Lecture 8 - Motivation Leadership

Organization and Management BME III/I
Lecture 7
Chapter 3: Motivation , Leadership and
Entrepreneurship
Iswor Bajracharya, PhD
Department of Mechanical Engineering
Pulchowk Engineering Campus
Outline
3. Motivation, Leadership and Entrepreneurship
3.1 Motivation
3.1.1 Human needs
3.1.2 Maslow’s Hierarchy of needs
3.1.3 Motivation – Introduction
3.1.4 Types of Motivation
3.1.5 Attitude Motivation; Group Motivation; Executive Motivation
3.1.6 Techniques of Motivation
3.1.7 Motivation Theories
3.1.7.1 McGregor’s Theory X -Y
3.1.7.2 Fear and Punishment Theory
3.1.7.3 Alderfer’s ERG Theory
3.1.7.4 MacClelland’s Theory of learned needs
3.1.7.5 Herzberg’s Hygiene Maintenance Theory
3.1.7.6 Vroom’s Expectancy/ ValencyTheory
Iswor Bajracharya 2/25/2016
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3.2 Leadership - Introduction
3.2.1 Qualities of a good Leader
3.2.2 Leadership Style
3.2.3 Blakes and Mouton’s Managerial Grid
3.2.4 Leadership Approach
3.2.5 Leadership Theories
3.3 Entrepreneurship – Introduction
3.3.1 Entrepreneurship Development
3.3.2 Entrepreneurial Characteristics
3.3.3 Need for Promotion of Entrepreneurship
3.3.4 Steps for establishing small scale unit
3 Iswor Bajracharya 2/25/2016

Motivation
Introduction
In simple meaning, motivation is the process to encourage
employees to do more work than what they are doing.
Motivation is described by a six-phase motivational model. It
begins with the inner state of need deficiency and ends with
need fulfillment.
Need Search and
Deficiency Choice Strategy Goal Directed
(1) (2) Behavior (3)
Re-evaluation Reward or Evaluation &

of Needs (6) Punishment (5) Performance (4)
4 Iswor Bajracharya Figure: Motivational model 2/25/2016

Example
Let us take example of an employee who want promotion in his
organization.
1. Employees wants a promotion. This desire for promotion
represents a need deficiency (Phase 1).
2. Then the employee searches for strategies for promotion and
makes choice among them. The strategies may be by better
performance or by pleasing the boss. Assume that the employee
chooses first choice (Phase 2).
3. Then he puts more efforts in his work, completes allotted work
on schedule (Phase 3).
4. His performance is evaluated by his boss (Phase 4).
5. Based on his performance, employee is rewarded in terms of
promotion (Phase 5).
6. If his hard work is recognized through promotion, he feels
encouraged to repeat the good performance and puts still more
effort in his work. Otherwise, he is discouraged (Phase 6).

Importance of Motivation
Motivated employees are always looking for better ways to do a
job .
A motivated employee generally is more quality oriented and
put more efforts for better performance.
Highly motivated employees are more productive than
apathetic workers.
Motivation is required to retain the highly qualified employees
in the organization.
Motivation increases the productivity of an organization.

Theories of Motivation
Motivation Theories
Early Theories Contemporary

Theories
Scientific Management Human Relation
Content Theories Process Theories Reinforcement

Theory
Maslow’s Hierarchy of Need Theory Vroom’s Expectancy Theory
McGregor’s Theory X & Y
Adam’s Equity Theory
Alderfer’s ERG Theory
Porter & Lawler’s
Herzberg’s 2 Factor Theory Performance Theory
McClelland’s Achievement Theory

Content Theories
Content theories deal with the individual needs and wants to
understand the job satisfaction and work behavior of employees.
As per this theory, poor performance, undesirable behavior and
decreased performance of employees are due to the dissatisfied
needs. Therefore, a manager’s job is to create the work
environment that responds positively to individual needs.
Process Theories
Content theories put emphasis on the importance of individual
inner needs for motivation.These theories view that motivation

