tasks.
iii) It can be a training experience for supportive staff. It helps to develop subordinates and
satisfy customers by giving them better service.
iv) It can result in better decisions.
v) It can improve morale Subordinates gain feelings of belongingness and being needed which
leads to a genuine commitment on the part of the subordinates.
vi) The expansion and diversification of business activities is possible
4.7.3.5 Disadvantages of Delegation
Delegation has two potential limitations.
i) Control at the top may be more difficult
The further decisions are removed from the highest level, the more difficult it is to pen point
problem areas and to take effective corrective action.
ii) A manager may over time lose touch with what is really happening in the organization
Without proper communication and feedback channel, the subordinate may make decisions
and take actions without the knowledge of the superior.
4.7.3.6 Principles of Delegation
a) Delegation has to be based on results expected
The superior should clearly know what he expects from the subordinate before the delegation
authority.
b) Non-delegation of responsibility
A superior can delegate authority but not responsibility. Assigning duties does not relieve the
delegator from being accountable for whatever happens in the process of carrying out the
responsibilities assigned.
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c) Authority and responsibility should commensurate with each other.
The parity principle states that authority and responsibility must balance each other. Authority
without responsibility will make the subordinate a careless person. Responsibility without
authority will make the subordinate an inefficient person. So there should be a proper balance
between authority and responsibility.
d) Unity of command
An employee should have one and only one immediate manager. Jesus said “No man can serve
two masters.” If a subordinate gets orders, instructions and directions from more than one
superior, it will create uncertainty and confusion in the organization. In such a situation, the
subordinate will find it very difficult to determine whose instructions, orders or directory he
should carry out first. Therefore, a subordinate should get instruction from only one superior.
The key to avoiding problems with unity of command is making sure that employees clearly
understand the lines of authority that directly affect them.
e) Definition of limitations of authority
The authority delegated should be well defined so that the subordinate can understand the limit
of the authority delegated to him.
f) The scalar principle/chain of command
This principle suggests that there must be a clear line of authority running step by step from the
highest to the lowest level of the organization. This clear line of authority will make it easier for
organization members to understand to whom they are responsible. This principle also makes
communication channels clear.
4.7.4 Centralization versus Decentralization as Features of Delegation
Centralization and decentralization are important features that become obvious in the process of
delegation. This is due to the fact that authority is decentralized or centralized in the process of
delegation.
a) Centralization is defined as the systematic and conscious reservation of authority at central
points in the organization. In a centralized set-up, decision-making authority is
concentrated in few hands at the top. Most of the time even though the degree might be
high or low, both centralization and decentralization can appear and exist in an
organization.
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b) Decentralization implies the placing of greater power in the hands of persons away from
the center. It means a greater number of important decisions are made at the lower levels
and few of these decisions are subject to prior approval of the higher authorities. So
decentralization can be defined as the systematic effort to delegate to the lowest levels all
authority except that which can be exercised at central points. In other words, there cannot
be absolute decentralization. If managers delegate all authority without exception, their
status as managers would cease, their position would be eliminated, and there would again
be no organization.
The degree of decentralization is greater when:
i) the number of decisions made at lower levels of the organization are greater;
ii) the decisions made at lower levels of an organization are more important;
iii) more functions are affected by decisions made at lower levels of the organization;
iv) the manager has less checking on decisions made by others;
v) there is no checking on decisions made by others; and
vi) Fewer people at the lower level in the hierarchy are consulted.
c) Factors Determining the Degree of Decentralization of Authority
Although the temperament of individual managers influences the extent to which authority
is delegated, other factors also affect it. They are:
i) Costliness of the Decision
The more costly the action to be taken the more probable it is that the decision will be made at
the upper levels of management. Costs may be in dollars and Cents Company‟s reputation, its
competitive position and employee morale.
ii) Desire for Uniformity of Policy
Those who value consistency above all invariably go for centralized authority since this is the
easiest road to such a goal.
iii) Size and Character of the Organization
The larger the organization, the more the decisions that are to be made, the more the places in
which they must be made and the more difficult it is to coordinate them.
iv) History and Culture of the Enterprise
Whether authority will be decentralized frequently depends upon the way the business has been
built. Owner founders have a tendency toward high centralization of authority. Enterprises that
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result from mergers and consolidations are likely to show, at least at first, a definite tendency to
retain decentralized authority, especially if the unit acquired is already operating profitably.
v) Management Philosophy
Sometimes top managers are not interested to delegate to others and they want to safeguard their
authority as a source of power. In many cases, top managers may see decentralization as a way
of organizational life that takes advantage of the innate desire of people to create, to be free, and
to have status.
vi) Desire for Independence
Individuals and groups often desire a degree of independence from bosses who are far away.
Individuals may become frustrated by delay in getting decisions made by long line
communication and by the practice of giving a difficult problem to someone else to solve it even
though it is one‟s own responsibility.
vii) Availability of Trained Managers
A real shortage of managers would limit decentralization of authority, since delegation of
authority requires qualified managers. Executives who complain that they have no one to whom
they can delegate authority are often trying to magnify their own value to the firm or confessing
a failure to develop subordinates.
viii) Control Techniques
A good manager at any level of the organization cannot delegate authority without having some
way of knowing whether it will be used properly. Some managers do not know how to control.
They may think that it takes more time to correct a mistake committed by others than to do the
job themselves.
ix) Decentralized Performance
It refers to the situation where managers of an enterprise are dispersed over a geographic area.
The reason is basically a technical matter that depends upon such factors as
 the economies of the division of labor;
 the opportunities for using machines;
 the opportunities for using machines;
 the nature of the work to be performed; and
 the location of raw materials, labor supply and customers.
Authority tends to be decentralized when performance is decentralized.
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x) Business Dynamics: the Pace of Change
If a business is growing fast and facing complex problems of expansion, its managers,
particularly those responsible for top policy, may be forced to make a large share of the
decisions; but strangely enough, this very dynamic condition may force these managers to
delegate authority and take a calculated risk on the costs or error. This dilemma is resolved by
implementing the following:
- Directing of delegation;
- Avoid delegating authority to untrained subordinates;
- Give close attention to rapid formation of policies;
- Accelerate training in management; and
- Slow the rate of change.
In old well-established or slow-moving business, there is a natural tendency to centralize
authority, whatever danger too much centralization may carry.
xi) Environmental Influences
In addition to the internal factors, there are definite external forces affecting the extent of
decentralization. Among the most important of these are governmental controls, national
unionism, and tax policies (political, social and economic factors).
d) Advantages of Decentralization
i) It relieves top managers from the burden of decision-making.
ii) It encourages decision making and assumption of authority and responsibility.
iii) It promotes the use of broad control techniques
iv) Performance comparison between departments becomes possible.
v) It facilitates setting up of profit centers.
vi) It facilitates product diversification.
vii) It promotes development of general managers.
viii) It aids in adaptation to fast-changing environment.
e) Limitations of Decentralization
i) The uniformity of policies will be less.
ii) Coordination becomes complex.
iii) The top management may lose control.
iv) It requires qualified managers and subordinates.
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v) Its cost is high.
vi) It is affected by external forces.
vii) It doesn‟t favor economic scale of some operations.
f) Guidelines to obtain the desired degree of decentralization
In order to obtain the degree of decentralization they want, top managers must:
 Understand decentralization which does not mean independence;
 Establish policies to guide decision making along desired courses;
 Delegate authority to the right person/subordinate;
 Accompany delegation by controls designed to ensure that delegated authority is used
properly;
 Realize that knowing the mere fact of delegation is not enough to ensure decentralization;
 Make sure that a system of verifiable objective is established;
 Provide a statement of each manager‟s duties and of the responsibility and the degree of
authority delegated to that manager;
 The statement should be clear, written and easily understood by all employees who want
to know;
 That the example and teaching of a superior has to start at the top of the organization;
 Develop a policy of promoting managers only when they have subordinates able to take
their places.
4.7.5 Check your progress.
a) What does delegation of authority mean?
b) What are the steps followed in the delegation of authority?
c) State that factors that determines the delegation of authority.
d) State five practical guidelines for overcoming weak delegation.
e) What are the advantages and disadvantages of delegation?
f) State six principles that govern the delegation of authority.
g) What does centralization mean?
h) What does decentralization mean?
i) Is it possible to decentralization or centralize authority absolutely?
j) When would the degree of decentralization be greater?
k) State the factors that determine the degree of decentralization of authority.
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l) What should top managers do to obtain the desired degree of decentralization?
m) What should top managers do to obtain the desired degree of decentralization?
n) What is the difference between authority, responsibility and accountability?
4.8 PRINCIPLES OF ORGANIZING
As a function of management, organizing operates on the basis of the following principles.
4.8.1 The Scalar or Chain-of Command Principle
Authority flows directly and clearly from the top executive in an organization to each
subordinate at each succeeding level. It implies that the best results are obtained when a clear
chain of command is established and followed. If the principle is not followed in organizing,
individuals will not know to whom they are responsible. Compulsion, indecision, and
inefficiency will be the result.
4.8.2The Unity-of-Objective Principle
This principle suggests that all individuals in the organization and the departments to which they
belong should contribute to the principal objectives of the organization. A football team,
according to this principle aims at winning all matches. The members of the team work toward
this objective individually and as a team.
4.8.3 The Adequacy-of Authority or the Parity Principle
It means that each manager in the organization should be given sufficient authority to achieve the
desired result. Authority and responsibility should be in parity with each other.
This principle will be violated, if a manager is instructed to produce a certain amount of
products, but not given the authority to request personnel, materials, finance, equipment, etc.
4.8.4 The Responsibility-for-Results Principle
It states that even if a superior delegate‟s authority to a subordinate to achieve a goal, the
superior is still responsible for the result if the goal is not attained.
4.8.5 The Accountability Principle
It holds that when managers accept a plan from their superiors, they are duty bound to carry it
out. In other words, they are accountable to their superiors for results. They are expected to put
forth their best efforts to achieve the stated objective. In principle, while allocating duties to
persons, the extent of liabilities of the person needs to be clearly explained to the concerned
person.
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4.8.6 The Division of Work Principle
According to this principle, work would be divided and grouped in a logical manner in order to
eliminate duplication of effort and other forms of waste.
This principle will be violated when two people or two departments are performing work that
could just as easily be done by one person or one department.
4.8.7 The Unity-of-Command Principle
This principle states that each individual in an organization should report to only one superior
and should receive the instruction or direction from one authority or boss. Failure to comply
with this principle may result in confusion, fear and inefficiency. However, this principle is often
violated. In some organizations, there are many people who are responsible to two or more
persons.
