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MANAGEMENT & ENTREPRENEURSHIP (15EE51) MODULE – 1
SYLLABUS:
Management – Definition, Importance - Nature and Characteristics of Management, Management

Functions, Roles of a Manager, Levels of Management, Managerial Skills, Management &
Administration, Management as a Science, Art & Profession.
Planning – Nature, Importance and Purpose of Planning, Types of Plans, Steps in Planning,
Limitations of Planning, Decision Making – Meaning, Types of Decisions, Steps in Decision Making.
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MANAGEMENT
Definition of Management:
 Simplest definition is that it is defined as the art of getting things done through people.
 Management can also be defined as the process consisting of planning, organizing, actuating,
and controlling performed to determine and accomplish the use of people and resources.
 It is systematic way of doing things.
 A manager is one who contributes to the organizational goals indirectly by directing the
efforts others by not performing the task by himself
 A person who is not a manager makes his contribution to the organizations goals directing by
performing the task himself.
The definition involves the act of achieving the organizations objectives. Management involves the act
of achieving organizations objectives.
Important Management activities or functions included in this process are:

1. Planning: means thinking of their actions in advance.
2. Organizing: means that managers coordinate human and material resources of the organization.
3. Actuating: means that managers motivate and direct subordinates.
4. Controlling: means that mangers attempt to ensure that there is no deviation from the norm or
plan.
5. Innovating: means creating new ideas which may improve a product, process or practice.
6. Representing: means representing his/her organization before various outside groups which may
have some stake in the organization.
Nature of management:
1. All the managers carry out the managerial functions of planning, organizing, staffing leading
and controlling
2. management applies to any kind of organization
3. applies to managers at all organizational levels
4. the aim of the managers is same create the surplus
5. managing is concerned with productivity, which implies effectiveness and efficiency
Characteristics of management:
Management is:
1. Intangible (not measurable and cannot be seen) but its presence can be felt by efforts in the
production sales and revenues.
2. universal and it is applicable to all sizes and forms of organizations
3. a group activity and it involves getting things done with and through others
4. Is goal oriented and all actions of management are directed at achieving specific goals.
5. is science as well art and emerging now as a profession
6. is multidisciplinary and it has contributions from psychology, sociology, anthropology
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Scope of the management:

 The management is a must for every organization which encompasses for profit as well as non-
profit organizations, government as well as non-government organizations, and service as well
as manufacturing organizations.
 It is in fact difficult to find an area of activity where management is not applicable.
 Management is not only limited to business enterprises for profits but also to the for non-
profit organizations like educational institutions, health care organizations, financial
organizations, stores management for keeping their cost of the operation at the optimal levels
 Government organizations like municipal corporations, water supply departments, electricity
boards in providing best possible services to the public
 Non-government agencies like environmental agencies benefit from management in achieving
their social objectives in cost effective manner
 Manufacturing organizations extensively use management to increase production to enhance
the quality of the products manufactured and similarly
 Service organizations benefit from management in providing an exemplary service experience
to the customers.
Management functions or The Process of Management
1. Planning is a function that determines in advance what should be done which is looking ahead
and preparing for the future
a. It is a process of determining the objectives and charting out the methods of attaining those
objectives.
b. It is determination of what, where and how it is to be done and how the results are to be
evaluated.
c. It is done for the organization as a whole but every division, department or subunit of the
organisation.
d. It is a function which is performed by the managers at all levels-top (which may be as long as
five years), middle (shorter may be week) and supervisory.
2. Organizing and staffing is a function which may be divided into two main sections namely the
human organization and material organization.
a. Once the plans have been developed and the objectives established they must design and
develop a human organization to carry out plans successfully.
b. It may defined as a structure which results from identifying and grouping work, defining and
delegating responsibility and authority and establishing the relationships.
c. Staffing is also considered an important function in building the human organization involves
building the right person for the right job.
d. Fixes responsibility for a manager to find the right person for the right job and ensures enough
manpower for the various positions needed for the organization which involves selection and
training of future managers and suitable system of compensation
e. Different objectives require different kinds of organizations.
3. Directing is the next step after planning, organizing and staffing

a. Involves three sub-functions namely communication, leadership and motivation.
b. Communication is the process of passing information from one person to another
c. Leadership is the process of guiding and influencing the work of his subordinates by the
manager.
d. Motivation is the arousing the desire in the minds of the workers to give their best to their
enterprise.
e. To pull out the weight effectively, to be loyal to their enterprise and carry out the task
effectively.
f. Has two types of motivation financial and nonfinancial

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g. Financial: takes the form of salary, bonus, profit-sharing etc.

h. Nonfinancial: takes the form of job security, opportunity of advancement recognition praise
etc.
4. Controlling is a function which ensures everything occurs in conformity with plans adopted and
involves three elements:
a. establishing the standards of performance
b. Measuring current performance and comparing it against the established standards.
c. taking action to correct any performance that does not meet the standards, management
process.
5. Innovating: It is very much necessary for an organization to grow better, for which INNOVATION
becomes very essential. A frequent catchphrase used in Organization is “Innovate or evaporate”.
Innovation means creating new ideas in the organization which may improve a product, process or
practice for their betterment.
6. Representing: A manager is also required to spend

a part of his/her time in representing his
organization before various outside groups which
may have some stake in the organization. These
stake-holders can be government officials, labour
unions, customers, suppliers, financial institutions,
etc. They have influence over the organization. A
manager must win their support by effectively
managing the social impact of the organization.
Management Process blends into each other like the flowing water of a river. These sub-processes
have no clear-cut separate entity or a line of demarcation where one ends & the other begins.
Roles of a Manager:
I. Interpersonal roles:
a) Figure head: performs duties of ceremonial nature such as greeting the touring dignitaries,
attending the wedding of an employee etc.
b) Leader: every manager must motivate and encourage their employees, try to reconcile
their individual needs with the goals of the organization.
c) Liaison: in this role, every manager must develop contacts outside the vertical chain of
command to collect information useful for the organization.
II. Informational roles:

a) Monitor: must perpetually scan his environment for information; interrogate his liaison
and subordinates to get any solicited information useful for the organization.
b) Disseminator: manager passes the privileged information directly to the subordinates who
otherwise would not have access to it.
c) Spokesman: may require spending a part of the time in representing the organization
before various outside groups having some stake in the organization such as government
officials, labour unions, and financial institutions.
III. Decisional roles:

a) Entrepreneur: in this role the manager proactively looks out for innovation to improve the
organization by means of means creating new ideas, development of new products or
services or finding new uses for the old ones.
b) Disturbance handler: must act like a fire-fighter to seek solutions to various unanticipated
problems

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c) Resource allocator: must divide work and delegate authority among his subordinates.
d) Negotiator: must spend considerable time in negotiations.
Example: the foreman negotiating with the workers for the grievance problems
Levels of Management:
The term “Levels of Management’ refers to a line of demarcation between various managerial
positions in an organization. The number of levels in management increases when the size of the
business and work force increases and vice versa. The level of management determines a chain of
command, the amount of authority & status enjoyed by any managerial position. The levels of
management can be classified in three broad categories:
1. Top level / Administrative level - consists of board chairman, the company presidents, and
the executive vice presidents.
2. Middle level / Executory - consist of vast and diversified group consisting plant managers,
personnel managers and department heads.
3. Low level / Supervisory / Operative / First-line managers - is made up of foreman and
white collared supervisors.
Managers at all these levels perform different functions. The role of managers at all the three levels is
discussed below:
Managerial skills:
The manager is required to possess three major skills: Conceptual skill which deals with ideas, human
relations skill which deals with people and technical skill which deals with things.
1. Conceptual skill: deals with the ability of manager to take a broad and farsighted view of
organization and its future, ability to think in abstract ability to analyse the forces working in a
particular situation.
2. Technical skill: are managers understanding of the nature of the job that people under him
have to perform. It refers to the person’s knowledge and proficiency in any type of process or
technique.
3. Human relations skill: is the ability to interact effectively with people at all levels and the
manager sufficient ability to:
a. to recognize the feelings and sentiments of others.
b. to judge the possible reactions to and the outcomes of various courses of action
c. to examine his own concepts and values which may enable to more useful attitudes and
about himself.
Skill mix of a manager with the change in his level:

a. Top level: technical skill becomes less important
b. Middle management: human relations skill become more important
c. Supervisory skill: technical skill becomes more important.

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Management & Administration:
Sl. Differences Administration Management

1 Nature of Work It is concerned about the It puts into action the policies and
determination of objectives and plans laid down by the administration
major policies of an organization.
2 Type of function It is a determinative function. It is an executive function.
3 Scope It takes major decisions of an It takes decisions within the
enterprise as a whole framework set by the administration.
4 Level of authority It is a top-level activity. It is a middle level activity.
5 Nature of status It consists of owners who invest It is a group of managerial personnel
capital in and receive profits from who use their specialized knowledge
an enterprise. to fulfil the objectives of an enterprise.
6 Decision making Its decisions are influenced by Its decisions are influenced by the
public opinion, government values, opinions, and beliefs of the
policies, social, and religious managers.
factors.
7 Nature of usage It is popular with government, It is used in business enterprises.
military, educational, and religious
organizations.
8 Main functions Planning and organizing functions Motivating and controlling functions
are involved in it. are involved in it.
9 Abilities It needs administrative rather It requires technical activities
than technical abilities
Management as a Science, Art & Profession –
Management is called SCIENCE if -

1. the methods of the inquiry are systematic and empirical
2. if the information can be ordered and analysed and
3. results are cumulative and communicable
Systematic means orderly and unbiased attempt to gain knowledge must be with the personal or
other prejudgment. Inquiry being empirical means that it is not an armchair speculation or priory
approach. the scientific information so collected as raw data must be finally ordered and analysed
with the statistical tools which makes the results. Communicable and intelligible which also permits
repletion of the study and the results in the sense that what is discovered is added to which has been
found before which helps us to learn from past mistakes and obtain guides for the future.
Management as ART -
1. As the science considers the why phenomena management as an art is concerned with the
understanding how a particular task can be accomplished which involves art of getting things done
through others in a dynamic and non-repetitive fashion and has to constantly analyse the existing
situation, determine the objectives, seek the alternatives, implement, coordinate, control and
evaluate information and make decisions.
2. As the knowledge of management theory and principles is a valuable kit of the manager but it
cannot replace his managerial skills and qualities which has to be applied and practiced which
makes us to consider manager as an art.
3. Like the art of a musician or the art of a painter who uses his own skill and does not copy the skills
of others

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Management is a PROFESSION-
 Characteristics of a profession:
a. existence of organized and systematic knowledge
b. Formalized methods of acquiring training and experience.
c. existence of an association with the professionalization as a goal
d. existence of an ethical code to regulate the behaviour of the members of the profession
e. Charging of fees based on service.
 Management as Profession:
a. Does not have fixed norms of managerial behaviour
b. no uniform of code of conduct or licensing of managers
c. entry of managerial jobs are not restricted to individuals with a special academic degree
only and hence management cannot be called a profession
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PLANNING
Meaning of Planning:
1. Planning is an intellectual process which requires manager to think before acting.
2. It is thinking in advance. it is planning that managers of organization decide what is to be done,
when it is to be done, how it is to be done, and how has to do it.
3. Decision making is an integral part of planning.
4. It is the process of choosing among alternatives. Obviously, decision making will occur at many
points in the planning process.
5. Planning is a continuous process like a navigator constantly checks where his ship in going in the
vast ocean, a manger must constantly watch his plans must constantly monitor the conditions,
both within and outside the organization to determine if changes are required in his plans.
Nature of Planning:
Planning involves selection of objectives, goals and determines the ways and means of achieving them.
Thus planning bridges the gap from ‘where the Organization is’ to ‘where it wants to be’. Planning is
dynamic in nature and is basically a discrete exercise. Nature of planning indicates essential quality or
general characteristics of planning. Planning involves four essential qualities:
1. Planning must contribute to accomplish purpose and objectives.
2. It must be considered as parent exercise in all processes.
3. It must spread through all management functions.
4. It must be efficient in such a manner so as to achieve the designed goals at the least cost.
Importance of planning:
1. Minimizes risk and uncertainty
a. By providing a more rational, fact-based procedure for making decisions, planning allows
managers and organizations to minimize risk and uncertainty.
b. Planning does not deal with future decisions, but in futurity of present decisions.
2. Leads to success:
a. Planning does not guarantee success but studies have shown that, often things being equal,
companies which plan not only outperform the non-planners but also their past results.
b. This may be because when a businessman’s actions are not random arising as mere reaction
to the market place
c. Planning leads to success by doing beyond mere adaption to market fluctuations.
d. With the help of a sound plan, management can act proactively and not simply react.
e. It involves to attempt to shape the environment on the belief that business is not just the
creation of environment but its creator as well.
3. Focus attention on the organizations goals:

a. Planning helps the manger to focus attention on the organizations goals and activities.
b. This makes it easier to apply and coordinate the resources of the organization more
economically.
c. The whole organization is forced to embrace identical goals and collaborate in achieving them.
d. It enables the manager to chalk out in advance an orderly sequence of steps for the realization
of organizations goals and to avoid needless overlapping of activities.
4. Facilitates control:
a. In planning, the manager sets goals and develops plans and to accomplish these goals.
b. These goals and plans then become standards against which performance can be measured.
c. The function of control is to ensure that activities conform to the plans.
d. Thus control can be exercised only if there are plans.

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5. Trains executives:
a. Planning is also an excellent means for training executives.
b. They become involved in the activities of the organization and the plans arouse their interest
in the multifarious aspects of planning.
Forms of planning:
1. There are many forms and styles of planning, and planning practices are likely to vary from
organization to organization.
2. One useful way of classifying them is to distinguish between strategic planning and tactical
planning.
3. About Strategic planning involves deciding what the major goals of the entire organization will
be and what policies will guide the organization in its pursuit of these goals and depends on the
data collect in the outside the organization such as market analysis, estimates of costs,
technological developments and so on and if the data being mostly imprecise make strategic
planning less certain.
4. About Tactical planning involves deciding specifically how the resources of the organization
will be used to help the organization achieve these strategic goals. for example if the
organization has prepared a ten-year strategic plan which envisages a profit rate of 25% on
capital employed in the tenth year, it also necessary to prepare a more detailed tactical plan for
the next year, with a specific target of 10% on the capital employed.
5. Contingency planning takes into account possible occurrences. It is planning for ‘what to do if
there is a recession or if there is a change in government policy and so on.
Sl. Strategic planning Tactical planning

1 decides the major goals and policies of decides the detail use of resources for
allocation of resources to achieve these goals achieving these goals
2 Done at higher levels of management. Middle is done at lower levels of management
managers sometimes may not even be aware
that strategic planning is being considered.
3 it is long term planning it is short term planning
4 Is generally based on long term forecasts is generally based on the past performance of
about technology, political environment and the organization and is less uncertainly
is more uncertain.
5 is less detailed because it is not involved with is more detailed because it is involved with
the day to day operations of the organization the day-to-day operations of the organization

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Types of plans:
1. Plans are arranged in a hierarchy within the organization

2. At the top of this hierarchy stand objectives.
3. Objectives are the broad ends of the organization which are achieved by means of strategies.
4. Strategies in their turn are carried out by means of the two major groups of plans. Single use
plans and standing plans.
5. Single use plans are developed to achieve a specific end and when the end is reached the plan is
dissolved.
6. The two major types of plans are single use plans are programmers and budgets.
7. Standing plans on the other hand are designed for situations that recur often to justify the
standardized approach.
8. For example, it would be inefficient for a bank to develop a single use plan for processing a loan
application for each new client.
9. instead it uses one standing plan that anticipates in advance whether to approve or turn down
the request based on the information furnished, credit rating, etc. the major types of plans are
policies, procedures methods and rules.
Vision:
1. At the top of the hierarchy is the VISION.
2. This is the dream that an entrepreneur creates about the direction that his business should
pursue in future.
3. It describes his aspirations, beliefs and values and shapes Organization’s strategy.
4. VISIONING is an on-going process.
5. A VISION should be brief, focused, clear and inspirational to an organization’s employees.
6. It should be linked to customers’ needs and convey a general strategy for achieving the
mission.

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Mission:
1. The unique aim of an organization that sets it apart from others of its type.
2. It is an organization’s specialization in some area – service, product or client, which decides the
organization’s scope of business.
3. In addition to describing the scope of business, the firm’s mission statement may mention its
cultural values.
4. Mission also guides the development of strategies.
5. It establishes the context within which daily operating decisions are made and sets limits on
available strategic options.
Objectives:
1. Are the goals of the organization which the management wishes the organization to achieve?
2. These are the end points or pole-star towards which all business activities like organizing,
staffing, directing and controlling are directed.
3. Only after having defined these end points the can determine the kind of organization the kind
of personnel and their qualifications, the kind of motivation, supervision and direction and the
control techniques which he must employ to reach these points.
4. Objectives are the specific targets to be reached by an organization.
5. They are the translation of the organization’s mission into concrete terms against which the
results can be measured.
6. Example:1)university decision to admit a certain number of students or the hospitals decision
to admit a certain number of indoor patients.
Characteristics of the objectives:

Some of the important characteristics of the objectives are:
1) Objectives are multiple in numbers:
 Implies that every business enterprise has a package of objectives set out in various key areas.
 There are eight key areas in which objectives of performance and results are set which are
(i) market standing (ii) innovation (iii) productivity (iv) profitability
(v) physical and financial resources (vi) Manager performance and development
(vii) worker performance (viii) attitude and public responsibility.
2) Objectives change over time: Considering the timely advancements, changes in the ecosystem –
internal & external, customers’ reactions over a product; it will be essential for the enterprise to
change its corporate objectives.
3) Objectives are either tangible or intangible:

 For some objectives such as in the areas of market standing, productivity, and physical and
financial resources) there are quantifiable values available.
 Other areas of objectives are not readily quantifiable and are intangible, such as manager’s
performance, workers morale, public responsibility etc.
4) Objectives have priority:

 Implies that at one particular given point of time, the accomplishment of one objective is
relatively more important than others.
 Priority of goals also says something about the relative importance of certain goals regardless
of time. For example, the survival of organization is necessary condition for the realization of
other goals.

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5) Objectives are generally arranged in a hierarchy:

 This means that we have corporate objectives of the total enterprise at the top, followed by
divisional or departmental objectives, then each section and finally individual objectives.
 Objectives at all levels serve as an end and as a means.
6) Objectives sometimes clash with each other:

 The process of breaking down the enterprise into units requires that objectives be assigned to
each unit.
 Each unit is given the responsibility of attaining an assigned objective.
The process of allocating objectives among various units creates the problem of potential goal conflict
and sub-optimization, where in achieving the goals of one unit may put in risk of achieving the goals of
the other.
Requirements of sound objectives:

a. Objectives must be clear and acceptable:
The objectives must be clear and understandable amongst people which could be achieved by
unambiguous communication, should be compatible with their individual goals.
b. Objectives must support one another:
Objectives could interlock or interfere with one another which require the need for
coordination and balancing the activities of the entire organization, otherwise its members
may pursue different paths making it difficult for the manager to achieve the company’s overall
objectives.
c. Objectives must be precise and measurable:
An objective must be spelled out in precise, measurable terms the reasons for which being
i. The more precise and measurable the goal, the easier it is to decide the way of achieving it.
ii. Precise and measurable goals are better motivators of people than general goals.
iii. Precise and general goals make it easier for lower level managers to develop their own
plans for actually achieving these goals.
iv. It is easier for managers to ascertain whether they are succeeding or failing if their goals
are precise and measurable.
d. Objectives should always remain valid:
The manager should constantly review, reassess and adjust them according to the changed
conditions.
Advantages of objectives:
The following are the benefits of objectives
1. They provide a basis for planning and for developing other type of plans such as policies,
budgets and procedures.
2. They act as motivators for individuals and departments of an enterprise by pointing the way to
desired performance.
3. They eliminate haphazard action which may result in undesirable consequences.
4. Facilitate coordinated behavior of various groups which otherwise may pull in different
directions.
5. Function as a basis for managerial control by serving as standards against which actual
performance can be measured.
6. They facilitate better management of the enterprise by providing a basis for leading, guiding,
directing and controlling the activities of people of various departments.
7. Lessen misunderstanding and other conflict and facilitate communication among people by
minimizing jurisdictional disputes.
8. Provide legitimacy to organization’s activities.

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Strategies:
 A corporate strategy is a plan which takes these factors into account and provides optimal match
between the firm and the environment.
 Two important activities are involved in strategy formulation
A. Environmental appraisal
B. Corporate appraisal
A. Environmental appraisal:
By analyzing the relevant environment it results in identifying various threats & Opportunities.
Components of External environment are grouped into 4 categories namely -
a. Political and legal factors:
Key environment factors which need to be studied are
i. stability of the government and its political philosophy.
ii. taxation and industrial licensing laws
iii. monitory and fiscal policies
iv. Restrictions on capital movement, repatriation of capital, state trading etc.
b. Economic factors:
i. level of economic development and distribution of income
ii. Trend in prices, exchange rates, balance of payments.
iii. Supply of labor, raw, material, capital etc.
c. Competitive factors:
i. identification of principle competitors
ii. analysis of their performance and programmers in major areas
iii. antimonopoly laws and rules of competition
iv. protection of patents, trademarks, brand names and other industrial property rights
d. Social and cultural factors:

i. literacy levels of population
ii. religious and social characteristics
iii. extent and rate urbanization
iv. rate of social change
B. Corporate appraisal:
 Involves the analysis of company’s strengths and weaknesses.
 A company’s strength may lie in outstanding leadership, excellent product design, low-cost
manufacturing skill, efficient distribution, efficient customer service, personal relationship
with customers, efficient transportation and logistics, effective sales promotion, high turnover
of inventories and capital etc.
 The company must plan to exploit these strengths to the maximum.
Standing plans:
Policies:
 A policy is a general guideline for decision making which sets up boundaries around decisions
including those that cannot be made and shutting out those that cannot.
 A policy can be considered as a verbal, written or implied overall guide setting up boundaries
that supply the general limits and the direction in which ,managerial action takes place Policies
suggest how to do the work.
 They do not dictate terms to subordinates and provide only a framework within which the
decisions must be made by the management in different spheres. For example:
1) Recruitment policy of a company is to recruit meritorious people through the employment
exchange

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2) Distribution policy of a fertilizer company is farmer oriented. Policies and objectives guide
thinking and action, but with a difference. Objectives are end points of planning while
policies channelize decisions to these ends.
Advantages of policies:
1) Policies ensure uniformity of action in respect of matters at various organizational points
which make actions more predictable.
2) Policies speed up decisions at lower levels because subordinates need not consult their
superiors frequently.
3) makes it easier for the superior to delegate more and more authority to the his subordinates
without being unduly concerned because he knows that whatever decision the subordinates
make will be within the boundaries of the policies.
4) Policies give a practical shape to the objectives by elaborating and directing the way in which
the predetermined objectives are to be attained.
Disadvantages of policies: Policies with broad areas of discretion and initiative lead to inconsistent
interpretations and make the very delegation of authority difficult which they are intended to
implement.
Types of policies:
Can be classified on the basis of sources, functions or organizational levels
1. Classification on the basis of sources: three types originated, appealed, implied and imposed
policies
(a) Originated policies:
 Are usually established formally and deliberately by top managers for the purpose of
guiding of actions of their subordinates and also their own.
 These policies are set out in print and embodied in manual.
(b) Appealed policies:
 Are those which arise from the appeal made by a subordinate to his superior regarding
the manner of handling a given situation and comes into existence because of the appeal
made by the subordinate to the supervisor.
(c) Implied policies:
 Are also policies which are stated neither in writing nor verbally.
 Such policies are called implied policies.
 Only by watching the actual behavior of the various superiors in specific situations can
the presence of implied policy is ascertained.
(d) Externally imposed policies:
 Are the policies which are imposed on the business by external agencies such as
government trade associations, and trade unions. Example: policy dictated by the
government law.
2. Classification on the basis of functions:

 On the basis of business functions, policies may be classified into production, sales, finance,
and Personnel policies.
 Every one of these functions has number of policies.
For example: Sales function may have policies relating to market.
Production function: may policies relating to the method of production, output, inventory,
research.
Finance function: may have policies relating to capital structure, working capital, internal
financing etc.
Personal function: may have policies relating to recruitment, training, working activities,
welfare activities etc.