Maslow’s Hierarchy of Need Theory
Introduction
This theory was propounded by Abraham Harold Maslow and is
the most simplest and widely discussed theory of motivation.
This theory explains the human needs in five hierarchical order
and states that until and unless lower needs are satisfied, he will
not desire or attempt for higher order needs. The five human
needs are:
1. Physiological Needs: The most basic needs to survive
like food, water, sleep, shelter.
2. Safety Needs: Once physiological needs are satisfied,
another set of motives called safety needs becomes
motivators. Protection from all adverse situations.
3. Belongings and Love Needs: This constitutes the third level in
hierarchical needs. Once the physiological and safety needs are
satisfied, these needs arise. Love, affection, relationship, trust,
friendship etc.
4. Self-Esteem Needs: This is the fourth level of hierarchical need.
This includes self-respect, and esteem from others. The self –respect
includes things such as confidence, strength, adequacy, achievement,
independence and freedom. Esteem from other includes prestige,
recognition, status, reputation and appreciation.
5. Self-actualization Needs: This is the highest level need and arises
only when all the other four level needs are satisfied. Self-
actualization is the desire to become everything that one is capable
of becoming. In this stage, a person can fully utilize his potential to
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become whatever he wants to become.
Iswor Bajracharya 2/25/2016
Self
Actualization
Self-esteem Needs
Belongingness & Love
Needs
Safety Needs
Physiological Needs
Figure : A schematic of Maslow’s Hierarchy of Needs

Essence of Maslow’s Need Theory
Human beings have wants and desires which can influence their
behavior. Only unsatisfied needs can influence behavior, satisfied
need do not act as motivators.
Since needs are many, they are arranged in the order of their
importance or hierarchy from basic to the complex.
The person advances to the next level of hierarchy or from the
basic to the complex, only when the lower-level need is , at
least, minimally satisfied.
Further up the hierarchy the person is able to go, the more
individuality , humanness and psychological health he or she will
display.
McGregor’s Theory X -Y
Depending upon what assumptions a manager makes about

his/her employees, two types of thoughts can be distinguished.
This is called McGregor’s Theory X and Y.
1. Theory X: Theory X assumes the following
a) Employees are inherently lazy and will avoid work unless
forced to do it.
b) Employees have no ambition or desire for responsibility ;
instead they prefer to be directed and controlled.
c) Employees have no motivation to achieve organizational
goals.
d) Employees are only motivated by physiological and safety
needs.
2. Theory Y: Theory Y assumes the following:
a) Employees find the work as natural as play if organizational
conditions are appropriate . People appear averse to work
only because their past work experiences have been
unsatisfactory.
b) Employees can be motivated by higher order needs such as
ego, autonomy and self-actualization.
c) Employees seek responsibility since it allows them to satisfy
higher order needs.

Herzberg’s Hygiene Maintenance Theory
This theory was proposed by psychologist Frederick Herzberg.
This theory is variously named as the two-factor theory, dual
factor theory and the motivation-hygiene theory.
Herzberg and his associates carried out survey of 200
accountants, engineers and managers. Two questions were
asked in the survey:
1. When did you feel particularly good about your job ?
2. When did you feel exceptionally bad about your job?
The answers obtained from the respondents were interesting.
The factors which made the respondents feel good were
totally different from what made them feel bad.

Herzberg classified these factors as Intrinsic factors and
Extrinsic factors.
a) Intrinsic Factors: This factors includes the achievement,
recognition, responsibility, advancement, and growth. These
factors are related to job satisfaction. These factors are
also known as motivators, satisfiers and job content factors.
b) Extrinsic Factors: These factors includes company policy,
administration, supervision, work conditions, salary, status,
security, interpersonal relations. These factors are related to
job dissatisfaction. These factors are also known as
dissatisfiers, hygiene factors, maintenance factors.

According to this theory, satisfaction and dissatisfaction are not
the opposite poles of one dimension. They are two separate
dimensions.
Satisfaction is affected by Motivation factors and
dissatisfaction is affected by Hygiene factors. This is the key
idea of Motivation-Hygiene theory.
Motivators
Satisfaction No Satisfaction
Hygiene Factors
No Dissatisfaction Dissatisfaction
Figure: Satisfiers and dissatisfiers compared
Difference Between Maslow’s and Herzberg’s
Motivation Theory
S.N Maslow Herzberg
1 This theory is descriptive type . This theory is prescriptive type.
2 Hierarchy of needs . No hierarchy of needs.
3 Unsatisfied needs lead to motivation. Motivators leads to motivation.
4 Pay is a motivators if it satisfies needs. Pay or salary is not a motivator.
5 This theory is a macro view –deals This theory is a Micro view- deals
with all aspects of existence. primarily with work related
motivation.
6 Relevant for all workers. Probably more relevant to white-
collar and professional workers.