4.8.9 Principle of Definition
It is necessary to define and fix the duties, responsibilities and authority of each worker, and the
organizational relationship of each worker with others.
4.8.10 Principle of Co-ordination /Unity of Direction/
Whenever coordination exists among the workers, objectives may be achieved quickly and each
work can be done effectively. The major plan is divided into sub-plans in a good organizational set
up. A particular group of department takes up each sub-plan. These groups or departments are
requested to cooperate to attain the main objectives or in implementing the major plan of the
organization.
4.8.11 Principle of Efficiency
According to this principle of an organization work should be completed with minimum members,
in less time, with minimum resources and within the right time.
4.8.12 Principle of Uniformity and Balance (Equilibrium)
The organization should make the work distribution in such a manner that there should be an equal
status and equal authority and powers among the same line officers. It is also essential that the
sequence of work should be arranged scientifically. In certain periods, some sections or departments
are overloaded and some departments are under loaded. During this period, due weight should be
given on the basis of the new workload. The overloaded sections or departments can be further
divided into sub sections or sub-departments. This entails effective control over all the
organizational activities.
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4.8.13 Principle of Continuity and Flexibility
It is essential that there should be a re-operation of objectives, re-adjustment of plans and privation
of opportunities for the development of future management.
The organizational set up should be flexible to adjust to the changing environment of business. The
organization should avoid complicated procedures and permit an expansion or contraction of
business activities.
4.8.14 Principle of Leadership Facilitation
Span of control refers to the maximum number of members effectively supervised by a single
individual. The number of members may be increased or decreased according to the nature of work
done by the subordinate or the ability of the supervisor.
4.8.15 Principle of Simplicity and Homogeneity
The simplicity of the organizational structure enables the staff members to maintain equality and
homogeneity. If equality and homogeneity are maintained in one organization, it is possible to
determine whether the staff members discharge their duties to realize the objectives of the
organization.
If the organization structure is a complex one, junior officers do not understand the level and the
extent of responsibility for a particular activity.
4.8.16 Principle of Joint Decision
Whenever decisions are made jointly, the deciding group would be more duty bound to keep its
word individually or as a group. This would be beneficial to the organization for a long period of
time.
4.9 GROUP DYNAMICS AND COMMITTEES
Managers deal with groups of people. They give direction to groups of people in the organization.
Therefore they need to understand group dynamics (the interaction of people in-group setting). This
understanding is made possible by studying psychology.
4.9.1 Behaviors Manifested by Groups
Groups show behaviors such as conformity, aggression, competition and cooperation. Conformity is
compliance with existing rules or customs. Groups require members to conform by obeying group
norms, accepting group sanctions, and giving up certain rights. Individuals conform because of fear,
insecurity, and good judgment. The extent of conformity desired depends on the type of
organization, the person‟s position within the organization, and the kind of task being performed.
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Aggression is offensive action that is caused by frustration, annoyance or attack. Aggression may be
either socially acceptable or unacceptable.
Competition is a struggle between two or more individuals or groups to obtain encouragement.
Completion may be internal or external.
Cooperation is a joint effort by two or more people to attain a common goal and requires an
individual to subordinate his or her self-interest.
4.9.2 Committees and Their Characteristics
A committee is a group of persons assigned or asked to investigate or act on some matter.
Committees can be permanent or temporary.
a) Standing Committees are permanent committees. They can be given authority to make key
decisions on matters such as guilt or innocence of someone accused of a crime, whether to
go ahead with a major project and size of next year‟s budget. Other committees may have
only advisory power by which they recommend what particular action may be taken to solve
a problem.
b) Ad Hoc Committees are temporary committees formed for specific purposes. An ad hoc
committee is usually dissolved after its recommendations have been submitted.
Committees are widely used to provide more information for decision-making. They
facilitate coordination. They foster support for decision. They can broaden the knowledge of
the people who participate in them.
4.9.3 Limitations of Committees
i) They are expensive.
ii) They often act slowly.
iii) They may come up with compromise solutions.
iv) They don‟t fix responsibility. Whatever decision is made, no individual takes the responsibility.
4.9.4 The Plural Executive
Most committees are purely advisory. But some have more power. A committee that has been
assigned authority to make decisions and to perform management functions is referred to as a plural
executive. E.g. A corporate board of directors is a plural executive, since it has the power to plan,
organize, staff, direct and control.
Some organizations establish an “executive committee” or a “management committee” or a
finance committee” or a “policy committee” that serves as a plural committee. These type of
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action oriented committees may formulate basic strategy, decide on key policies, allocate money
and other resources to various projects, settle disagreements between division of the enterprise or
make other high-level decision.
4.9.5 Guidelines for Maximizing the Effectiveness of Committees
Committees usually spend a lot of time and money either attending committee meetings or preparing
for them. So committee effectiveness can be achieved if the following principles for successful
committee operations are observed.
i) Establish the right size of committee.
Deciding how large a committee should be is always judgmental, unless the size is specified by
law. Large committees are designed when:
 the main purpose is to inform the members who comprise it;
 widely differing talents and experiences are needed to make the recommendation or decision;
 the scope of the committee‟s activity is very broad; if small committees are desired, it
 is wise to divide the work among subcommittees;
 speedy action is needed;
 the matter assigned to the committee must not be kept confidential; the more persons
 serving on a committee, the greater the chance of information leaks.
ii) Select the right members. The following are criteria for selecting the right members:
 interest in the purpose of the committee;
 knowledge and experience related to the committee‟s purpose;
 psychological compatibility (ability to compromise);
 sufficient time to prepare for and attend meetings
iii) Select the right chairperson. An effective chairperson should have the following qualities:
Planning ability, objectivity, diplomacy, experience and efficiency
iv) Define instructions clearly. The following must be made clear:
 the committee‟s purpose;
 its authority;
 a deadline for completion of the committee‟s work;
 money, staff and other resources assigned to the committee;
 the name of the chairperson or how one is to be selected;
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 whether the report will be oral or written; and
 to whom the final report will be made.
v) Define operating procedures clearly:
 where, and for how long the meeting will be held;
 what voting procedures will be followed;
 whether a non-committee member will be eligible to attend; and
 plans for reimbursement should be established.
vi) Provide needed information and staff assistance
vii) Expedite the committee‟s work. Check frequently on the committee‟s progress to ensure that
the deadline will be met.
viii) Require a final report read and signed by the members.
ix) Take action on the committee‟s report.
4.9.6 Summary of the Unit
As a key function of management, organizing involves many important activities: identifying and
grouping similar tasks; assigning the tasks to a manager who is delegated the authority; and
coordinating the different groups of activities.
Organizing is characterized by the following features: division of labor; coordination; objectives;
authority-responsibility structure; and communication.
Organizing holds an important place in management because it facilitates administration, growth
and diversification; increases the efficiency of management; improves the efficiency and quality of
work through synergism; encourage creativity and initiative; establishes lines of authority; and
improved communication within the organization.
On the basis of legality, authority delegated and responsibility assigned to the personnel and their
relationship with each other, organizations can be classified as formal or informal.
Formal organization is the intentional structure of roles in a formally and legally established firm or
enterprise.
Informal organization is a network of personal and social relations not established or required by the
formal organization, but arising spontaneously as people associate with one another on the basis of
preference without considering the rules and regulations of the organization.
Organizing firms or enterprises follows certain steps. After determining activities and groupin g
them, duties are assigned to specific persons who at the same time are entrusted with the authority to
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carry out the duties. The relationship of the persons working together will be defined and the
activities coordinated. In other words, the organizing process results in achieving its three key
elements: departmentalization deciding the span of control of each managerial level and delegation
of authority.
Departmentalization is a process by which similar activities of a business are grouped into units for
the purpose of facilitating smooth administration at all levels. The grouping of activities is done on
the bases of function, products or services, area or territory, customers, process or equipment, time,
number and marketing channels.
Span of control or management is the number of subordinates who report directly to a given
manager. In other words, it is the number of people managed efficiently by a single officer in an
organization. A span of supervision is said to be narrow when the number of subordinates is few,
and wide when the number subordinates supervised is comparatively many. Narrow span results in
all tall organizational structure, while a wide span creates a flat organizational structure. Both
structures have advantages and disadvantages.
Span of management is affected by the educational or training background of subordinates, the
clarity of authority delegation, clarity of plans, use of objective standards, rate of change, variety of
tasks, proximity, and complexity of jobs, communication techniques and the manager‟s quality.
The third element of organizing is delegation of authority. Delegation is the act of entrusting formal
authority and assigning responsibility to a subordinate for completion of specific activities.
Authority is delegated on the basis of certain principles. These principles include the following.
 Delegation has to be based on results expected.
 A superior can delegate authority, but not responsibility.
 Authority and responsibility must be in parity with each other.
 The delegation of authority must ensure that employees have only one immediate superior.
 Delegation of authority must be based on a clear chain of command and a well-defined authority.
In the process of delegation, centralization and decentralization are important features that become
obvious.
Centralization is the systematic and conscious reservation of authority at central points in the
organization.
Decentralization implies the placing of greater power in the hands of persons away from the center.
The following are factors that determine the degree of decentralization of authority.
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 The costliness of the decision.
 The desire for the uniformity of policy.
 The size, character, history and culture of the organization.
 The philosophy of the management.
 The desire for independence.
 The availability of trained managers.
 The control techniques employed.
 The decentralization of performance.
 The pace of change and other environmental influences.
The three elements of organizing mentioned above operate on the basis of certain principles. In the
process of organizing, one has to base the steps he/she takes on the following principles.
 A clear chain of command has to prevail.
 There must be unity of objectives in which case all individuals and departments to which
they belong should contribute to the principal objectives of the organization.
 According to the parity principle, each manger in the organization should be given
sufficient authority to achieve the desired results.
 A superior who delegates authority to a subordinate would still be responsible for the
results attained by the subordinate.
 Accepting a plan for implementation makes one accountable to the superior for results,
because he/she is duty-bound to carry it out.
 The division of labor principle requires that work be grouped logically and divided
among people to eliminate duplication of effort.
 To carry out their responsibilities without any hindrance, employees need to get
instructions or directives from only one superior to whom they should also report.
The other principles of organizing include unity of direction, the principle of efficiency, uniformity
of balance, continuity and flexibility, leadership facilitation, simplicity and homogeneity and the
principle of joint decision.