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3. Classification on the basis of organizational level:

 On this basis range from major company policies through major departmental policies to
minor or derivative polices applicable to the smallest element of organization.
Procedures:
 Policies are carried out by means of more detailed guidelines called procedures.
 A procedure provides a detailed set of instructions for performing a sequence of actions
involved in doing a certain piece of work.
 The same steps are followed each time that activity is performed.
For example: the procedure for purchasing raw material may be -
i. the requisition from the storekeeper to the purchasing department.
ii. Calling tenders for purchase of materials.
iii. placing orders with the suppliers who are selected
iv. inspecting the materials purchased by the inspecting department
v. Making payment to the supplier of materials by the accounts department.
 Similarly, the procedure for the recruitment of personnel may be
i. inviting applications through advertisement
ii. screening the applications
iii. conducting written test
iv. conducting interview for those who have passed the written test and
v. Medical examination of those who are selected for the posts.
 Procedures may also exist for conducting the meetings of directors and shareholders, granting
loans to employees, issuing raw materials from the stores department, granting sick leaves to
the employees, passing bills by the accounts department.
Sl. Policies Procedures

1 Are the general guidelines to both thinking are the guidelines to action only usually for
and action of people at higher levels the people at the lower levels
2 Help in fulfilling the objectives of the show us the way to implement policies
enterprise.
3 are generally broad and allow some latitude Are specific and do not show latitude.
in decision making
4 are often established without any study or are always established after thorough study
analysis and analysis of work
Advantages and limitations of procedures:

Advantages:
1. They indicate a standard way of performing a task which ensures a high level of uniformity in
performance in the enterprise.
2. they result in work simplification and elimination of unnecessary steps and overlapping
3. they facilitate the executive control over performance by laying down the sequence and timing of
each task, executives dependence on the personal attributes of his subordinates is reduced
4. they enable employees to improve their efficiency by providing them with knowledge about their
entire range of work
Limitations:
1. By prescribing one standard way of performing a task, they limit the scope for innovation or
improvement of work performance.
2. By cutting across department lines and extending into various other departments, they
sometimes result in duplication, overlapping and conflict. These limitations can be overcome if
the management reviews and appraises the procedures periodically with an intention to improve
them.

Dept. of EEE, SVIT
Methods: A Method is a prescribed way in which one step of a procedure is to be performed. Methods
help in increasing the effectiveness and usefulness of the procedure. Improving methods increases the
productivity, reduces fatigue in operation and reduction in costs can be achieved.
Rules: Rules are detailed and recorded instruction that a specific action must or must not be
performed in a given situation. Like procedures, RULES also bring in predictability. A rule makes sure
that a job is done in the same manner every time & brings in uniformity in efforts & results.
A rule is different from policy, procedure or method.
- Not a policy because it does not give a guide to thinking and does not leave any discretion to
the party involved.
- Not a procedure because there is no sequence to a particular action.
- Not a method because it is not concerned with any one particular step of a procedure.
Single use plans

Programmes:
 Programmes are precise plans which are made to discharge a non – routine or non –
repetitive task.
 The essential ingredient of every programme are time phasing and budgeting.
 Often a single step in a programme is set up as a project. The chief virtue of a project lies in
identifying, a relatively separate and clear–cut work package within array of activities involved
in a programme.
Example:
Programme → Opening a New branch of an enterprise
Project (1) → Securing the necessary accommodation for the new branch.
Project (2) → Recruiting personnel to manage the branch.
Project (3), Project (4), Project (5) and so on many projects may exist.
 A schedule specifies the time when each of the series of actions should take place.
Budgets:
 A budget is a financial and/or quantitative statement prepared prior to a definite period of
time, of the policy to be pursued during that period, for the purpose of obtaining a given
objective.
 Budgets are useful plans for an enterprise, planned for a future period of time containing
statements of expected results in numerical terms. Example: Sales Budget. Expense Budget,
Production Budget.
Business plan:
 It is an important document prepared by an entrepreneur as a start-up strategy to prove to its
stake holders about the company’s position to articulate and manage diverse aspects of the
business.
 A good business plan must provide full information on all the topics readers may be interested
in; must have an objective tone; must not be over critical of past failures or mistakes if any;
should not be filled only with technical details.
Steps in planning:
The various steps involved in planning are as follows:

1) Establishing verifiable goals or set of goals to be achieved:
 The first step in planning is to determine the enterprise objectives which are often set up by
the upper level or top managers, usually after number of possible objectives have been
carefully considered.

Dept. of EEE, SVIT
 There are many types of objectives managers may select: desired sales volume or growth rate,
the development of a new product or service or even a more abstract goal such as becoming
more active in the community.
 The type of goal selected will depend on a number of factors: the basic mission of the
organization, the value its mangers hold and the actual and the potential abilities of the
organization.
2) Establishing planning premises:

It is the second step in planning to establish planning premises which is vital to the success of
planning as they supply pertinent facts and information relating to the future such as population
trends, general economic conditions, production costs and prices, probable competitive behavior,
capital and material availability and government control and so on. Planning can be variously
classified as under
a. internal and external premises
b. tangible and intangible premises
c. controllable and non-controllable premises
a. Internal and external premises
 Premises may exist within and outside company.
 Internal premises include sales forecasts, policies and Programmes of the organization,
capital investment in plant and equipment, competence of management, skill of labor, etc.
 External premises can be classified into three different groups Business environment,
factors which influence the demand for the product, and the factors which affect the
resources available to the enterprise.
b. Tangible and non-tangible premises:

 Tangible premises: those which can be quantitatively measured while Intangible
premises are those which being qualitative in character and cannot be measured.
 Tangible examples: population growth, industry demand, capital and resources invested
in the organization are all tangible.
 Intangible examples: political stability, sociological factors, business and economic
environment are all tangible.
c. Controllable and non-controllable premises:

 Some of the planning premises are controllable and some are non-controllable and because
of the non-controllable factors there is need for the organization to revise the plans
periodically in accordance with the current development.
Examples of uncontrollable factors: strikes, wars, natural calamities, emergency,
legislation etc. Examples of controllable factors: company’s advertising agency,
competence of management member’s skill of the labour force, availability of resources in
terms of capital and labour, attitude and behavior of the owners of the organization.
3) Deciding the planning period:

 It is the next task once the upper level managers have selected the basic long term goals
and the planning premises.
 Business plans are made in some instances once for a year and plans are made for decades
based on some logic and future thinking.
 The factors which affect the choice of period are:
a. Lead time in development and commercialization of new product.
b. The time required to recover capital investments or the pay-back period and
c. Length of the commitments which are already made.

Dept. of EEE, SVIT
4) Finding alternate courses of action: The fourth step of planning is to search for & examine the
alternate courses of action. Example: securing the technical knowhow by engaging a foreign
technician or by training staff abroad.
5) Evaluating and selecting the alternate courses of action: After listing the alternates, selecting
the best alternate or course of action is done with the help of quantitative techniques and
operations research.
6) Developing the derivative plans: Once plan formulated, its broad goals must be translated on
day to day operations of organization Middle level managers must draw up the appropriate plans,
programmes and budgets for their sub-units which are described as derivative plans.
7) Establishing and Deploying Action Plans: Action represents ‘the lowest level of execution’. The
action plan identifies particular activities necessary for this purpose and specifies the who, what,
when, where and how of each action. A draft version of the action plan should be communicated to
inform those directly involved & gain their cooperation.
8) Measuring and controlling the process: Plan cannot be run without monitoring its progress. The
managers must check the progress of their plans.
a. Take whatever remedial action is necessary to make the plan work
b. Change the original plan is it is unrealistic.
Limitations of planning:
1. Planning is expensive and time consuming process. it involves significant amount of money,
energy and also risk without any assurance of the fulfilment of the organizations objectives
2. Sometimes restricts the organization to the most rational and risk free opportunities. Curbs the
initiatives of the manager and forces him to operate within the limits set by it and sometimes
cause delay in decision making in case of emergency.
3. Scope of planning is limited with rapidly changing situations.
4. Establishment of advance plans tends to make administration inflexible. Example: business
changes, change in government policy, may make the original plan lose its value.
5. Another limiting factor in planning is the formulating of the accurate premises.
6. Planning may sometimes face peoples’ resistance to it.
To make planning effective, it requires Extent of detail, Coordination, communication,

participation, proper climate.
Planning skills:
1. Ability to think ahead
2. Ability to define company objectives
3. Ability to forecast future environmental trends
4. Ability to monitor the implementation of strategies
5. Ability to provide an appropriately timed, intermeshed network of derivative and supporting
programmes.
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Dept. of EEE, SVIT
DECISION MAKING AND PROBLEM SOLVING:
Quite literally, organizations operate by people making decisions. A manager plans, organizes staffs,
leads, and controls her team by executing decisions. The effectiveness and quality of those decisions
determine how successful a manager will be.
The Decision-Making Process

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

1. Define the problem.
2. Identify limiting factors.
3. Develop potential alternatives.
4. Analyze the alternatives.
5. Select the best alternative.
6. Implement the decision.
7. Establish a control and evaluation system.
STEP 1 - Define the problem

The decision-making process begins when a manager identifies the real problem. The accurate
definition of the problem affects all the steps that follow; if the problem is inaccurately defined,
every step in the decision making process will be based on an incorrect starting point. One way
that a manager can help determine the true problem in a situation is by identifying the problem
separately from its symptoms. The most obviously troubling situations found in an organization
can usually be identified as symptoms of underlying problems. Manager doesn’t just attack
symptoms; he works to uncover the factors that cause these symptoms.
Symptoms and Their Real Causes: Symptoms Underlying the Problem ‘Low profits and/or
declining sales’ are as follows - Poor market research, high costs, Poor design process, poorly
trained Employees, Low morale, Lack of communication between management and subordinates,
High employee turnover, Rate of pay too low, job design not suitable, High rate of absenteeism,
Employees believe that they are not valued and so on.
STEP 2 - Identify limiting factors

All managers want to make the best decisions. To do so, managers need to have the ideal resources
— information, time, personnel, equipment, and supplies — and identify any limiting factors.
Realistically, managers operate in an environment that normally doesn’t provide ideal resources.
For example, they may lack the proper budget or may not have the most accurate information or
any extra time. So, they must choose to satisfice — to make the best decision possible with the
information, resources, and time available.
STEP 3 - Develop potential alternatives

Time pressures frequently cause a manager to move forward after considering only the first or
most obvious answers. However, successful problem solving requires thorough examination of the
challenge, and a quick answer may not result in a permanent solution. Thus, a manager should
think through and investigate several alternative solutions to a single problem before making a
quick decision. One of the best known methods for developing alternatives is through
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brainstorming, where a group works together to generate ideas and alternative solutions. The
assumption behind brainstorming is that the group dynamic stimulates thinking — one person’s
ideas, no matter how outrageous, can generate ideas from the others in the group. Ideally, this
spawning of ideas is contagious, and before long, lots of suggestions and ideas flow. Brainstorming
usually requires 30 minutes to an hour.
The following specific rules should be followed during brainstorming sessions:

a. Concentrate on the problem at hand. This rule keeps the discussion very specific and
avoids the group’s tendency to address the events leading up to the current problem.
b. Entertain all ideas. In fact, the more ideas that come up, the better. In other words, there
are no bad ideas. Encouragement of the group to freely offer all thoughts on the subject is
important. Participants should be encouraged to present ideas no matter how ridiculous
they seem, because such ideas may spark a creative thought on the part of someone else.
c. Refrain from allowing members to evaluate others’ ideas on the spot. All judgments
should be deferred until all thoughts are presented, and the group concurs on the best
ideas. Although brainstorming is the most common technique to develop alternative
solutions, managers can use several other ways to help develop solutions.
STEP 4 - Analyze the alternatives

The purpose of this step is to decide the relative merits of each idea. Managers must identify the
advantages and disadvantages of each alternative solution before making a final decision.
Evaluating the alternatives can be done in numerous ways. Here are a few possibilities:
a. Determine the pros and cons of each alternative.
b. Perform a cost-benefit analysis for each alternative.
c. Weight each factor important in the decision, ranking each alternative relative to its ability to
meet each factor, and then multiply by a probability factor to provide a final value for each
alternative. Regardless of the method used, a manager needs to evaluate each alternative in
terms of its
Feasibility — Can it be done?
Effectiveness — How well does it resolve the problem situation?
Consequences — What will be its costs (financial and nonfinancial) to the organization?
STEP 5 - Select the best alternative

After a manager has analysed all the alternatives, she must decide on the best one. The best
alternative is the one that produces the most advantages and the fewest serious disadvantages.
Sometimes, the selection process can be fairly straightforward, such as the alternative with the
most pros and fewest cons. Other times, the optimal solution is a combination of several
alternatives.
Sometimes, though, the best alternative may not be obvious. That’s when a manager must decide
which alternative is the most feasible and effective, coupled with which carries the lowest costs to
the organization. Probability estimates, where analysis of each alternative’s chances of success
takes place, often come into play at this point in the decision-making process. In those cases, a
manager simply selects the alternative with the highest probability of success.
STEP 6 - Implement the decision

Managers are paid to make decisions, but they are also paid to get results from these decisions.
Positive results must follow decisions. Everyone involved with the decision must know his or her
role in ensuring a successful outcome. To make certain that employees understand their roles,
managers must thoughtfully devise programs, procedures, rules, or policies to help aid them in the
problem-solving process.

STEP 7 - Establish a control and evaluation system

On-going actions need to be monitored. An evaluation system should provide feedback on how
well the decision is being implemented, what the results are, and what adjustments are necessary
to get the results that were intended when the solution was chosen. In order for a manager to
evaluate his decision, he needs to gather information to determine its effectiveness.
 Was the original problem resolved? If not, is he closer to the desired situation than he was at
the beginning of the decision-making process? If a manager’s plan hasn’t resolved the problem,
he needs to figure out what went wrong. A manager may accomplish this by asking the
following questions:
 Was the wrong alternative selected? If so, one of the other alternatives generated in the
decision-making process may be a wiser choice.
 Was the correct alternative selected, but implemented improperly? If so, a manager
should focus attention solely on the implementation step to ensure that the chosen alternative
is implemented successfully.
 Was the original problem identified incorrectly? If so, the decision- making process needs
to begin again, starting with a revised identification step.
 Has the implemented alternative been given enough time to be successful? If not, a
manager should give the process more time and re-evaluate at a later date.
Conditions that influence Decision Making

Managers make problem-solving decisions under three different conditions: certainty, risk, and
uncertainty. All managers make decisions under each condition, but risk and uncertainty are common
to the more complex and unstructured problems faced by top managers.
1. Certainty:
Decisions are made under the condition of certainty when the manager has perfect knowledge
of all the information needed to make a decision. This condition is ideal for problem solving.
The challenge is simply to study the alternatives and choose the best solution. When problems
tend to arise on a regular basis, a manager may address them through standard or prepared
responses called programmed decisions.
These solutions are already available from past experiences and are appropriate for the
problem at hand. A good example is the decision to reorder inventory automatically when
stock falls below a determined level. Today, an increasing number of programmed decisions
are being assisted or handled by computers using decision-support software. Structured
problems are familiar, straightforward, and clear with respect to the information needed to
resolve them. A manager can often anticipate these problems and plan to prevent or solve
them. For example, personnel problems are common in regard to pay raises, promotions,
vacation requests, and committee assignments, as examples. Proactive managers can plan
processes for handling these complaints effectively before they even occur.
2. Risk:
In a risk environment, the manager lacks complete information. This condition is more difficult.
A manager may understand the problem and the alternatives, but has no guarantee how each
solution will work. Risk is a fairly common decision condition for managers. When new and
unfamiliar problems arise, non-programmed decisions are specifically tailored to the situations
at hand. The information requirements for defining and resolving non-routine problems are
typically high. Although computer support may assist in information processing, the decision
will most likely involve human judgment. Most problems faced by higher-level managers
demand non-programmed decisions. This fact explains why the demands on a manager’s
conceptual skills increase as he or she moves into higher levels of managerial responsibility.
A crisis problem is an unexpected problem that can lead to disaster if it’s not resolved quickly
and appropriately. No organization can avoid crises, and the public is well aware of the

immensity of corporate crises in the modern world. The Chernobyl nuclear plant explosion in
the former Soviet Union and the Exxon Valdez spill of years past are a couple of sensational
examples. Managers in more progressive organizations now anticipate that crises,
unfortunately, will occur. These managers are installing early-warning crisis information
systems and developing crisis management plans to deal with these situations in the best
possible ways.
3. Uncertainty:
When information is so poor that managers can’t even assign probabilities to the likely
outcomes of alternatives, the manager is making a decision in an uncertain environment. This
condition is the most difficult for a manager. Decision making under conditions of uncertainty
is like being a pioneer entering unexplored territory. Uncertainty forces managers to rely
heavily on creativity in solving problems: It requires unique and often totally innovative
alternatives to existing processes. Groups are frequently used for problem solving in such
situations. In all cases, the responses to uncertainty depend greatly on intuition, educated
guesses, and hunches — all of which leave considerable room for error. These unstructured
problems involve ambiguities and information deficiencies and often occur as new or
unexpected situations. These problems are most often unanticipated and are addressed
reactively as they occur. Unstructured problems require novel solutions. Proactive managers
are sometimes able to get a jump on unstructured problems by realizing that a situation is
susceptible to problems and then making contingency plans. For example, at the Vanguard
Group, executives are tireless in their preparations for a variety of events that could disrupt
their mutual fund business. Their biggest fear is an investor panic that overloads their
customer service system during a major plunge in the bond or stock markets. In anticipation of
this occurrence, the firm has trained accountants, lawyers, and fund managers to staff the
telephones if needed.
4. Personal Decision-Making Styles:

Managerial decision making depends on many factors, including the ability to set priorities and
time decisions correctly. However, the most important influence on managerial decision
making is a manager’s personal attributes or his or her own decision-making approach. The
three most common decision models are as follows:
 Rational/logical
 Intuitive
 Predisposed
Regardless of the model favoured by a manager, understanding personal tendencies and
moving toward a more rational model should be the manager’s goal. The best decisions are
usually a result of a blend of the decision maker’s intuition and the rational step-by-step
approach.
These models are described in the next sections.
Decision Models
1. Rational/Logical decision model
This approach uses a step-by-step process, similar to the seven-step decision- making process
described earlier in this chapter. The rational/logical decision model focuses on facts and
reasoning. Reliance is on the steps and decision tools, such as payback analysis, decision tree,
and research — all are described later in this chapter. Through the use of quantitative
techniques, rationality, and logic, the manager evaluates the alternatives and selects the best
solution to the problem.

2. Intuitive decision model

The managers who use this approach avoid statistical analysis and logical processes. These
managers are “gut” decision makers who rely on their feelings about a situation. This definition
could easily lead one to believe that intuitive decision making is irrational or arbitrary.
Although intuition refers to decision making without formal analysis or conscious reasoning, it
is based on years of managerial practice and experience. These experienced managers identify
alternatives quickly without conducting systematic analyses of alternatives and their
consequences. When making a decision using intuition, the manager recognizes cues in the
situation that are the same as or similar to those in previous situations that he or she has
experienced; the cues help the manager to rapidly conduct subconscious analysis. Then a
decision is made.
3. Predisposed decision model

A manager who decides on a solution and then gathers material to support the decision uses
the predisposed decision model approach. Decision makers using this approach do not search
out all possible alternatives. Rather, they identify and evaluate alternatives only until an
acceptable decision is found. Having found a satisfactory alternative, the decision maker stops
searching for additional solutions. Other, and potentially better, alternatives may exist, but will
not be identified or considered because the first workable solution has been accepted.
Therefore, only a fraction of the available alternatives may be considered due to the decision
maker’s information- processing limitations. A manager with this tendency is likely to ignore
critical information and may face the same decision again later.
Quantitative Tools to Assist in Decision Making:

Quantitative techniques help a manager improve the overall quality of decision making. These
techniques are most commonly used in the rational/logical decision model, but they can apply in
any of the other models as well. Among the most common techniques are decision trees, payback
analysis, and simulations.
 Decision trees
A decision tree shows a complete picture of a potential decision and allows a manager to graph
alternative decision paths. Decision trees are a useful way to analyze hiring, marketing,
investments, equipment purchases, pricing, and similar decisions that involve a progression of
smaller decisions. Generally, decision trees are used to evaluate decisions under conditions of risk.
The term decision tree comes from the graphic appearance of the technique that starts with the
initial decision shown as the base. The various alternatives, based upon possible future
environmental conditions, and the payoffs associated with each of the decisions branch from the
trunk. Decision trees force a manager to be explicit in analyzing conditions associated with future
decisions and in determining the outcome of different alternatives. The decision tree is a flexible
method. It can be used for many situations in which emphasis can be placed on sequential
decisions, the probability of various conditions, or the highlighting of alternatives.
 Payback analysis
Payback analysis comes in handy if a manager needs to decide whether to purchase a piece of
equipment. Say, for example, that a manager is purchasing cars for a rental car company. Although
a less-expensive car may take less time to pay off, some clients may want more luxurious models.
To decide which cars to purchase, a manager should consider some factors, such as the expected
useful life of the car, its warranty and repair record, its cost of insurance, and, of course, the rental
demand for the car. Based on the information gathered, a manager can then rank alternatives
based on the cost of each car. A higher-priced car may be more appropriate because of its longer
life and customer rental demand. The strategy, of course, is for the manager to choose the
alternative that has the quickest payback of the initial cost. Many individuals use payback analysis

when they decide whether they should continue their education. They determine how much
courses will cost, how much salary they will earn as a result of each course completed and
perhaps, degree earned, and how long it will take to recoup the investment. If the benefits
outweigh the costs, the payback is worthwhile.
 Simulations
Simulation is a broad term indicating any type of activity that attempts to imitate an existing
system or situation in a simplified manner. Simulation is basically model building, in which the
simulator is trying to gain understanding by replicating something and then manipulating it by
adjusting the variables used to build the model. Simulations have great potential in decision
making. In the basic decision making steps listed earlier in this chapter, Step 4 is the evaluation of
alternatives. If a manager could simulate alternatives and predict their outcomes at this point in
the decision process, he or she would eliminate much of the guesswork from decision making.
Types of decisions:
1. Programmed and non-programmed decisions:
 Programmed decisions are concerned with the problems of repetitive nature or routine type
matters. A standard procedure is followed for tackling such problems. These decisions are
taken generally by lower level managers. Decisions of this type may pertain to e.g. purchase of
raw material, granting leave to an employee and supply of goods and implements to the
employees, etc.
 Non-programmed decisions relate to difficult situations for which there is no easy solution.
These matters are very important for the organization. For example, opening of a new branch
of the organization or a large number of employees absenting from the organization or
introducing new product in the market, etc., are the decisions which are normally taken at the
higher level.
2. Routine and strategic decisions:

 Routine decisions are related to the general functioning of the organization. They do not
require much evaluation and analysis and can be taken quickly. Ample powers are delegated to
lower ranks to take these decisions within the broad policy structure of the organization.
 Strategic decisions are important which affect objectives, organizational goals and other
important policy matters. These decisions usually involve huge investments or funds. These
are non-repetitive in nature and are taken after careful analysis and evaluation of many
alternatives. These decisions are taken at the higher level of management.
3. Tactical (Policy) and operational decisions:

 Decisions pertaining to various policy matters of the organization are policy decisions. These
are taken by the top management and have long term impact on the functioning of the concern.
For example, decisions regarding location of plant, volume of production and channels of
distribution (Tactical) policies, etc. are policy decisions.
 Operating decisions relate to day-to-day functioning or operations of business. Middle and
lower level managers take these decisions. An example may be taken to distinguish these
decisions. Decisions concerning payment of bonus to employees are a policy decision. On the
other hand if bonus is to be given to the employees, calculation of bonus in respect of each
employee is an operating decision.
4. Organizational and personal decisions:

 When an individual takes decision as an executive in the official capacity, it is known as
organizational decision. If decision is taken by the executive in the personal capacity
(thereby affecting his personal life), it is known as personal decision.