Alderfer’s ERG Theory
The ERG theory stand for existence, relatedness, and
growth-the three sets of needs, developed by Alderfer.
There are certain similarity between Maslow’s hierarchy of need
theory and this theory.
1. Existence need which is necessary for basic human
existence roughly corresponds to the physiological and
security needs of Maslow’s need theory.
2. Relatedness needs- the desire for maintaining interpersonal
relationship is similar to Maslow’s belongingness needs.
3. Growth needs –the desire for personal development are
analogous to Maslow’s needs for self-esteem and self-
actualization.
Both theories argue that people do have needs and those needs
are important determinants of human behavior.
However, ERG theory differs from Maslow’s need theory in
three respects:
1. Instead of five hierarchy of needs, ERG theory hypothesizes
only three.
2. The Maslow’s need theory postulates the rigid step like
progression. The ERG theory , instead, postulates that more
than one need may be operative at the same time. In other
words, ERG theory suggests that there is no existence of
rigid hierarchy where a lower need must be substantially
gratified before one can move on other needs.
3. Maslow argues that a person will stay at a certain level until
that need is satisfied. The ERG theory counters by noting
that when the higher level needs are frustrated, the
individual’s desire to increase a lower level need takes
place. Thus ERG theory contains a frustration-defence
dimension.

MacClelland’sTheory of Learned Needs
Also called Achievement Motivation Theory or Three Needs
Theory. This theory has been advocated by David C.
McClelland and his associates.
This theory focuses on three needs-
1. Need for Achievement
2. Need for Power
3. Need for Affiliation
This theory postulates that each person has a desire for all
these three needs but people differ in degree to which the
various needs motivate them.

Need for Achievement
According to this theory, employees with a high need for
achievement derive their satisfaction from achieving goals.
Successful completion of task is important for high achiever.
High achievers are often wealthy and they derive their wealth
from their ability to achieve goals.
They are not motivated by money; money is their indicator of
achievement.
They dislike tasks with high risks because they get no
achievement satisfaction if they fail.
They also dislike easy task because there is no challenge to
their skills.
High achievers also prefer to work independently so that
successful task performance (or failure) can be related to their
own efforts rather than to someone else’s.
McClelland believes that the need for achievement can be
learned. He believes that economically backward cultures can
be changed if the need to achieve can be taught them.
Developing Achievement Motives
This theory has suggested four specific suggestions for developing a
high achievement need:
1. Give employees periodic feedback on performance. This will
help them to modify or correct their performance.
2. Provide good models of achievement. Employees who are “
Heroes” should be presented for others to emulate.
3. Arrange tasks so that employees can pursue moderate challenges
and responsibilities. Avoid tasks that are either extremely
difficult or extremely easy.
4. As much as possible, employees should be able to control their
own destiny and imagination. However, they should be trained
to think realistically and positively about how they will
accomplish goals.

Need for Power
The employees exhibiting the needs for power derive
satisfaction from the ability to control others.
Satisfaction is derived from being in positions of influence and
control.
Organizations that exercise the power motive tend to attract
individuals with high need for power for example military and
political organizations.

Need for Affiliation
Individuals exhibiting this need derive their satisfaction from
social and interpersonal activities.
If they are asked to choose between working at a task with those
who are technically competent and those who are their friends,
high need for affiliation individuals will choose their friends.