Joint decisions are made possible through the activities of formal groups created as task forces and/
or committees. Committee can be temporary (ad hoc) or permanent (standing). Even though group
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decisions are more reliable, committees act slowly, are expensive, may come up with compromise
solutions and they do not fix responsibility.
At times standing committees can be entrusted with authority to make decisions and to perform
management functions. These types of committees are referred to as plural executives, but can have
different names such as executive committee, policy committee or management committee.
Groups manifest behaviors such as conformity, aggression, competition and cooperation during the
interaction of the members as the group deals with some matters.
4.9.7 Check your progress by answering the following questions. Follow the instructions given
in 4.5.2
a) Explain the following principles of organizing briefly:
i) scalar chain or chain of command principle;
ii) unity-of-objective principle;
iii) the adequacy-of-authority or parity principle;
iv) the responsibility-for-results principle;
v) the accountability principle;
vi) the division of work /labor principle;
vii) unity-of-command principle;
viii) unity-of-direction or the coordination principle;
ix) principle of continuity and flexibility;
x) principle of simplicity and homogeneity;
xi) principle of joint decision;
xii) principle of leadership facilitation;
xiii) principle of uniformity and balance or equilibrium;
xiv) principle of efficiency;
xv) principle of definition.
b) What do group dynamics mean?
c) Indicate and explain some of the behaviors manifested by groups.
d) What is a committee? Identify two types of committees and explain each.
e) What are the disadvantages of committees?
f) What is a plural executive?
g) State the major guidelines for maximizing the effectiveness of committees.
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UNIT FIVE
THE STAFFING FUNCTION
Objectives of the unit
Upon completion of this unit, you will be able:
 To discuss the meaning of recruitment, selection, induction and placement;
 To explain the various sources of recruitment;
 To describe the steps involved in the selection process.
5.1 MEANING OF STAFFING
Dear Learner, have you ever heard about staffing? What is meant by staffing for you? (Use the
space left below for your response)
______________________________________________________________________________
______________________________________________________________________________
__________________________________________________________________________
Staffing is the process of identifying human resource needs, procuring the necessary employees,
training, utilization, and separation of those employees. It is a separate field by itself and known
as human resource management. The major objective of the staffing function is enabling an
organization to attract, maintain and utilize efficient and effective workforce.
Broadly speaking, staffing function has three major elements. These are:
 Acquisition (Procurement)
 Retention (Maintenance) and
 Separation (Exit)
5.1.1 Acquisition (Procurement)
Procurement is concerned with determining and obtaining the proper quality and quantity of the
workforce and contains elements of human resource planning, recruitment, selection and
induction (placement)
A. Human resource planning:-
It is the process of determining and preserving a firm‟s human resource recruitment of
organization at its different levels for achieving its goals. Human resource planning translates the
overall organizational objectives, plans and programs to achieve specific performance in to
workforce needs.
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Steps in human resource planning includes:-
 Analyzing organizational objectives and plan.
 Determining over all human resource needs.
 Taking inventory of existing personnel.
 Determining net new personnel requirements.
 Developing action plans.
B. Recruitment
Recruitment is the process of searching for prospective employees and stimulating them to apply
for jobs in the organization. There are two sources of recruiting potential candidates.
Internal requirement: - An effort to fill open positions with people already employed in the
firm. These include processes like transfer, promotion, and recall from layoff.
Advantages: familiar employees, less costly, less orientation
Disadvantages: narrows down selection options, organizational breeding
a. External; recruitment: _ an effort to fill open positions from sources outside the firm. It is
searching for employees in the labor market, walk ins, write ins, educational institutions,
employment agencies and labor unions.
Advantages: wide option for selection, new outlook comes in
Disadvantages: unfamiliar employees, more cost, orientation needed
C. Selection
It is the process of evaluating and deciding the best and qualified candidates out of the pool of
applicants received in the recruitment process for job opening based on their abilities, skill and
performance. In other words, selection is a process in which candidates for job pass through
succession of hurdles to ascertain whether the candidate‟s posses the appropriate qualifications
for specific job. It needs care and allows no discretion when performed. The selection process
may include:
 preliminary screening
 application form filling
 reference letters
 employment interview
 employment tests
 physical examination
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D. Induction (Orientation)
Placement is the process where the selected candidates are familiarized with the organization and
it may be done through oral communication, written Medias like manuals, guidelines and others.
It is designing to provide new employees with information needed to function comfortably and
effectively in the organization. Induction conveys three types of information.
a. General information about the daily work i.e. routine things.
b. A review of organizational history, purpose, operations and products and services.
c. A detailed presentation of the organizational policies, work rules and employee benefits.
5.1.2 RETENTION
Retention is the process through which the selected employees are maintained or utilized and is
at the same time the process of increasing the qualification of employees. It includes the
following elements.
A. Training and development: -
Training is any process by which the aptitudes, skills and abilities of employees to perform
specific jobs are increased or it is the act of increasing the knowledge and skills of employees for
doing a particular job. Training programs are directed towards maintaining and improving
current job performance. Training is mainly given to non-managers to improve their technical
skills.
Objectives of Training
To provide the knowledge, skills and attitudes for individuals to undertake their current job more
effectively.
o to help employees to become capable of assuming other responsibilities
o to help employees to adopt to changing circumstances E.g.: new technologies
o to reduce waste and to increase productivity
o to minimize input use and maximize output
o to relieve superiors from close supervision and get time for other duties
Development, on the other side, is the systematic process of education, training and growing by
which a person learns and applies information, knowledge, skills, attitudes and perceptions. It is
training offered at present for up grading the future performance of individuals at higher level
positions. Development programs seek to develop skills for future jobs. Managers receive
assistance in developing the skills required in futures jobs, conceptual and human relations skills.
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Hence, development includes training and it focuses at individual growth through increasing the
general knowledge and understanding, not restricted to a particular job. In other words, training
complements development.
B. Compensation
It refers to all forms of financial returns and tangible services and benefits employee receives as
a part of an employment relationship or it is the reward that individuals receive in return for their
labor from organization. Compensation is adequate and equitable remuneration of personnel for
their contributions to the achievement of organizational objectives.
 For an employee, compensation is a means by which they support their needs and families
 For the employer, compensation represents a lion share cost.
Different factors affect compensation decisions.
 Internal factors
o the size and age of organizations
o labor budget
 External factors
o government wage controls and guidelines
o labor unions
o economic conditions of the industry
C. Performance appraisal (PA)
PA is defined as a human resource activity that is used to determine the extent to which an
employee is performing the job effectively. It is a formal structured system designed to measure
the actual job performance of an employee with designed performance standards. It is the
evaluation of an employee‟s job performance by his superiors.
Objectives of PA
 to provide information towards strengths and weaknesses of employees
 to bring better allocation of resources
 to maintain equitable and competitive pay structure
 to supply information on training needs
 to prepare rewards
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D. Discipline
It is generally administered when an employee violates company policy or falls short of work
expectations and managers must act to remedy the situation. Discipline usually progresses
through a series of steps- warning, reprimand, probation, suspension, disciplinary transfer,
demotion, and discharge- until the problem is solved or eliminated. Discipline refers to the taking
of disciplinary actions for the application of penalties to inhibit undesired behavior. The main
objective of disciplinary actions is to maintain desired behavior within the organization through
exemplary measures.
E. Transfer, Promotion and Demotion
Transfer is the movement of an employee from one job to another on the same occupational
level and at the same level of wages (salary) and other benefits. Transfer can be temporary or
permanent.
Promotion is the advancement of employee to a better job i.e. better in terms of greater
responsibility, more prestige or status, greater skills and increased rate of pay. Merit and
seniority are important factors in promotions.
Demotion is the movement of an employee from higher occupational level to a lower level(less
pay and less responsibility, status, prestige etc.). It may be the result of disciplinary action.
5.1.3 EXIT (SEPARATION)
It refers to the termination of the relationship between the worker and the organization due to one
of the following reasons.
Transfer is moving a person from one organizational level or location to the other.
Resignation refers to the termination at the instance of the employee‟s interest. An employee
resigns when he or she secures a better job elsewhere or the employee may quit for personal
reasons or when an employee suffers from ill health or some other reason.
Dismissal: - When the employer initiates the termination of employment. Some of the reasons,
which lead to the dismissal of employees, include excessive absenteeism, serious misconduct,
theft of organization‟s property etc.
The employee may also be separated from the organization due to retirement- due to age and
disability.
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SELF ASSESSMENT QUESTIONS
1. What is meant by recruitment? How does it differ from selection?
2. Critically discuss the various sources of requirement of employee. What sources of
recruitment will you recommend for the appointment of managerial personnel?
3. Discuss in brief the significance of proper selection of personnel. What steps are involved
in the selection procedure? Explain.
4. What is the significance of proper selection of employees in an organization? Explain the
steps followed in selection procedure.
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UNIT SIX
THE DIRECTING FUNCTION
6.0 Objectives
Dear Learner, after reading this unit, you should be able to:
 Know the meaning of directing, motivation, leadership and communication
 Know the different motivational theories and approaches
 Describe the theories of leadership
 Describe the meaning of communication and different models of communication
 Explain the objectives of motivation, leadership and communication in an organization
6.1 INTRODUCTION
Dear students, what is the meaning of Directing and why do you think managers are required to
direct and/or lead their organization? (You can use the space below to write your response)
______________________________________________________________________________
______________________________________________________________________________
______________________________________________________________________________
________________________________________________________________________
As a function of management, directing focuses on the leading activities undertaken by managers
at different levels. Leading activities include motivating, communicating, supervising and
resolving conflicts that arise from time to time. The leader‟s approach, the principles that he/she
employs, the style of leadership that he/she assumes, the overall personality of the leader and the
methods that he/she uses in resolving conflict need special attention to understand the unit as a
whole.
6.2 MEANING OF DIRECTING
Directing is a management function which deals with what managers do to employees or cause
them to do certain activities that lead to the achievement of the objectives of the organization. It
includes guidance, supervision, communication, leadership, inspiring, coordinating and
motivating employees for an action.
6.2.1 Components of Directing
Directing includes many activities such as guidance, supervision, communication, leading,
coordinating and motivating. Among these only three components will be discussed: Motivation,
Leadership and Communication in the same order.
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6.3 MOTIVATION
6.3.1 Meaning of Motivation
Motivation is the act of inducing, instigating, inciting or promoting someone to a particular
course of action to get the results expected of him/her.
“Motivation is a general term applying to the entire class of drives, desires, needs, wishes and
similar forces that induce an individual or a group of people to work.” Koontz and O‟Donnell.