 Personal decisions sometimes may affect functioning of the organization also. For example, if
an executive leaves the organization, it may affect the organization. The authority of taking
organizational decisions may be delegated, whereas personal decisions cannot be delegated.
5. Major and minor decisions:

 Another classification of decisions is major and minor.
 Decision pertaining to purchase of new factory premises is a major decision. Major decisions
are taken by top management.
 Purchase of office stationery is a minor decision which can be taken by office superintendent.
6. Individual and group decisions:

 When the decision is taken by a single individual, it is known as individual decision. Usually
routine type decisions are taken by individuals within the broad policy framework of the
organization.
 Group decisions are taken by group of individuals constituted in the form of a standing
committee. Generally very important and pertinent matters for the organization are referred to
this committee. The main aim in taking group decisions is the involvement of maximum
number of individuals in the process of decision- making.
 Dialectic group – It is a time-honoured group decision-making method which calls to foster
a structured debate of opposing view-points prior to making a decision.
 Devils Advocacy – Involves one of the group discussion members the role of a critic.
Consequently, the individual assigned the role of devil’s advocate will note & list all possible
objections to the other individual who presented his/her opinions.
 Nominal group technique – This method involves the use of a highly structured meeting,
complete with an agenda, and restricts discussion or interpersonal communication during
the decision-making process. This technique is useful because it ensures that every group
member has equal input in the decision-making process. It also avoids some of the pitfalls,
such as pressure to conform, group dominance, hostility, and conflict, that can plague a
more interactive, spontaneous, unstructured forum such as brainstorming.
 Delphi technique – With this technique, participants never meet, but a group leader uses
written questionnaires to conduct the decision making. No matter what technique is used,
group decision making has clear advantages and disadvantages when compared with
individual decision making.
The following are among the advantages of Group decisions:

a. Groups provide a broader perspective.
b. Employees are more likely to be satisfied and to support the final decision.
c. Opportunities for discussion help to answer questions and reduce uncertainties for the decision
makers.
These points are among the disadvantages of Group decisions:

a. This method can be more time-consuming than one individual making the decision on his own.
b. The decision reached could be a compromise rather than the optimal solution.
c. Individuals become guilty of groupthink — the tendency of members of a group to conform to the
prevailing opinions of the group.
d. Groups may have difficulty performing tasks because the group, rather than a single individual,
makes the decision, resulting in confusion when it comes time to implement and evaluate the
decision.
The results of dozens of individual-versus-group performance studies indicate that groups not only
tend to make better decisions than a person acting alone, but also that groups tend to inspire star
performers to even higher levels of productivity. So, are two (or more) heads better than one? The

answer depends on several factors, such as the nature of the task, the abilities of the group members,
and the form of interaction. Because a manager often has a choice between making a decision
independently or including others in the decision making, therefore one needs to understand the
advantages and disadvantages of group decision making.
Difficulties in Decision making

1. Non-actionable information
2. Non-supportive environment
3. Non-acceptance by subordinates
4. Ineffective communication
5. Incorrect timing
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Steps in decision making (With example for easy remembrance)
Following are the important steps of the decision making process. Each step may be supported by
different tools and techniques.
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SYLLABUS:
(A) Organizing and Staffing - Meaning, Nature and Characteristics of Organization – Process of
Organization, Principles of Organization, Departmentalization, Committees – meaning, Types of
Committees, Centralization Versus Decentralization of Authority and Responsibility, Span of
Control (Definition only), Nature and Importance of Staffing, Process of Selection and
Recruitment.
(B) Directing and Controlling - Meaning and Nature of Directing-Leadership Styles, Motivation
Theories Communication – Meaning and Importance, Coordination- Meaning and Importance,
Techniques of Coordination. Controlling – Meaning, Steps in Controlling.
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PART – A: ORGANISING AND STAFFING
Definition
● An organization can be defined as a social unit or human grouping deliberately structured for the
purpose of attaining specific goals.
● An organization can also be defined as the process of identifying and grouping of the work to be
performed, defining and delegating responsibility and authority and establishing relationships for
the purpose of enabling people to work most effectively together in the accomplishment of their
objectives.
Nature of organization:
1. An organization basically consists of group of people who form the dynamic human element of the
organization
2. Organization helps in identifying the various tasks to be performed which are assigned to the
individuals to perform to achieve the common objectives or common purpose of the organization.
3. It ensures to achieve coordination amongst the people working in various departments of the
organization and ensures integrated efforts to achieve organizational objectives or goals.
4. It delegates authority to the managers with commensurate responsibility and accountability for
the discharge of their duties and also amongst different hierarchical levels in an organization.
5. It also aides in achieving financial, physical material and human resources.
6. Organizations are part of the larger environment and hence they are influenced by the external
environment.
7. Organization helps in the realization of the plans made by the managers
8. It helps in nurturing and growing special skills and talents by the virtue of division of labour
9. It facilities seamless communication.
Characteristics of an organization:
1. Every organization has a purpose, goal or goals [task of planning]
2. Every organization has a clear concept of the major duties or activities required to achieve the
purpose
3. Classification of activities into JOBS
4. Establishment of relationships between these jobs in order to ensure coordination. This is
achieved through division of labour and delegation of authority.
Purpose of an organization:
1. The purpose of any organization is to achieve goals for which it is formed and aims at
achieving common objectives through its group members efforts.
2. The organizations exist for different purpose and the efforts for organizational members are
directed for the achievement of this purpose.

For example: For a business organization the purpose is to develop people and their skills for
contributing towards the growth of the enterprise through profits, whereas for a nonprofit
organization the purpose and the objective would be to serve the members of the committee in a
productive manner.
Types of organization:
a. Business organization: are those organizations which are formed with the purpose of earning
profits. The sole purpose being to earn surplus in the form of profits without which they cannot
survive and grow. Example: Firms engaged in manufacturing, trading, services etc.
b. Non -profit service organizations: are those organizations that do not have the motive of making
profits but to serve the people of the specific community or a segment of a society.
Example: Rotary club, Lions club, Orphanages, Charitable hospitals etc.
Process of organizing:
Organizing means the design of the ‘Organization Structure’. The principles of organization are as
follows
1. Consideration of Objectives: The objectives of the enterprise influence the organization
structure and hence the objectives of the enterprise should first be clearly defined. Then every
part of the organization should be geared to the achievement of these objectives.
2. Deciding the Organizational boundaries
3. Grouping of activities as Departments based on Specialization: Effective organization must
promote specialization. The activities of the enterprise should be divided according to
functions and assigned to persons according to their specialization.
4. Analyzing inter-department Relations and deciding which Departments will be key
departments
5. Determining levels at which various types of decisions are to be made: As the executives
at the higher levels have limited time, only exceptionally complex problems should be referred
and routine matters should be dealt with by the subordinates at lower levels. This will enable
the executives at higher levels to devote time to more important and crucial issues.
6. Determining the span of Management [Span of control]: As there is a limit to the number of
persons that can be supervised effectively by one boss, the span of control should be as far as
possible, the minimum. That means, an executive should be asked to supervise a reasonable
number of subordinates only.
7. Setting up a coordination mechanism: As individuals and departments carry out their
specialized activities, the overall goals of the organization must be taken care of. Therefore
Coordination is an important aspect for smooth functioning of the organization.
Principles of organization:
The principles of organization are as follows
1. Objectives: The objectives of the enterprise influence the organization structure and hence the
objectives of the enterprise should first be clearly defined.
Then every part of the organization should be geared to the achievement of these objectives.
2. Specialization: Effective organization must promote specialization.
The activities of the enterprise should be divided according to functions and assigned to
persons according to their specialization.
3. Span of control: As there is a limit to the number of persons that can be supervised effectively
by one boss, the span of control should be as far as possible, the minimum. That means, an
executive should be asked to supervise a reasonable number of subordinates only.
4. Exception: As the executives at the higher levels have limited time, only exceptionally complex
problems should be referred and routine matters should be dealt with by the subordinates at
lower levels. This will enable the executives at higher levels to devote time to more important
and crucial issues.

5. Scalar Principle: This Principle is sometimes known as the “chain of command”. The line of
authority from the chief executive at the top to the first-line supervisor at the bottom must be
clearly defined.
6. Unity of command: Each subordinate should have only one superior whose command he has
to obey. Multiple-subordination must be avoided for it causes Uneasiness, disorder,
indiscipline and undermining of authority.
7. Delegation: Proper authority should be delegated at the lower levels oh manager of the
organization also. The authority delegated should be equal to responsibility that is each
manager should have enough authority to accomplish the task assigned to him. Inadequate
delegation often results into multiplication of staff and service activity.
8. Responsibility: The superior should be held responsible for the acts of his subordinates. No
superior should be allowed to avoid responsibility by delegating authority to his subordinates
The other important principles also include – Authority, Efficiency, simplicity, flexibility, balance,
Unity of direction, Personal ability, Acceptability.
DEPARTMENTALIZATION
Definition: The horizontal differentiation of tasks or activities into discrete segments is called
departmentalization. Departmentalization is one important step of building an organization. The aim
is to take advantage of the division of labor and specialization up to a certain limit.
I. PROCESS DEPARTMENTALIZATION:
A. On the basis of Business or Organizational functions:
The most widely used base for departmentalization is based on functions. Each major function
of the enterprise is grouped into a department. Example: finance and marketing
departments in a manufacturing company
Advantages:
1. It is a simple form of grouping activities for small organizations which manufacture only a
limited number of Products or render only a limited number of services. Everybody in this
form of organization understands and feels highly secure both in his work and in
relationships.
2. It promotes excellence is performance because of development of expertise in only a
narrow range of skills.
3. It leads to improved planning and control of the key functions.
4. It ensures economy, there is only one department related to one function for the entire
function.
5. Manpower and Other resources of the company are effectively utilized by time-sharing then
across products or projects.
Drawbacks:
1. It fosters sub-goal loyalties. It is difficult for anyone to understand the task of the whole
and to relate his own work to it. Each manager thinks only in terms of his own
departmental goals and does not think in terms of the company as a whole. Example: the
manufacturing department may concentrate on meeting cost standards and delivery dates,
and neglect quality control. Result: the sales or marketing department may be flooded with
complaints lead to inter-departmental conflicts and disagreements, feuds,
misunderstandings etc.
2. Does not offer a good training ground for the overall development of manager who
gains expertise in handling problems of his particular department only
3. Unsuitable for organizations which are large in size, complexity or innovative scope.
4. In this form the customer needs evoke conflicting interpretations from each department
head like the story of twelve blind people and an elephant.

5. In this form the procedures are overly complicated, wasteful and time consuming weakness
called organizational arthritis develops where the structure is rigid and resists adaptation.
6. It is difficult to judge whether the activities of a particular department are worth their cost.
B. Based on Technology:
Departmentalization is done on the basis of several discrete stages in the process or
technologies involved in the manufacture of a product.
Example: A cotton textile mill may have separate departments for ginning, spinning, weaving,
dyeing, printing, packing and sales.
Advantages:
1. It facilitates the use of heavy & costly equipment in an efficient manner.
2. Follows the principle of specialization of work. This increases the efficiency of people in
their phase of business.
3. Suitable for organizations which are engaged in the manufacture of products which involve
a number of processes.
Drawbacks:
1. In technology departmentalization, the workers tend to feel less responsible for the whole
product.
2. It does not provide good training ground and opportunity for the overall development of
managerial talent.
3. When the technology is sequential, a breakdown/delay caused in one department slows the
work of the other departments after it.
4. It is difficult to compare the performance of different technology based departments. (Ex:
profits)
5. Movement of work from department top department may become complex. Management
may have to pay attention in order to maintain inter-departmental cooperation &
coordination.
II. PURPOSE DEPARTMENTALIZATION:

A. Products:
1. Eminently suited for large organization manufacturing a variety of products.
2. For each major product a separate semi-autonomous department is created and is put
under the charge of a manager who may also be responsible for producing profit of a given
magnitude.
3. For each department, all the needed manufacturing, engineering, marketing, manpower
and other facilities are assembled.
4. Product departmentalization is the logical pattern to be followed when each product
requires raw materials, manufacturing technology and marketing methods that are
markedly different from others from those used by other products in the organization.
Example: many companies like Hindustan Lever, Richardson Hindustan and Johnson
& Johnson have product based departments.
Advantages:
1. This form relieves top management from operating task responsibility and therefore can
concentrate on such centralized activities such as finance, R&D and control.
2. Enables top management to compare performances of different products and invest more
resources in profitable products and withdraw resources from unprofitable ones.
3. In this form as the responsibility is entrusted on a particular department head, he is
stimulated for improving his performance.
4. In this form natural team work develops as each worker sees that his contribution is
needed to make the whole product.

Drawbacks:
1. This form results in duplication of staff and facilities.
2. Extra expenditure is incurred in maintaining a sales force for each product line.
3. Employment of a large number of managerial powers is required.
4. Equipment in each product may not be utilized fully.
B. Customers:
An enterprise may be divided into number of departments on the basis of the customers
that it services.
Example: An electronics department may be divided into separate departments for military,
industrial and consumer customers.
C. Regions or territory:
When production or marketing units of an organization are geographically dispersed in various
locations, it is logical to departmentalize those units on a geographical basis.
Example: The Indian railways are departmentalized on this basis like north, west, and south,
eastern, central are departments in this sense.
Advantages:
1. Motivates each divisional head to show high performance.
2. Provides each regional head an opportunity to adapt to his local situation and customer
need with speed and accuracy.
3. Affords valuable top management training and experience to middle-level executives.
4. Enables the organization to take advantage of location factors, such as availability of raw
materials, labor, market etc.
5. Enables the organization to compare regional performances and invest more resources in
profitable regions and withdraw resources from unprofitable ones
Drawbacks:
1. Gives rise to duplication of various activities and many of the routine and service functions
carried out by the regional offices can be carried out centrally by the head office very
economically.
2. Many regional units may forget the overall interest of the total organization
D. Division (Free-form organization)

In large, multi-product companies categorize themselves into several profit centers on the
basis of product, territory or customer; these units are called divisions or free-form
organizations. Each divisional head enjoys a freehand to operate his division within the
framework of general companywide policies. As a division can be dropped or added with little
disruption to the rest of the organization, it is also called free-form organization.
Example: L&T with divisions such as infrastructure, metallurgical, heavy equipment, financial
services, etc.
E. TIME
In departmentalization by time, activities are grouped on the basis of timing of their
performance. For example: as a small machine shop grows in size, its owner has the choice of
either adding extra shifts (thus separating identical sub-groups by time) or renting two more
shops (thus by separating the two sub-groups territorially). Generally, departmentalization by
time is found in the production function of the enterprise.

Major disadvantages of departmentalization

1. Accidental occurrences when carried out from one shift to another affect the product of the other
shift also.
2. Workers working in the shift may incomplete work to workers of the following shift.
3. Difficult for the manager to correctly measure the performance of certain department
III. COMBINED BASE DEPARTMENTALIZATION
It can be noted that each

departmentalization has its own pros
& cons and cannot be advised as a
common method to every
organization. Also the same
departmentalization cannot be
applied for all the activities of a
business at each level. Therefore it is
possible to find an organization
practicing different base of
departmentalization at different
organizational levels.
For example: an organization
manufacturing agricultural
machinery may implement
“PRODUCT DEPARTMENTALIZATION” as a base at the primary level, “TERRITORY
DEPARTMENTALIZATION” as the base at the intermediate level and “FUNCTION
DEPARTMENTALIZATION” as the base at the ultimate level., as indicated in the diagram.
IV. MATRIX ORGANIZATION
Another form of
combined base
organization which is
very popular nowadays
is Matrix
departmentalization
(also called as grid or
lattice pattern). In this
two types of
departmentalization –
function & product –
exist simultaneously as
shown in the diagram.
Functional departments
are fixed part of Matrix
organization. They retain
authority for the overall operation of their respective units.
Product departments or project teams, on the other hand, are created as the need for them
arises. That is Members of the project team are borrowed from the functional departments and
are placed under the direction of a project manager. The manager for each project is
responsible and accountable for its success; thus he has authority over the other team
members for the duration of the project. (In the figure, the temporary authority is indicated in
dotted lines). On completion of the project, the members of the tem, including the project
manager revert to their respective departments until the next assignment to a project.

COMMITTEES
A committee is a group of people who have been formally assigned some task or some problem for
their decision and implementation.
Committees are broadly classified into Advisory committees and Executive committees.
Advisory committees:
1. Committees are vested with staff authority
2. Only have a recommendation role and cannot enforce implementation of their advice or
recommendation.
Examples of advisory committees formed in business enterprises: works committees, sales
Executive committees:
1. Vested with the line of authority
2. Not only take decisions but also enforce decisions and thus perform a double role of taking a
decision and ordering its execution.
Example: Board of directors is an example of an executive committee.
Committees can also be classified as standing committees or ad-hoc task forces.

1. Standing committees: Are formed to deal with current organizational problem.
Example: finance committee in a company, loan approval committee in a bank etc. Members of
this committee are chosen because of their title or position, instead of individual qualifications
or skills.
2. Ad-hoc committees: Have a short duration, dissolved after the task is over, or the problem is
solved and their members are chosen for their skills and experience.
Advantages of forming committees:

1. People get an opportunity to better understand each other’s problems and move towards
organizational goals.
2. Provide a forum for the pooling of knowledge and experience of many persons of different
skills, ages and backgrounds which helps in improving the quality of decisions.
3. Provide an opportunity to many persons to participate decision-making process.
4. They are excellent means of transmitting information and ideas, both upward and down ward
5. Contribute indirectly to their training and viewpoints.
6. They are impersonal inaction and hence their decisions are generally unbiased and are based
on facts and there is no fear of single individual taking a decision.
Weaknesses of forming committees:

1. Committees keep up minutes and waste hours by setting up a committee which takes a longer
time to get action than from an individual manager.
2. If wrong decision taken, no member can be individually blamed which encourages
irresponsibility among members of the committee.
3. Can be expensive form of administration where huge amount is spent on convening meetings
and giving allowances to the members.
4. Members of the coordinating committees feel appointed to protect their interests of the
departments rather than finding appropriate solution to the problem.
5. Have a tendency to perpetuate themselves and difficult to dissolve them.
6. Decisions are generally based on some compromise among members which are not best
decisions which results in log rolling.
7. Consists of large number of persons, difficult to maintain secrecy.
8. Chairman often changes, influences accumulate in the hands of some other person which may
result in domination and may bring about resistance from others.

DECENTRALIZATION OF AUTHORITY:
1. The delegation if authority by an individual manager is closely related to and organizations
decentralization of authority.
2. Management has to decide the amount of decision-making authority should be centralized in
the hands of the chief executive and the amount to be distributed among them at lower levels
3. The greater the decentralization
a. The greater is the number of decisions made at the lower levels.
b. The greater are the important decisions made at the lower levels.
c. The greater is the number of decisions made at the lower levels
d. The fewer are the people to be consulted at the lower level and lesser is the checking
required on the decisions made at the lower levels.
4. Centralization and decentralization are not absolute but relative.
5. Absolute centralization is not possible except in one man enterprise.
6. Decentralization characterizes all organizations and there cannot be absolute decentralization
of authority because the manager cannot delegate all his authority without surrendering his
position as a manager.
Distinction between delegation and decentralization

Delegation Decentralization
1 It is a process, which refers to the granting of It is the end result of delegation and
authority and the creation of responsibility dispersal of authority
between one individual to another
2 In this process, superior continues to be In this process, the superior is relieved
responsible for the work delegate to his from his responsibility for the work
subordinates decentralized and the subordinate becomes
liable for that.
3 It is vital and essential to the management process This process is optional and may or may not
and only through delegation subordinates can be be practiced as a systematic policy.
involved in the organization and management can
get things done
Advantages of decentralization:
1. Reduces the problem of communication and red tape: As organization grows bigger it takes
long time for top managers to make decisions. Decentralization unclogs the communication
process and improves efficiency.
2. Permits quicker and better decision making: The employees being close to the work,
knowledgeable often make better and swift decisions than their superiors who are not in touch
with the specifics of the situation
3. Recognizes and capitalizes on the importance of the human element: Gives more power,
prestige and status and feel more motivated and satisfied in their jobs
4. Leads to a competitive climate within the organization: Where each division is made into a
distinct profit center, its head is encouraged to exercise initiative and ingenuine.
5. Ensures the development of employees: Because the employees are to be excellently trained
for promotions into positions of greater authority and responsibility.
6. Facilitates diversification of products activities and markets: Initially these companies had
a centralized organizational structure due to limited products but as companies expanded
these companies decentralized their operations to provide greater independence and
convenience.
SPAN OF CONTROL (Definition only)

The term “span of management” is also referred to as span of control, span of supervision, span of
authority or span of responsibility. It indicates the number of subordinates who report directly to a
manager.

STAFFING:
Nature and importance of proper staffing:
Definition of Staffing: The process of recruiting, retaining, developing and nurturing the
workforce is called staffing
1. It helps in discovering talented and competent workers and developing them to move up the
corporate ladder.
2. Ensures greater production by putting the right man in the right job.
3. It helps to avoid a sudden disruption of an enterprises production run by indicating shortages of
personal if any in advance.
4. Helps to prevent underutilization of personnel through over manning and the resultant high labor
cost and low profit margins.
5. Provides information to management for the internal succession of managerial personnel in the
event of unanticipated turnover.
Recruitment:
It is defined as the process of identifying the sources for prospective candidates and to stimulate them
to apply for the jobs.
Sources of requirement:
They can be broadly classified into two categories namely internal and external.
Internal sources refer to the present working force of the company. Vacancies other than the lowest
level may be filled by the existing employees of the company.
External sources of recruitment

1. Re-employing former employees: laid off employees or employees left due to personal
reasons may be reemployed who may require less training compared to the strangers of the
enterprise.
2. Friends and relatives of the present employees: personnel with a record of good
relationships may be encouraged to recommend their friends and relatives for Appointment in
the concern where they are employed.
3. Applicants at the gate: suitable unemployed employees who call at the gates of the factories
or companies are called are interviewed by the factory or company personnel and those who
are found suitable for the existing vacancies are selected.
4. College and technical institutes: many big companies remain in touch with the colleges and
technical institutions to recruit young and talented personnel.
5. Employment exchanges: employment exchange set up by the government for bringing
together those men who are in search of the employment and these who are in search of
employment and those who are looking for men. Employment exchanges are considered a
useful source for the recruitment of clerks, accountants, typists.
6. Advertising the vacancy: can be done by advertising the vacancy in leading newspapers
which may be used when the company requires services of persons possessing certain special
skills or when there is acute shortage of labor force.
7. Labor unions: persons are sometimes recommended for appointment by their labor unions.
Selection:
Steps in the selection procedure:
1. Job analysis: Is the process by means of which a description is developed of the present
methods and procedures of doing a job, physical conditions in which the job is done, relation of
the job to other jobs and other conditions of employment

2. Job description: The results of the job analysis are set down in job descriptions for production
workers, clerical people and the first-line supervisors and managers also.
3. Job specification: A job specification is a statement of the minimum acceptable human
qualities necessary to perform a job satisfactorily.
Commonly practiced steps for selections:

1. Application bank: Filling the application blank by the candidate is the first step in which the
applicant gives relevant personal data such as qualification, experience, firms in which he has
worked.
2. Initial interview: Selected personnel based on the particulars furnished in the application
blank are called for the initial interview by the company which is the most important means of
evaluating the poise or appearance of the candidate.
3. Employment tests: Are used for the further assessment of the candidate of his nature and
abilities certain tests are conducted by the company. These are:
i. Aptitude test: is used in finding out whether a candidate is suitable for clerical or a
mechanical job which helps in assessing before training as how well the candidate will
perform the job.
ii. Interest test: is used to find out the type of work in which the candidate has an interest.
iii. Intelligent test: used to find out the candidates intelligence and candidates mental
alertness, reasoning ability, poor of understanding are judged.
iv. Trade or performance achievement test: this test is used to measure the candidate’s
level of knowledge and skill in the particular trade or occupation in which all he will be
appointed, in case he is finally selected. In this test the candidate is asked to do a simple
operation of the proposed job. Example: A candidate for a driver may be asked to drive
to test his driving proficiency, a typist may be asked to type out some letters to find out
his speed and efficiency.
v. Personality test: is used to measure those characteristics of a candidate.
4. Checking references: used to know about the important personal details about the candidate,
his character, past history his background verified from the people mentioned in the
application after selection and found satisfactory at the interview.
5. Physical or medical examination: is another step in selection procedure. The objectives of
this examination are
a) to check the physical fitness of the applicant for the job applied for
b) to protect the company against the unwarranted claims for compensation under certain
legislative enactments.
6. Final interview: This interview is conducted for those who are ultimately selected for
employment and the selected candidates are given an idea about their future projects within
the organization.
************************************************************************************************

