Business Management

M.Com. 101: Business Management

UNIT I

Q.1. What is Management? Explain the nature of management with suitable illustrations.

Ans. It is very difficult to give a precise definition of the term ‘management’. Different scholars from different disciplines view and interpret management from their own angles. The economists consider management as a resource like land, labour, capital and organisation. The bureaucrats look upon it as a system of authority to achieve business goals. The sociologists consider managers as a part of the class elite in the society.

The definitions by some of the leading management thinkers and practitioners are given below:

(i) Management consists in guiding human and physical resources into dynamic, hard-hitting organisation unit that attains its objectives to the satisfaction of those served and with a high degree of morale and sense of attainment on the part of those rendering the service. —Lawrence A. Appley

(ii) Management is the coordination of all resources through the process of planning, organising, directing and controlling in order to attain stated objectives. —Henry L. Sisk.

(iii) Management is principally the task of planning, coordinating, motivating and controlling the efforts of others towards a specific objective. —James L. Lundy

(iv) Management is the art and science of organising and directing human efforts applied to control the forces and utilise the materials of nature for the benefit of man. —American Society of Mechanical Engineers

(v) Management is the creation and maintenance of an internal environment in an enterprise where individuals, working in groups, can perform efficiently and effectively towards the attainment of group goals. —Harold Koontz and Cyrill O’Donnell

(vi) Management is the art of knowing what you want to do and then seeing that it is done in the best and cheapest way. —F.W. Taylor

(vii) To manage is to forecast and to plan, to organise to command, to coordinate and to control. —Henry Fayol

(viii) Management is the function of executive leadership anywhere. —Ralph C. Davis

(ix) Management is concerned with seeing that the job gets done; its tasks all centre on planning and guiding the operations that are going on in the enterprise. —E.F.L. Breach

(x) Management is a distinct process consisting of planning, organising, actuating and controlling performed to determine and accomplish the objectives by the use of people and resources. —George R. Terry

(xi) Management is guiding human and physical resources into dynamic organisational units which attain their objectives to the satisfaction of those served and with a high degree of morale and sense of attainment on the part of those rendering service. —American Management Association

(xii) Management is a multipurpose organ that manage a business and manages Managers and manages Workers and work. —Peter Drucker

NATURE OF MANAGEMENT

To understand the basic nature of management, it must be analysed in terms of art and science, in relation to administration, and as a profession, in terms of managerial skills and style of managers.

Management is Combination of Art and Science

Management knowledge exhibits characteristics of both art and science, the two not mutually exclusive but supplementary. Every discipline of art is always backed by science which is basic knowledge of that art. Similarly, every discipline of science is complete only when it is used in practice for solving various kinds of problems faced by human beings in an organisation or in other fields of social life which is more related to an art. Art basically deals with an application of knowledge personal skill and know-how in a specific situation for efficiently achieving a given objective. It is concerned with the best way of doing things and is consequently, personalised in nature.

During the primitive stages of development of management knowledge, it was considered as an art. There was a jungle of managerial knowledge. It was not codified and systemised. People used it to get things done by others, in their own way giving an impression that whosoever uses it, knows the art of using it. This kind of loose and inadequate understanding of management supported the view that it was an art.

Management as a Science

Science means a systematic body of knowledge pertaining to a specific field of study. It contains general principles and facts which explains a phenomenon. These principles establish cause-and-effect relationship between two or more factors. These principles and theories help to explain past events and may be used to predict the outcome of actions. Scientific methods of observations, and experiments are used to develop principles of science. The principles of science have universal application and validity.

Thus, the essential features of science are as follows:

(i) Basic facts or general principles capable of universal application

(ii) Developed through scientific enquiry or experiments

(iii) Establish cause and effect relationships between various factors

(iv) Their Validity can be verified and they serve as reliable guide for predicting future events.

Let us now examine as to what extent management satisfies the above conditions:

(i) Systematic body of knowledge: Management has a systematic body of knowledge consisting of general principles and techniques. These help to explain events and serve as guidelines for managers in different types of organisations.

(ii) Universal principles: Scientific principles represent basic facts about a particular field enquiry. These are objective and represent best thinking on the subject. These principles may be applied in all situations and at all times. Exceptions, if any, can be logically explained. For example, the Law of Gravitation states that if you throw an object in the air it will fall on the ground due to the gravitational force of the earth. This law can be applied in all countries and at all points of time. It is as applicable to a football as it is to an apple falling from tree. Management contains sound fundamental principles which can be universally applied. For instance, the principle of unity of command states that at a time one employee should be answerable to only one boss. This principle can be applied in all types of organisation-business or non business. However, principles of management are not exactly like those of physics or chemistry. They are flexible and need to be modified in different situations.