The goal of motivation is to cause people to put forth their best efforts with enthusiasm and
effectiveness in order to achieve and hopefully surpass the organizational objectives. In order to
motivate employees, managers should identify the basic motives that initiate people. Motives are
inner forces that move a person to believe in a certain way. Sources of motives can be biogenic
or psychogenic needs. Biogenic needs arise from physiological states of tension such as hunger,
thirst, and discomfort. Psychogenic needs arise from psychological states of tension such as a
need for self-esteem, affiliation, achievement, status, recognition or belonging. This fact can be
expressed in short as follows.
/Needs=>Motives=>Drive=>Action=>Satisfaction/
Human motivation is influenced by environmental factors. An environment is the physical and
cultural surrounding within which we find ourselves at any given time. For example, a person
who sees ice cold water may feel thirsty; a person who sees the rain falling may feel cold; a
person who feels the smell of food can feel hungry; a person who is satisfied in his job may be
dissatisfied by the mistreatment of his boss.
6.3.2 Characteristics of Motivation
Motivation is characterized by the following features
a) Motivation is unending process. As man has a number of wants and all wants cannot be
satisfied at one time, motivation becomes a continuous task of managers. Human needs
are infinite.
b) Motivation is a psychological concept. It deals with the psychology of workers
c) Motivation is total and not partial. An individual is motivated fully and not partly because
motivation is related to the needs and psychological states of people.
d) Motivation may be financial or non-financial
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Motivation includes increasing wages, allowances, recognition, and praise, giving more
responsibility and inducing to participate in the decision-making process. The
appropriateness of motivation depends on the situations and individual characteristics.
e) Motivation is determined by human needs. In order to motivate, knowing the need of an
individual is mandatory. A need that is already satisfied cannot be a motivator. The
purpose of motivation is to induce an individual to put forth all his capacities to his job
through satisfying his needs.
f) Motivation cannot be applied to a frustrated man.
g) Motivation may be positive or negative.
6.3.3 Importance of Motivation
Motivation provides the following advantages to an organization.
a) Through motivation, an organization can utilize the factors of production to the maximum.
b) When people are motivated there is willingness to work.
c) When people are highly motivated absenteeism would be less.
d) Labor turnover would be low. If employees are motivated positively, there is a tendency
on their part to stay in the organization.
e) Efficient personnel would be attracted to the organization.
f) If there is positive motivation in the organization, there will be good labor relations.
g) The knowledge and skill of employees can be developed and improved.
h) Motivation develops a sense of belongingness.
i) Motivation serves as a basis of co-operation.
6.3.4 Early Views of Motivation
At different stages in the evolution of management thought managers subscribed to different
models or theories of motivation. They held their own views or supported the views of others.
6.3.4.1 The Traditional Model
This model is associated with Fredrick W. Taylor and scientific management. It assumed that
workers were essentially lazy and that managers understood the worker‟s job better than the
worker. Workers could only be motivated by financial reward and had little to contribute beyond
their labor. Here workers had been expected to accept management‟s authority in return for high
wages made possible by the efficient system designed by management and implemented by the
workers.
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A motivational theory related to this model is for example the reward vs. punishment or the stick
vs. carrot theory. This theory states that if employees perform well reward them if not punish
them. The reward/ carrot given for “good” behavior could be in the form of money, bonus, titles,
special office arrangements, awards, and more power or company cars. The Punishment/stick
administered for “bad” behavior could be in the form of demotion, undesirable transfers, no pay
increase or lack of recognition.
6.3.4.2 The Human Relations Model
This model is associated with Elton Mayo and other human relations researchers. Elton Mayo
and his associates carried out a study at the Haw-throne Plant of Western Electric Company in
the 1930‟s. They studied the effects of environmental factors on productivity and concluded that
worker‟s productivity increases when special attention is given them; the attention gives them a
special status among their peers. Workers attitudes are the key to their motivation, and fair
treatment improves their attitude. They believed that managers could motivate employees by
acknowledging their social needs and by making them feel useful and important. Workers were
expected to accept management‟s authority because supervisors treated them with consideration
and attending to their needs.
6.3.4.3 The Human Resources Model
This model was developed by Douglas Mc Gregor, Abraham Maslow, Chris Argyris, Rensis
Likert and Herzberg.
They generally suggest that employees are motivated by many factors other than money or the
desire for satisfaction, such as the need for achievement and meaningful work. They argued that
most people are already motivated to do a good job and that they do not automatically see work
as undesirable. Employees are likely to get satisfaction from good performance. Thus, employees
can be given far more responsibility for making decisions and carrying out their tasks. The
contribution of each scientist will be discussed as follows.
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a) The Hierarchy of Needs Theory of Abraham H. Maslow.
Self-Actualization Needs
Esteem Needs
Social/Love Needs
Safety Needs
Physiological Needs
Physiological Needs are the basic needs for food, rest and sex.
Safety Needs are the needs for physical and economic security.
Social/Love Needs are the needs for affection and belongingness.
Esteem Needs are the needs self-respect and recognition
Self-Actualization Need includes the drive to become what one is capable of becoming.
These include growth, achieving one‟s potential, self-fulfillment, etc.
He stipulated that as the first level needs are satisfied the next and higher level needs emerge. He
also stated that a satisfied need cannot be a motivator. Once a person satisfies a certain need, that
need will not motivate him/her any more.
b) Participative-Management Approach
This approach to motivation was developed by Rensis Likert and his associates. They stated that
managers who practice effective human relations let lower-level personnel to participate in
making decisions that affect them in achieving better cooperation higher motivation and greater
productivity. People who do some kind of work want to be consulted about how to do it.
c) Douglas Mc Gregor
Mc Gregor developed Theory X and Theory Y assumptions.
i) Theory X Assumption
This assumption is a pessimistic, static and rigid approach. According to this assumption:
Authority and control are external.
Average human beings have an inherent dislike of work and will avoid it if they can.
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Because of their characteristics, most people must be coerced, controlled, directed and
threatened with punishment to make them put forth adequate effort toward the achievement of
organizational objectives.
Average human beings prefer to be directed, wish to avoid responsibility, have relatively little
ambition and want security above all.
ii) Theory Y Assumption
This assumption is an optimistic a dynamic and flexible approach. According to this assumption:
 Emphasis on self- direction and the integration of individual needs with organizational
demands are necessary.
 The expenditure of physical effort and mental effort in work is as natural as play or rest.
 People will exercise self-direction and self-control in the service of objectives to which
they are committed.
 The degree of commitment to objectives is in proportion to the size of the rewards
associated with their achievement.
 Under proper conditions the average person learns not only to accept but also to seek
responsibility.
 The capacity to think creatively to innovate and to solve organizational problems is widely
not narrowly distributed in the population.
 The intellectual potentialities of the average human being are only partially utilized.
6.3.4.4 A systems View of Motivation in Organizations
According to this view of motivation, it is believed that a system consists of three sets of
variables affecting motivation in organizations: individual characteristics, job characteristics and
work situation.
a) Characteristics of the Individual
Each individual brings his or her own interest, attitudes and needs to the work situation.
Obviously people differ in these characteristics and their motivations will therefore differ. These
facts are based on the contributions of Abraham Maslow (The Hierarch of Needs Theory);
Clayton Alderfer‟s ERG Theory (existence needs, relatedness needs and growth needs); (ERG is
a combination of the first letters of the three needs: existence, relatedness and growth); and
David Mc Clelland‟s Need-Based Motivation Theory which states that human beings have
power, affiliation and achievement needs.
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David Mc Clelland and John.W. Atkinson developed a related theory known as” Need-based
Motivation Theory”. They suggested that human beings have three basic motivational needs:
power affiliation and achievement.
Power need is expressed in a strong desire to change or alter the course of events. People who
are motivated by power need are often effective speakers, may be argumentative, like
communicating and want to exercise highly.
The achievement need is a twin desire to succeed and not fail. People who have strong
achievement need seek challenge, set big goals, work hard and long hours, want to win for the
sake of winning.
The affiliation need is the need for close interpersonal relationships, belongingness or love.
b) Characteristics of the Job Task
This include the attributes of the employee‟s tasks such as the amount of responsibility, the
variety of tasks and the extent to which the job‟s characteristics are found by people as
satisfying.
The two-factor approach, to work motivation developed by Frederick Herzberg and his
associates states that there are hygienic and intrinsic (motivator) factors in any organization that
may or may not motivate an individual
i) Hygienic or Maintenance Factors are job factors which are necessary before an individual
can be motivated. For example, an acceptable salary, company policy, supervision procedures,
job security, work conditions, interpersonal relationships with one‟s supervisor, peers and
subordinates.
Hygienic factors also known as extrinsic factors do not in themselves inspire or motivate a
person to put forth maximum effort on a job. Their existence does not motivate a person but their
absence demotivates an individual.
ii) Motivator or Intrinsic Factors include achievement, recognition and the possibility for
growth and responsibility. Their existence motivates an individual and their absence demotivates
an individual.
c) Characteristics of the Work Situation
The work situation consists of two categories: the actions, policies and culture of the
organization as a whole and the immediate work environment. To motivate the individual, these
have to be positive and attractive.
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6.3.5 Integrative Approaches to Motivation
6.3.5.1 The Expectancy Approach
This model of motivation which was put forward by David Nadler and Edward Lwler Specifies
that the effort to achieve high performance is a function of the perceived likelihood that high
performance can be achieved and will be achieved. It achieved, it will be rewarded and the
reward will be worth the effort expended. The expectancy approach attempts to account for
differences among individuals and situations. Three assumptions are identified in relation with
the expectancy approach. They are:
a) Performance-outcome Expectancy
According to this assumption, individuals engaged in or contemplating a certain behavior expect
certain consequences. For example, a worker who is thinking about doubling his or her output
may expect that his act will result in praise, more pay, or perhaps no reward at all; the worker
may even expect hostility from other workers. Each expected outcome will affect the
individuals‟ decision on whether or not to proceed with the contemplated behavior.
b) Valence
This refers to the value or motivating strength of a reward to the individual. Valence is
determined by the individual and is not an objective quality of the outcome itself; for a given
situation valence differs from one person to the next.
C) Effort- Performance Expectancy
People‟s expectations of how difficult it will be to perform successfully will also affect their
decision on whether or not to proceed. For example, an individual may be told that increasing
sales by 50 percent will lead to a much desired salary increase. Before deciding whether or not to
pursue the task he asks in effect, „Can I do it?‟ and „If I do it, what will it bring to me?‟ and „Is
what it will bring me worth the effort of doing it?‟
6.3.5.2 The Equity or Inequity Approach
This is a theory of job motivation emphasizing the role played by an individual‟s belief in the
equity or fairness of rewards and punishments in determining his or her performance and
satisfaction. Equity can be defined as a ratio between the individual‟s job inputs compared with
the rewards others are receiving for similar job inputs.