PART – B : DIRECTING & CONTROLLING:
Meaning and nature of directing -Leadership styles, Motivation Theories, Communication - Meaning
and importance – Coordination, meaning and importance and Techniques of Co-ordination. Meaning
and steps in controlling - Essentials of a sound control system - Methods of establishing control.
DIRECTING
Definition:
1. Means issuance of orders and leading and motivating subordinates as they go about executing
orders Consists of the process and techniques utilized in issuing instructions and making certain
that operations are carried on as originally planned.
2. Is a vital in managerial function Is used to stimulate action by giving direction to his subordinates
through orders and also supervise their work to ensure that the plans and policies achieve the
desired actions and results.
3. To conclude direction is the process of utilizing the techniques in issuing instructions and making
certain that operations are carried out on as originally planned.
Requirements or Principles of effective direction:

1. Harmony of objectives:
a. The goals of its members must be in complete harmony with the goals of an organization
b. The manager must direct the subordinates in such a way that they that they perceive their
goals to be in harmony with enterprise objectives.
c. For Example the company’s profits may be associated with the employee’s gains by giving
additional bonus or promotion.
2. Unity of Command: The subordinates must receive orders and instructions from one
supervisor only the violation of which may lead to conflicting orders, divided loyalties and
decreased personal responsibility for results.
3. Direct supervision: Every supervisor must maintain face-to-face contact with his
subordinates which boosts the morale of the employees, increases their loyalty and provides
them with feedback on how well they are doing.
4. Efficient Communication:
a. Communication is an instrument of direction through which the supervisor gives orders,
allocates jobs and explains duties and ensures performance.
b. Is a two way process which enables the superior to know how his subordinates feel about
the company and how the company feels on a number of issues concerning them.
c. In communication comprehension is more important than the content.
5. Follow-through: It is an act of following through the whole performance of his subordinates to
keep check on their activities, help them in their cat and point out deficiencies if any and revise
their direction if required.
Leadership Styles:
Three leadership styles widely used: Traits approach, Behavioral approach, Contingency approach
1. Traits approach: Trait is basically a character and deals with personal abilities and assumed to
be God’s gift and abilities are identified as mental and physical energy, emotional stability,
knowledge of human relations, empathy, objectivity, personal motivation, communication skills,
teaching ability, social skills, technical competence, friendliness and affection, integrity and faith,
intelligence etc.
Traits approaches –
a) Trait theories argue that leaders share a number of common personality traits and
characteristics, and that leadership emerges from these traits.

b) Early trait theories promoted the idea that leadership is an innate, instinctive quality that you
either have or don't have.
c) Now we have moved on from this approach, and we're learning more about what we can do as
individuals to develop leadership qualities within ourselves and others.
d) Traits are external behaviors that emerge from things going on within the leader's mind – and
it's these internal beliefs and processes that are important for effective leadership.
2. Behavioral approach: Behavioral theories focus on how leaders behave. There are three types of
leaders:
a) Autocratic leaders make decisions without consulting their teams. This is considered
appropriate when decisions genuinely need to be taken quickly, when there's no need for
input, and when team agreement isn't necessary for a successful outcome.
b) Democratic leaders allow the team to provide input before making a decision, although the
degree of input can vary from leader to leader. This type of style is important when team
agreement matters, but it can be quite difficult to manage when there are lots of different
perspectives and ideas.
c) Laissez-faire leaders don't interfere; they allow people within the team to make many of the
decisions. This works well when the team is highly capable and motivated, and when it doesn't
need close monitoring or supervision. However, this style can arise because the leader is lazy
or distracted, and, here, this approach can fail.
3. Contingency approach:
a) Situation influencing good leadership
b) The realization that there isn't one correct type of leader led to theories that the best
leadership style is contingent on, or depends on, the situation.
c) These theories try to predict which leadership style is best in which circumstance.
Motivation theories:
A. Content theories: Describes WHAT motivates an individual. They throw light on the various
needs and incentives which cause behaviour.
1. Maslow’s need hierarchy theory
2. Alderfer’s ERG Theory
3. Herzberg’s two factor theory
4. McClelland’s achievement theory
B. Process theories: Describes HOW behaviour is caused.
1. Victor Vroom’s Expectancy theory
2. Adam’s equity theory
C. Reinforcement theory: Explains the ways in which behaviour is learned, shaped or modified.
1. Skinner’s behaviour modification theory
EXPLANATION:
Content theories: Describes WHAT motivates an individual. They throw light on the various needs
and incentives which cause behaviour.
1. Maslow’s need hierarchy theory:

An unsatisfied need is the basis for the motivation
process and the starting point and begins the chain
of events leading to behaviour as shown in the
figure below.
Order of priority of human needs begins with the
person’s unsatisfied need at the lowest level-
identification of the need develops in the form of

as goal which leads to the fulfilment of the need to achieve the goal. These needs are arranged in the
form of a ladder of five successive categories as shown in the figure above.
a. Physiological needs: Arise of the basic physiology of life like the need for food, water, air, etc.
which must be at least satisfied partially for continued survival.
b. Security needs: Needs to feel both economically secure and psychologically secure. That is
free from economic threat and physical harm which need protection from arbitrary lay-off and
dismissal, disaster and avoidance of the unexpected.
c. Social needs: are needs to associate with other people and be accepted by them.
d. Egoistic needs: are the needs which relate to respect and prestige the need for dominance for
example. This can be further classified as self-esteem and esteem from others. Self-esteem is
the need for worthiness of oneself and the esteem is the necessity to think others that he is
worthy.
e. Self-fulfilment needs: are the needs to realize ones potential that is realizing one’s own
capabilities to the fullest-for accomplishing what one is capable of to the fullest. For example, a
musician must make music etc.
According to Maslow, people attempt satisfy their physical needs first. As long as the needs are
unsatisfied they dominate and after they become reasonably satisfied and progress to the next level
and so on.
2. Herzberg’s Two-factor theory:

Original study based on the research by Fredrick and Herzberg who interviewed 200 engineers and
accountants and were asked about the good times and bad times they think about their jobs. Out of
these interviews two factors emerged called the ‘Maintenance factors’ and ‘Motivators or satisfiers’.
I. Maintenance factors (Factor 1)
1. Fair company polices and administration
2. A supervisor who knows the work
3. A good relationship with one’s supervisor.
4. A good relationship with one’s peers.
5. A good relationship with one’s subordinates.
6. A fair salary
7. Job security
8. Personal life
9. Good working conditions
10. Status
II. Motivators or satisfiers (Factor 2)

1. Opportunity to accomplish something significant
2. Recognition for significant achievements
3. Chance for advancement
4. Opportunity to grow and develop on the job
5. Chance for increased responsibility
6. The job itself.
Some facts about the two factors:

1. Motivators are job centered
2. Maintenance factors are related working conditions and environmental conditions.
3. These two groups of factors are also known as intrinsic and extrinsic rewards.
4. These two sets of factors are unidirectional.

3. Alderfer’s ERG theory

Clayton Alderfer’s ERG (Existence, Relatedness, and Growth) theory is built upon Maslow’s hierarchy
of needs theory. To begin his theory, Alderfer collapses Maslow’s five levels of needs into three
categories.
a. Existence needs are desires for physiological and material well-being. (In terms of Maslow’s
model, existence needs include physiological and safety needs)
b. Relatedness needs are desires for satisfying interpersonal relationships. (In terms of
Maslow’s model, relatedness correspondence to social needs)
c. Growth needs are desires for continued psychological growth and development. (In terms of
Maslow’s model, growth needs include esteem and self-realization needs)
This approach proposes that unsatisfied needs motivate behaviour, and that as lower level needs are
satisfied, they become less important. Higher level needs, though, become more important as they are
satisfied, and if these needs are not met, a person may move down the hierarchy, which Alderfer calls
the frustration-regression principle. What he means by this term is that an already satisfied lower
level need can become reactivated and influence behaviour when a higher level need cannot be
satisfied. As a result, managers should provide opportunities for workers to capitalize on the
importance of higher level needs.
4. McClelland’s need for achievement theory:

According to McClelland there are three important needs
a. Need for affiliation (n Aff): Reflects desire to interact socially with people Concerned about
the quality of an important personal relationship
b. Need for power (n Pow): Person having high need for power tries to exercise the power and
authority Concerned with influencing others and winning arguments
c. Need for achievement (n Ach): Reflects desire to interact socially with people Concerned
about the quality of an important personal relationship. A person with high need for
achievement has three distinct characteristics
● preference in setting moderately difficult but potentially achievable goals
● Doing most things by himself rather than getting them done by others and willing to take
personal responsibility for his success or failure and does not want to hold anybody
responsible for it.
● Seeking situations where concrete feedback is possible.
Process theories: Describes HOW behaviour is caused.
1. Victor Vroom’s Expectancy theory: Works under conditions of free choice where an individual is
motivated towards activity which he is most capable of rendering and which he believes has the
highest probability of leading to his most preferred goal. The basic concepts of this theory are
a) First and second level outcomes:
● Job related goals before an individual such as promotion, increase in salary, recognition,
and praise and so on are called second level outcomes.
● Each second level outcome can be associated with a value called valence for each individual.
● The valence can be positive, negative or zero
Valence positive: individual wants to attain promotion
Valence negative: does not want to attain promotion
Valence zero: outcome towards which he is indifferent Second level outcomes can be achieved
in different ways: promotion by leaving the organization, by absenting himself to show
dissatisfaction, by joining a pressure group, by attending a training programme, or developing

intimacy with the boss, by bribing somebody, by improving performance or by bribing

somebody and so on.
b) Instrumentality:
● All first level outcomes have equal probability of leading the individual to the second level
outcome the individual has subjective estimates of these probabilities ranging from -1 to +1
which are called instrumentalities. -1 indicates a belief that second level outcome is certain
without the first level outcome 0 indicates a belief that second level outcome is impossible
without first level outcome 1 indicates a belief that second level outcome is certain with
first level outcome
● These instrumentalities are helpful in determining the valence of each first-level
outcome. The valence of each first-level outcome is the summation of all products
arrived by multiplying its instrumentalities with the related valences of the second
level outcomes.
c) Expectancy:
● It is the probability estimate which joins the individual’s efforts to first level outcome
● Expectancy values are always positive ranging from 0 to 1.
d) Motivation: Motivation is the multiplicative function of the valence of each first-level outcome
(V1) And they believed expectancy (E) that given effort will be followed by a particular first
level outcome, That is M=f(V1*E)
2. Adams equity theory:

In this theory, Equity is defined as the ratio between the individual’s job inputs (such as
effort, skill, experience, education and seniority) to the job rewards (such as pay or
promotion). It is believed that the individual’s motivation, performance and satisfaction will
depend on his or her subjective evaluation of his or her effort/reward ratio and the effort/reward
ratio of others in similar situations
Reinforcement theory: Explains the ways in which behaviour is learned, shaped or modified.
1. Skinners behavior modification theory:

The theory is developed by researches done by B.F Skinner.
The theory is believed and based on the behavior of the past circumstances which they have learnt
that the certain behaviors associated with pleasant outcomes and certain other behaviors are
associated with unpleasant outcomes.
Example: Obedience to authority leads to praise and disobedience leads to punishment.
The consequences that increase the frequency of a behavior are positive reinforcement (praise or
monitory rewards) or negative enforcement (A manager requiring all subordinates to attend early
morning meetings if the performance falls below a certain desired level of the organization).
Negatives of the above theory proposed: Avoids concern for the inner motivation of the
individual. Skinners behavior modification theory is criticized for two reasons
a) Overemphasis of extrinsic rewards ignores the fact that people are better motivated by
intrinsic rewards.
b) The theory is unethical no manager has a right to manipulate and control his employee’s
behavior life.

COMMUNICATION
● Communication means Exchange of opinions, facts ideas or emotions by two or more persons.
● The sum of all things what one does to create an understanding in the minds of others.
● It is the process of passing information, correct understanding and with right Interpretation from
one person to another.
Importance of communication:
✔ The importance of communication rose from the fact that earlier business was considered only a
technical and formal structure.
✔ But by Hawthorne’s experiments, it was realized that every organization requires structure is a
social system involving the interactions of the people working at different levels and proper
communication is required to achieve the goals of the organization.
✔ It is the basis to an organization’s existence from the birth to continuing of the organization on
through its continuing life.
✔ When communication stops, organized action comes to an end. Thus, communication is the
foundation of cooperative group activity.
COORDINATION
● Coordination is the orderly synchronization or fitting together of the interdependent efforts of
individuals to attain a common goal
For example: In a hospital there is a proper synchronization of the activities of the nurses,
doctors, wards, attendants and lab technicians so as to give a good care to the patient.
● Coordination can be considered as an essential part of all managerial functions of planning,
organizing, directing and directing. If the manger performs these functions efficiently and expertly
coordination is automatically generated and there remains no need for special coordination.
Coordination is required at every level of all managerial functions

✔ In planning: performs his function of planning by coordination of the interrelating the plans of
various departments
✔ In organizing: coordination is required in grouping and various activities to subordinates and
in creating departments
✔ In directing: coordination is required to take effect of his particular action will have on other
departments and executives
✔ In controlling: coordination is required manger evaluates operations and checks whether
performance is in conformity with the desired results.
Techniques of coordination:
The following are the important techniques of coordination
1. Rules procedures and policies:
● Helps in coordinating the subunits in the performance of their Repetitive activities.
● Standard policies, procedures and policies are laid down to cover all possible situations
● If the breakdown of the above occurs more rules, regulations are required to be framed to
take care of the breakdown
2. Planning:
● Ensures coordinated effort and targets of each department dovetail with the targets of all
other departments.
● Example: fixing the targets of the10000 units of additional production and consequently
the sales requires the coordination of the two departments respectively to meet the
demands and achieve the target.
3. Hierarchy:
● Is the simplest device of achieving coordination by hierarchy or chain of command By
putting together independent units under one boss some coordination among their
activities is achieved.

● Sometimes defective because makes individuals dependent upon, passive towards and
subordinates to the leader.
4. Direct contact: Used to solve the problems created at the lower levels which affects the
employees can be resolved by formal informal contacts to prevent overloading to top
executives.
5. Task force: Temporary group made up of representatives from the same departments facing
problems and exists as long as the problems lasts and each participant returns to normal tasks
once the solution is reached
6. Committees:
● Arise due the fact when certain decisions consistently become permanent.
● These groups are labelled committees.
● This device greatly eases the rigidity of the hierarchical structure, promotes effective
communication and understanding, of ideas, encourages the acceptance of commitment to
policies and makes implantation more effective.
7. Induction:
● Of a new employee is a social setting of his work is also a coordinating mechanism.
● The device familiarizes the new employee with organizations rules and regulations
dominant norms and behavior, values and beliefs and integrates his personal goals with
organizational goals.
8. Indoctrination: Device commonly used in religious and military organizations is another
coordinating device which develops the desire to work together for a purpose. The major task
of a leader being to build an organization can be succeeded by the indoctrination and other
means by converting the neutral body into a committed body
9. Incentives: providing independent units with an incentive to collaborate such as profit
sharing plan is another mechanism.
10. Liaison departments: evolved to handle transactions and typically occurs between the sales
and production departments.
11. Workflow: is the sequence of steps by which the organization acquires inputs and transforms
them into outputs and exports these to the environment which is largely shaped by the
technological, economic and social considerations and helps them in coordination.
CONTROLLING
Organizational control is the process of assigning, evaluating, and regulating resources on an ongoing
basis to accomplish an organization’s goals. To successfully control an organization, managers need to
not only know what the performance standards are, but also figure out how to share that information
with employees.
Control can be defined narrowly as the process a manager takes to assure that actual performance
conforms to the organization’s plan, or more broadly as anything that regulates the process or activity
of an organization. General interpretation of defining managerial control is - monitoring
performance against a plan and then making adjustments either in the plan or in operations as
necessary.
The six major purposes of controls are as follows:
1. Controls make plans effective. Managers need to measure progress, offer feedback, and direct
their teams if they want to succeed.
2. Controls make sure that organizational activities are consistent. Policies and procedures help
ensure that efforts are integrated.
3. Controls make organizations effective. Organizations need controls in place if they want to
achieve and accomplish their objectives.
4. Controls make organizations efficient. Efficiency probably depends more on controls than any
other management function.
5. Controls provide feedback on project status. Not only do they measure progress, but controls also
provide feedback to participants as well. Feedback influences behavior and is an essential
ingredient in the control process.

6. Controls aid in decision making. The ultimate purpose of controls is to help managers make
better decisions. Controls make managers aware of problems and give them information that is
necessary for decision making.
Many people assert that as the nature of organizations has changed so must the nature of
management controls. New forms of organizations, such as self-organizing organizations, self-
managed teams, and network organizations, allow organizations to be more responsive and adaptable
in today’s rapidly changing world. These forms also cultivate empowerment among employees,
much more so than the hierarchical organizations of the past.
Some people even claim that management shouldn’t exercise any form of control whatsoever, and
should only support employee efforts to be fully productive members of organizations and
communities. Along those same lines, some experts even use the word “coordinating” in place of
“controlling” to avoid sounding coercive. However, some forms of controls must exist for an
organization to exist. For an organization to exist, it needs some goal or purpose, or it isn’t an
organization at all. Individual behaviors, group behaviors, and all organizational performance
must be in line with the strategic focus of the organization.
The Control Process or Steps in Controlling
The control process involves carefully collecting information about a system, process, person, or
group of people in order to make necessary decisions about each. Managers set up control systems
that consist of four key steps:
1. Establish standards to measure performance. Within an organization’s overall strategic plan,

managers define goals for organizational departments in specific, operational terms that include
standards of performance to compare with organizational activities.
2. Measure actual performance. Most organizations prepare formal reports of performance
measurements that manager’s review regularly. These measurements should be related to the
standards set in the first step of the control process. For example, if sales growth is a target, the
organization should have a means of gathering and reporting sales data.
3. Compare performance with the standards. This step compares actual activities to performance
standards. When managers read computer reports or walk through their plants, they identify
whether actual performance meets, exceeds, or falls short of standards. Typically, performance
reports simplify such comparison by placing the performance standards for the reporting period
alongside the actual performance for the same period and by computing the variance—that is, the
difference between each actual amount and the associated standard.
4. Take corrective actions. When performance deviates from standards, managers must determine
what changes, if any, are necessary and how to apply them. In the productivity and quality-
centered environment, workers and managers are often empowered to evaluate their own work.
After the evaluator determines the cause or causes of deviation, he or she can take the fourth
step—corrective action. The most effective course may be prescribed by policies or may be best
left up to employees’ judgment and initiative. These steps must be repeated periodically until the
organizational goal is achieved.
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MANAGEMENT & ENTREPRENEURSHIP (15EE51) MODULE – 3 [PART A]
SYLLABUS:
Social Responsibilities of Business - Meaning, Social Responsibilities of Business towards different

groups, Social audit, Business ethics and Corporate Governance.
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MEANING OF SOCIAL RESPONSIBILITIES OF BUSINESS
Social responsibility is the idea that businesses should balance profit-making activities with
activities that benefit society. It involves developing businesses with a positive relationship to the
society in which they operate. It is a concept whereby organizations serve the interests of society by
taking responsibility for the impact of their activities on customer, employees, shareholders,
communities and the environment in all aspects of their organizations.
Social responsibility is an ethical framework and suggests that an entity, be it an organization or

individual, has an obligation to act for the benefit of society at large. Social responsibility is a duty
every individual has to perform so as to maintain a balance between the economy and the ecosystems.
Social responsibility means sustaining the equilibrium between the two. It pertains not only to
business organizations but also to everyone whose any action impacts the environment. This
responsibility can be passive, by avoiding engaging in socially harmful acts, or active, by performing
activities that directly advance social goals.
Example: “Starbucks Corporation and Ben & Jerry's Homemade Holdings Inc.” have blended social
responsibility into the core of their operations. Both companies purchase Fair Trade Certified
ingredients to manufacture their products and actively support sustainable farming in the regions
where they source ingredients. Conversely, big-box retailer Target Corporation, also well known for
its social responsibility programs, has donated more than $1 billion in grants to the communities in
which the stores operate, including education grants, since 2010.
MEANING / DEFINITIONS OF CSR:

CSR is a concept whereby organizations serve the interests of society by taking responsibility for the
impact of their activities on customers, employees, shareholders, communities, and the environment
in all aspects of their operations.
Corporate social responsibility (CSR, also called corporate conscience, corporate citizenship, social
performance, or sustainable responsible business/ Responsible Business) is a form of corporate self-
regulation integrated into a business model.
Notable examples of social responsibilities in India are as follows:

1. ITC - contract with farmers, helping poor people, donating books.
2. INFOSYS - share there 1% of profit every year for NIRMALA project.
3. LARSEN & TURBO LIMITED - Training institutes for semi-skilled labour.
4. NESTLE INDIA - Environmental awareness, drinking water facilities for rural areas.
5. DABUR - undertaken many rural areas for development.
REASONS FOR SOCIAL RESPONSIBILITIES

1. Consumerism
2. Trade Union
3. Public Opinion
4. Enlightened self interest
5. Professionalization
6. Trusteeship

SOCIAL RESPONSIBILITIES OF BUSINESS TOWARDS DIFFERENT GROUPS

There are basically 4 types of social responsibilities, they are as follows:
1. Responsibilities towards Consumers & community.
2. Responsibilities towards Employees & workers
3. Responsibilities towards Shareholders &other businesses
4. Responsibilities towards State
SOCIAL AUDIT
It is a way of measuring, understanding, reporting and ultimately improving an organizations social
and ethical performance.
Example: Infosys Foundation established in 1996. Areas of companies are healthcare, education,
culture, rural development and IT.
FEATURES OF SOCIAL AUDIT

1. Systematic evaluation
2. Measure social performance
3. Conducted on regular intervals
4. Wide coverage
5. Supplement to social responsibility
6. Acts as a guide
7. Different from commercial audit
8. Voluntary in character
NEED FOR SOCIAL AUDIT

1. Social consciousness
2. Monitor unethical practice
3. Social accountability
4. Informative system
5. Evaluating performance
OBJECTIVE OF SOCIAL AUDIT: Principal objectives & Secondary objectives.

Principal Objectives of Social Audit are as follows:
1. The extension, development and improvement of the company’s business and building up of its
financial independence.
2. The payment of a fair and regular dividend to the shareholders.
3. The payment of fair wages under the best possible conditions to the worker.
4. The reduction of prices to the consumers.
Secondary Objectives of Social Audit

1. Provision of a bonus to the workers.
2. Assist in promoting the amenities of the locality.
3. Assist in developing the industry in which the firm is a member.
4. Promote education, research and development in the techniques of the industry.
BUSINESS ETHICS
• It is a set of standards worked out from human reason and experience by which human actions
are determined as ultimately right or wrong, food or evil.
• It is the study of proper business policies and practices regarding potentially controversial
issues such as corporate governance, insider trading, bribery, discrimination.