(iii) Scientific enquiry and experiments: Scientific principles are derived through scientific investigation and reasoning. It means that there is an objective or unbiased assessment of the problem situation and the action chosen to solve it can be explained logically. Scientific principles do not reflect the opinion of an individual or of a religious guru. Rather these can be scientifically proved at any time. They are critically tested. For example, the principle that the earth revolves around the sun has been scientifically proved.

(iv) Management principles are also based on scientific enquiry and investigation. These have been developed through experiments and practical experience of a large number of managers. For example, it has been observed that wherever one employee has two or more bosses simultaneously, confusion and indiscipline are likely to arise, with regard to following the instructions.

(v) Cause and effect relationship: Principles of science lay down a cause and effect relationship between related factors. For example, when water is heated up to 100ºC, it starts boiling and turns into vapour. Similarly, the principles of management establish cause and effect relationship between different variables. For instance lack of balance between authority and responsibility will cause management to become ineffective.

(vi) Tests of validity and predictability: Validity of scientific principles can be tested at any time and any number of times. Every time the test will give the same result. Moreover, the future events can be predicted with reasonable accuracy by using scientific principles. For example, the Law of Gravitation can be tested by throwing various things in the air and every time the object will fall on the ground. Principles of management can also be tested for their validity. For example, the principle of unity of command can be tested by comparing two persons, one having a single boss and other having two bosses. The performance of the first person will be higher than that of the second.

Thus, management is undoubtedly a science. It contains a systematic body of knowledge in the form of general principles which enjoy universal applicability. However, management is not as exact a science—Physics, Chemistry, Biology and other Physical sciences. This is because management deals with people and it is very difficult to predict accurately the behaviour of living human beings. Management principles are universal but they cannot be expected to give exactly the same results in every situation. That is why management is known as a soft science. Management is a social science. It is still growing, with the growing needs of human organisations.

Management as an Art

Art implies the application of knowledge and skills to bring about the desired results. The essential elements of arts are:

(i) Practical knowledge

(ii) Personal skill

(iii) Result oriented approach

(iv) Creativity

(v) Improvement through continuous practice

Let us judge how far management fulfils these requirements:

(i) Practical knowledge: Every art signifies practical knowledge. An artist not only learn the theory but also its application in practice. For example, a person may have adequate technical knowledge of painting but he cannot become a good painter unless he knows how to make use of the brush and colours. Similarly, a person cannot become a successful manager simply by reading the theory and getting a degree or diploma in management. He must also learn to apply his knowledge in solving managerial problems in practical life. A manager is judged not just by his technical knowledge but by his efficiency in applying this knowledge.

(ii) Personal skill: Every artist has his own style and approach to his job. The success of different artists differ even when all of them possess the same technical knowledge or qualifications. This is due to the level of their personal skills. For example, there are several qualified singers but Lata Mangeshkar has achieved the highest degree of success. Similarly, management is personalised. Every manager has his individual approach and style in solving managerial problems. The success of a manager depends on his personality in addition to his technical knowledge.

(iii) Result-oriented approach: Arts seeks to achieve concrete results. The process of management is also directed towards the accomplishment of desirable goals. Every manager applies certain knowledge and skills to achieve the desired results. He uses men, money, materials and machinery to promote the growth of the organisation.

(iv) Creativity: Art is basically creative and an artist aims at producing something that had not existed before. Therefore, every piece of art requires imagination and intelligence to create. Like any other art, management is creative. A manager effectively combines and coordinates the factors of production to create goods and services. Moulding the attitudes and behaviour of people at work, towards the achievement of the desired goals is an art of the highest order.

(v) Improvement through people: Practice makes one perfect. Every artist become more and more efficient through constant practice. A dancer, for example, learns to perform better by continuously practicing a dance. Similarly, manager gains experience through regular practice and becomes more effective.

Thus, “management is both a science as well as an art”. It is a science because it has an organised body of knowledge consisting of certain universal facts. It is known as an art because it involves creating results through practical application of knowledge and skills. However, art and science are complementary to each other. They are not mutually exclusive. Science teaches one to know and art to do. Art without science has no guide and science without art is knowledge wasted.

For example, a person cannot be a good surgeon unless he has scientific knowledge of human anatomy and the practical skill of applying that knowledge in conducting an operation.

Similarly, a successful manager must know the principles of management and also acquire the skill of applying those principles for solving managerial problems in different situations. Knowledge of principles and theory is essential, but practical application is required to make this knowledge fruitful. One cannot become an effective manager simply by learning management principles by heart. Science (theory) and art (practice) are both essential for the success of management.