Work Preferences of Persons High in Need for Achievement,
Affiliation and Power
Individual Needs Work Preferences Example
High need for Individual responsibility Field sales person with
achievement Challenging but achievable challenging quota and
goals opportunity to earn
Feedback on performance individual bonus
High need for affiliation Interpersonal relationship Customer service
Opportunities to representatives
communicate
High need for power Control over other persons Formal position of
Attention supervisory responsibility,
Recognition Appointment as head of
special task force

Vroom’s Expectancy/Valence Theory
This theory is also known as Instrumentality theory, Path-goal
theory and Valence-Instrumentality –Expectancy theory. This
theory was proposed byVictor H.Vroom.
This theory postulates that motivation depends upon the
strength of the expectation i.e. probability that an effort will
lead to the desired outcome (Expectancy), the strength of an
individual’s preference for that outcome (Valence) and the belief
that the one level of outcome will lead be instrumental in
obtaining another level of outcome (Instrumentality).
Therefore, according to this theory,
Motivation = Expectancy ×Valence × Instrumentality

1. Valence:
Valence refers to the strength of an individual’s preference
for a particular outcome. It is the degree of desirability of
certain outcomes for an individual.
Valance may vary from -1 to +1
Valence is -1 if the individual does not prefer an outcome.
Valence is 0 if an individual is indifferent to the outcome and
the valence is +1 if he has strong preference to the outcome.
The valence of an individual must be positive if the
motivation has to take place.

2. Expectancy
It refers to the belief than an effort will lead to completion
of a task or the desired outcome or result.
For example, students believe that hard work will lead to the
good grades.
Expectation is stated in terms of probability –employees
estimate of the degree to which performance will be
determined by the amount of effort expended.
Since expectancy is the probability of connection between
effort and performance, it value may range from 0 to 1

If an employee sees no chance that effort will lead to the desired
performance or outcome or result, the expectancy is 0. On the
other hand, if he is confident that the effort will lead to the
desired outcome, the expectancy is 1.
Normally the expectancy of employees lie between these two
values.
Like valence, the expectancy must be high for motivation to
take place.

3. Instrumentality
It refers to the belief that the first of level of outcome will
lead to the second level of outcome.
For example, an employee will be motivated towards superior
performance because of desire to be promoted. Here,
superior performance is the first level of outcome which is
instrumental in obtaining promotion (second level outcome).
The value of instrumentality varies from 0 to 1. If an
employees sees that promotions are based on performance,
instrumentality will be rated high, otherwise will be low.

Therefore, according to this theory,
Motivation = Expectancy ×Valence × Instrumentality
This equation states that motivation to work results from
expectancy times valence time instrumentality. This
multiplicative relationship means that the motivation appeal of a
given work is drastically reduced whenever one or two of three
variables is low.
Valence Instrumentality Expectancy Motivation
High High High High
Low High High Moderate
High Low High Moderate
Low Low High Low
Figure: Vroom’s VIE Theory of Motivation
Leadership
Introduction
Leadership is the most widely word by political orators,
business executives, social workers, philosophers and scholars.
By simple meaning, leadership is the ability of an individual to
influence others to change their behavior.
Some more definitions are :
1. “Leadership is the process of encouraging and helping others
to work enthusiastically towards objectives”.
2. Leadership is “interpersonal influence, exercised in a situation
and directed through the communication process, towards the
attainment of a specified goal”.
3. A manager should have leadership ability.
Qualities of Good Leader
A good leader should have the following qualities which make them
distinct from followers:
A strong desire for accomplishment.
Persistent pursuit of goals.
Creativity and intelligence used to solve problems.
Ability to influence other people
Ability to structure social interactions
Clear vision of the goal
Good moral character
Innovative
Focuses on people

Leadership Styles
Leadership style is the typical approach a particular person uses
to lead people. The behavior that a leader exhibits during
supervision of subordinates is known as leadership style.
Style consists of two distinct elements- the leader’s assumptions
about subordinates and the leader’s actual behavior while
interacting with others.
There are three different leadership styles according to
authority retained.
1. Authoritarian Style
2. Participative Style
3. Free-rein Style

Authoritarian Style
Also known as autocratic style, authoritarian style involves
retention of full authority by the leader.
Leader decides, and the decision is passed on to subordinates.
Subordinates are expected to do what the leader has told them
to do.
If the leader is competent, the style has advantage that the tasks
are efficiently performed.
The problem of this style is that as subordinates are not involved
in the decision making process, this may lead to low employee
morale and loose initiative and avoid responsibility for any
errors.
Participative Style
There are three related types of participative leaders:
a) Consultative leaders solicit opinions from the sub-ordinates
before making decision but they may or may not include the
opinions of subordinates. The final decision is within the hand
of leader.
b) Consensual leaders encourage group discussion on an issue
and then make a decision based upon the general agreement of
group members. Such leaders delegates more authority to the
group that do consultative leaders. This style may lead to
considerable delay in decision making process because every
member has to give his/her consent.
c) Democratic leaders delegates the final authority to the
group. They function as collectors of opinion and take a vote
before making a decision. Democratic leaders delegates full
authority to subordinates.
Participative style may lead to slow decision making.
This style is effective where group comprises competent and
motivated members who want to get involved in making
decision and providing feedback.
Employee’s morale will increase.
Employee participation in decision making will increase the
quality of decisions.