BASIC PRINCIPLES OF BUSINESS ETHICS

1. Honesty- Ethical executives are honest and truthful in all their dealings and they do not
deliberately mislead or deceive others by misrepresentations, overstatements, partial truths,
selective omissions, or any other means.
2. Integrity- Ethical executives demonstrate personal integrity and the courage of their
convictions by doing what they think is right even when there is great pressure to do
otherwise; they are principled, honorable and upright; they will fight for their beliefs. They will
not sacrifice principle for expediency, be hypocritical, or unscrupulous.
3. Promise-Keeping & Trustworthiness - Ethical executives are worthy of trust. They are
candid and forthcoming in supplying relevant information and correcting misapprehensions of
fact, and they make every reasonable effort to fulfill the letter and spirit of their promises and
commitments. They do not interpret agreements in an unreasonably technical or legalistic
manner in order to rationalize non-compliance or create justifications for escaping their
commitments.
4. Loyalty - Ethical executives are worthy of trust, demonstrate fidelity and loyalty to persons
and institutions by friendship in adversity, support and devotion to duty; they do not use or
disclose information learned in confidence for personal advantage. They safeguard the ability
to make independent professional judgments by scrupulously avoiding undue influences and
conflicts of interest. They are loyal to their companies and colleagues and if they decide to
accept other employment, they provide reasonable notice, respect the proprietary information
of their former employer, and refuse to engage in any activities that take undue advantage of
their previous positions.
5. Fairness - Ethical executives and fair and just in all dealings; they do not exercise power
arbitrarily, and do not use overreaching nor indecent means to gain or maintain any advantage
nor take undue advantage of another’s mistakes or difficulties. Fair persons manifest a
commitment to justice, the equal treatment of individuals, tolerance for and acceptance of
diversity, they are open-minded; they are willing to admit they are wrong and, where
appropriate, change their positions and beliefs.
6. Concerns for Others - Ethical executives are caring, compassionate, benevolent and kind; they
like the Golden Rule ‘help those in needs, and seek to accomplish their business objectives in a
manner that causes the least harm and the greatest positive good’.
7. Respect for Others - Ethical executives demonstrate respect for the human dignity, autonomy,
privacy, rights, and interests of all those who have a stake in their decisions; they are courteous
and treat all people with equal respect and dignity regardless of sex, race or national origin.
8. Law Abiding - Ethical executives abide by laws, rules and regulations relating to their business
activities
9. Commitments to Excellence - Ethical executives pursue excellence in performing their duties,
are well informed and prepared, and constantly endeavour to increase their proficiency in all
areas of responsibility.
10. Leadership - Ethical executives are conscious of the responsibilities and opportunities of their
position of leadership and seek to be positive ethical role models by their own conduct and by
helping to create an environment in which principled reasoning and ethical decision making
are highly prized.
11. Reputation & Morale - Ethical executives seek to protect and build the company’s good
reputation and the morale of its employees by engaging in no conduct that might undermine
respect and by taking whatever actions are necessary to correct or prevent inappropriate
conduct of others.
12. Accountability - Ethical executives acknowledge and accept personal accountability for the
ethical quality of their decisions and omissions to themselves, their colleagues, their
companies, and their communities.

CORPORATE GOVERNANCE
Corporate – It is defined as a business or organization formed by a group of people and it has rights
and liabilities separate from those of the individuals involved.
Governance - It is defined as the Act of governing. It relates to decisions that define expectations,
grant power, or verify performance. In the case of a business or non - profit organization, governance
relates to consistent management, cohesive policies, and guidance, process and decision rights for a
given area of responsibilities.
Corporate Governance - is the system by which companies are directed and controlled by the
management in the best interest of the shareholders and others ensuring greater transparency and
better and timely financial reporting. It refers to combination of laws, rules and regulations,
procedures and voluntary practices to enable the companies to maximize the shareholders long term
value. In simple words, corpora governance is a set of relationship between a company’s management,
board, shareholders and stakeholders.
The main feature of the corporate governance is to manage the company by the
Board of Directors and not by the owners.
OBJECTIVES OF CORPORATE GOVERNANCE

1. To mitigate conflicts of interest
2. To ensure that the assets of the company are used efficiently and productively and in the best
interest of its shareholders and stakeholders.
3. To create a trust in the corporate and its abilities
4. To improve efficiency of capital market
5. To promote a healthy environment for long term investment
NEED FOR CORPORATE GOVERNANCE

1. Wide Spread of Shareholders: Today a company has a very large number of shareholders
spread all over the nation and even the world; and a majority of shareholders being
unorganized and having an indifferent attitude towards corporate affairs. The idea of
shareholders’ democracy remains confined only to the law and the Articles of Association;
which requires a practical implementation through a code of conduct of corporate governance.
2. Corporate Scams or Scandals: Corporate scams (or frauds) in the recent years of the past
have shaken public confidence in corporate management. The event of Harshad Mehta scandal,
which is perhaps, one biggest scandal, is in the heart and mind of all, connected with corporate
shareholding or otherwise being educated and socially conscious.
3. Changing Ownership Structure: The pattern of corporate ownership has changed
considerably, in the present-day-times; with institutional investors (foreign as well Indian) and
mutual funds becoming largest shareholders in large corporate private sector. These investors
have become the greatest challenge to corporate managements, forcing the latter to abide by
some established code of corporate governance to build up its image in society.
4. Greater Expectations of Society of the Corporate Sector: Society of today holds greater
expectations of the corporate sector in terms of reasonable price, better quality, pollution
control, best utilization of resources etc. To meet social expectations, there is a need for a code
of corporate governance, for the best management of company in economic and social terms.
5. Hostile Take-Overs: Hostile take-overs of corporations witnessed in several countries, put a
question mark on the efficiency of managements of take-over companies. This factor also
points out to the need for corporate governance, in the form of an efficient code of conduct for
corporate managements.
6. Huge Increase in Top Management Compensation: It has been observed in both developing
and developed economies that there has been a great increase in the monetary payments
(compensation) packages of top level corporate executives. There is no justification for
exorbitant payments to top ranking managers, out of corporate funds, which are a property of
shareholders and society.

7. Globalization: Desire of more and more Indian companies to get listed on international stock
exchanges also focuses on a need for corporate governance. In fact, corporate governance has
become a buzzword in the corporate sector. There is no doubt that international capital market
recognizes only companies well-managed according to standard codes of corporate
governance.
IMPORTANCE OF CORPORATE GOVERNANCE
1. Changing Ownership Structure: In recent years, the ownership structure of companies has
changed a lot. Public financial institutions, mutual funds, etc. are the single largest shareholder
in most of the large companies. So, they have effective control on the management of the
companies. They force the management to use corporate governance. That is, they put
pressure on the management to become more efficient, transparent, accountable, etc. The also
ask the management to make consumer-friendly policies, to protect all social groups and to
protect the environment. So, the changing ownership structure has resulted in corporate
governance.
2. Importance of Social Responsibility: Today, social responsibility is given a lot of importance.
The Board of Directors have to protect the rights of the customers, employees, shareholders,
suppliers, local communities, etc. This is possible only if they use corporate governance.
3. Growing Number of Scams: In recent years, many scams, frauds and corrupt practices have
taken place. Misuse and misappropriation of public money are happening every day in India
and worldwide. It is happening in the stock market, banks, financial institutions, companies
and government offices. In order to avoid these scams and financial irregularities, many
companies have started corporate governance.
4. Indifference on the part of Shareholders: In general, shareholders are inactive in the
management of their companies. They only attend the Annual general meeting. Postal ballot is
still absent in India. Proxies are not allowed to speak in the meetings. Shareholders
associations are not strong. Therefore, directors misuse their power for their own benefits. So,
there is a need for corporate governance to protect all the stakeholders of the company.
5. Globalization: Today most big companies are selling their goods in the global market. So, they
have to attract foreign investor and foreign customers. They also have to follow foreign rules
and regulations. All this requires corporate governance. Without Corporate governance, it is
impossible to enter, survive and succeed the global market.
6. Takeovers and Mergers: Today, there are many takeovers and mergers in the business world.
Corporate governance is required to protect the interest of all the parties during takeovers and
mergers.
7. SEBI: Securities and Exchange Board of India (SEBI) has made corporate governance
compulsory for certain companies. This is done to protect the interest of the investors and
other stakeholders.
ISSUES IN CORPORATE GOVERNANCE
1. Distinguishing the roles of board and management
2. Composition of the board and related issues.
3. Separation of the roles of CEO and Chairperson.
4. Should the board have committees
5. Appointments to the board and directors election
6. Director and executives remuneration
7. Disclosure and audit
8. Protection of shareholder rights and their expectations
9. Dialogue with institutional shareholder
10. Should invest have a say in making a company CSR
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M&E (15EE51)
MODULE 3 (Part B)
ENTREPRENEUR
An entrepreneur has been defined as, "a person who starts, organises and manages
any enterprise, especially a business, usually with considerable initiative and risk;
running a small business with all the risk and reward of any given business process”.
Entrepreneurs tend to be good at perceiving new business opportunities and they
often exhibit positive biases in their perception (i.e., a bias towards finding new
possibilities and seeing unmet market needs) and a pro-risk-taking attitude that makes
them more likely to exploit the opportunity. An entrepreneur may be in control of a
commercial undertaking, directing the factors of production – the human, financial
and material resources – that are required to exploit a business opportunity.
Entrepreneurs act as managers and oversee the launch and growth of an enterprise.
The word “entrepreneur” is derived from the French verb enterprendre, which
means ‘to undertake’. This refers to those who “undertake” the risk of new
enterprises. An enterprise is created by an entrepreneur. The process of creation is
called “entrepreneurship”. Entrepreneurship is a process of actions of an entrepreneur
who is a person always in search of something new and exploits such ideas into
gainful opportunities by accepting the risk and uncertainty with the enterprise.
Entrepreneurship is the process of designing, launching and running a new

business, which is more often than not, initially a small business, offering a product,
process or service for sale or hire. The people who create these businesses are called
entrepreneurs. Entrepreneurship has been described as the "capacity and willingness
to develop, organise and manage a business venture along with any of its risks in
order to make a profit".
Entrepreneurship is a role played by or the task performed by the entrepreneur. The

central task of the entrepreneur is to take moderate risk and invest money to earn
profits by exploiting an opportunity. For this he must posses far-sightedness to
perceive an opportunity so that he can exploit it well in time. Although an
entrepreneur has to perform diverse functions yet he must manifest many qualities in
himself to be a good entrepreneur.
Entrepreneurship is the process by which either an individual or a team identifies a

business opportunity and acquires and deploys the necessary resources required for
its exploitation.
DEFINITION OF ENTREPRENEUR
According to economist Joseph Alois Schumpeter (1883-1950), entrepreneurs are not
necessarily motivated by profit but regard it as a standard for measuring achievement
or success.
According to Richard Cantillon - An entrepreneur is a person who pays a certain

price for a product to resell it at an uncertain price, thereby making decisions about
obtaining and using the resources while consequently admitting the risk of enterprise.
Entrepreneurship can be defined as the propensity of mind to take calculated risks

with confidence to achieve a pre-determined business or industrial objective. That
points out the risk taking ability coupled with decision making.
CHARACTERISTICS OF SUCCESSFUL ENTREPRENEUR

1. Vision - One of your responsibilities as founder and head of your company is
deciding where your business should go. That requires vision. Without it, your
boat will be lost at sea. Are you the type of person who looks ahead and can see
the big picture?
2. Knowledge - Entrepreneurs realise that every event and situation is a business

opportunity. Ideas are constantly being generated about workflows and efficiency,
people skills and potential new businesses. They have the ability to look at
everything around them and focus it toward their goals.
3. Desire to succeed - It's easy in this fast paced, constant info-in-your-face world to
get distracted. This is especially true for start-ups, that often get side-tracked by
shiny object syndrome (i.e. products and services that promise fast results), or
bogged down in unimportant busy work. Successful entrepreneurs are focused on
what will bring results.
4. Independence - An Entrepreneurs needs independence in work and decision

making. They don’t follow the rules of them but make their own rules and
destiny.
5. Optimism - It's difficult to succeed at anything if you don't believe in a good
outcome. Entrepreneurs are dreamers and believe their ideas are possible, even
when they seem unattainable.
6. Value addition - Entrepreneurs do now follow the conventional rules of thumb.

They have a constant desire to introduce something new to the existing business.
They create something new to society.
7. Leadership - Entrepreneurs will take an initiative in the company to start up any

programs because it helps them to understand the problem between employees
and also help for them to gain more and more knowledge.
8. Hardworking - Entrepreneurs enjoy what they do. They believe in themselves and
are confident and dedicated to their project. Occasionally, they may show
stubbornness in their intense focus on and faith in their idea. But the flip side is
their demonstrated discipline and dedication.
9. Desire to have control over their fate - Entrepreneurs should have ability to
change the mind set from negative to positive when they feel they are in wrong
directions.
10. Risk taking ability - Launching any entrepreneurial venture is risky. Are you
willing to assume that risk? You can reduce your risk by thoroughly researching
your business concept, industry and market. You can also test your concept on a
small scale. Can you get a letter of intent from prospective customers to
purchase? If so, do you think customers would actually go through with their
transaction?
11. Motivation - Entrepreneurs are enthusiastic, optimistic and future-oriented. They

believe they’ll be successful and are willing to risk their resources in pursuit of
profit. They have high energy levels and are sometimes impatient. They are
always thinking about their business and how to increase their market share.
12. Creativity and Persuasiveness - Successful entrepreneurs have the creative

capacity to recognise and pursue opportunities. They possess strong selling skills
and are both persuasive and persistent.
13. Economic and dynamic activity:Entrepreneurship is an economic activity because
it involves the creation and operation of an enterprise with a view to creating
value or wealth by ensuring optimum utilisation of scarce resources. Since this
value creation activity is performed continuously in the midst of uncertain
business environment, therefore, entrepreneurship is regarded as a dynamic force.
IMPORTANCE OF ENTREPRENEURSHIP
1. Development of managerial capabilities: The biggest significance of
entrepreneurship lies in the fact that it helps in identifying and developing
managerial capabilities of entrepreneurs. An entrepreneur studies a problem,
identifies its alternatives, compares the alternatives in terms of cost and benefits
implications, and finally chooses the best alternative. This exercise helps in
sharpening the decision making skills of an entrepreneur. Besides, these
managerial capabilities are used by entrepreneurs in creating new technologies
and products in place of older technologies and products resulting in higher
performance.
2. Creation of organisations: Entrepreneurship results into creation of organisations

when entrepreneurs assemble and coordinate physical, human and financial
resources and direct them towards achievement of objectives through managerial
skills.
3. Improving standards of living:By creating productive organisations,

entrepreneurship helps in making a wide variety of goods and services available
to the society which results into higher standards of living for the
people.Possession of luxury cars, computers, mobile phones, rapid growth of
shopping malls, etc. are pointers to the rising living standards of people, and all
this is due to the efforts of entrepreneurs.
4. Means of economic development: Entrepreneurship involves creation and use of

innovative ideas, maximisation of output from given resources, development of
managerial skills, etc., and all these factors are so essential for the economic
development of a country.
5. A Creation of job opportunitiesEntrepreneurship firms contributed a large share

of new jobs. It provides entry-level jobs so necessary fur training or gaining
experience for unskilled workers. The small enterprises arc the only sector that
generates large portion of total employment every year. Moreover,
entrepreneurial ventures prepare and supply experienced labor to the large
industries.
6. InnovationEntrepreneurship is the incubator of the innovation. Innovation creates

disequilibria in the present state of order.It goes beyond discovery and does
implementation and commercialisation, of innovations. “Leap frog” innovation,
research, and development are being contributed by entrepreneurship.Thus,
entrepreneurship nurses innovation that provides new ventures, product,
technology , market, quality of good etc. to the economy that increase Gross
Domestic Products and standard of living of the people.
7. Enhances standard of living - Standard of living is a concept built on increasing

amount of consumption of variety of goods and services over a particular period
by a household.So it depends on availability of diversified products in the market.
Entrepreneurship provides enormous kinds product of various natures by their
innovation.Besides, it increases the income of the people who are employed in
the entrepreneurial enterprises. That also capable employed persons to consumer
more goods and services. In effect entrepreneurship enhances the standard of
living of the people of a country.
8. Promotes research and development - Entrepreneurship is innovation and hence

the innovated ideas of goods and services have to be tested by experimentation.
Therefore, entrepreneurship provides funds for research and development with
universities and research institutions. This promotes the general development o:’
research and development in the economy. Entrepreneurship is the pioneer zeal
that provides events in our civilisation. We are indebted to it for having prosperity
in every arena of human life- economic, technological and cultural. The above
discussion in a nutshell enumerates that tremendous’ contributions of
entrepreneurship.
Entrepreneurial Process:
Entrepreneurship is a process, a journey, not the destination; a means, not an end. All
the successful entrepreneurs like Bill Gates (Microsoft), Warren Buffet (Hathaway),
Gordon Moore (Intel) Steve Jobs (Apple Computers), Jack Welch (GE) GD Birla,
Jamshedji Tata and others all went through this process.
To establish and run an enterprise it is divided into three parts – the entrepreneurial
job, the promotion, and the operation. Entrepreneurial job is restricted to two steps,
i.e., generation of an idea and preparation of feasibility report. In this article, we shall
restrict ourselves to only these two aspects of entrepreneurial process.
Idea Generation:
To generate an idea, the entrepreneurial process has to pass through three
stages:Germination:
a. This is like seeding process, not like planting seed. It is more like the natural
seeding. Most creative ideas can be linked to an individual’s interest or curiosity
about a specific problem or area of study.
b. Preparation:
Once the seed of interest curiosity has taken the shape of a focused idea, creative
people start a search for answers to the problems. Inventors will go on for setting up
laboratories; designers will think of engineering new product ideas and marketers will
study consumer buying habits.
c. Incubation:
This is a stage where the entrepreneurial process enters the subconscious
intellectualisation. The sub-conscious mind joins the unrelated ideas so as to find a
resolution.
2. Feasibility study:
Feasibility study is done to see if the idea can be commercially viable.
It passes through two steps:
a. Illumination:
After the generation of idea, this is the stage when the idea is thought of as a realistic
creation. The stage of idea blossoming is critical because ideas by themselves have no
meaning.
b. Verification:
This is the last thing to verify the idea as realistic and useful for application.
Verification is concerned about practicality to implement an idea and explore its
usefulness to the society and the entrepreneur.
CONCEPTS OF ENTREPRENEURSHIP
Entrepreneurship is the tendency of a person to organise the business of his own and
to run it profitably, using all the qualities of leadership, decisions making and
managerial caliber etc. The term “entrepreneur” is often used interchangeably with
“entrepreneurship”. But conceptually they are different. In a way, entrepreneur
precedes entrepreneurship. It is concerned with the development and co-ordination of
entrepreneurial functions.
Entrepreneurship is an abstraction and entrepreneurs are tangible persons. Well

designed and controlled research studies on entrepreneurship are very few. If we view
entrepreneurship as opposed to management, it becomes still more difficult to define
entrepreneurship.
Entrepreneurship is a role played by or the task performed by the entrepreneur. The

central task of the entrepreneur is to take moderate risk and invest money to earn
profits by exploiting an opportunity. For this he must posses far-sightedness to
perceive an opportunity so that he can exploit it well in time. Although an
entrepreneur has to perform diverse functions yet he must manifest many qualities in
himself to be a good entrepreneur.
Entrepreneurship can be defined as the propensity of mind to take calculated risks
with confidence to achieve a pre-determined business or industrial objective. That
points out the risk taking ability coupled with decision making.
The word ‘entrepreneurship’ typically means to undertake. It owes its origin to the
western societies. But even in the west, it has undergone changes from time to time.
In the early 16th century, the term was used to denote army leaders. In the 18lh
century, it was used to denote a dealer who buys and cells goods at uncertain prices.
Towards 1961, Schumpeter, used the term innovator, for an entrepreneur. Two
centuries before, the concept of entrepreneurship was shady. It is only in the recent
years that entrepreneurship has been recognised widely all over the world like in
USA, Germany, Japan and in the developing countries like ours. Gunnar Myrdal
rightly pointed out that Asian societies lack entrepreneurship not because they lack
money or raw materials but because of their attitudes. Till recently, in the west, the
entrepreneurship is mainly an attribute of an efficient manager. But the success
achieved by entrepreneurs in developing countries demolishes the contention that
entrepreneur is a rare animal and an elusive character. In India, the definition of ‘an
entrepreneur being the one who undertakes to organise, own and run a business’ has
been accepted in a National Seminar on Entrepreneurship organised in Delhi in 1975.
Still there has been no consensus on the definition of entrepreneurship and qualities
of entrepreneurship.
CLASSIFICATIONS OF ENTREPRENEURSHIP
Entrepreneurs according to the type of business.
Business entrepreneur: Business entrepreneurs are individuals who conceive an
idea for a new product or service and then create a business to materialize their idea
into reality. They may set up a big establishment or a small business unit. They are
called small business entrepreneurs when found in small business units such as
printing press, textile processing house, advertising agency, readymade garments or
confectionery.
Trading Entrepreneur: The trading entrepreneur is one who undertakes trading
activities and is not concerned with the manufacturing work. He identifies potential
markets, stimulates demand for his product line and creates a desire and interest
among buyers to go in for his product line and creates a desire and interests among
buyers to go in for his product line and creates a desire and interests and buyers to go
in for his product. He is engaged in both domestic and overseas trade. Britain,
due to geographical limitations has developed trade through trading entrepreneurs.
Industrial Entrepreneurs: Industrial entrepreneur is essentially a manufacturer who
identifies the potential needs of customers and tailors a product or service to meet the
marketing needs. He is product- oriented man who starts in an industrial unit because
of the possibility of some new product.
Corporate Entrepreneur: Corporate entrepreneur is a person who demonstrates his

innovative skill in organising and managing corporate undertaking. A corporate
undertaking is is a form of business organisation which is registered under some
statue or act which gives it a separate legal entity. A trust registered under Trust act or
company registered under the companies act is examples of corporate undertakings. A
corporate entrepreneur is thus an individual who plans, develops and manages a
corporate body.
Agricultural Entrepreneur: Agricultural entrepreneur are those entrepreneurs who
undertake agricultural activities as raising and marketing of crops, fertilisers and
other inputs of agriculture. They are motivated to raise agricultural through
mechanisation, irrigation and application of technologies for dry land agriculture
products.
Entrepreneurs and stages of Development:

First-generation entrepreneur: A first generation entrepreneur is one who starts an
industrial unit by innovative skills. He is essentially an innovator, combining different
technologies to produce a marketable product or service.
Modern entrepreneur: A modern entrepreneur is one who undertakes those ventures
which go well along with the changing demand in the market. They undertake those
ventures which suit the current marketing needs.
Classical entrepreneur: A classical entrepreneur is one who is concerned with the
customers and marketing needs through the development of the self supporting
venture. He is a stereotype entrepreneur whose aim is to maximize his economic
returns at a level consistent with the survival of the firm with or without an element
of growth.
Based on Gender:
1. Men Entrepreneurs:
When business enterprises are owned, managed, and controlled by men, these are
called ‘men entrepreneurs.
2. Women Entrepreneurs:
Women entrepreneurs are defined as the enterprises owned and controlled by a
woman or women having a minimum financial interest of 51 per cent of the capital
and giving at least 51 per cent of employment generated in the enterprises to women.
Based on the Size of Enterprise:

1. Small-Scale Entrepreneur:
An entrepreneur who has made investment in plant and machinery up to Rs 1.00
crore is called ‘small-scale entrepreneur.
2. Medium-Scale Entrepreneur:
The entrepreneur who has made investment in plant and machinery above Rs 1.00
crore but below Rs 5.00 crore is called ‘medium-scale entrepreneur.
3. Large-Scale entrepreneur:
The entrepreneur who has made investment in plant and machinery more than Rs
5.00 crore is called ‘large-scale entrepreneur.
TYPES OF ENTREPRENEURS
1. Innovating Entrepreneurs:
Innovating entrepreneurs are one who introduce new goods, inaugurate new method
of production, discover new market and reorganise the enterprise. It is important to
note that such entrepreneurs can work only when a certain level of development is
already achieved, and people look forward to change and improvement.
2. Imitative Entrepreneurs:
These are characterised by readiness to adopt successful innovations inaugurated by
innovating entrepreneurs. Imitative entrepreneurs do not innovate the changes
themselves, they only imitate techniques and technology innovated by others. Such
types of entrepreneurs are particularly suitable for the underdeveloped regions for
bringing a mushroom drive of imitation of new combinations of factors of production
already available in developed regions.
3. Fabian Entrepreneurs:
Fabian entrepreneurs are characterised by very great caution and skepticism in
experimenting any change in their enterprises. They imitate only when it becomes
perfectly clear that failure to do so would result in a loss of the relative position in the
enterprise.
4. Drone Entrepreneurs:
These are characterised by a refusal to adopt opportunities to make changes in
production formulae even at the cost of severely reduced returns relative to other like
producers. Such entrepreneurs may even suffer from losses but they are not ready to
make changes in their existing production methods.
INTRAPRENEUR
An intrapreneur is an inside entrepreneur, or an entrepreneur within a large firm, who
uses entrepreneurial skills without incurring the risks associated with those activities.
Intrapreneurs are usually employees within a company who are assigned to work on a
special idea or project, and they are instructed to develop the project like an
entrepreneur would. Intrapreneurs usually have the resources and capabilities of the
firm at their disposal.
Intrapreneurship is acting like an entrepreneur within a larger organisation.