Management as a Profession

A profession is calling that requires specialised knowledge and often, long intensive academic preparation. The essential features of profession are as follows:

(i) Well defined body of knowledge

(ii) Restricted entry

(iii) Service motive

(iv) Code of Conduct

(v) Representative professional association

Let us examine to what extent management fulfils the above requirements:

(i) Specialised body of knowledge: Every profession has a well defined body of knowledge relevant to the area of specialisation. In order to practice a profession, a person requires specialised knowledge of its principles and techniques. Moreover, he must make deliberate efforts to gain proficiency unit. There exists a substantial and rapidly expanding body of knowledge in management. A manager must have intensive devotion and involvement to acquire expertise in the science of management. In addition, there should be competent application or judicious utilisation of this knowledge in solving complex problems. Today, management is a separate discipline having a specialised and organised body of knowledge.

(ii) Restricted entry: There exists institutions and universities to impart education and training for a profession. No one can enter a profession without going through the prescribed course of learning. For example one must pass the Chartered Accountancy examination to practice accountancy profession. Many institutes of management have been set up in India and abroad which offer courses for specialised training in management. Several management consultancy firms have also come into existence to offer advise for solving managerial problems. Formal education and training has become very helpful in getting jobs as managers. But no minimum qualification or course of study has been prescribed for managers by law.

(iii) Service motive: A profession is a source of livelihood but professionals are primarily motivated by the desire to serve the community. For example, a doctor earns his living from his medical practice. But he does not treat his patients only for the sake of money. He has a concern for the suffering of others and a desire to help the community. Therefore, a profession enjoys high community sanction or respect. Similar is the case with managers. A manager of a factory is responsible not only to its owners, but he is also expected to produce quality goods at a reasonable cost and to contribute to the well-being of the community.

(iv) Representative association: In every profession there is a statutory association or institution which regulates that profession. For example, the Institute of the Chartered Accountants of India establishes and administers standards of competence for the auditors. In management also associations have been established both in India and abroad. Managers have formed associations for the regular exchange of knowledge and experience. In India, there is the All India Management Association. However, this association does not have the statutory power to regulate the activities of managers. No university accepted criteria or standard exists for their evaluation. Membership of this association is not compulsory in order to become a manager.

(v) Code of conduct: Members of one profession have to abide by a code of conduct which contains rules and regulations providing the norms of honesty, integrity and professional ethics. For example a chartered accountant is not expected to commercially advertise his firm. The code of conduct is by the representative association to ensure self-discipline among its members. Any member violating the code can be punished and his membership can be cancelled. The All India Management Association has framed code of conduct for managers. The code requires the managers to fulfil their social and moral obligations. Members of the association are expected not to disclose the trade secrets of their employers and to make personal gain from the knowledge of internal working of the organisation. But this code does not have legal sanctions. However, observing business ethics is always helpful in becoming a more effective manager.

The above discussion reveals that management fulfils several essentials of profession. But like other professions, management does not restrict the entry into managerial jobs to people with a special academic degree. No minimum qualifications have been prescribed for managerial personnel. No management association has the authority to grant certificates of practice or to regulate entry into management careers. Few managers have uniform background in terms of education and experience. The management associations have no legal right to enforce their code of conduct. There is no single group to which the majority of the managers belong and whose authority is recognised by law as a sanction. Moreover, there is no single client group to which managers owe complete loyalty. Doctors owe their loyalty to patients. But managers are responsible to the owners as well as to other social groups.

Thus, management is, not strictly speaking, a full-fledged profession like medicine, law or chartered accountancy. Some experts believe that there should be no control over entry into management careers. According to Peter F. Drucker, “Management is a practice rather than a science or profession through containing elements of both. No greater damage could be done to economy and society than to attempt to professionalise management by licensing managers or by limiting access to management to people with special academic degree”.

Q.2. Elaborate upon the purpose & importance of management.

Ans. Management is indispensable for the successful functioning of every organisation. It is all the more important in business enterprises. No business runs in itself, even on momentum. Every business needs repeated stimulus which can only be provided by management. According to Peter Drucker,“ management is a dynamic lifegiving element in an organisation, without it the resources of production remain mere resources and never become production”.

The importance of management has been highlighted clearly in the following points:

(i) Achievement of group goals: A human group consists of several persons, each specialising in doing a part of the total task. Each person may be working efficiently, but the group as a whole cannot realise its objectives unless there is mutual cooperation and coordination among the members of the group. Management creates team-work and coordination in the group. He reconciles the objectives of the group with those of its members so that each one of them is motivated to make his best contribution towards the accomplishment of group goals. Managers provide inspiring leadership to keep the members of the group working hard.

(ii) Optimum utilisation of resources: Managers forecast the need for materials, machinery, money and manpower. They ensure that the organisation has adequate resources and at the sametime does not have idle resources. They create and maintain an environment conducive to highest productivity. Managers make sure that workers know their jobs well and use the most efficient methods of work. They provide training and guidance to employeers so that they can make the best use of the available resources.