Free-rein Style
Also called laissez-faire, free-rein leader delegates full authority
to the employee. Such leader choose not to adopt a leadership
role and actually abdicates leadership position, generally
relinquishing it to someone else in the work group.
This leadership style works when the group is composed of
highly committed members.
Employees may perceive that the leader is incompetent.

Low People Emphasis High
Supportive Participative
Style Style
Free-rein Autocratic
Style Style
Low High
Task Emphasis
Figure: Leadership style based on Task versus People emphasis

Blakes and Mouton’s Managerial Grid
The managerial grid model (1964) is a behavioral

leadership model developed by Robert Blake and Jane Mouton.
This model has identified five different leadership styles based
on the concern for people and the concern for
production. The optimal leadership style in this model is
based on TheoryY.
This model is represented as a grid with concern for
production as the x-axis and concern for people as the y-
axis; each axis ranges from 1 (Low) to 9 (High). The resulting
leadership styles are as follows:

Figure: Managerial Grid
1. Task Management (9,1): Control & Dominate
(Dictatorial)
This leader is primarily concerned with the production
and has little concern for people. This leader believes in
getting work done at all costs.
Managers using this style find employee needs
unimportant; they provide their employees with money
and expect performance in return.
They also pressure their employees through rules and
punishments to achieve the company goals.
This dictatorial style is based on Theory X of Douglas
McGregor.
2. Country Club Management (1,9): Yield & Comply (
Accommodating)
This leader is mainly concerned with people rather than the
production.
Managers using this style pay much attention to the security,
comfort and need of the employees, in hopes that this will
increase performance.
This results usually friendly atmosphere, but not necessarily
very productive.

3. Middle of the Road Management (5,5): Balance &
Compromise ( Status quo)
This leader represents the moderate concern for both.
Managers using this style try to balance between company
goals and workers' needs.
By giving some concern to both people and production,
managers who use this style hope to achieve suitable
performance but doing so gives away a bit of each concern
so that neither production nor people needs are met.

4. Team Management (9,9): Contribute and Commit
(Sound)
This style demonstrates high concern for both production
and people and therefore, is the ideal approach to
leadership.
Managers who use this style encourage teamwork and
commitment among employees.
This method relies heavily on making employees feel
themselves to be constructive parts of the company.

1. Impoverished Management (1,1): Evade and Elude
(Indifferent)
This leader has minimum concern for both people and
production.
Managers use this style to preserve job and job seniority,
protecting themselves by avoiding getting into trouble. The
main concern for the manager is not to be held responsible
for any mistakes, which results in less innovative decisions.

Leadership Theories
There are different types of leadership theories. The most
commonly used theories are :
1. Trait Theory
2. Leader Behavior Theory
3. Contingency Theory
4. Theory X and Theory Y

Trait Theory
According to this theory, certain personal characteristics makes
a successful leader distinct from unsuccessful ones.
These personality traits are Intelligent, Capable, Persistent,
Confident, Adventurous, Visionary, Conscientious, Optimistic,
Charismatic, Friendliness etc.
A successful leader is said to possess biological, psychological
and social qualities.