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6.3.5.3 Goal Setting Theory
This is a cognitive approach to the theory of work motivation which holds that workers are
conscious (cognitive) creatures who strive toward goals.
According to psychologist Edwin Locke, the natural inclination to set and strive for goals is
useful only if the individual both understands and accepts a particular goal. To motivate, goals
should be:
- Specific and challenging, and
- Developed by the participation of subordinates rather than receiving them from
superiors by means of one-way, top-down process.
6.3.6 Motivation Theories
6.3.6.1 Content Theories
These theories are associated with Maslow, Alderfer, Mc Gregor, Herzberg, Alkinson and Mc
Clelland. Content theories stress that it is necessary to understand the factors within individuals,
which cause them to act in a certain way. For example:
a) An employee who has a strong need to achieve may be motivated to work extra
hours in order to complete a difficult task on time
b) An employee with a strong need for self-esteem may be motivated to work very
carefully in order to produce high quality work.
6.3.6.2 Process Theories
Process theories emphasize hot and by what goals individuals are motivated. According to these
theories, needs are just one element in the process by which individuals decide how to behave.
For example, individuals may see the strong possibility of receiving some reward (a salary
increase) if they act in a certain way (say, by working hard). This reward will become an
incentive or motive for their behavior. Basic to process theories of motivation is the notion of
expectancy, i.e. what a person anticipates is likely to occur as a result of his or her behavior.
Preference-Expectancy Theory by Victor Vroom deals with this same idea. He suggested that
motivation relates to two factors: preference and expectancy. For example, if a student wants to
get an “A” grade in his Introduction to Management course (preference), he/she then evaluates
what actions to take and how the instructor will regard the actions (expectancy).
In other words, preference is what a person wishes to happen. Expectancy is what a person
believes will probably happen if certain behavior patterns are pursued.
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6.3.6.3 Reinforcement Theories
These theories are associated with B.F. Skinner and others. They do not utilize the concept of a
motive or a process of motivation. Instead, they deal with how the consequences of a past action
influence future action in a cyclical learning process. In this view, people behave the way they do
because they have learned through experience that certain behaviors are associated with pleasant
outcomes and others with unpleasant outcomes.
Skinner in his “Motivation through Positive Reinforcement” states that all behavior is a result of
a stimulus. Behavior is best modified by deciding what behavior pattern is desired and then
selecting and using the stimulus that produces the desired behavior.
In practice, almost anything can be a status symbol if it is recognized by the responsible group as
a badge of distinction. Therefore, it would act as a positive reinforcement and thus motivate the
people to whom it is given, A key to the executive wash room, a large office, a ten-year service
pin, a reserved parking space and carpeting the flour of the office in which one works are ways
of recognition and thereby status can be conferred.
6.3.7 Guidelines to Effective Motivation
Richard M. Steers and Lyman W.Porter suggest the following guidelines of effective motivation.
a) Managers must actively and intentionally motivate their subordinates.
b) Managers should understand their own strengths and limitations before attempting to
modify those of others.
c) Managers must recognize that employees have different motives and abilities.
d) Rewards should be related to performance, not seniority or other non-merit based
considerations.
e) Jobs should be designed to offer challenge and variety; subordinates must clearly understand
what is expected of them.
f) Management should foster an organizational culture oriented to performance.
g) Managers should stay close to employees and remedy problems as they arise.
h) The active cooperation of employees should be sought in improving the organization‟s
output; employees are, after all also stakeholders in the organization.
6.3.8 Basic Factors that Motivate
The following factors are considered as motivators.
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6.3.8.1 Challenging Work
To motivate personnel to perform at their best, managers should try to make work as challenging
as possible, keeping in mind that what is challenging to one person may not excite another.
6.3.8.2. Participation in Planning
The higher in an organization one goes, the more participation in planning becomes a strong
motivational force. Even at lower levels participation is important. If an individual is allowed to
participate in developing the plan and setting goals to be achieved, he feeds important and
valuable to the organization. This motivates him in his job.
6.3.8.3 Recognition and Status
The desire for recognition and the improved status it brings appears universal regardless of
position, age, education and other factors. All of us seem to want approval from our peers as well
as from our superiors. Therefore, supervisors should give recognition for a specialized effort
offered by subordinates.
6.3.8.4 More Responsibility and Power
More responsibility and power satisfies the need for security. The need for security that is the
desire to be free from fear of such things as job loss, demotion and loss of income apparently are
is inherent in all of us. Too little or too much security can be harmful.
6.3.8.5 Independence of Action
The desire to be one‟s own boss appears to give more self-reliance than others. Hence,
supervisors should give their subordinates freedom to make certain decisions by themselves
without referring to their superiors now and then.
6.3.8.6 Opportunity for Personal Growth
Growth in skill, professional capability and experience are very important in people‟s lives. A
strong motivational device is to promise and then deliver an opportunity to an individual to grow
more skillful as a result of work experience.
6.3.8.7 Good Working Conditions
Working conditions, which include both physical and psychological factors surrounding a job,
vary in importance as a motivator. Some people may like a modern work environment while
others may be motivated by unattractive environment.
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6.3.8.8 Job Enrichment
This factor which is also known as job reform is the process of designing jobs to make them
more interesting, challenging and meaningful. It includes efforts that are planned to make jobs
more satisfying such as:
 giving workers greater freedom in choosing work methods; and
 Letting them plan their work.
Finally, the result of motivation is high morale. High morale is a confident, resolute, often self-
sacrificing attitude of a group that has strong faith in its leadership and believes organizational
goals can be achieved.
Low morale is just the opposite. It is characterized by depression, lack of confidence and
negative attitude toward the achievement of goals.
6.3.9 Check your progress questions
a) Define the following
(i) Directing
(ii) Motivation
b) Explain the different views towards motivation
c) Identify similarities and differences between and among different motivational approaches,
views and theories.
d) Link the different motivational approaches, views and theories to the evolution of
management.
6.4. Leadership
6.4.1 Definition of Leadership
Dear Student, what is the meaning of leadership and why it is so important for managers while
carrying out their business operation? (Please, use the space left below to write your answer)
______________________________________________________________________________
______________________________________________________________________________
_______________________________________________________________________
Leadership is the art of inspiring subordinates to perform their duties willingly, competently and
enthusiastically. Leaders are examples or symbols to their subordinates. Therefore, they are
expected to lead subordinates by their talent and skill. A leader is one who plays a directing role
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and imposes a commanding influence over others. Leaders can be chosen or appointed.
Managers are appointed leaders.
Chosen leaders are those chosen from among members. The leader is chosen by members; i.e.
members chose their leader. The leader is chosen on the basis of dominance physically or
psychologically.
Appointed leaders are those that are not chosen by members. They may or may not be members
of the group. They are appointed by someone outside the group. This is practical in formal
organizations.
Managers should have an ability to lead which is not of course written on the job description but
simply an implied one. Leaders are more likely to arise during crises such as war, or depression
than when conditions are stable. When people feel threatened they are eager to follow someone
who appears able to protect them and return conditions to normal.
6.4.2 Approaches to the Study of Leadership
There are three major approaches to the study of leadership: Trait, behavioral and situational
approaches.
6.4.2.1 The Trait Approach to the Study of Leadership
According to this approach, leadership emphasizes psychological traits (qualities), compelling
obedience from subordinates. The leader is endowed with natural psychological traits that give
him/her advantages over most mortals. Leaders in general as a group have been found to be
brighter more extrovert and more self-confident than non-leaders; they also tend to be taller. This
theory is connected to the notion that leaders are born and not made. However, this approach is
contested by a number of weaknesses even though it was mostly accepted during 1930s and
1950s.
6.4.2.2 The Behavioral Approach to the Study of Leadership
Unlike traits, behaviors can be learned and so it follows that individuals trained in appropriate
leadership behavior would be able to lead more effectively. Thus, rather than trying to figure out
what effective leaders were, researchers tried to determine what effective leaders did, how they
delegate tasks, how they communicated with and tried to motivate their subordinates, how they
carried out their tasks and so on.
These researchers have focused on two aspects of leadership behavior: leadership functions and
leadership styles. The two major functions of leaders are “task related” or problem-solving
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functions and “group-maintenance‟‟ or social functions. Task-related functions might include
suggesting solutions and offering information and opinions; group maintenance functions may
include anything that helps the group operate more smoothly, agreeing with or complimenting
another group member or mediating group disagreements.
Leadership behavior focuses on one of two styles that a leader may use in dealing with
subordinates: a task-oriented style and an employee-oriented style.
Task-oriented managers closely supervise subordinates to ensure that the task is performed to
their satisfaction. A manager with this leadership style is more concerned with getting the job
done than with the development and growth of subordinates.
Employee-oriented managers try to motivate rather than to control subordinates. They encourage
group members to perform tasks by allowing group members to participate in decisions that
affect them and by forming friendly, trusting and respectful relationships with group members.
In order to analyze the relationship between the two factors a matrix grid has been developed.
The Leadership Grid
The Managerial/Leadership Grid, developed by Robert Blake and Jane Mouton to help measure a
manager‟s relative concern for people and tasks is depicted below. In the diagram the relative
concern of leaders for people and task is depicted in a two dimensional matrix grid. The vertical
line represents concern for people whereas the horizontal line represents concern for production.
9 1,9 9,9
8
Concern 7
for 6
People 5 5,5
4
3
2
1 1,1 9,1
1 2 3 4 5 6 7 8 9
Concern for Production
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Style 1.1, management is impoverished management; low concern for people and low concern
for tasks or production. This style is sometimes called laissez-faire management, because the
leader abdicates his or her leadership role. Exertion of minimum effort to get required work done
is appropriate to sustain organizational membership.
Style 1.9, management is country club management where there is high concern for employees
but low concern for production. Thoughtful attention to needs of people for satisfying
relationships leads to a comfortable friendly organization atmosphere and work tempo.
Style 9.1, management is task or authoritarian management. It shows high concern for production
and efficiency but low concern for employees. Efficiency in operations results from arranging
conditions of work in such a way that human elements interfere to a minimum degree.