(iii) Minimisation of cost: In the modern era of cut-throat competition no business can succeed unless it is able to supply the required goods and services at the lowest possible cost per unit. Management directs day-to-day operations in such a manner that all wastage and extravagance are avoided. By reducing costs and improving efficiency, managers enable an enterprise to be competent to face competitors and earn profits.

(iv) Survival and growth: Modern business operates in a rapidly changing environment. An enterprise has to adapt itself to the changing demands of the market and society. Management keeps in touch with the existing business environment and draws its predictions about the trends in future. It takes steps in advance to meet the challenges of changing environment. Changes in business environment create risks as well as opportunities. Managers enable the enterprise to minimise the risks and maximise the benefits of opportunities. In this way, managers facilitate the continuity and prosperity of business.

(v) Generation of employment: By setting up and expanding business enterprises, managers create jobs for the people. People earn their livelihood by working in these organisations. Managers also create such an environment that people working in enterprise can get job satisfaction and happiness. In this way managers help to satisfy the economic and social needs of the employees.

(vi) Development of the nation: Efficient management is equally important at the national level. Management is the most crucial factor in economic and social development. The development of a country largely depends on the quality of the management of its resources. Capital investment and import of technical knowhow cannot lead to economic growth unless wealth producing resources are managed efficiently. By producing wealth, management increases the national income and the living standards of people. That is why management is regarded as a key to the economic growth of a country.

Q.3. Discuss basic principles of Management along with their significance.

Ans. A body of principles of management has been developed by Henri Fayol, the father of modern management. Fayol wrote perceptibly on the basis of his practical experience as a manager. Although, he did not develop an integrated theory of management, his principles are surprisingly in tune with contemporary thinking in management theory.

Fayol held that there is a single "administrative science", whose principles can be used in all management situations no matter what kind of organization was being managed. This earned him the title of "Universality". He, however, emphasized that his principles were not immutable laws but rules of thumb to be used as occasion demanded.

Fayol held that activities of an industrial enterprise can be grouped in six categories : (i) technical (production), (ii) commercial (buying, selling and exchange), (iii) financial (search for and optimum use of capital), (iv) security (protection of property and persons), (v) accounting (including statistics); and (vi) managerial. However, he devoted most of his attention to managerial activity. He developed the following principles underlying management of all kinds of organizations :

1. Authority and Responsibility are Related : Fayol held that authority flows from responsibility. Managers who exercise authority over others should assume responsibility for decisions as well as for results. He regarded authority as a corollary to responsibility. Authority is official as well as personal. Official authority is derived from the manager's position in organizational hierarchy and personal authority is compounded of intelligence, experience, moral worth, past services, etc. A corollary of the principle that no manager should be given authority unless he assumes responsibility is that those who have responsibility should also have commensurate authority in order to enable them to initiate action on others and command resources required for the performance of their functions. This aspect of relationship between responsibility and authority is particularly relevant in India where authority tends to be concentrated in higher echelons of management.

2. Unity of Command : This principle holds that one employee should have only one boss and receive instructions from him only. Fayol observed that if this principle is violated authority will be undermined, discipline will be jeopardy, order will be disturbed and stability will be threatened. Dual command is a permanent source of conflict. Therefore, in every organization, each subordinate should have one superior whose command he has to obey.

3. Unity of Direction : This means that all managerial and operational activities which relate a distinct group with the same objective should be directed by "one head and one plan. According to Fayol, there should be, "one head and one plan for a group of activities having the same objective". It, however, does not mean that all decisions should be made at the top. It only means that all related activities should be directed by one person. For example, all marketing activities like product strategy and policy, advertising and sales promotion, distribution channel policy, product pricing policy, marketing research, etc., should be under the control of one manager and directed by an integrated plan. This is essential for the "unity of action, coordination of strength and focusing of effort". Violation of this principle will cause fragmentation of action and effort, and wastage of resources.

4. Scalar Chain of Command : According to Fayol scalar chain is the chain of superiors ranging from the ultimate authority to the lowest ranks. The line of authority is the route followed via every link in the chain by all communication which start from or go to the ultimate authority.

5. Division of Work : This is the principle of specialization which, according to Fayol, applies to all kinds of work, managerial as well as technical. It helps a person to acquire an ability and accuracy with which he can do more and better work with the same effort. Therefore, the work of every person in the organization should be limited as far as possible to the performance of a single leading function.

6. Discipline : Discipline is a sine qua non for the proper functioning of an organization. Members of an organization are required to perform their functions and conduct themselves in relation to others according to rules, norms and customs. According to Fayol, discipline can best be maintained by : (i) having good superiors at all levels; (ii) agreements (made either with the individual employees or with a union as the case may be) that are as clear and fair as possible; and (iii) penalties judiciously imposed.