Behavioral Theory
This theory focuses on the behavior of leaders while influencing
the behavior of subordinates.
As per this theory, the behavior of leader can be acquired.
Ohio State University and the University of Michigan studies
are the research studies in support of the behavioral theories.
The focus of Ohio State University study was to identify how
the leader behavior affects on the employee performance and
satisfaction.They found two leadership dimensions:
1. The initiating structure: which means how the leader
defines and organizes group tasks, assigns tasks to
employee and supervises their activities.
2. Consideration : It refers to the leader behavior such as
friendliness, respect, supportiveness, openness, trust, and
concern for the welfare of the employees.
The focus of the Michigan University study was to identify the
behavior of production-centered and employees-centered
leaders.
1. Production–Centered: These leaders set rigid work standards,
organized tasks down to the last details, prescribed work
methods to be followed and close supervision.
2. Employee-Centered: These leaders encouraged employee
participation in goal setting, decision making, and helped
ensure high performance by inspiring respect and trust.
Contingency Theory
It is difficult to decide which leadership theories are effective at
what condition and situation. The theory that works well in one
organizational setting may not be effective in other organization
with different organizational setting.
Management problems are different under different situations
and any one theory does not work to solve the organizational
problems. Therefore, require to be tackled as per the demand
of the situation.
Therefore, contingency theory has been proposed.

Under this, there are three different theories:
1. Fiedler’s Contingency Model
2. Path-goal Theory
3. Situational Theory
All these theories stress on the fact that leadership
effectiveness depends upon on the situations and not on the
personality traits or the behavior of leaders.
Fiedler’s Contingency model postulates that effectiveness
of a leader depends upon the (1) his motivational style
(authoritarian, participative ) and (2) situational factors
(leader-member relation: good/poor, task structure: well
structured/unstructured, positional power: formal authority)
Path-goal theory: According to this theory, leader must clarify
goals for the sub-ordinates and clear the path for realizing the
goals.
According to the Situational theory, the leadership should be
dynamic and flexible as per the situation rather than static.

Entrepreneurship
Introduction
Lot of risks are involved in doing business. Those people who
venture into business bearing all these risks are entrepreneurs
and all the activities that are done for the establishment of an
enterprise or business in called entrepreneurship.
The term entrepreneur and entrepreneurship is closely related
but there is conceptual difference.
According to Norma and Thomas, “ The entrepreneur is one
who creates a new business in the face of risk and uncertainty
for the purpose of achieving profit and growth by identifying
opportunities and assembling the necessary resources to
capitalize the opportunities”.
F.B. Hawley defines entrepreneur as the risk-taker.
F.H. Knight defines entrepreneur as the uncertainty bearer.
In brief, entrepreneur is one who organizes and manages an
enterprise undertaking and assuming all the risks for the sake of
profit.
An entrepreneur is the risk and uncertainty bearer, innovator,
organizer of factor or production.
Entrepreneurship is the various functions and activities
performed by an entrepreneur for the establishment and
operation of an enterprise.

According to Bengamin Higgins, “ By entrepreneurship is meant
the function of seeing investment and production opportunities,
organizing enterprise to undertake a new production process,
raising capital, hiring labor, arranging for the supply of raw
materials, finding a site, combining the factors of production in a
going concern, introducing new techniques and selecting top
managers for day to day operation”.

Relationship Between Entrepreneur and Entrepreneurship
Entrepreneur Entrepreneurship
Person Process
Organizer Organization
Innovator Innovation
Risk-taker Risk-taking
Motivator Motivation
Creator Creation
Leader Leadership
Decision maker Decision making

Need for Promotion of Entrepreneurship
Why Entrepreneurship Development ?
Entrepreneurs are one of the actors and play a crucial role in the
economic development of a country in the following way:
1. Entrepreneurship promotes the entrepreneurs who
promote the capital formation in the country.
2. Entrepreneur help in optimum utilization of natural
resources.
3. Promotes the employment opportunities
4. Promotes the foreign trade
5. Promotes industrialization in the country
6. Reduces economic inequality.

Entrepreneurship Development
Introduction
Entrepreneurs have some inherent characteristics which make
them successful. Although entrepreneurs are to some extent
born, some behavioral scientists opine that entrepreneurship
skill can be imparted and developed to the greater extent by
proper education and training.
D.C. McClelland on the basis of his study for more than 40
years, is one of the behavioral scientists who advocated that
entrepreneurship skills can be taught.
The program aimed at providing entrepreneurship skill is
called entrepreneurship development program (EDP).

Entrepreneurship Development
Objectives
The objectives of entrepreneurship development program are:
1. To strengthen potential entrepreneurs’ confidence in
doing business, or establish an enterprise.
2. To impart necessary skills and knowledge about financial,
technical, and managerial aspects of business.
3. To provide information and assistance in identifying,
formulating and implementing projects.
4. To create and strengthen entrepreneurial motivation.
5. To enable to make business decisions.