Style 5.5, is a middle-of-the-road management. Here an intermediate amount of concern for both
production and employee satisfaction exists. Adequate organization performance is possible
through balancing the necessity to get out work with maintaining morale of people at a
satisfactory level.
Style 9.9, management is team or democratic management. It indicates a high concern for both
production and employee morale and satisfaction. Work accomplishment is from committed
people; interdependence through a „common stake‟ in organization purpose leads to relationships
of trust and respect.
6.4.2.3 Open System Leadership Theory: A Planning and Integrating Process
According to this theory, organizational leadership (as opposed to group leadership) must be
macro and micro in its scope and extend through the organization all the way to the employees
who are actually doing the jobs, which is composed of objectives and the mission of the system.
Leadership must also extend upward and outward into the external environment, controlling
some systems and being controlled by others when appropriate (Hanson, 1979).
According to this theory, leadership can be thought of as a process by which the policies, people,
and other resources of an organization can be integrated into a cohesive and effective effort to
accomplish goal under the control of a management team that works within a planned framework
established by the chief executive.
The management team is a problem-solving, program-developing leadership unit. Ideally, the
members of the team possess high performance work norms and balanced mix of expertise and
skills. The chief executive builds his/her management team through training and selection.
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He/she is only as effective as the management team he/she builds. The team members, not the
chief executive, control the levels of information and power and exercise leadership in the far
reaches of the organization (Hanson, 1979).
6.4.2.4 Contingency Approach to the Study of Leadership
No one trait was common to all effective leaders and no one style was effective in all situations.
Therefore, this new approach was developed to include situations that influenced the
effectiveness of a particular leadership style.
Contingency approach is the view that the management technique that best contributes to the
attainment of organizational goals might vary in different types of situations or circumstances.
Some of the situational factors in leadership effectiveness are:
i) The leader’s personality, past experience and future expectations.
Naturally a manager‟s values, background, experiences and expectations affect his or her style of
leadership.
ii) The expectations and behavior of superiors.
iii) Subordinate’s characteristics, expectations and behaviors.
iv) Task requirements
Jobs that require precise instructions demand a more task-oriented style than do jobs whose
operating procedures can be left largely to the individual employees.
v) Organizational culture and policies
The culture and policies of an organization shape the leader‟s behavior and the expectations of
subordinates.
vi) Peers’ expectations and behavior
The opinions and attitudes of a manager‟s peers can often affect how effectively the manager
performs; hostile colleagues may harm the manager‟s reputation by competing for resources and
behaving uncooperatively.
6.4.2.5 Contingency Models of Leadership
a) Hersey and Blanchard’s Situational Model
This model describes how leaders should adjust their leadership style in response to their
subordinate‟s evolving desire for achievement, experience, ability and willingness to accept
responsibility. It believes that the most effective leadership style varies with the “maturity” of
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subordinates. Maturity – refers to not as age or emotional stability but as desire for achievement,
willingness to accept responsibility and task-related ability and experience.
b) Leadership Style and the Work Situation: The Fiedler Model
The basic assumption of this model is that it is quite difficult for managers to alter the
management styles that have helped them develop successful careers and that, in fact, most
managers are not very flexible. Feidler believes that trying to change a manager‟s style to fit
unpredictable or fluctuating situations is inefficient or useless. Since styles are relatively
inflexible, and since no one style is appropriate for every situation, effective group performance
can be achieved by matching the manager to the situation or by changing the situation to fit the
manager.
Fiedler had identified three “leadership situations” that help to determine which leadership style
will be effective: Leader-member situation, the task structure and the leader‟s position power.
i) Leader-Member Relations
The quality of the interaction between a leader and his subordinates is the most important
influence on the manager‟s power. If the manager gets along well with the rest of the group, if
group members respect the manager for reasons of personality, character or ability, then the
manager may not have to rely on formal rank or authority. On the other hand, a manager who is
disliked or distressed may be less able to lead informally and may have to rely on directives to
accomplish group tasks.
ii) Task Structure
This is a work situation variable that helps to determine a manager‟s power. In structured tasks,
managers automatically have high power; in unstructured tasks; the manager‟s power is
diminished. A highly structured task is one in which:
 step-by-step procedures or instructions for the task are available;
 group members have a very clear idea of what they are expected to do;
 managers have a great deal of authority;
 guidelines are developed to measure worker performance; and
 Managers‟ instructions can be backed by a note book or manual.
When tasks re unstructured as in committee meetings:
 Group member roles are more ambiguous.
 No clear guidelines on how to proceed.
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 Manager‟s power is diminished, since group members can more easily
disagree with or question the manager‟s instructions.
iii) Position Power
This is the power that is inherent in the formal position the leader holds. This power may be
great or small depending upon the specific position. High position power simplifies leader‟s task
of influencing subordinates, while low position power makes a leader‟s task more difficult.
c) A Path-Goal Approach to Leadership
This approach formulated by Martin G.Evans and Robert J.House, emphasizes the leader‟s role
in clarifying for subordinates how they can achieve high performance and its associated rewards.
This approach is based on the expectancy model which states that an individual‟s motivation
depends on his or her expectation of reward and valence or attractiveness of the reward. It
focuses on the leader as a source of rewards and attempts to predict how different types of
rewards and different leadership styles affect the motivation, performance and satisfaction of
subordinates. This approach views the leader‟s ability as the most important to provide rewards
and clarify what subordinates must do to earn them. Leaders determine the availability of “goals”
(rewards) and make clear the “paths” to be taken to reach them.
6.4.3 Major Principles or Guidelines of Leading/Leadership
H.Koontz (1989, p. 485-489), in his book “Management” points out the following principles of
managerial leadership.
a) Principle of harmony of objective. The more managers can harmonize the personal
goals of individuals with the goals of the enterprise, the more effective and efficient
the enterprise will be.
b) Principle of motivation. Since Motivation is not a simple cause-and-effect matter,
the more managers carefully assess a reward structure, look upon it from a situation
and contingency point of view, and integrate it into the entire system of managing,
the more effective a motivation program and leadership will be.
c) Principles of leadership. People tend to follow those who, in their view, offer them
a means of satisfying their personal goals; therefore, the more managers understand
what motivates operatives, and the more they reflect this understanding in carrying
out their managerial actions, the more effective they are likely to be as leaders.
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d) Principle of communication clarity. Communication tends to be clear when it is
expressed in a language and transmitted in a way that can be understood by the
receiver. The responsibility of the sender is to formulate the message so that it is
understandable to the receiver. The responsibility pertains primarily to written and
oral communication and points to the necessity for planning the message, staffing
the underlying assumptions, and applying the generally accepted roles for effective
writing and speaking.
e) Principle of communication integrity. The greater the integrity and consistency of
written, oral and nonverbal messages, as well as of the moral behavior of the
sender, the greater the acceptance of the message by the receiver.
f) Principle of supplemental use of informal organization. Communication tends to be
more effective when managers utilize the informal organization to supplement the
communication channels of the formal organization. Informal organization is a
phenomenon managers must accept. Information, true or not, flows quickly through
the informal organization. Consequently, P.T.O managers should take advantage of
this device to correct misinformation and to provide information that cannot be
effectively sent or appropriately received through the formal communication
system.
6.4.4 Personal Characteristics of an Ideal Leader
Leadership is an intangible art. The success /effectiveness of leaders can best be judged by the
behavior of their subordinates not by what they profess. When subordinates perform well,
cooperate effectively and put forth extra effort to achieve group goals, the manager is described
as a good leader. When people perform badly fail to cooperate and do a minimal amount of work
the manager is described as a weak or ineffective leader.
“The overall effectiveness of leadership is a function of the effectiveness of decisions minus the
cost of making the decisions plus the value realized in developing people‟s abilities by means of
committed decision making. ” Vroom and Jago
The following are personal characteristics of an ideal leader

a) Ability to inspire others. A leader‟s charisma is his/her personal qualities of being
attractive, extra-special and usually interesting. These qualities enable the leader to be
acceptable by his/her followers.
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b) Ability to understand human behavior. To gain the respect and cooperation of people, it
is necessary to understand them and give them the due respect.
c) Similarity to the group. Occasionally, there is a need on the part of managers to look like
the group when some kinds of social gathering goes on.
d) Verbal assertiveness. An ideal leader is assertive; he/she has the ability to speak up and
make people understand him/her.
e) Willingness to communicate honestly. In life, honesty is the best policy. This means, an
ideal leader tells the truth; straight forwardness, fairness in conduct and speech,
openness and transparency are good and essential qualities.
f) Ability to set up example to be followed. An ideal is diligent. He/she does not behave in
a manner that goes against the ethical and cultural standards of the people with whom
he/she works.
g) Willingness to take risks. An ideal leader is daring enough to take risks in the right
proportion. It is this readiness to take risks that makes organizational life more exciting.
h) Willingness to assume responsibility. An ideal leader does not shun responsibility.
He/she knows and takes responsibility that a position entails.
i) Willingness to be supportive of personnel. Occasionally situations force the leader to
assume a paternalistic attitude towards personnel that are desperately in problems that
they could not overcome without the help of the organization.
j) Skill in the art of compromise. Compromising is one of the techniques of resolving
conflicts. It is an art that requires skill. An ideal leader needs to master this art.
k) Ability to tolerate criticism. Criticisms are either constructive or destructive. AS a
leader, a manager has to be able to differentiate the two, accept the constructive, and refute
the destructive ones convincingly.
So, according to the contingency theory of leadership described above, situational factors and
certain personality attributes or traits interact in determining leadership effectiveness. This
theory, as pointed out earlier, considers contingency variables as those variables that influence
the relationship between leadership styles and subordinate response to those styles.
6.4.5 Theories of Leadership Styles
Rensis Likert has developed a system for classifying leaders in to four based on their leadership
style. They are:
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6.4.5.1 Exploitative – Authoritative Leadership Style
- They are autocratic
- They do not seek the opinions of subordinates
- They make all major decisions independently
- They motivate through fear and punishment
6.4.5.2 Benevolent – Authoritative Leadership Style
- They have a “big-daddy” approach to leadership.
- They sometimes seek advice from subordinates, but make key decisions themselves.
- They use both fear and rewards to motivate.
- They say to subordinates, “I will treat you all right and see that your needs are met if you
play along with the system.”
6.4.5.3 Consultative Leadership Style
- They have considerable confidence in their subordinates.
- They delegate extensively.
- They encourage subordinates to make recommendations.
- They rely on rewards more than punishment to motivate.
6.4.5.4 Democratic Participative – Group leadership style
- They intentionally seek to involve members of the group in decision making process
- They liberally delegate authority and use rewards, not punishment to motivate.