7. Subordination of Individual Interest to General Interest : The interest of the organization is above the interests of the individual and the group. It can be achieved only when managers in high positions in the organization set an example of honesty, integrity, fairness and justice. It will involve an attitude and a spirit of sacrificing their own personal interests whenever it becomes apparent that such personal interests are in conflict with organizational interests. It may, however, be emphasized that social and national interests should have precedence over organizational interests whenever the two run counter to each other.

8. Remuneration : Employees should be paid fairly and equitably. Differentials in remuneration should be based on job differentials, in terms of qualities of the employee, application, responsibility, working conditions and difficulty of the job. It should also take into account factors like cost of living, general economic conditions, demand for labour and economic state of the business.

9. Centralisation : Fayol believed in centralisation. He, however, did not contemplate concentration of all decision making authority in the top management. He, however, held that centralisation and decentralisation is a question of proportion. In a small firm with a limited number of employees, the owner-manager can give orders directly to everyone. In large organizations, however, where the worker is separated from the chief executive through a long scalar chain, the decision making authority has to be distributed among various managers in varying degrees. Here one generally comes across a situation of decentralisation with centralised control. The degree of centralisation and decentralisation also depends on the quality of managers.

10. Order : Order, in the conception of Fayol, means right person on the right job and everything in its proper place. This kind of order, depends on precise knowledge of human requirements and resources of the concern and a constant balance between these requirements and resources.

11. Equity : It means that subordinates should be treated with justice and kindliness. This is essential for eliciting their devotion and loyalty to the enterprise. It is, therefore the duty of the chief executive to instill a sense of equity throughout all levels of scalar chain.

12. Stability of Tenure of Personnel : The managerial policies should provide a sense of reasonable job security. The hiring and firing of personnel should depend not on the whims of the superiors but on the well-conceived personnel policies. He points out that it takes time for an employee to learn his job; if they quit or are discharged within a short time, the learning time has been wasted. At the same time those found unsuitable should be removed and those who are found to be competent should be promoted. However, "a mediorce manager who stays is infinitely preferable to outstanding managers who come and go".

13. Initiative : It focuses on the ability, attitude and resourcefulness to act without prompting from others. Managers must create an environment which encourages their subordinates to take initiative and responsibility. Since it provides a sense of great satisfaction to intelligent employees, managers should sacrifice their personal vanity in order to encourage their subordinates to show initiative. It should, however, be limited, according to Fayol, by respect for authority and discipline.

14. Esprit de Corps : Cohesiveness and team spirit should be encouraged among employees. It is one of the chief characteristics of organized activity that a number of people work together in close coopearation for the achievement of common goals. An environment should be created in the organization which will induce people to contribute to each other's efforts in such a way that the combined effort of all together promotes the achievement of the overall objectives of enterprise. Fayol warns against two enemies of esprit de corps, viz. (i) divide and rule, and (ii) abuse of written communication. It may work to the benefit of the enterprise to divide its enemy but it will surely be dangerous to divide one's own workers. They should rather be welded in cohesive and highly interacting work-groups. Overreliance on written communication also tends to disrupt team spirit. Written communication, where necessary, should always be supplemented by oral communication because face-to-face contacts tend to promote speed, clarity and harmony.

The other important principles of management as developed by pioneer thinkers on the subject are :

(a) Separation of planning and execution of business operations

(b) Scientific approach to business problems

(d) Economizing production costs and avoiding the wastage of resources

(e) Fuller utilization of the operational capacity and emphasis on higher productivity

(f) Standardisation of tools, machines, materials, methods, timings and products

(g) Evaluation of results according to criteria of standard levels of performance

(h) Understanding and co-operation among the members of the organization set-up

Q.4. Discuss the important functions of management which support the philosophy of modern management thinkers.

Ans. Management process suggests that all the managers in the organization perform certain functions to get the things done by others. However, what are these functions which comprise management process is not quite clear and divergent views have been expressed on this. List of management functions varies from author to author with the number of functions ranging from three to eight.

There is enough disagreement among management writers on the classification of managerial functions. Newman and Summer recognize only four functions, namely, organizing, planning, leading and controlling. Henri Fayol identifies five functions of management, viz. planning, organizing, commanding, coordinating and controlling. Luther Gulick states seven such functions under the catch word "POSDCORB' which stands for planning, organizing, staffing, directing, coordinating, reporting and budgeting. Warren Haynes and Joseph Massie classify management functions into decision-making, organizing, staffing, planning, controlling, communicating and directing. Koontz and O'Donnell divide these functions into planning organizing, staffing, directing and controlling.

Davis includes planning, organizing and controlling. Breach includes planning, organizing, motivating, coordinating and controlling.