Intraprenuers are usually highly self-motivated, proactive and action-oriented people
who are comfortable with taking the initiative, even within the boundaries of an
organisation, in pursuit of an innovative product or service. The intrapreneur has the
comfort of knowing that failure does not have a personal cost as it does for an
entrepreneur, since the organisation absorbs losses arising from failure.
An intrapreneur is an employee who is given the authority and support to create a

new product without having to be concerned about whether or not the product will
actually become a source of revenue for the company. Unlike an entrepreneur, who
faces personal risk when a product fails to produce revenue, an intrepreneur will
continue to receive a salary even if the product fails to make it to production.
DIFFERENCE BETWEEN INTRAPRENEUR AND ENTREPRENEUR.
INTRAPRENEUR ENTREPRENEUR
Intrapreneurship is the Entrepreneurship is the dynamic
entrepreneurship within an existing process of creating incremental
organization. wealth.
To increase competitive strength To innovate something new of
and market sustainability of the socio economic value.
organization.
Enhance rewarding capacity of the Innovation, financial gain tad
organization and autonomy. independence.
Direct participation, which is more Direct and total participation in the
that delegation of authority. process of innovation. _
Hears moderate risk. Bears all types of risk.
Organizational employee expecting Free and sovereign person doesn’t
freedom in work. bother with status.
Keeps risky projects secret unless it Recognizes mistake and failures so
is prepared due to high concern for as to take new innovative efforts.
failure and mistakes.
Collaborative decisions to execute Independent decisions to execute
dreams. dreams.
Organization and intrapreneur Customers and entrepreneur
himself. himself.
May not have or a little Professional or small business
professional post. family heritage.
Authority structure delineates the Basic relationship based on
relation. interaction and negotiation.
Self-imposed or organtzauonally There is no time bound.
stipulated time limits.
Technology and market. Increasing sales and sustaining
competition.
Follows self-style beyond given Adaptive self-style considering
structure. Structure as inhabitants.
Strong self-confidence and hope Strong commitment to self-initiated
for achieving goals. efforts and goals.
Operates from inside the Operates from outside the
organization. organization.
CHARACTERISTICS OF INTRAPRENEUR
Entrepreneurs bridge gap between inventors and managers.
They have vision and courage to realise it.
They can imagine what business prospects will follow from the way customers
respond to their innovators
They have ability to plan necessary steps for actualisation of the idea
They have high need for achievement
They take moderate risk
They are dedicated to there work that they take it up
MYTHS OF ENTREPRENEURSHIP
1. Entrepreneurs tend to carefully seek the best risk/reward action.

2. Entrepreneurs Are Born
3. Entrepreneurs Are Mainly Motivated to Get Rich
4. Entrepreneurs Give Little Attention to Their Personal Life
5. Entrepreneurs Are Often High-Tech Wizards
6. Entrepreneurs Are Loners and Introverts
7. Entrepreneurs Are Job Hoppers
8. Entrepreneurs Finance Their Business with Venture Capital
9. Entrepreneurs Are Often Ruthless or Deceptive
10. Entrepreneurs Have Limited Dedication
11. If my product or service is good, I’ll be successful
12. Entrepreneurship will give me back complete control over my schedule
13. Never give away your product or service: It’ll dilute your brand
14. Early on, I need to do it all myself.
15. The more clients, the better
16. It takes a lot of money to finance a new business
17. Venture capitalists are a good place to go for startup money
18. Most business angels are rich.
19. Startups can’t be financed with debt
20. Banks don’t lend money to startups
21. Most entrepreneurs start businesses in attractive industries
22. The growth of a startup depends more on an entrepreneur’s talent than on the
business he chooses
23. Most entrepreneurs are successful financially
24. It takes a lot of Money To Start a Successful Business
25. I will Be Happier in Life as an Entrepreneur
26. I will not have a Boss When I Become an Entrepreneur
27. I will Have More Freedom and Work-Life Balance
DIFFERENCE BETWEEN ENTREPRENEUR AND ENTREPRENEURSHIP
ENTREPRENEUR ENTREPRENEURSHIP
Person Process
Visualiser Vision
Creator Creation
Organiser Organisation
Innovator Innovation
Technician TEchnology
Initiator Initiative
Decision maker Decision
Planner Planning
Leader Leadership
Motivator Motivation
Programmer Action
Risk taker Risk taking
Communicator Communication
Administrator Administration
ENTREPRENEURIAL DEVELOPMENT CYCLE
Stimulatory
1 Entrepreneurial Education.
2 Planned publicity for entrepreneurial opportunities.
3 Identification of potential entrepreneurs through scientific methods.
4 Motivational training to new entrepreneurs.
5 Help and guidance in selecting products and preparing project reports. J
6.Making available techno-economic information and product profits.
6 Evolving locally suitable new products and processes.
7 Availability of local agencies with trained personnel for entrepreneurial
counselling and promotions.
8 Organising entrepreneurial forum.
Support
1 Registration of unit
2 Arranging finance
3 Providing land, shed, power, water etc
4 Guidance for selecting and obtaining machinery
5 Supply of scarce raw materials
6 Getting licenses/import licenses
7 Providing common facilities
8 Granting tax relief or other subsidy
9 Offering management consultancy
10 Help marketing product
Sustaining
1 Help modernisation
2 Help diversification/ expansion/substitute production
3 Defining repayment/interest
4 Define repayment/interest
5 Diagnostic industrial extension/consultancy source
6 Production units’ legislation/policy change reservation/Creating new avenues
for marketing
7 Oath testing and improving services
8 Need-based control facilities centre
Entrepreneurship development cycle contributes to the development of

entrepreneurs.
It consist of 3 stages.
1st Stage:
In this initial stage, for the development of entrepreneurial, education is
provided to them. Then they provide different opportunities through planned
publicity. Than identification of potential entrepreneurs is done through
scientific method .Special training is provided to them to motivate them. They
also help and guide them to select product and preparing project reports. They
also make available Techno-Economic Information and Product Profits to them
as well as Local agencies with trained personnel to them. It creates an
entrepreneurial forum. And helps them to recognise entrepreneurial skills.
2nd Stage:-
After getting educated, motivated and trained, in this stage financing,
marketing and other steps are performed by entrepreneurs. Here, registration of
unit is done along with arrangement of finance. It also provides land, shed,
power, water, scarce raw materials, different information, common facilities etc
to them. They guide entrepreneurs for selecting and obtaining machinery, for
importing the licenses and also for marketing the product.
3rd Stage:-
After marketing the product in market n above stage, this stage helps in
modernisation, accepting diversification, expansion and substitute production.
Additional financing is done for full capacity utilisation. There is differing
repayment or interest. There is a diagnostic and different industrial extension or
consultancy source. There is Production unit’s legislation that is policy can be
change. Product is copyright and patent or reserved and creating new avenues
for marketing. After this quality is tested and try to improve the services and to
provide best quality product in the market. Needs-Based Centres are provided
with common facilities.
In this way entrepreneurial cycle contributes to the development of
entrepreneurs step by step. Initially by providing education, training,
motivation then by making proper allocation of resource and finance and
proper marketing of the product and then by accepting modernisation,
changing policies, new technologies advancement.
It leads to a successful, well trained, motivated entrepreneur.
PROBLEMS FACED BY ENTREPRENEURS IN INDIA

1. Bureaucracy
2. Corruption
3. Labour ( Skilled labour)
4. Regional Sentiments
5. Grey Market and Counterfeit Goods
6. Social Capital
7. Cash flow management
8. Hiring employees
9. Time management
10. Delegating tasks
11. Choosing what to sell
12. Marketing strategy
13. Capital
14. Business growth
15. Strapped budget
16. Self-doubt
17. Less Stability
18. High Rates of Risk
19. Taxes and Overhead
20. Teambuilding
21. Loneliness
22. Inability to market their business
Module - 4
Modern Small Business Enterprises: Role of Small Scale Industries, Concepts and
definitions of SSI Enterprises, Government policy and development of the Small
Scale sector in India, Growth and Performance of Small Scale Industries in India,
Sickness in SSI sector, Problems for Small Scale Industries, Impact of Globalisation
on SSI, Impact of WTO/GATT on SSIs, Ancillary Industry and Tiny Industry
(Definition only).
Institutional Support for Business Enterprises: Introduction, Policies & Schemes of
Central–Level Institutions, State-Level Institutions.
CONCEPT OF SMALL SCALE ENTERPRISE: Small scale sector plays an

important role in the development of every country. In a developing country like
India this sector is indispensable. Since independence small scale units have made
significant progress. After agriculture small scale sector provides highest employment
to the labour force. Since small units are widely dispersed, they provide jobs to local
residents.
Manufacturing enterprises in which investment in plant & machineries is more than

Rs 25.00 lakhs but does not exceed Rs 5.00 crores and service sector industries in
which investment in equipment is more than Rs 10.00 lakhs but does not exceed Rs
2.00 crores are termed as small-scale enterprises.
The Small Scale Sector owes its definition to the Industries (Development and
Regulation) Act, 1951. The Sector is defined in terms of investment limits in plant &
machinery (original value), up to a prescribed value. It comprises a wide divergent
spectrum of industries, ranging from the micro and rural enterprises, using
rudimentary technology on the one hand to the modern small scale industries using
sophisticated technology on the other.
In India, small-scale industries (SSIs) occupy 12.3 million units, contribute to 40 per
cent of industrial production and 35 per cent of their exports and provide employment
to about 29.5 million people. The SSIs now produce more than 8000 products. By
recognising the importance I of SSI units in the development of economy, the
government has been continuously attempting to improve the availability of critical
input to this sector and create appropriate infrastructural environment. Recently,
significant policy initiatives have created easy availability of financial assistance,
incentives and subsidies and influenced many enterprises to start SSIs. This has
resulted in growth in the number of SSI units.
ROLE / IMPORTANCE OF SMALL SCALE INDUSTRY
Partner in nation building: provide numerous job opportunities to various classes of
people, they are not only paying them their salaries but also enabling them to improve
their lifestyle, sending their children to schools to gain education who will become
partners in the nation building in time to come and providing them with good and
hygienic food.
Customised Products: Instead of generic products already present in the market, you
want to provide some sort of customised products to your customers, then small
players can come to your rescue. Conglomerates and MNCs usually do not disturb
their already continuing chain of products for any order, unless it is big enough to
form part of company’s sizeable revenue. However, smaller players are always ready
to surprise you with their latest products which can be customised at your will.
Creation of jobs: In the modern era where larger corporates and MNCs are moving
more and more towards automation and mechanisation, SSIs which still cannot afford
such high-end technologies, seek to recruit more and more people into their labour
intensive industries. Recently, a large IT company laid off 3000 employees due to
increased level of automation and robots replacing humans. Whereas, even today
myriads of SSIs are labour intensive and provide earning to many skilled, semi-
skilled & unskilled workers.
Employment to local people: recruit more and more local people as they want to
build relations instead of just generating numbers. If the relations are good, the
employee remains loyal to the company and treats the company’s property, company’
profits & losses as his own. Employing local people instils confidence among the
workers which ultimately increases their productivity in the long-term.
Discipline into the industry: Nowadays there has been increased trend of big
corporates taking care of their customers. Some big players have even setup an
altogether different department just for the customer care. Even conglomerates are
aware that if they start ignoring customers and merely focus on maximising profits,
then those customers will ultimately shift to smaller players present in the industry.
Due to existence of smaller players into the market, bigger companies conduct their
businesses with required discipline.
Large Production: The small-scale industries also contribute a sizeable amount to

the industrial output of the country. Out of the total output of the manufacturing
sector, as much as 40% comes from these industries. And out of the total supplies of
industrial consumer goods a major part originates in the small-scale sector. Almost all
the products of this sector are in the nature of consumer goods, with a significant part
consisting of luxury goods. The adequate availability of consumer goods plays an
important role in stabilising and developing the economy.
Large Exports: Many products of the small-scale industries like handloom cotton
fabrics, silk fabrics, handicrafts, carpets, jewellery, etc. are exported to foreign
countries. Their share in the total exports is as much as 40%. In this way the small-
scale sector makes a very valuable contribution to the accumulation of foreign
exchange resource of the country.
Use of Latent (domestic) resources: The small-scale industries used resources

which are available locally which would otherwise have remained unused. These
resources are, the hoarded wealth, family-labour, artisan’s skills, native
entrepreneurship, etc. Being thinly spread throughout the country, these resources
cannot be used by large-scale industries which need them in big amounts and at a few
specified places.
Promoting Welfare: The small-scale industries are also very important for welfare
reasons. People of small means can organise these industries. This in turn increases
their income-levels and quality of life. As such these industries help in reducing
poverty in the country. Further, these industries tend to promote equitable distribution
of income. Since income gets distributed among vast number of persons throughout
the country, this help in the reduction of regional economic disparities.
Facilitates Women Growth: It provides employment opportunities to women in

India.It promotes entrepreneurial skills among women as special incentives are given
to women entrepreneurs.
Brings Balanced Regional Development: promotes decentralised development of

industries as most of the small scale industries are set up in backward and rural
areas.It promotes urban and rural growth in India.
Paves for Optimisation of Capital: requires less capital per unit of output. It
provides quick return on investment due to shorter gestation period. The pay back
period is quite short in small scale industries.
Promotes Exports : SSI does not require sophisticated machinery. Hence, it is not
necessary to import the machines from abroad. On the other hand, there is a great
demand for goods produced by small scale sector. Thus it reduces the pressure on the
country’s balance of payments.
Meets Consumer Demands: SSI produces wide range of products required by

consumers in India. SSI meets the demand of the consumers without creating a
shortage for goods. Hence, it serves as an anti-inflationary force by providing goods
of daily use.
Ensures Social Advantage: SSI helps in the development of the society by reducing
concentration of income and wealth in few hands.SSI provides employment to people
and pave for independent living.SSI helps the people living in rural and backward
sector to participate in the process of development.It encourages democracy and self-
governance.
Develops Entrepreneurship: It helps to develop a class of entrepreneurs in the

society. It helps the job seekers to turn out as job givers.It promotes self-employment
and spirit of self-reliance in the society.Development of small scale industries helps
to increase the per capita income of India in various ways.It facilitates development
of backward areas and weaker sections of the society.Small Scale Industries are adept
in distributing national income in more efficient and equitable manner among the
various participants of the society.
Equitable distribution of income: Small entrepreneurs stimulate a redistribution of

wealth, income and political power within societies in ways that are economically
positive and without being politically disruptive.Thus small-scale industries ensures
equitable distribution of income and wealth in the Indian society which is largely
characterised by more concentration of income and wealth in the organised section
keeping unorganised sector undeveloped. This is mainly due to the fact that small
industries are widespread as compared to large industries and are having large
employment potential.
GOVERNMENT POLICY AND DEVELOPMENT OF THE SMALL SCALE
SECOTR IN INDIA
Industrial Policy Resolution (IPR) 1948: The IPR, 1948 for the first time, accepted
the importance of small-scale industries in the overall industrial development of the
country. It was well realised that small-scale industries are particularly suited for the
utilisation of local resources and for creation of employment opportunities.However,
they have to face acute problems of raw materials, capital, skilled labour, marketing,
etc. since a long period of time. Therefore, emphasis was laid in the IPR, 1948 that
these problems of small-scale enterprises should be solved by the Central
Government with the cooperation of the State Governments. In nutshell, the main
thrust of IPR 1948, as far as small-scale enterprises were concerned, was ‘protection.’
Industrial Policy Resolution (IPR) 1956:

The main contribution of the IPR 1948 was that it set in the nature and pattern of
industrial development in the country. The post-IPR 1948 period was marked by
significant developments taken place in the country. For example, planning has
proceeded on an organised manner and the First Five Year Plan 1951-56 had been
completed. Industries (Development and Regulation) Act, 1951 was also introduced
to regulate and control industries in the country.
The parliament had also accepted ‘the socialist pattern of society’ as the basic aim of
social and economic policy during this period. It was this background that the
declaration of a new industrial policy resolution seemed essential. This came in the
form of IPR 1956.
The IPR 1956 provided that along with continuing policy support to the small sector,
it also aimed at to ensure that decentralised sector acquires sufficient vitality to self-
supporting and its development is integrated with that of large- scale industry in the
country. To mention, some 128 items were reserved for exclusive production in the
small-scale sector.Besides, the Small-Scale Industries Board (SSIB) constituted a
working group in 1959 to examine and formulate a development plan for small-scale
industries during the, Third Five Year Plan, 1961-66. In the Third Five Year Plan
period, specific developmental projects like ‘Rural Industries Projects’ and ‘Industrial
Estates Projects’ were started to strengthen the small-scale sector in the country.
Thus, to the earlier emphasis of ‘protection’ was added ‘development.’ The IPR 1956
for small-scale industries aimed at “Protection plus Development.” In a way, the IPR
1956 initiated the modem SSI in India.
During the two decades after the IPR 1956, the economy witnessed lopsided
industrial development skewed in favour of large and medium sector, on the one
hand, and increase in unemployment, on the other. This situation led to a renewed
emphasis on industrial policy. This gave emergence to IPR 1977.
The Policy Statement categorically mentioned:

“The emphasis on industrial policy so far has been mainly on large industries,
neglecting cottage industries completely, relegating small industries to a minor role.
The main thrust of the new industrial policy will be on effective promotion of cottage
and small-scale industries widely dispersed in rural areas and small towns. It is the
policy of the Government that whatever can be produced by small and cottage
industries must only be so produced.”
The IPR 1977 accordingly classified small sector into three broad categories:
1. Cottage and Household Industries which provide self-employment on a large scale.
2. Tiny sector incorporating investment in industrial units in plant and machinery up
to Rs. 1 lakh and situated in towns with a population of less than 50,000 according to
1971 Census.
3. Small-scale industries comprising of industrial units with an investment of upto Rs.
10 lakhs and in case of ancillary units with an investment up to Rs. 15 lakhs.

The Government of India adopted a new Industrial Policy Resolution (IPR) on July
23, 1980. The main objective of IPR 1980 was defined as facilitating an increase in
industrial production through optimum utilisation of installed capacity and expansion
of industries.
As to the small sector, the resolution envisaged:
(i) Increase in investment ceilings from Rs. 1 lakh to Rs. 2 lakhs in case of tiny units,
from Rs. 10 lakhs to Rs. 20 lakhs in case of small-scale units and from Rs. 15 lakhs to
Rs. 25 lakhs in case of ancillaries.
(ii) Introduction of the concept of nucleus plants to replace the earlier scheme of the
District Industry Centres in each industrially backward district to promote the
maximum small-scale industries there.
(iii) Promotion of village and rural industries to generate economic viability in the
villages well compatible with the environment.
Thus, the IPR 1980 reemphasised the spirit of the IPR 1956. The small-scale sector
still remained the best sector for generating wage and self-employment based
opportunities in the country.

The IPR 1990 was announced during June 1990. As to the small-scale sector, the
resolution continued to give increasing importance to small-scale enterprises to serve
the objective of employment generation.
The important elements included in the resolution to boost the development of

small-scale sector were as follows:
(i) The investment ceiling in plant and machinery for small-scale industries (fixed in
1985) was raised from Rs. 35 lakhs to Rs. 60 lakhs and correspondingly, for ancillary
units from Rs. 45 lakhs to Rs. 75 lakhs.
(ii) Investment ceiling for tiny units had been increased from Rs. 2 lakhs to Rs. 5
lakhs provided the unit is located in an area having a population of 50,000 as per
1981 Census.
(iii) As many as 836 items were reserved for exclusive manufacture in small- scale
sector.
(iv) A new scheme of Central Investment Subsidy exclusively for small-scale sector
in rural and backward areas capable of generating more employment at lower cost of
capital had been mooted and implemented.
(iv) With a view, to improve the competitiveness of the products manufactured in the
small-scale sector; programmes of technology up gradation will be implemented
under the umbrella of an apex Technology Development Centre in Small Industries
Development Organisation (SIDO).
(v) To ensure both adequate and timely flow of credit facilities for the small- scale
industries, a new apex bank known as ‘Small Industries Development Bank of India
(SIDBI)’ was established in 1990.
(vi) Greater emphasis on training of women and youth under Entrepreneurship
Development Programme (EDP) and to establish a special cell in SIDO for this
purpose.
(vii) Implementation of delicensing of all new units with investment of Rs. 25 crores
in fixed assets in non-backward areas and Rs. 75 crores in centrally notified
backward areas. Similarly, delicensing shall be implemented in the case of 100%
Export Oriented Units (EOU) set up in Export Processing Zones (EPZ) up to an
investment ceiling of Rs. 75 lakhs.
The other development of SSI are as follows:
The National Small Industries Corporation and the nationalised Commercial Banks
are taking measures to provide long term finance for the development of such
industries. The Central Government has now given loans to the State Government for
the institution of industrial estates.
In the rural areas, the Industrial Training Centres have been set up for the proper
education and training of cottage workers and artisans
The Indian Government has set up the Cottage Industries Board, the Khadi and
village Industries Board, Inventions Promotions Board, Small Industries
Development Board etc. for the development of small scale industries.
The Indian Government has also made provision for cheap electricity and small
machine tools in order to raise the labor productivity of small scale cottage industries.
With the help of the Reserve Bank of India, the nationalised Commercial Banks have
been taking suitable measures for the modernisation of machines and production
techniques of small scale and cottage industries as a complementary to large scale
units. We get quality products from the cottage industries.
GOWTH AND PERFORMANCE OF THE SMALL SCALE INDUSTRY IN

INDIA
Small-scale sector has broadened from SSIs to small-scale enterprises that include all
business enterprises in the services sector which provide service to industrial sector in
addition to SSIs. Taking into account all these factors, at present, Reserve Bank of
India uses an expanded definition of SSIs which includes:
1. Small-scale industrial undertaking which is engaged in the manufacturing,

processing and preservation of goods in which the investment in plant and
machinery does not exceed ` 50 million. These would include units engaged in
mining or quarrying servicing and repairing of machinery.
2. Tiny enterprises whose investment in plant and machinery does not exceed ` 2.5
million.
3. Power looms.
4. Traditional industries which require high workmanship and techniques and also
village and household industries producing common goods of consumption
predominantly by using simple tools.
5. The decentralised and informal sector like handlooms and handicrafts.
6. The industry related to services/business enterprises.
7. Food and agro-based industries.
8. Software industry.
The development of SSIs is being given due importance by the government in order
to achieve the following objectives:
1. To provide additional employment opportunities.
2. To mobilise resources of capital and skill from various parts of the country.
3. To provide a more equitable distribution of national income.
4. To provide a helping hand to large industries and facilitate them in their work.
Small-scale industries and economic development of India
Employment generation. The basic problem that the Indian economy is confronting
is increasing pressure of population on the land and the need to create massive
employment opportunities. This problem is solved to a large extent by SSIs because
SSIs are labour-intensive in nature. They generate large number of employment
opportunities. Employment generation by this sector has shown a phenomenal
growth. It is a powerful tool of job creation.
Mobilisation of resources and entrepreneurial skill. SSIs can mobilise a good

amount of savings and entrepreneurial skill from rural and semi-urban areas which
remain untouched from the clutches of large industries and put them into productive
use by investing in small-scale units. Small entrepreneurs also improve social welfare
of a country by harnessing dormant, previously overlooked talent. Thus, a huge
amount of latent resources is being mobilised by the small-scale sector for the
development of the economy.
Equitable distribution of income. The SSIs ensure equitable distribution of income
and wealth in the Indian society which is largely characterised by more concentration
of income and wealth in the organised sector keeping unorganised sector
undeveloped. This is mainly due to the fact that small industries are widespread as
compared to large industries and have large employment potential.
Regional dispersal of industries. There has been massive concentration of industries

in a few large cities of different states of India. People migrate from rural and semi-
urban areas to these highly developed centres in search of employment and
sometimes to earn a better living which ultimately leads to many evil consequences
like overcrowding, pollution, creation of slums, etc. This problem of Indian economy
is better solved by SSIs which utilise local resources and bring about dispersion of
industries in various parts of the country thereby promoting balanced regional
development.
Providing opportunities for development of technology. SSIs have tremendous

capacity to generate or absorb innovations. They provide ample opportunities for the
development of technology and technology in turn, creates an environment conducive
to the development of small units. The entrepreneurs of small units play a strategic
role in commercialising new inventions and products. They also facilitate the transfer
of technology from one to the other. As a result, the economy reaps the benefit of
improved technology.
Promotion of exports. SSIs have registered a phenomenal growth in export over the
years. The value of exports of products of SSIs has increased from ` 6979.7 million in
2000-01 to ` 28,384.7 million in 2011-12. Thus they help in increasing the country’s
foreign exchange reserves thereby reducing the pressure on country’s balance of
payments.
Supporting the growth of large industries. The SSIs play an important role in
assisting bigger industries and projects so that the planned activity of development
work is timely attended. They support the growth of large industries by providing
them components, accessories and semi-finished goods. In fact, small industries
breathe vitality into the life of large industries.
Better industrial relations. Better industrial relations between the employer and
employees help in increasing the efficiency of employees and reducing the frequency
of industrial disputes. The loss of production and man days are comparatively less in
SSIs. There are hardly any strikes or lockout in these industries due to good
employee-employer communication and relationship. Of course, increase in number
of units, production, employment and exports of SSIs over the years are considered
essential for the economic growth and development of the country.
Sickness in SSI - The SSI sector now faces problems such as fierce competition and
natural threat to indigenous technology. The process of liberalisation, privatisation
and globalisation (LPG) posed several threats and challenges for SSIs in India. As a
consequence of this, several SSIs flourished and several became sick. The reason for
sickness in SSIs include:
1. Inadequacy of working capital
2. Delay in sanction of working capital and time gap between sanction of term loan
and working capital
3. Poor and obsolete technology
4. Problems related to availability of raw material
5. Inadequate demand and other marketing problems
6. Erratic power supply
7. Labour problem
8. Infrastructural constraints
9. inadequate attention to research and development
10. Inability of the units to face growing competition due to liberalisation and
globalisation
11. Slow technology adaptation in mitigation of environmental management,

technology system and lack of enforcement of existing procedure.
12. Shortage of liquid funds
13. Growing of excessive investors
14. Government policy
15. Planning and decision making