- This leadership style is more effective in achieving group goals than any other style.
Other indicates a fifth category as laissez-faire style of leadership. These leaders do not have a
leadership ability and confidence. They do not set goals to the group rather the group sets its own
goal.
6.4.6 Supervision as a Facilitating Tool of Leadership Activities
6.4.6.1 Meaning of Supervision
Supervision means overseeing subordinates at work. It implies a face-to-face contact between the
supervisor and those whom he/she supervises. The aim is to ensure that subordinates work
efficiently and effectively to accomplish the tasks assigned to them. The function of supervision
is universal. That is, it is performed at all levels of management from top to bottom.
6.4.6.2 Qualities of a Good Supervisor
a) Knowledge of the organization. A good supervisor knows his organization very well.
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b) Technical ability. A good supervisor knows her/his job very well.
c) Ability to communicate well. A good supervisor transmits information eloquently.
d) Ability to listen. A good supervisor is an excellent listener.
e) Ability to memorize. A good supervisor is not forgetful.
f) Ability to secure cooperation through good leadership.
g) Ability to think logically. A good supervisor is reasonable.
h) Ability to judge people objectively. A good supervisor is fair.
i) Patience and emotional stability. A good supervisor is not temperamental.
j) Ability to instruct and inspire. A good supervisor is an excellent teacher.
k) Ability to delegate. A good supervisor authority with others.
l) Physical vigor. A good supervisor tries to keep physically fit and healthy.
6.4.7 Leadership and Conflict Resolution/Management
6.4.7.1 Definition of Conflict
A conflict is an interactive state manifested in disagreements, differences or incapability within
or between social entities (individuals, groups and whole organization). It is a fact of life that
occurs and a result of incompatible goals interfering with each other as they try to attain their
respective goals.
There are five stages of conflict.
Stage 1. Latent conflict-arises from competition.
Stage 2. Perceived conflict-may arise due to misunderstandings of the points of view of others:
Stage 3. Felt conflict-is a stage at which perceived conflict develops into felt conflict creating
anxieties and tensions
Stage 4. Manifest conflict-may take the form of any conflict behavior breakdowns of cooperative
interaction- fistfights, insults, etc.
Stage 5. Conflict aftermath- results from inadequate resolution of conflict situations. If
suppressed, the latent conditions for conflict will remain to flare up again at a later date.
6.4.7.2 Types of Conflict
a) Intra-personal/Intra-individual conflict-occurs when a member of an organization
is required to perform certain tasks and roles which do not match his/her
expertise, goals, interests and values.
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b) Inter-personal/Inter-individual conflict refers to conflict between two or more
organization members of the same or different hierarchical levels or merits. It can
be generated form disagreement over organization policies, power struggles,
competitions, anger, distrust, fear, rejection, etc.
c) Intra-group/Intra-individual group conflict is conflict among members of a group
(department) or between two or more sub-groups within a group; it may also
occur as a result of incompatibilities or disagreements between some or all
members of a group. It can be generated from leadership styles of the heads, or an
individual violating group norms.
d) Inter-group conflict-is between two or more units or groups within an
organization. Conflicts between line and staff, administrative quarters, and
departments are examples.
Conflicts can be positives/functional (result in better ideas, innovations, etc), or
negative/dysfunctional.
The amount of performance depends on the levels of conflicts. Low conflict results in good
performance while high conflict results in anxiety, fear and reduced performance.
6.4.7.3 Methods of Conflict Resolving/Conflict Management
Depending on whether the conflict is functional or dysfunctional, one can stimulate or resolve it.
The following are five methods of resolving conflicts.
a) Dominating or compelling. This approach depends on forcing behavior to win one‟s
position.
b) Smoothing or obliging refers to the tendency to minimize or suppress the open recognition
of real or perceived differences while emphasizing common interests.
c) Compromising refers to the tendency to sacrifice one‟s own position by seeking a middle
ground by splitting the differences in conflict situations. This is the most widely used
technique.
d) Integrating involves openness in exchange of information, and examination of differences to
reach a solution that is acceptable to both parties.
e) Avoiding or flight is withdrawing, by-passing, and side-stepping. This is at the other
extreme of dominance.
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Conflict resolution must be handled just like a problem-solving process. UNESCO suggests the
following scientific steps.
 Recognize the existence of the problem;
 Establish a hypothetical solution(s);
 Select the hypothesis and assess its feasibility;
 Select the optimal (best) solution; and
 Check and make adjustment if necessary.
The manager can be an initiator, a defendant, and a mediator or conciliator in conflict situations.
As conflict initiators, he develops and employs mechanism for the discovery of conflict of
interests expressed through grievances, work procedures, direct observations, suggestion boxes,
open door policy, personnel counselors, etc.
As a conflict defendant, the manager uses his authority to dominate conflict situations because
others defer to the forcefulness or magnetism of his personality; he also dominates by arranging
facts for compelling arguments.
As a conflict mediator or conciliator, the manager can use a preventive-maintenance approach,
which involves designing and structuring the organization in ways that lessen the potential for
destructive conflict; or he can use a fire-fighting approach, which involves coping with problems
as they develop. The ideal resolution to a conflict is to remove its source or to help the
participants reach a mutually satisfying solution.
6.4.7.4 Check your progress question
a) Define the following:
i) Leadership iii) Conflict
ii) Supervision
b) Identify the principles of leadership and briefly discuss them.
c) Identify the different leadership theories and approaches and briefly explain them.
d) Compare and contrast the different leadership approaches and theories of leadership.
e) Identify the qualities of a good supervisor
f) Identify the personal characteristics of an ideal leader
g) Identify the methods of conflict management methods and discuss them briefly.
h) What are organizational conflicts?
i) What are the different stages of conflicts?
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6.5. COMMUNICATION
6.5.1 Definition
There is no agreeable single definition for communication but a number of scholars define it in
the following manner.
- Communication is effective self-expression.
- Communication is the exchange of messages in writing, speaking or images.
- Communication is sharing information of providing entertainment through works or speech
or other methods.
- Communication is the exchange of meanings between individuals using a common symbol
system.
- Communication is the process whereby one person transmits a message through a channel
to another person, with some effect.
- Communication is an intercourse by words, letters, symbols or messages and is a way that
one organization member shares meaning and understanding with another.” Koontz and
O‟Donnell.
- To communicate means to make known, to impart or to transmit information.
Each definition has elements of truth or utility, but no one of them is complete. Managers, rarely,
spend their time alone at their desks thinking, planning or contemplating alternatives. In fact
managerial time is spent largely in face-to-face electronic or telephone communication with
subordinates, peers, supervisors, suppliers or customers. They transmit and receive ideas, reports,
data and other forms of information needed to make an enterprise function. The success achieved
by an organization reflects the effectiveness of its communication.
6.5.2 Elements in the Communication Process
Communication can be thought of as a process involving five elements.
a) The message sender is the person who sends the message.
b) The message is the information.
c) The encoder is the person who feeds the message in the message vehicle.
d) The message vehicle is the means by which message is transmitted. The vehicle may be:
i) Face-to-face. This includes one-to-one contact personally in discussion or several people
in discussion, committee meetings, etc.
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ii) Written Statements. This may include memos, status reports, recommendations, tax
reports, letters, etc.
iii) Advertisement. This may include radio, television, newspaper, magazine, billboard
direct mail etc.
iv) Telephone telegraph, e-mail, and fax
Factors used to determine the message vehicle are:
- Urgency – telephone call or personal visit, not a letter.
- Importance – fax instead of a telephone to have a record.
- Delicacy of the message – if the message is sensitive, face-to-face conversation than
sending memo or a letter is better.
- Cost Considerations
- When the message is intended for a large number of people.
- A news item or an advertisement instead of telephone calls, telegrams or
personal letters.
- Future reference to information
If the message may need to be referred to later:
- a written vehicle (letter, memo, report, and so on) or
- a tape recording is best.
e) The decoder is the person who interprets the message from the message-vehicle.
f) The message recover is any one the message sender wants to influence or inform.
g) The message feedback is the reversal of the communication process that occurs when
the receiver expresses his or her reaction to the sender‟s message.
h) Noise -Anything that confuses, disturbs, diminishes or interferes with communication. It
may occur at any stage of communication and it can be internal or external.
For communication to be effective, the message must be as brief and simple as possible.
6.5.3 Types of Communication
Communication may be
-One way or two-way
-Formal or informal
-Vertical or Horizontal or diagonal
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6.5.3.1 One way communication
Is any communication from the sender without expecting or getting feedback from the receiver.
Example, policy statements from top managers
6.5.3.2 Tw o way communication
It refers to any communication that occurs or exists when the receiver provides feedback to the
sender. Example, making a suggestion to a subordinate and receiving a question or counter
suggestion
6.5.3.3 Formal communication is inherent to organizational communication and it might be
vertical (downward, upward) or horizontal. It follows formal channels in an organization and
maintains the hierarchy of authority and chain of command.
a) Downward communication starts with top management and flows down through
management levels to line workers and non-supervisory personnel. Its major purposes are
to advise, inform, direct, instruct and evaluate subordinates and to provide organization
members with information about organizational goals and objectives.
b) Upward communication is the transmission of information formally from the lower
levels of the organization to the top. Its main function is to supply information to the upper
levels about what is happening at the lower levels. It includes progress reports,
suggestions, explanations, and requests for aid or decisions.
c) Lateral/Horizontal Communication
This is a type of formal communication between people at different units having the same
status in an organizational structure. It is communication between and among members of
work group, different departments, one work group and another, line and staff. Its main
purpose is to provide a direct channel for organizational coordination and problem
solving. It helps to avoid a much slower procedure of communications through a common
superior. It also enables organization members to form relationships with their peers.
6.5.3.4 Informal Communication is the grapevine. Grapevines are developed within an
organization as a result of common hobbies, hometowns, lunch or tea breaks, family ties, and
social relationships among employees. The grapevine in an organization is made up of several
informal communication networks that overlap and intersect at a number of points. It disregards
rank and authority and may link organization members in any combination of directions-
horizontal, vertical and diagonal.
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6.5.4 Barriers to Effective Communication
Any factor that impels the exchange of information between a sender and receiver is a barrier to
communication.
The following are some of the most common barriers of effective communication:
a) Differing perceptions:-Individual variation is one common source of communication
barriers. People who have different backgrounds of knowledge and experience often perceive
the same phenomenon from different perspectives.
b) Language differences: - For a message to be properly communicated, the words used must
mean the same thing to the sender and the receiver. The same symbolic meaning must be
shared. Jargons must be avoided.
c) Noise: - Any factor that disturbs confuses or otherwise interferes with communication.