For our purpose, we shall designate the following six as the functions of a manager: planning, organizing, staffing, directing, coordinating and controlling. Henry Fayol, an early thinker of management process, has classified management functions into planning, organizing, commanding, coordinating and controlling. Gullick and Urwick have described the functions of management as POSDCORB referring to planning, organizing, staffing, directing, coordinating, reporting and budgeting. Koontz and O’Donell have included planning, organizing, staffing, leading and controlling. Earnest Dale has suggested innovation and representing also as important management functions besides these. Thus it can be seen that there is no agreement over the various functions of management. These functions have been treated differently over the period of time. Ervin Williams has summarized the various managerial functions developed over the period of time. All the above functions can be categorized into four basic functions of management i.e. planning, organizing, leading and controlling.

Planning

The planning function is the primary activity of management. Planning is the process of establishing goals and a suitable course of action for achieving those goals. Planning implies that managers think through their goals and actions in advance and that their actions are based on some method, plan, or logic rather than on a....... Plans give the organization its objectives and set up the best procedures for reaching them. The organizing, leading and controlling functions all derived from the planning function.

The first step in the planning is the selection of goals for the organization. Goals are then established for each of the organization’s subunits-its division, department and soon. Once these are determined, programs are established for achieving goals in a systematic manner.

The organizational objectives are set by top management in the context of its basic purpose and mission, environmental factors, business forecasts, and available and potential resources. These objectives are both long-range as well as short-range. They are divided into divisional, departmental, sectional and individual objectives or goals. This is followed by the development of strategies and courses of action to be followed at various levels of management and in various segments of the organization. Policies, procedures and rules provide the framework of decision making, and the method and order for the making and implementation of these decisions.

Every manager performs all these planning functions, or contributes to their performance. In some organizations, particularly those which are traditionally managed and the small ones, planning are often not done deliberately and systematically but it is still done. The plans may be in the minds of their managers rather than explicitly and precisely spelt out: they may be fuzzy rather than clear but they are always there. Planning is thus the most basic function of management. It is performed in all kinds of organizations by all managers at all levels of hierarchy.

Relationship and time are central to planning activities. Planning produces a picture of desirable future circumstances - given currently available resources, past experience etc. Planning is done by all managers at every level of the organization. Through their plans, managers outline what the organization must do to be successful while plans may differ in focus, they are all concerned with achieving organizational goals in the short and long term. Taken as a whole, an organization’s plans are the primary tools for preparing for and dealing with changes in the organization’s environment.

Organizing

After managers develop objectives and plans to achieve the objectives, they must design and develop an organization that will be able to accomplish the objectives. Thus the purpose of the organizing function is to create a structure of task and authority relationships that serves this purpose.

Organizing is the process of arranging and allocating work, authority, and resources among an organization’s members so they can achieve the organization’s goals.

Stoner defines “organizing as the process of engaging two or more people in working together in a structured way to achieve a specific goal or set of goals.

The organizing function takes the tasks identified during planning and assigns them to individuals and groups within the organization so that objectives set by planning can be achieved. Organizing, then, can be thought of turning plans into actions. Organizing function can be viewed as a bridge connecting the conceptual idea developed in creating and planning to the specific means for accomplishing these ideas.

The organizing function also provides on organizational structure that enables the organization to function effectively. Managers must match an organization’s structure to its goals and resources, a process called

organizational design. Organizing thus involves the following subfunctions:

(a) Identification of activities required for the achievement of objectives and implementation of plans.

(b) Grouping the activities so as to create self-contained jobs.

(d) Delegation of authority so as to enable them to perform their jobs and to command the resources needed for their performance.

(e) Establishment of a network of coordinating relationships.

Organizing process results in a structure of the organization. It comprises organizational positions, accompanying tasks and responsibilities, and a network of roles and authority-responsibility relationships.

Organizing is thus the basic process of combining and integrating human, physical and financial resources in productive interrelationships for the achievement of enterprise objectives. It aims at combining employees and interrelated tasks in an orderly manner so that organizational work is performed in a coordinated manner, and all efforts and activities pull together in the direction of organizational goals.

Staffing

Staffing is a continuous and vital function of management. After the objectives have been determined, strategies, policies, programmes, procedures and rules formulated for their achievement, activities for the implementation of strategies, policies, programmes, etc. identified and grouped into jobs, the next logical step in the management process is to procure suitable personnel for manning the jobs. Since the efficiency and effectiveness of an organization significantly depends on the quality of its personnel and since it is one of the primary functions of management to achieve qualified and trained people to fill various positions, staffing has been recognized as a distinct function of management. It comprises several sub-functions :

(a) Manpower planning involving determination of the number and the kind of personnel required

(b) Recruitment for attracting adequate number of potential employees to seek jobs in the enterprise

(d) Placement, induction and orientation

(e) Transfers, promotions, termination and layoff

(f) Training and development of employees.

As the importance of human factor in organizational effectiveness is being increasingly recognized, staffing is gaining acceptance as a distinct function of management. It need hardly any emphasize that no organization can ever be better than its people, and managers must perform the staffing function with as much concern as any other function.