Entrepreneurial Characteristics
Following are the main entrepreneurial characteristics:
Desire for high Achievement
Desire for responsibility
Ability to take risk
Confidence in their ability to succeed
High level of energy
Future orientation
Skill in organizing
High degree of commitment
Flexibility
Foresight
Innovative
Steps for Establishing Small Scale Unit
Following steps are followed for establishing a
business unit: Project Identification
1. Project Identification
Searching and identifying a good business Project Preparation
(project) for investment
2. Project Preparation Appraisal
Feasibility study is carried out & project
document is prepared.
3. Project Appraisal Implementation
Project is evaluated
4. Project Implementation Evaluation
Project is launched.
5. Project Evaluation
Project Identification
The entrepreneur has to identify the profitable business project
before venturing into a new business. Having identified the list of
project, an appropriate project should be selected. Before that idea
related to the new business should be generated. Various sources of
idea generation are:
Analyze the performance of existing industries- Study of
capacity utilization of existing industries and market demand.
Examine the inputs and outputs of various industries-
Opportunity to produce input materials
Review of import and exports- Import trend analysis and
import substitution
Investigate local materials and resources- Industry that can use
local resources.
Analyze economic and social trend- Help project the demand
and supply of various goods.
Study new technological development- May provide new
business opportunity using new technology
Explore the possibility of reviving sick units
Visit trade fair and exhibitions

Project Selection
After identifying the business idea, the best idea has to be selected to
further analyze the project from among the given alternatives.
1. Preliminary Screening: It is done to eliminate the unprofitable
ideas at the very beginning. Consider the following points for
screening:
Compatibility with the promoter
Availability of input raw materials
Adequacy of the market
Volume of investment required
Acceptability of risk
2. Feasibility Study : Feasibility study is carried out for the final
selection of the project. The purpose to analyze whether the
project is technically, economically, environmentally viable.
Following studied are done in feasibility analysis:
Market Analysis: To estimate the market size in terms of
demand.
Technical Analysis: To know technology availability and its cost
Financial Analysis: To know the investment requirement and
return
Economic Analysis: Social cost benefit analysis
Environmental Analysis: To know the environment impact
3. Site Selection : The next step for project feasibility study is site
selection or the location analysis. Following factors are considered:
Primary Factors: Labor situation, availability of
infrastructure, raw materials, nearness to market, government
policies, environmental factors
Secondary Factors: Secondary factors includes the following:
Physical environment
Local government attitudes and policies
Availability of basic amenities like school, hospitals, banks,
entertainment house, health club etc

Project Formulation
After the selection of the appropriate project, next step is to
formulate the project. It involves writing a details business plan or
proposal.
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.
It provides guideline of the business.
It is necessary to approach the investors/financial institutions.
Major Components of Business Plan
1. Executive Summary: Summary of project plan
2. Business concept: Purpose, Objective, Mission & Vision of
business

3. Market Research and Analysis: Demand projection, market size,
industry structure, competition, and sales forecast.
4. Market Plan: Market strategy to compete, pricing, promotion,
distribution, service and warranties
5. Manufacture or Production: Facilities, locations, inventory and
material needed, human resources, operation process,
technology, safety, insurance
6. Entrepreneurial Team: Profile of founders, key personal,
investors,
7. Financial Documentation: Financial statement for income and
expenses, cash flow, assets and liabilities, BEP projection, Cost
and Benefit analysis, payback period

Project Appraisal
Project appraisal is the evaluation of the project. The purpose is to
determine the viability of the project and in case of need to make the
entrepreneur to modify the business plan.
The economic, technical, financial, marketing, environmental and
managerial aspects are analyzed in project appraisal.
Financial analysis is the most important part of business plan as
finance is the prerequisite of the business.
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Lecture 8 - Motivation Leadership

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Organization and Management BME III/I

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Re-evaluation Reward or Evaluation &

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Early Theories Contemporary

Scientific Management Human Relation

Content Theories Process Theories Reinforcement

McClelland’s Achievement Theory

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Figure : A schematic of Maslow’s Hierarchy of Needs

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Depending upon what assumptions a manager makes about

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Figure: Leadership style based on Task versus People emphasis

The managerial grid model (1964) is a behavioral

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