Noise leads to information distortion.
d) Emotionality: - Emotional reactions such as Unger, love, defensiveness, hate, jealousy,
fear, and embarrassment influence how we understand others messages and how we influence
others with our own messages.
e) Inconsistent Verbal and Nonverbal Communication
f) The message we send and receive are strongly influenced by such nonverbal factors as body
movements, clothing, the distance we stand from the person we are taking to, our
posture, gestures, facial expression, eye movement and body contact.
g) Distrust: The credibility of a message is to a large extent a function of the credibility of the
sender in the mind of the receiver. A sender‟s credibility is in turn determined by a variety of
factors.
h) Filtering: - Is the act of interpreting information only having better conditions.
6.5.5 Overcoming Barriers to Communication
Overcoming barriers is a two-step process. First one must learn to recognize the various types of
barriers that can occur. Second, one must act to overcome the barriers.
a) Overcoming differing perceptions
The message should be explained so that it can be understood by those with different views and
experiences.
b) Overcoming differences in language
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The meanings of unconventional or technical terms should be explained; single, direct and
natural language should be used.
c) Overcoming noise
Noise is best dealt with by eliminating it. As a whole it is good to avoid distracting
environments. When noise is unavoidable, increase the clarity and strength of the message.
d) Overcoming emotionality
Before a crisis, try to understand your subordinate‟s emotional reactions and prepare yourself to
deal with receivers. Also think about your own moods and how they influence others.
e) Overcoming inconsistent verbal and nonverbal communication
Gestures, clothes, posture, facial expression and other powerful nonverbal communications
should agree with the message.
f) Overcoming distrust
Overcoming distrust is to a large extent the process of creating trust.
g) Redundancy
Being redundant purposefully might be necessary. Repeating or restating a message ensures its
perception or reinforces its impact.
5.5.6 Characteristics of Communication
The following are some of the characteristics of communication
a) Communication is a process.
b) Communication is symbolic-gestures, sounds, letters, numbers and words represent an idea
meant to communicate.
c) Communication is contextual-the meaning may vary depending on contexts
d) Communication is purposive- it is done to share meaning, to impart information or influence.
e) Communication is two way
f) Communication involves people.
6.5.7 Models of Communication
a) Aristotle‟s Model
This is the earliest model which is the foundation of speech communication as a discipline.
Aristotle tried to understand what constituted effective public speaking or oratory. The variables
are the speaker, the message and audience.
The figure below shows these variables.
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Audience/Reader
Speaker/Author Form/Content
b) David Berlo‟s Model: This is one of the simplest and most urgent contemporary models of
communications. It is commonly referred to as the SMCR model. This stands for source –
Message–Channel–Receiver.
Six basic constituents:
a. the source c. the message e. the decoder
b. the encoder d. the channel f. the receiver
In a face-to-face communication (i) and (ii) and (v) and (vi) are the same.
c) Shammon and Weaner‟s Model
Information
Source Transmitter Receiver Destination
Message Signal Received

Signal
Noise Source
This model introduced new concepts to communication
i) Noise – is anything in the channel (or medium) that interferes with the message.
ii) Bits or binary digits are the information a channel could carry in a given period of time and
noise‟s adverse effects on the information flow.
iii) Channel noise is the interference which exists in the medium of communication.
iv) Semantic noise is when we do not exactly share the communication context and the messages
are noisy.
v) Entropy is the unpredictability that contains more information.
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vi) Redundancy is the predictability that contains less information.
d) Gerbne‟s Model
Source Transmitter Receiver Destination
Encode Decode
Signal Signal
Message Received Message Received
Noise
Source
e) Lasswell‟s Model: Lasswell concluded that a useful way to describe communication was to
ask the following about communication:
i) Who? i) To whom?
ii) Says what? ii) With what effect?
iii) In which channel?
f) Defluer‟s Model Mass
Medium
Device
Source Transmitter Channel Receiver Destination
Noise
Destination Receiver Channel Transmitter Source

6.5.8 Check your progress questions
i. Define communication
Feedback
ii. What are the important elements of the communication process?
iii. What are the different types of communication?
iv. Define each type of communication.
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v. Identify the common barriers of communication and briefly explain the methods of
overcoming these barriers.
vi. What are the characteristics of communication?
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UNIT SEVEN
THE CONTROLLING FUNCTION
7.0 Aims and Objectives
Dear Learner, by the time you complete studying this unit, you should be able to:
 Define controlling and know its importance.
 Identify and explain the major steps in controlling.
 Describe the different methods of controlling.
7.1 INTRODUCTION
So far you have seen the four basic managerial functions. That is to say after the different
management functions involving different activities like goal setting, formulating plans,
arranging and delegating structures, hiring, training and motivating employees are carried out,
then the need to ensure that all these things are going on effectively and efficiently arises. So
management must control the performance of the organization as a whole.
7.2 What is controlling?
Dear Learner, have you ever controlled an activity, enterprise, or any venture? What do you
think is the meaning of controlling? (You can use the following space to write your response)
______________________________________________________________________________
______________________________________________________________________________
___________________________________________________________________
Controlling is the process of ensuring that actual performance conforms to planned activities.
Controlling consists of actions and decisions that managers undertake to ensure that actual
results are consistent with desired results.
7.3 Importance and Nature of Controlling
The basic importance of controlling is to make sure whether plans are implemented and desired
results are achieved or not.
Good controlling is characterized by the following.
a) Suitability- good controlling is obviously appropriate to the nature, needs and
circumstances of a firm and each level of activity inside it.
b) Pragmatic- good controlling is flexible enough that it can be adjusted to fit the needs of any
modification or change in a plan. Its usefulness or use value is observable and clear.
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c) Quick Reporting- Since time is an important element in enforcing a control system, man
ideal control system enables any supervisor to report quickly.
d) Objective- A good control is not arbitral and subjective. It aims at reaching tangible results.
e) Economical- An ideas control must not be expensive.
f) Simple- A good Control is easy to understand and operate.
g) Internal Corrective Mechanism- An ideal control provider for solutions to the problems that
cause deviations.
7.4 Types of Control Methods
There are three different types of control methods.
7.4.1 Pre-Control
Pre-control methods increase the possibility that future actual results will compare favorably
with planned results.
Policies are important pre control methods since they define appropriate future action.
7.4.2 Concurrent Control
Concurrent control consist primarily actions by supervisors who direct the work of their
subordinates. Under this method managers must instruct subordinates properly and procedurally.
They should also oversee the work of subordinates to ensure that it is done effectively and
efficiently.
7.4.3 Post Control
This method employs historical outcomes as bases for correcting future actions.
Example- A firm‟s financial statement can be used to evaluate the acceptability of historical
results and determine changes that should be made in the future concerning resource acquisition
or other operational activities.
7.5 The Basic Controlling Process
Any basic control process, wherever it is found and whatever is being controlled, involves three
major steps
7.5.1 Establishment of Standards.
A standard is the model or level of performance to be attained.
There are two types of standards. These are: quantitative and qualitative standards.
a) Quantitative Standard.
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A quantitative standard is a measurement in terms of dollars, time elapsed, percentage, weights,
distance or some other numerical terms. These standards are reasonably precise and can be
measured with relative case and simplicity.
b) Qualitative Standard
A qualitative standard is subjective and difficult to use in evaluating performance. It is not
tangible as the quantitative standard.
7.5.2 Measuring Performance against Standards.
This step involves comparing actual performance with what was intended to be achieved. A
standard serves no purpose unless the degree to which it is met is determined. In measuring
performance it is necessary to pick strategic co0ntrol points for measurements. Strategic control
points are those activities that can ensure the success and existence of the enterprise.
Examples of strategic control points are briefly noted below.
a) Income- is virtually a key control-point in all organizations.
b) Expense- expense for a given period of time should not exceed income for the same period.
c) Inventory-its level is highly significant in many organizations; it enables firm to keep the
economic order clearly quantified in its store.
d) Product quality- the more health and safety considerations related to the consumptions of a
product, the more important quality control is.
The following are some of the most frequently used quantitative standards.
a) Time standard- this indicates how much time should be required to achieve specific
results. E.g.- 40 work hours per week.
b) Cost standard- this indicates how much money should be spent to perform an activity
c) Revenue standard-this indicates how much income should be received from a specific
operation.
d) Historical data- managers often use past result as a basis for estimating future satisfactory
performance.
e) Productivity standard- productivity is needed in all the activities of an enterprise. For
example, sales production might be expressed as sales per employee per day or per week.
f) Return on Investment (ROI)
This is the ratio of net income to invested capital. It may also be called the accounting
rate of return and it expresses the profit earned from a project as a percentage of capital
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cost. Example, if an enterprise invests $10 million and gets a total net income of $2
million, the return on investment (ROI) would be 20 %;( i.e. 2/10 x 100).
g) Profitability- this can be expressed as a ratio of net profit to sales.
Example- if a firm earns a profit of $5 million on sales of $50 million; the profitability
ratio is 10 percent. $5 million x 100 = 10%
$ 50 million
7.5.3 Taking Corrective Action.
This is done when performance does not meet the standard set for it. Corrective actions may
involve simple act, such as adjusting a machine or giving employee instruction on how to
perform properly.
7.5.4 Summary
Control has very broad applications both in the personal as well as in the business world. When
things go smoothly and as planned, they are under control. “Self control” is a word we are all key
familiar with which simply means that we discipline our self in such a manner that we strictly
adhere to our plans for our lives and do not deviate from it.
Controlling is one of the most important functions of management; second perhaps, only to the
function of management, second perhaps, only to the function of decision-making. There is more
to control than mere measurement and reporting of activities.
Controlling consists of those activities that are undertaken to ensure that the events do not
deviate from the pre-arranged plans. The activities consist of establishing standards for work
performance, measuring performance and comparing it to these set standards and taking
corrective action as and when needed, to correct any deviation.
7.5.5 Check your progress questions.
a) Define controlling
b) What is the relevance of controlling to management?
c) What are the three basic steps of the controlling process?
d) What is the difference between quantitative and qualitative standards?
e) Identify the characteristics of a good control system
f) Can an organization use MBO as a managerial control method? Explain.
g) What are the three types of control methods? Explain each.
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1.1 1.2 1.3 2.1 2.2 2.3 3.1 3.2 3.3

Quality Procurement Budget

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Project C Production Marketing

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