Directing

Directing is the function of leading the employees to perform efficiently, and contribute their optimum to the achievement of organizational objectives. Jobs assigned to subordinates have to be explained and clarified, they have to be provided guidance in job performance and they are to be motivated to contribute their optimum performance with zeal and enthusiasm. The function of directing thus involves the following sub-functions:

(a) Communication

(b) Motivation

Once objectives have been developed and the organizational structure has been designed and staffed, the next step is to begin to move the organization toward the objectives. The directing function serves this purpose. It involves directing, influencing and motivating employees to perform essential tasks.

The best human resources employed will be of house if they are not motivated and directed in the right direction to achieve the organizational goals. Managers lead is an attempt to persuade others to join them in pursuit of the future that emerges from the planning, and organizing steps. By establishing the proper atmosphere, managers help their employees to do their best.

Effective leadership is a highly prized ability in organizations and is a skill that some managers have difficulty in developing. The ability requires both task-oriented capabilities and the ability to communicate, understand and motivate people.

Coordinating

Coordinating is the function of establishing such relationships among various parts of the organization that they all together pull in the direction of organizational objectives. It is thus the process of tying together all the organizational decisions, operations, activities and efforts so as to achieve unity of action for the accomplishment of organizational objectives.

The significance of the coordinating process has been aptly highlighted by Mary Parker Follet. The manager, in her view, should ensure that he has an organization "with all its parts coordinated, so moving together in their closely knit and adjusting activities, so linking, interlocking and interrelation, that they make a working unit that is not a congeries of separate pieces, but what I have called a functional whole or integrative unity". Coordination, as a management function, involves the following sub-functions :

(a) Clear definition of authority-responsibility relationships

(b) Unity of direction

(d) Effective communication

(e) Effective leadership

Controlling

Finally, the manager must be sure that actions of the organizations members do in fact move the organization towards its stated goals. This is the controlling function of management. The controlling is the process of ensuring that actual activities confirm to plan activities. It involves four main elements :-

1. Establishing standards of performance

2. Measuring current performance

3. Comparing this performance to the established standards

4. Taking correction actions if deviations are detected

Controlling implies that objectives, goals and standards of performance exist and are known to employees and their superiors. It also implies a flexible and dynamic organization which will permit changes in objectives, plans, programmes, strategies, policies, organizational design, staffing policies and practices, leadership style, communication system, etc., for it is not uncommon that employees failure to achieve predetermined standards is due to defects or shortcomings in any one or more of the above dimensions of management.

Thus, controlling involves the following process :

(a) Measurement of performance against predetermined goals

(b) Identification of deviations from these goals

It may be pointed out that although management functions have been discussed in a particular sequence-planning, organizing, staffing, directing, coordinating and controlling – they are not performed in a sequential order. Management is an integral process and it is difficult to put its functions neatly in separate boxes. Management functions tend to coalesce, and it sometimes becomes difficult to separate one from the other. For example, when a production manager is discussing work problems with one of his subordinates, it is difficult to say whether he is guiding, developing or communicating, or doing all these things simultaneously. Moreover, managers often perform more than one function simultaneously.

Through the controlling function, managers keep the organization on track. Without the controlling functions, other functions lose their relevance. If all the activities are properly planned, organized and directed but there is no control on the activities then there are full chances that the organization does not achieve its planned goals. Controlling function helps us knowing the deviations but the reasons for such deviations and the corrective actions is to be taken depends on the managers. Hence, the personal ability of the managers makes the controlling function effective or ineffective.

Q.5. Write a note on the evolution of management thought.

Ans. In the past, the business houses, particularly corporates, did not have a high academic stature and position in the society and it certainly compelled the scholars inculcate the academic interest in the study of business management so that its real fruits could be realized for the stakeholders under reference. There was a widespread belief that management process consisted of hidden tricks, mysterious clues and intuitive knowledge that could be mastered only by a few divinely gifted people. Moreover, the businessmen were very much afraid that through the study of management their tricks and secrets would be exposed.

But the advent of industrial revolution and the introduction of large scale mechanized production and the resultant growth of trade, industry and commerce necessitated the study of management. The evolution of management thoughts might be better approached through the framework as depicted in Figure. In the beginning there were two classical schools of management thoughts. These were- the scientific management school and the organizational school. Later on, behavioural school and the quantitative school came into existence. These four schools merged into integration school which led to the contemporary school of management thoughts.

Among the people who were in search of management principles, techniques and processes, a few emerged as outstanding pioneers. These are- Urwick and Brech, Boulton and Watt, Robert Owen, Charles Babbage, Oliver Sheldon, Lyndall Urwick, Herbert A. Simon, Frederick Winslow Taylor, H.S. Person, Henry L. Gantt, Frank Gilbreth, Harrington Emerson, H.P. Kendall, C.B. Barth, F.A. Halsey, Henri Dennison, Mooney and Reiley, Chester I. Barnard, Elton Mayo, F.J. Roethlisberger and T.N.Whitehead, Mary Parker Follett and Henry Fayol etc.