Problems faced by the small-scale industries in India
Problem of skilled manpower. The success of a small enterprise revolves around the
entrepreneur and its employees, provided the employees are skilled and efficient.
Inefficient human factor and unskilled manpower create innumerable problems for
the survival of small industries. Non-availability of adequate skilled manpower in the
rural sector poses problem to SSIs.
Inadequate credit assistance. Inadequate and untimely supply of credit facilities is

an important problem faced by SSIs. This is partly due to scarcity of capital and
partly due to weak creditworthiness of the small units in the country.
Irregular supply of raw material. Small units face severe problems in procuring the
raw materials whether they use locally-available raw materials or imported raw
materials. The problems arise due to faulty and irregular supply of raw materials.
Non-availability of sufficient quantity of raw materials, sometimes poor quality of
raw materials, increased cost of raw materials, foreign exchange crisis and above all
lack of knowledge of entrepreneurs regarding government policies are other few
hindrances for the small-scale sector.
Absence of organised marketing. Another important problem faced by small-scale

units is the absence of organised marketing system. In the absence of organised
marketing, their products compare unfavourably with the quality of the product of
large-scale units. They also fail to get adequate information about consumer’s choice,
taste and preferences of the type of product. The above problems do not allow them
to stay in the market.
Lack of machinery and equipment. Small-scale units are striving hard to employ
modern machineries and equipment in their production process in order to compete
with large industries. Most of the small units employ outdated and traditional
technology and equipment. Lack of appropriate technology and equipment creates a
major stumbling block for the growth of SSIs.
Absence of adequate infrastructure. Indian economy is characterised by inadequate

infrastructure which is a major problem for small units to grow. Most of the small
units and industrial estates found in towns and cities are having one or more problems
like lack of power supply, water and drainage problem, poor roads, raw materials and
marketing problem.
Competition with large-scale units and imported articles. Small-scale units find it
very difficult to compete with the product of large-scale units and imported articles
which are comparatively very cheap and of better quality than products manufactured
Other problems. Besides the above problems, small-scale units have been
constrained by a number of other problems which include poor project planning,
managerial inadequacies, old and orthodox designs and high degree of obsolescence.
Due to all these problems, the development of SSIs could not reach a prestigious
stage.
Poor capacity utilisation: In many of the Small Scale Industries, the capacity
utilisation is not even 50% of the installed capacity. Nearly half of the machinery
remains idle. Capital is unnecessarily locked up and idle machinery also occupies
space and needs to be serviced resulting in increased costs.
Problems in Export: They lack knowledge about the export procedures, demand
patterns, product preferences, international currency rates and foreign buyer
behaviour. Small Scale Industries are not able to penetrate foreign markets because of
their poor quality and lack of cost competitiveness. In countries like Taiwan, Japan
etc. products produced by Small Scale Industries are exported to many foreign
countries. But in India not much thought and focus has gone into improving the
export competitiveness of Small Scale Industries.
Lack of technology up-gradation: Many Small Scale Industries still use primitive,
outdated technology leading to poor quality and low productivity. They do not have
adequate funds, skills or resources to engage in research and development to develop
new technologies. Acquiring technology from other firms is costly. Therefore Small
Scale Industries are left with no choice but to continue with their old techniques.
Inability to meet environmental standards: The government lays down strict

environmental standards and Courts have ordered closure of polluting industries.
Small Scale Industries which are already facing shortage of funds to carry out their
business are not able to spend huge sums on erecting chimneys, setting up effluent
treatment plants etc.
Delayed payments: Small Scale Industries buy raw materials on cash but due to the
intense competition have to sell their products on credit. Buying on cash and selling
on credit itself places a great strain on finances. The greater problem is payments are
delayed, sometimes even by 6 months to one year. It is not only the private sector but
even government departments are equally guilty. Delayed payments severely impact
the survival of many Small Scale Industries.
Lack of awareness: The government has set up many organisations to support and
provide assistance to Small Scale Industries. But, many of the entrepreneurs running
Small Scale Industries are not aware of the various support services.
IMPACT OF GLOBALISATION ON SSI
Globalisation refers to the process of integration of the world into one huge market. It
provides several things to several people with removal of all trade barriers among
countries. Globalisation happens through three channels: trade in goods & services,
movement of capital and flow of finance. Globalisation in India is generally taken to
mean ‘integrating’ the economy of the country with the world economy. The real
thrust to the globalisation process was provided by the new economic policy
introduced by the Government of India in July 1991 .
Globalisation has led to an ‘Unequal Competition’- a competition between ‘giant

MNC’s and dwarf Indian enterprises’. The small scale sector is a vital constituent of
overall industrial sector of the country. The small scale sector forms a dominant part
of Indian industry and contributing to a significant proportion of production, exports
and employment. Therefore, the present study analyses the impact of globalisation on
Indian Small Scale Industries. The main theme of the paper is to evaluate the
performance of SSI, before and after liberalisation and compare them with average
annual growth rates, to know the impact of Globalisation on the performance of SSI.
Before the introduction of new economic reforms in 1991 following the inevitable
globalisation, the SSI sector was overprotected. The small scale industry never had a
strong desire to grow to medium and large scale because of the benefits of protection
given to it. Many of the policies also discouraged the growth of small scale units into
large ones and had a stunting effect on manufacturing, employment and output
growth. With the globalisation, the SSIs are now exposed to sever competition both
from large-scale sector, domestic and foreign and MNCs.
The effect of globalisation can be summarised as below.
• The new policies of the government towards liberalisation and globalisation

without ensuring the interest or priority of small-scale sector resulted in poor
growth rate of SSI sector. The SSI sector has suffered because of the lending
institutions and promotional agencies, whose main agenda is to serve big units and
multinationals
• The problems of SSI in liberalised environment have become multidimensional

delay in implementation of project, inadequate availability of finance and credit,
marketing problems, cheap and low quality products, technological obsolescence,
lack of infrastructural facilities, deficient managerial and technical skills, to name
some.
• Globalisation resulted in opening up of markets, leading to intense competition.

For example, the World Trade Organisation (WTO) regulates multilateral trade,
requiring its member countries to remove its import quotas, restrictions and reduce
import tariffs. India was also asked to remove quantitative restrictions on import
by 2001 and all export subsidies by 2003. As a result every enterprise in India
whether small-scale or large scale has to face competition. The process was
initiated for small-scale units by placing 586 of its 812 reserved items on the open
general license list of imports.
• With the removal of restrictions of foreign direct investment, multinational

companies entered India which further intensified the competition in the domestic
market. The 1990’s witnessed the entry of multinational companies in areas such
as automobiles, electronics and IT based sectors.
In the changed environment after globalisation and liberalisation, the policies and
projects for the SSI sectors will have to be effective and growth oriented (not just
protecting) so as to achieve competitiveness. In order to protect, support and promote
small enterprises, a number of protective and promotional measures have been
undertaken by the central government.
The promotional measures cover the following:
1. Industrial extension services
2. Institutional support in respect of credit facilities
3. Provision of developed sites for construction of sheds
4. Provision of training facilities
5. Supply of machinery on hire purchase terms
6. Assistance for domestic marketing as well as exports

7. Special intensive for setting up enterprises in backward areas
8. Technical consultancy and financial assistance for technological upgradation
IMPACT OF WTO/GATT ON SSI
The challenges to the small-scale sector are due to the impact of agreements under
WTO. The setting up of the WTO in 1995 has altered the framework of international
trade towards non - distortive, market oriented policies. This is in keeping with the
policy shift that occurred world wide in favour of the free market forces and tilt away
from state regulation/intervention in economic activity. This is likely to lead to an
expansion in the volume of international trade and changes in the pattern of
commodity flows. The main outcome of WTO stipulated requirements will be
brought about through reduction in export subsidies, greater market access, removal
of non-tariff barriers and reduction in tariffs.
There will also be tighter patent laws through regulation of intellectual property
rights under Trade-Related Intellectual Property Rights (TRIPS) Agreements, which
laid down what is to be patented, for what duration and on what terms.
Increased market access to imports will mean opening up the domestic market to
large flows of imports. The removal of quantitative restrictions on imports of these
items will soon be freed from all restrictions as announced in the recent import-export
policy. Increased market access will also mean that our industries can compete for
export markets in both developed and developing countries. But the expected surge in
our exports can come about only if SSI sector is restructured to meet the demands of
global competitiveness, which is the key to the future of small industries in present
contest.
SSIs have to face threats and also avail opportunities owing to the WTO and its
agreements. The main opportunities of the WTO are classified into three. Firstly,
national treatment of exportable items across the countries all over the world, with
better market access through the internet. Second, enlightened entrepreneurs have
greater opportunities to benefit from their comparative advantages due to lowering of
tariffs and dismantling of other restrictions. Finally, industries that are in constant
touch with government, which in turn negotiates in their best interests in the on-going
dialogue with the WTO, are going to benefit. India has real chance of becoming
superpower in the service sector, particularly IT. It has already captured about 25
percent of world exports.
The World Trade Organisation (WTO) was established on 1st January 1995.
During 15th April1994“Marrakesh Declaration” was made where by affirmation was
done that the Uruguay Round would strengthen the world economy thereby leading
towards more trade, investment, employment and income growth throughout the
world. The WTO is the embodiment of the Uruguay Round Results and the successor
to the GATT. It was the only forum for negotiating lower customs duty rates and
other trade hurdles starting from 1947 to 1994.When GATT came under the WTO
umbrella, it has certain annexes regarding sector like agriculture and textiles, burning
issues like State Trading, Product Standards, Subsidies and Actions taken against
dumping. It aims to boost country’s economy by accelerating exports among the-
member countries.
Key Subjects in WTO The WTO is the umbrella organisation for overseeing the
implementation of all agreement -multilateral (signed by all WTO members)
and pluryilateral (signed by a group of members regarding a particular issue) that
have been discussed underUruguay Round or will be dealt in due course of
time.Secondly , it frames international standardised labour wages and working
conditions , globalises the trade and weeds out the corruption at Government level
while dealing with its procurement policies. Thirdly, it is responsible for settlement of
disputes among member nations. Fourthly, it facilitates procuring new technologies
from different countries at lower cost.Fifthly, it monitors periodically trade policies
among member nations.
WTO Agreements - The WTO Agreements cover
Goods (main agreement (GATT) e.g. all
industrial products, FMCGs (consumer durables) etc.
Services (main agreement GATS) e.g.
Banking, Insurance, consultancy etc.
Intellectual property (TRIPS) e.g.
Patents,Copyrights, and Trademarks etc.

WTO And SSI Sector
It has been realised that the repercussions ofWTO and its agreements have been felt
on every economic activity whether it is agriculture, trading, service or
manufacturing.
Enlightened and awakened entrepreneurs can avail of the opportunities arising from
comparative advantages as world markets are opening up due to lowering of tariffs
and dismantling of other restrictions undeveloped and developing countries.
It will pose a threat to domestic markets due to lowering of tariffs thereby leading to
forestry of foreign goods and because of foreign companies establishing base locally
The developed countries will receive benefits by opening up of service sector and
tightening of Intellectual Property Regime, while developing countries will receive
greater economies from cost based comparative advantages like textiles, agriculture
etc. opportunities in sectors
Emergence of tough competition among developing countries having similar

comparative advantage.
The breeze of standardisation swept across the globe ,products from developing
countries have to face strict quality standards in developed markets specifically in the
areas where they have comparative cost advantage.
Positive impact of WTO on SSIs
It enabled India to export goods to the member countries of the WTO with lesser
restrictions. Tariff based protection has come to the scene for tariffs was reduced on
export products to India.
Exports have shown an upward trend registering Rs.13883 cores during 1991-92 to
Rs.150242crores during 2005-06.
Better prospects of agricultural exports due to likely increase in the world prices of
agricultural products as a result of lowering domestic subsidies and hindrances to
trade.
Developing market orientation.
Exploration of new investment opportunities due to remarkable trade in SSI thereby

boosting economic growth.
Ancillary Industry - Meaning of AncillaryAncillary means 1. Subordinate;
subsidiary. 2. Auxiliary; helping. Ancillary is used to describe something of
secondary importance. One common use of the word is to describe an estate
administration done in another state where the decedent owned real property. An
ancillary administration is done in addition to the primary administration in the state
where the decedent died.
Ancillary industries are those which manufacture parts and components to be

used by larger industries. Eg- Companies like GE (ancillary) produce engines for the
aircraft industry.
Ancillary industries are companies that manufacture parts for larger

companies. Most ancillary industries are considered non essential in the business
world.
Tiny Industry - Tiny Scale industry is one in which the investment in plant and
machinery is less than Rs.25 lakhs irrespective of the location of the unit.
INSTITUTIONAL SUPPORT FOR BUSINESS ENTERPRISES
The Institutional support system is necessary to provide all help needed by the small
scale industries, as small industries lack information about the existing support
systems developed by the Central Government as well as the State Governments.
They also lack the technical and managerial skills, strong financial background,
knowledge about Government sponsored infrastructural facilities, subsidies and tax
incentives. These institutions include Government owned agencies, statutory
corporations, semi- autonomous and autonomous organisations.
FINANCIAL INSTITUTION IN INDIA ARE AS FOLLOWS:
1. Central Level
2. State Level
Central Level - there are 2 types, they are as follows:
Financial Aid
SIDBI - Small industries development bank of india .
NABARD - National bank for agricultural & rural development.
IDBI - Industrial development bank of india.
SIDO - small industries development organisation .
SSIB - Small scale industries board .
KVIC - Khadi and Village industries commission .
Non Financial Aid
IIE - Indian institute of entrepreneurship.
NISIET - National institute of small industry extension and training.
EDII - Entrepreneurship development institute of india
NIESBUD - National Institute of entrepreneurship and small business

development
State Level - there are 2 types, they are as follows:
Financial Aid
SFCs - State finance corporation
SIDCs / SIICs - State industrial development / investment corporation
SSIDCS - State small industrial development corporation
Non Financial Aid
DIs - Directorate of industries
DICs - District industries centre

Project Management: Meaning of Project, Project Objectives & Characteristics, Project
Identification- Meaning & Importance; Project Life Cycle, Project Scheduling, Capital
Budgeting, Generating an Investment Project Proposal, Project Report-Need and
Significance of Report, Contents, Formulation, Project Analysis-Market, Technical,
Financial, Economic, Ecological, Project Evaluation and Selection, Project Financing,
Project Implementation Phase, Human & Administrative aspects of Project Management,
Prerequisites for Successful Project Implementation.
New Control Techniques- PERT and CPM, Steps involved in developing the network,
Uses and Limitations of PERT and CPM
MEANING OF PROJECT
A piece of planned work or an activity that is finished over a period of time and intended to
achieve a particular purpose. Planned set of interrelated tasks to be executed over a fixed
period and within certain cost and other limitations.
A project is a temporary endeavour designed to produce a unique product, service or result

with a defined beginning and end (usually time-constrained, and often constrained by
funding or deliverable) undertaken to meet unique goals and objectives, typically to bring
about beneficial change or added value.
MEANING OF PROJECT MANAGEMENT -
is the application of knowledge, skills, tools, and techniques to project activities to meet the
project requirements. Project management is the discipline of initiating, planning, executing,
controlling, and closing the work of a team to achieve specific goals and meet specific
success criteria at the specified time.
The primary challenge of project management is to achieve all of the project goals within
the given constraints. This information is usually described in project documentation,
created at the beginning of the development process. The primary constraints are scope,
time, quality and budget. The secondary — and more ambitious — challenge is to optimize
the allocation of necessary inputs and apply them to meet pre-defined objectives.
PROJECT MANAGEMENT STAGES / PROCESS
Initiating
Planning
Executing
Monitoring and controlling
Closing
PROJECT MANAGEMENT COMPONENTS
PROJECT OBJECTIVE
• Financial - Financial objectives are normally relatively easy to put together and you will
find your sponsor is keen to make sure that if your project is going to make the company
any money that this is record adequately in the project objectives. Your project may
deliver a clear financial return (for example, launching a new product to the consumer
market) or make a financial saving (such as closing an underperforming office).
• Quality - There may be some quality objectives for your project, such as delivering to
certain internal or external quality standards. Quality objectives also manifest themselves
in the form of process improvement projects that aim to reduce defects or increase
customer satisfaction somehow. You may find that quality objectives are included in your
quality plan, so you can take them from there and include them in the main body of your
project documentation (or vice versa, as you will probably write the quality plan after
your charter).
• Technical - Companies already have technology in use so a technical objective could be
to upgrade existing technology, install new technology or even to make use of existing
technology during the deployment of your project. Technology comes in different forms
so this could include mobile devices or telephones as well as hardware, software and
networking capabilities.
• Performance - Performance objectives tend to be related to how the project will be run,
so could include things like delivering to a certain budget figure or by a certain date, or
not exceeding a certain number of resources. You could also have performance objectives
related to achieving project scope, such as the number of requirements that will be
completed or achieving customer sign off.
• Compliance - Regulatory requirements form compliance objectives. For example, there

could be the obligation to meet legal guidance on your project or to comply with local
regulations. A construction project could also have the objective to meet or exceed health
and safety targets.
• Business - Of course! This is the main area where you are likely to find project objectives
and it relates to what it is that you are doing – the key drivers for the project. Business
objectives would be things like launching that new product, closing that office or
anything else that is the main reason for delivering the project.
• produce something new or altered, tangible or intangible.
• To have a finite timespan: a definite start and end.

• likely to be complex in terms of work or groups involved
CHARACTERISTICS OF PROJECT
• To define the reason why project is necessary

• To capture the requirements, specifying quality of the deliverables, estimating resources
and timescales.
• Preparing the business case to justify the investment

• Securing corporate agreement and funding
• Developing and implementing management plan for the project
• Leading and motivating the project delivery team
• Managing the risk, issues and changes of the project
• Monitoring progress against plan
• Managing the project budget
• Marinating communication with shareholders and stake holders
• Closing the project in a controlled fashion when appropriate.
PROJECT IDENTIFICATION
This guide aims to give a brief overview of the project management cycle and some handy
tips to consider when you are planning and implementing a project. Identification, design
and budgeting/funding are the steps that make up your planning process. The planning
process should make up a significant part of the whole cycle in order to ensure a successful
project.
Project identification results from issues emerging from the external environment. You
might pick up on these issues in the environment by reading reports on trends in the
geographical area where you work and speaking to stakeholders (including users) about the
local issues arising.
KEY STPES TO IDENTIFY.
Scanning the external environment
Undertaking preliminary research
Making decisions
Checklist
IMPORTANCE OF PROJECT IDENTIFICATION
• Strategic alignment - Project management is important because it ensures what is being

delivered, is right, and will deliver real value against the business opportunity.Every
client has strategic goals and the projects that we do for them advance those goals.
Project management is important because it ensures there’s rigour in architecting projects
properly so that they fit well within the broader context of our client’s strategic
frameworks Good project management ensures that the goals of projects closely align
with the strategic goals of the business. In identifying a solid business case, and being
methodical about calculating ROI, project management is important because it can help
to ensure the right thing is delivered, that’s going to deliver real value.
• Leadership - Project management is important because it brings leadership and direction

to projects. Without project management, a team can be like a ship without a rudder;
moving but without direction, control or purpose. Leadership allows and enables a team
to do their best work. Project management provides leadership and vision, motivation,
removing roadblocks, coaching and inspiring the team to do their best work. Project
managers serve the team but also ensure clear lines of accountability. With a project
manager in place there’s no confusion about who’s in charge and in control of whatever’s
going on in a project. Project managers enforce process and keep everyone on the team in
line too because ultimately they carry responsibility for whether the project fails or
succeeds.
• Clear Focus & Objectives - Project management is important because it ensures there’s a
proper plan for executing on strategic goals.Where project management is left to the team
to work out by themselves, you’ll find teams work without proper briefs, projects lack
focus, can have vague or nebulous objectives, and leave the team not quite sure what
they’re supposed to be doing, or why.As project managers, we position ourselves to
prevent such a situation and drive the timely accomplishment of tasks, by breaking up a
project into tasks for our teams. Oftentimes, the foresight to take such an approach is
what differentiates good project management from bad. Breaking up into smaller chunks
of work enables teams to remain focused on clear objectives, gear their efforts towards
achieving the ultimate goal through the completion of smaller steps and to quickly
identify risks, since risk management is important in project management.
• Realistic Project Planning - Project management is important because it ensures proper

expectations are set around what can be delivered, by when, and for how much1.Without
proper project management, budget estimates and project delivery timelines can be set
that are over-ambitious or lacking in analogous estimating insight from similar projects.
Ultimately this means without good project management, projects get delivered late, and
over budget. Effective project managers should be able to negotiate reasonable and
achievable deadlines and milestones across stakeholders, teams, and management. Too
often, the urgency placed on delivery compromises the necessary steps, and ultimately,
the quality of the project’s outcome. We all know that most tasks will take longer than
initially anticipated; a good project manager is able to analyse and balance the available
resources, with the required timeline, and develop a realistic schedule. Project
management really matters when scheduling because it brings objectivity to the planning.
• Quality Control - Projects management is important because it ensures the quality of
whatever is being delivered, consistently hits the mark. Projects are also usually under
enormous pressure to be completed Without a dedicated project manager, who has the
support and buy-in of executive management, tasks are underestimated, schedules
tightened and processes rushed. The result is bad quality output. Dedicated project
management ensures that not only does a project have the time and resources to deliver,
but also that the output is quality tested at every stage. Good project management
demands gated phases where teams can assess the output for quality, applicability, and
ROI. Project management is of key importance to Quality Assurance because it allows
for a staggered and phased process, creating time for teams to examine and test their
outputs at every step along the way.
• Risk Management - Project management is important because it ensures risks are

properly managed and mitigated against to avoid becoming issues. Risk management is
critical to project success. The temptation is just to sweep them under the carpet, never
talk about them to the client and hope for the best. But having a robust process around
the identification, management and mitigation of risk is what helps prevent risks from
becoming issues. Good project management practice requires project managers to
carefully analyse all potential risks to the project, quantify them, develop a mitigation
plan against them, and a contingency plan should any of them materialise. Naturally,
risks should be prioritised according to the likelihood of them occurring, and appropriate
responses are allocated per risk. Good project management matters in this regard,
because projects never go to plan, and how we deal with change and adapt our plans is a
key to delivering projects successfully.
• Orderly Process - Project management is important because it ensures the right people do
the right things, at the right time – it ensures proper project process is followed
throughout the project lifecycle. Surprisingly, many large and well-known companies
have reactive planning processes. But reactivity – as opposed to proactivity – can often
cause projects to go into survival mode. This is a when teams fracture, tasks duplicate,
and planning becomes reactive creating inefficiency and frustration in the team. Proper
planning and process can make a massive difference as the team knows who’s doing
what, when, and how. Proper process helps to clarify roles, streamline processes and
inputs, anticipate risks, and creates the checks and balances to ensure the project is
continually aligned with the overall strategy. Project management matters here because
without an orderly, easily understood process, companies risk project failure, attrition of
employee trust and resource wastage.
• Continuous Oversight - Project management is important because it ensures a project’s
progress is tracked and reported properly.Status reporting might sound boring and
unnecessary – and if everything’s going to plan, it can just feel like documentation for
documentation’s sake. But continuous project oversight, ensuring that a project is
tracking properly against the original plan, is critical to ensuring that a project stays on
track.When proper oversight and project reporting is in place it makes it easy to see when
a project is beginning to deviate from its intended course. The earlier you’re able to spot
project deviation, the easier it is to course correct.Good project managers will regularly
generate easily digestible progress or status reports that enable stakeholders to track the
project. Typically these status reports will provide insights into the work that was
completed and planned, the hours utilised and how they track against those planned, how
the project is tracking against milestones, risks, assumptions, issues and dependencies
and any outputs of the project as it proceeds.
• Subject Matter Expertise - Project management is important because someone needs to

be able to understand if everyone’s doing what they should. With a few years experience
under their belt, project managers will know a little about a lot of aspects of delivering
the projects they manage. They’ll know everything about the work that their teams
execute; the platforms and systems they use, and the possibilities and limitations, and the
kinds of issues that typically occur.Having this kind of subject matter expertise means
they can have intelligent and informed conversations with clients, team, stakeholders, and
suppliers. They’re well equipped to be the hub of communication on a project, ensuring
that as the project flows between different teams and phases of work, nothing gets
forgotten about or overlooked.Without subject matter expertise through project
management, you can find a project becomes unbalanced – the creatives ignore the
limitations of technology or the developers forget the creative vision of the project.
Project management keeps the team focussed on the overarching vision and brings
everyone together forcing the right compromises to make the project a success.
• Managing and Learning from Success and Failure - Project management is important
because it learns from the successes and failures of the past. Project management can
break bad habits and when you’re delivering projects, it’s important to not make the same
mistakes twice. Project managers use retrospectives or post project reviews to consider
what went well, what didn’t go so well and what should be done differently for the next
project. This produces a valuable set of documentation that becomes a record of “dos and
don’ts” going forward, enabling the organisation to learn from failures and success.
Without this learning, teams will often keep making the same mistakes, time and time
again. These retrospectives are great documents to use at a project kickoff meeting to
remind the team about failures such as underestimating projects, and successes such as
the benefits of a solid process or the importance of keeping time sheet reporting up to
date.
• Stake holder agreement
PROJECT LIFE CYCLE
we can define Project Cycle Management as a tool that describes the management activities
and decision making procedures used during the life-cycle of a project.
The systematic process of initiating, planning, implementing, managing and evaluating

projects or programmes is known as ‘Project Cycle Management’, PCM ; it is also defined
as an approach in project management used to guide management activities and decision-
making procedures during the life-cycle of a project, from the first idea until the last ex-post
(afterwards) evaluation.
The project cycle follows the life of a project, from the initial idea through its completion. It
provides a structure to ensure that stakeholders are consulted, and defines the key decision,
information requirements and responsibilities at each phase so that informed decision can be
made at each phase in the life of the project.
THE PHASES OF PROJECT CYCLE ARE AS FOLLOWS
!
Project initiation: During this phase a business problem or opportunity is identified and a
business case providing various solution options is defined. Next, a feasibility study is
conducted to investigate whether each option addresses the business problem and a final
recommended solution is then put forward.
Project planning: This phase involves outlining the activities, tasks, dependencies and
timeframes; resource plan; financial plan; quality plan; acceptance plan; and procurement
plan.
Project execution: This phase involves implementing the plans created during the project
planning phase.
Project closure: Project closure involves releasing the final deliverables to the customer,
handing over project documentation to the business, terminating supplier contracts,
releasing project resources and communicating the closure of the project to all stakeholders.
PROJECT SCHEDULING
In project management, a schedule is a listing of a project's milestones, activities, and
deliverables, usually with intended start and finish dates. Those items are often estimated by
other information included in the project schedule of resource allocation, budget, task
duration, and linkages of dependencies and scheduled events. A schedule is commonly used
in the project planning and project portfolio management parts of project management.
Project scheduling is a mechanism to communicate what tasks need to get done and which
organisational resources will be allocated to complete those tasks in what timeframe. A
project schedule is a document collecting all the work needed to deliver the project on time.
The project schedule is the tool that communicates what work needs to be performed, which
resources of the organisation will perform the work and the timeframes in which that work
needs to be performed. The project schedule should reflect all of the work associated with
delivering the project on time. Without a full and complete schedule, the project manager
will be unable to communicate the complete effort, in terms of cost and resources, necessary
to deliver the project.
Online project management software allows project managers to track project schedules,
resources, budgets and project related assets in real time. The project schedule can be
viewed and updated by team members associated with the project, keeping everyone well
informed on the overall project status.
CAPITAL BUDGETING
Capital Budgeting is the process of making investment decision in fixed assets or capital
expenditure. Capital Budgeting is also known as investment, decision making, planning of
capital acquisition, planning and analysis of capital expenditure etc.
Capital budgeting is the planning process used to determine whether an organisation's long
term investments such as new machinery, replacement of machinery, new plants, new
products, and research development projects are worth the funding of cash through the
firm's capitalisation structure.
It is the process of allocating resources for major capital, or investment, expenditures. One
of the primary goals of capital budgeting investments is to increase the value of the firm to
the shareholders.
GENERATING AN INVESTMENT PROJECT PROPOSAL
Ideas for new capital investments can come from many sources, both inside and outside a
firm. Proposals may originate at all levels of the organisation —from factory workers up to
the board of directors. Most large and medium -size firms allocate the responsibility
for identifying and analysing capital expenditures to specific staff groups.
These groups can include cost accounting, industrial engineering, marketing research,
research and development, and corporate planning. In most firms, systematic procedures are
established to assist in the search and analysis steps. For example, many firms provide
detailed forms that the originator of a capital expenditure proposal must complete. These
forms normally request information on the project’s initial cost, the revenues it is expected
to generate, and how it will affect the firm’s overall operating expenses. These data are then
channeled to a reviewer or group of reviewers at a higher level in the firm for analysis and
possible acceptance or rejection.
Project proposal classified as follows:
Classifying Investment Projects
Projects Generated by Growth Opportunities
Projects Generated by Cost Reduction Opportunities
Projects Generated to Meet Legal Requirements and Health and Safety Standards
Project Size and the Decision-Making Process

PROJECT REPORT - An assessment that takes place during a project or process, that
conveys details . A Project Report is a document which provides details on the overall
picture of the proposed business. The project report gives an account of the project proposal
to ascertain the prospects of the proposed plan/activity.
Project Report is a written document relating to any investment. It contains data on the basis
of which the project has been appraised and found feasible. It consists of information on
economic, technical, financial, managerial and production aspects. It enables the
entrepreneur to know the inputs and helps him to obtain loans from banks or financial
Institutions.
The project report contains detailed information about Land and buildings required,
Manufacturing Capacity per annum, Manufacturing Process, Machinery & equipment along
with their prices and specifications, Requirements of raw materials, Requirements of Power
& Water, Manpower needs, Marketing Cost of the project, production, financial analyses
and economic viability of the project.
CONTENTS OF PROJECT REPORT
• General Information - A project report must provide information about the details of the
industry to which the project belongs to. It must give information about the past
experience, present status, problems and future prospects of the industry. It must give
information about the product to be manufactured and the reasons for selecting the
product if the proposed business is a manufacturing unit. It must spell out the demand for
the product in the local, national and the global market. It should clearly identify the
alternatives of business and should clarify the reasons for starting the business.
• Executive Summary - A project report must state the objectives of the business and the
methods through which the business can attain success. The overall picture of the
business with regard to capital, operations, methods of functioning and execution of the
business must be stated in the project report. It must mention the assumptions and the
risks generally involved in the business.
• Organisation Summary - The project report should indicate the organisation structure and
pattern proposed for the unit. It must state whether the ownership is based on sole
proprietorship, partnership or joint stock company. It must provide information about the
bio data of the promoters including financial soundness. The name, address, age
qualification and experience of the proprietors or promoters of the proposed business
must be stated in the project report.
• Project Description - A brief description of the project must be stated and must give
details
1. Location of the site,
2. Raw material requirements
3. Target of production,
4. Area required for the work shed
5. Power requirements,
6. Fuel requirements,
7. Water requirements,
8. Employment requirements of skilled and unskilled labour,
9. Technology selected for the project,
10. Production process,
11. Pollution treatment plants required.
• Marketing Plan - The project report must clearly state the total expected demand for the
product. It must state the price at which the product can be sold in the market. It must
also mention the strategies to be employed to capture the market. If any, after sale service
is provided that must also be stated in the project. It must describe the mode of
distribution of the product from the production unit to the market.
• Capital Structure and operating cost - The project report must describe the total capital
requirements of the project. It must state the source of finance, it must also indicate the
extent of owners funds and borrowed funds. Working capital requirements must be stated
and the source of supply should also be indicated in the project. Estimate of total project
cost, must be broken down into land, construction of buildings and civil works, plant and
machinery, miscellaneous fixed assets, preliminary and preoperative expenses and
working capital.
• Management Plan - The project report should state the following.

1. Business experience of the promoters of the business,
2. Details about the management team,

3. Duties and responsibilities of team members,
4. Current personnel needs of the organisation,
5. Methods of managing the business,
6. Plans for hiring and training personnel,
7. Programmes and policies of the management.
• Financial Aspects - In order to judge the profitability of the business a projected profit
and loss account and balance sheet must be presented in the project report. It must show
the estimated sales revenue, cost of production, gross profit and net profit likely to be
earned by the proposed unit. In addition to the above, a projected balance sheet, cash
flow statement and funds flow statement must be prepared every year and at least for a
period of 3 to 5 years. The income statement and cash flow projections should include a
three-year summary, detail by month for the first year, and detail by quarter for the
second and third years. Break even point and rate of return on investment must be stated
in the project report. The accounting system and the inventory control system will be
used is generally addressed in this section of the project report. The project report must
state whether the business is financially and economically viable.
• Technical Aspects - Project report provides information about the technology and
technical aspects of a project. It covers information on Technology selected for the
project, Production process, capacity of machinery, pollution control plants etc.
• Project Implementation - Every proposed business unit must draw a time table for the
project. It must indicate the time within the activities involved in establishing the
enterprise can be completed. Implementation schemes show the timetable envisaged for
project preparation and completion.
• Social responsibility - The proposed units draws inputs from the society. Hence its
contribution to the society in the form of employment, income, exports and infrastructure.
The output of the business must be indicated in the project report.
NEED AND SIGNIFICANCE OF PROJECT REPORT
• It helps an entrepreneur to judge the profitability of given proposal

• It is the basis for the development bank to sanction loan for business
• It helps in understanding the level of project completed
• It gives in detail about project
• Helps in understanding the strength and weakness of the project
• It helps in increasing the knowledge. I.e.. industry , market, raw material , technology
etc.
• It educate the entrepreneur regarding reducing risk for future

• It bring into sharp focus the key performance
• Helps in choosing the correct way of completing
PROJECT FORMULATION
A process is a collection of interrelated actions and activities that take place in order to
achieve a set of previously specified products, results or services. The project team is in
charge of executing the formulation, evaluation and project management processes. Project
Formulation is a concise, exact statement of a project to set the boundaries or limits of work
to be performed by the project. It is a formal document that gives a distinctive identity of the
project and precise meaning of project work to prevent conflict, confusion, or overlap.
Project formulation can be also defined as one of the stages in the lifecycle of a project. The
formulation stage is also called Initiation, Conceptualisation, Definition, Pre-Project.
PROJECT ANALYSIS - A step-by-step breakdown of the phases of a process, used to

convey the inputs, outputs, and operations that take place during each phase. A process
analysis can be used to improve understanding of how the process operates, and to
determine potential targets for process improvement through removing waste and increasing
efficiency and also the company should conduct few analysis like are as follows:
Market analysis
Technical analysis
Financial analysis
Economic analysis
Ecological analysis
PROJECT EVALUATION AND SELECTION
PROJECT FINANCING - Project finance is the financing of long-term infrastructure,

industrial projects and public services based upon a non-recourse or limited recourse
financial structure, in which project debt and equity used to finance the project are paid back
from the cash flow generated by the project. Project financing is a loan structure that relies
primarily on the project's cash flow for repayment, with the project's assets, rights and
interests held as secondary security or collateral. Project finance is especially attractive to
the private sector because companies can fund major projects off balance sheet.
PROJECT IMPLEMENTATION PHASE

HUMAN & ADMINISTRATIVE ASPECTS OF PROJECT MANAGEMENT
Nail down project details
Identify project and team requirements
Be the project leader
Keep the communication lines open
Attain pertinent documenttion
Manage project risk
Avoid scope creep
Test deliverables
Evaluate the project
PREREQUISITES FOR SUCCESSFUL PROJECT IMPLEMENTATION - In order to

minimise time and cost over-runs during the implementation of a project it is necessary to
study about the prerequisites for successful project implementation. Keeping checks on
these prerequisites help to improve prospects of successful completion of projects. The
Prerequisites for successful project implementation are as follows
Adequate Formulation – A project may be improperly formulated due to the following

reasons:
• Poor assessment of input requirements
• Superficial field investigation
• Using faulty procedures for computing costs and benefits
• Omission of project linkages
• Poor Decisions due to lack of experience and expertise
• Over-estimation of Benefits and underestimating costs
Sound Organisation – A prerequisite for successful project implementation is a sound

organisation. Few Characteristics of a sound organisation are:
• It is led by a competent leader
• Authority and Responsibility are equitably distributed
• Adequate attention is paid to designing jobs and work procedures
• All work methods and systems are clearly defined
• A culture of Rewards and Punishment on the basis of performance is

established
Proper Implementation Planning – Proper Planning is necessary for all projects therefore
before the implementation of any project a project manager must:
• Develop a comprehensive plan for various activities related to the project
• Estimate the resource requirement and time plan for each activity
• Define inter linkages between different activities of the project
• And Specify cost standards
Advance Action – Another prerequisite for successful project implementation is taking

advance action on the following activities:
• Acquisition of land
• Securing essential clearances
• Identifying technology collaborators/consultants
• Arranging for infrastructure facilities
• Preliminary design and engineering
• Calling of tenders
Timely availability of funds – In order to be successfully completed a project must have

adequate funds available to meet its requirements as per the implementation plan. Therefore
applications for loans, tie- ups with suppliers and contractors must be done in advance.
Proper allocation of funds must be done with the help of experts.
Judicious Equipment Tendering and Procurement – An optimum balance must be

maintained between foreign suppliers and indigenous suppliers keeping in mind time and
cost factors. Procurement must be done in such a way that outflow of foreign exchange is
minimum, however the business must not also be highly dependent on indigenous suppliers.
Importing foreign technology must be considered only when it compliment development of
indigenous technology and capabilities or helps in speedy development or due to non-
availability in local market..
Better contract management – Proper management of contracts is critical to successful

project implementation. Therefore:
• Competence and capability of the contractors must be ensured before entering

into a contract.
• All parties to contract must be treated as partners in common pursuit.
• Discipline must be established between all intermediaries
• Help must be extended to intermediaries when they have a genuine problem
• Project authorities must retain the power to transfer a contract to third parties
when delays are anticipated.
Effective Monitoring – An adequate system of feedback and monitoring must be

established in order to keep tabs on the progress of project. Critical aspects must be focused
on, Physical and financial milestones must be set, working standards must be established.
This helps in:
• Anticipating deviation from implementation plan
• Analysing emerging problem
• Taking corrective action
Prepare the infrastructure. Many solutions are implemented into a production

environment that is separate and distinct from where the solution was developed and tested.
It is important that the characteristics of the production environment be accounted for. This
strategy includes a review of hardware, software, communications, etc. In our example
above, the potential desktop capacity problem would have been revealed if we had done an
evaluation of the production (or real-world) environment. When you are ready for
implementation, the production infrastructure needs to be in place.
Coordinate with the organisations involved in implementation. This may be as simple as

communicating to your client community. However, few solutions today can be
implemented without involving a number of organisations. For IT solutions, there are
usually one or more operations and infrastructure groups that need to be communicated to
ahead of time. Many of these groups might actually have a role in getting the solution
successfully deployed. Part of the implementation work is to coordinate the work of any
other groups that have a role to play. In some cases, developers simply failed to plan ahead
and make sure the infrastructure groups were prepared to support the implementation. As a
result, the infrastructure groups were forced to drop everything to make the implementation
a success.
Implement training. Many solutions require users to attend training or more informal
coaching sessions. This type of training could be completed in advance, but the further out
the training is held, the less information will be retained when implementation rolls around.
Training that takes place close to the time of implementation should be made part of the
actual implementation plan.
Install the production solution. This is the piece everyone remembers. Your solution needs
to be moved from development to test. If the solution is brand new, this might be finished in
a leisurely and thoughtful manner over a period of time. If this project involves a major
change to a current solution, you may have a lot less flexibility in terms of when the new
solution moves to production, since the solution might need to be brought down for a period
of time. You have to make sure all of your production components are implemented
successfully, including new hardware, databases, and program code.
Convert the data. Data conversion, changing data from one format to another, needs to
take place once the infrastructure and the solution are implemented.
Perform final verification in production. You should have prepared to test the production
solution to ensure everything is working as you expect. This may involve a combination of
development and client personnel. The first check is just to make sure everything is up and
appears okay. The second check is to actually push data around in the solution, to make sure
that the solution is operating as it should. Depending on the type of solution being
implemented, this verification step could be extensive.
Implement new processes and procedures. Many IT solutions require changes to be made
to business processes as well. These changes should be implemented at the same time that
the actual solution is deployed.
Monitor the solution. Usually the project team will spend some period of time monitoring
the implemented solution. If there are problems that come up immediately after
implementation, the project team should address and fix them.
New Control Techniques- PERT and CPM, Steps involved in developing the network,
Uses and Limitations of PERT and CPM
PERT charts were created in the 1950s to help manage the creation of weapons and defence
projects for the US Navy. While PERT was being introduced in the Navy, the private sector
simultaneously gave rise to a similar method called Critical Path.
The program (or project) evaluation and review technique, commonly abbreviated PERT, is
a statistical tool, used in project management, which was designed to analyse and represent
the tasks involved in completing a given project.
First developed by the United States Navy in the 1950s, it is commonly used in conjunction
with the critical path method (CPM).
PERT stands for Program Evaluation Review Technique. PERT charts are tools used to plan
tasks within a project – making it easier to schedule and coordinate team members
accomplishing the work. PERT is a project management planning tool used to calculate the
amount of time it will take to realistically finish a project.
PERT is calculated backward from a fixed end date since contractor deadlines typically
cannot be moved.
A PERT chart presents a graphic illustration of a project as a network diagram consisting of

numbered nodes (either circles or rectangles) representing events, or milestones in the
project linked by labelled vectors (directional lines) representing tasks in the project
The PERT chart is sometimes preferred over the Gantt chart, another popular project
management charting method, because it clearly illustrates task dependencies. On the other
hand, the
PERT chart can be much more difficult to interpret, especially on complex projects.
Frequently, project managers use both techniques.
Project management technique that shows the time taken by each component of a project,
and the total time required for its completion. PERT breaks down the project into events and
activities, and lays down their proper sequence, relationships, and duration in the form of a
network. Lines connecting the events are called paths, and the longest path resulting from
connecting all events is called the critical path. The length (duration) of the critical path is
the duration of the project, and any delay occurring along it delays the whole project. PERT
is a scheduling tool, and does not help in finding the best or the shortest way to complete a
project.
CRITICAL PATH METHOD
The CPM was developed in the 1950s by DuPont, and was first used in missile- defence
construction projects. Since that time, the CPM has been adapted to other fields including
hardware and software product research and development.
The critical path method (CPM) is a step-by-step project management technique for process
planning that defines critical and non-critical tasks with the goal of preventing time-frame
problems and process bottlenecks. The CPM is ideally suited to projects consisting of
numerous activities that interact in a complex manner.
The critical path method (CPM), or critical path analysis (CPA), is an algorithm for
scheduling a set of project activities. It is commonly used in conjunction with the program
evaluation and review technique (PERT).
Critical path project management (CPM) is a technique used to complete projects on time
by focusing on key tasks. One path through all the inter-connected tasks is the fastest
avenue to take when completing any project. By focusing on the tasks that make up the
critical path, the project manager maximises the chances of completing the project on time.
STEPS INVOLVED IN DEVELOPING NETWORKS
1 Identify activities and milestones - the tasks required to complete the project, and
the events that mark the beginning and end of each activity, are listed in a table.
2 Determine the proper sequence of the activities - this step may be combined with
step 1, if the order in which activities must be performed is relatively easy to determine.
3 Construct a network diagram - using the results of steps 1 and 2, a network

diagram is drawn which shows activities as arrowed lines, and milestones as circles.
Software packages are available that can automatically produce a network diagram from
tabular information.
4 Estimate the time required for each activity - any consistent unit of time can be
used, although days and weeks are a common
5 Determine the critical path - the critical path is determined by adding the activity
times for each sequence and determining the longest path in the project. If the activity time
for activities in other paths is significantly extended, the critical path may change. The
amount of time that a non-critical path activity can be extended without delaying the project
is referred to as its slack time.
6 Update the PERT chart as the project progresses - as the project progresses,
estimated times can be replaced with actual times.
USES AND LIMITATION OF PERT AND CPM
Advantages:
• Simple to understand and use
• Show whether the project is on schedule; or behind/ ahead of the
schedule
• Identify the activities that need closer attention (critical)
• Determine the flexibility available with activities
• Show potential risk with activities (PERT)
• Provide good documentation of the project activities
• Help to set priorities among activities and resource allocation as
per priority
Limitations:
• Demand clearly defined and stable activities
• Precedence relationship should be known in advance
• Overemphasis on Critical path
• Activity time estimates are subjective
• Activity times in PERT may not follow Beta PD in reality
• Cost of crashing an activity may not be linear

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MANAGEMENT & ENTREPRENEURSHIP (15EE51) MODULE – 1

Management – Definition, Importance - Nature and Characteristics of Management, Management

Important Management activities or functions included in this process are:

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Scope of the management:

Management functions or The Process of Management

3. Directing is the next step after planning, organizing and staffing

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g. Financial: takes the form of salary, bonus, profit-sharing etc.

6. Representing: A manager is also required to spend

II. Informational roles:

III. Decisional roles:

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Skill mix of a manager with the change in his level:

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Management & Administration:

Sl. Differences Administration Management

Management as a Science, Art & Profession –

Management is called SCIENCE if -

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3. Focus attention on the organizations goals:

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Sl. Strategic planning Tactical planning

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1. Plans are arranged in a hierarchy within the organization

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Characteristics of the objectives:

3) Objectives are either tangible or intangible:

4) Objectives have priority:

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5) Objectives are generally arranged in a hierarchy:

6) Objectives sometimes clash with each other:

Requirements of sound objectives:

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d. Social and cultural factors:

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2. Classification on the basis of functions:

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3. Classification on the basis of organizational level:

Sl. Policies Procedures

Advantages and limitations of procedures:

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Single use plans

The various steps involved in planning are as follows:

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2) Establishing planning premises:

b. Tangible and non-tangible premises:

c. Controllable and non-controllable premises:

3) Deciding the planning period:

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To make planning effective, it requires Extent of detail, Coordination, communication,

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DECISION MAKING AND PROBLEM SOLVING:

The Decision-Making Process

The decision-making process involves the following steps:

STEP 1 - Define the problem

STEP 2 - Identify limiting factors

STEP 3 - Develop potential alternatives

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The following specific rules should be followed during brainstorming sessions:

STEP 4 - Analyze the alternatives

STEP 5 - Select the best alternative