UNIT II

Q.6. "Management starts from planning and ends up with controlling". Discuss this statement, giving suitable examples.

Henri Fayol identifies five functions of management, viz. planning, organizing, commanding, coordinating and controlling. Luther Gulick states seven such functions under the catch word "POSDCORB' which stands for planning, organizing, staffing, directing, coordinating, reporting and budgeting. Warren Haynes and Joseph Massie classify management functions into decision-making, organizing, staffing, planning, controlling, communicating and directing. Koontz and O'Donnell divide these functions into planning organizing, staffing, directing and controlling.

Davis includes planning, organizing and controlling. Breach includes planning, organizing, motivating, coordinating and controlling.

For our purpose, we shall designate the following six as the functions of a manager: planning, organizing, staffing, directing, coordinating and controlling.

Henry Fayol, an early thinker of management process, has classified management functions into planning, organizing, commanding, coordinating and controlling.

Gullick and Urwick have described the functions of management as POSDCORB referring to planning, organizing, staffing, directing, coordinating, reporting and budgeting.

Koontz and O’Donell have included planning, organizing, staffing, leading and controlling.

Earnest Dale has suggested innovation and representing also as important management functions besides these. Thus it can be seen that there is no agreement over the various functions of management. These functions have been treated differently over the period of time.

Ervin Williams has summarized the various managerial functions developed over the period of time.

All the above functions can be categorized into four basic functions of management i.e. planning, organizing, leading and controlling.

Planning

Organizing

Organizing is the process of arranging and allocating work, authority, and resources among an organization’s members so they can achieve the organization’s goals.

Stoner defines “organizing as the process of engaging two or more people in working together in a structured way to achieve a specific goal or set of goals.

(a) Identification of activities required for the achievement of objectives and implementation of plans.

(b) Grouping the activities so as to create self-contained jobs.

(d) Delegation of authority so as to enable them to perform their jobs and to command the resources needed for their performance.

(e) Establishment of a network of coordinating relationships.

Staffing

sub-functions :

(a) Manpower planning involving determination of the number and the kind of personnel required.

(b) Recruitment for attracting adequate number of potential employees to seek jobs in the enterprise.

(d) Placement, induction and orientation.

(e) Transfers, promotions, termination and layoff.

(f) Training and development of employees.

Directing

(a) Communication

(b) Motivation

By establishing the proper atmosphere, managers help their employees to do their best.

Coordinating

(a) Clear definition of authority-responsibility relationships

(b) Unity of direction

(d) Effective communication

(e) Effective leadership

Controlling

1. Establishing standards of performance

2. Measuring current performance

3. Comparing this performance to the established standards.

4. Taking correction actions if deviations are detected.

Thus, controlling involves the following process :

(a) Measurement of performance against predetermined goals.

(b) Identification of deviations from these goals.

Management is an integral process and it is difficult to put its functions neatly in separate boxes. Management functions tend to coalesce, and it sometimes becomes difficult to separate one from the other. For example, when a production manager is discussing work problems with one of his subordinates, it is difficult to say whether he is guiding, developing or communicating, or doing all these things simultaneously. Moreover, managers often perform more than one function simultaneously.

Q.7. What do you understand by planning? Define its objectives and assess its importance.

Ans. Planning is the most fundamental function of management. An organization can succeed in effective utilization of its human financial and material resources only when its management decides in advance its objectives, and methods of achieving them. Without it purposive and coordinated effort is not possible, and what results are chaos, confusion and wastage of resources. Planning involves determination of objectives of the business, formation of programmes and courses of action for their attainment, development of schedules and timings of action and assignment of responsibilities for their implementation. Planning thus precedes all efforts and action, as it is the plans and programmes that determine the kind of decisions and activities required for the attainment of the desired goals. It lies at the basis of all other managerial functions including organizing, staffing, directing and controlling. In the absence of planning, it will be impossible to decide what activities are required, how they should be combined into jobs and departments, who will be responsible for what kind of decisions and actions, and how various decisions and activities are to be coordinated. And, in the absence of organizing involving the above managerial activities, staffing cannot proceed, and directing cannot be exercised. Planning is also an essential prerequisite for the performance of control function, as it provides criteria for evaluating performance. Planning thus precedes all managerial functions.

Definition of Planning : Planning is the process of deciding in advance what is to be done, who is to do it, how it is to be done and when it is to be done. It is the process of determining a course of action, so as to achieve the desired results. It helps to bridge the gap from where we are, to where we want to go. It makes it possible for things to occur which would not otherwise happen. Planning is a higher order mental process requiring the use of intellectual faculties, imagination, foresight and sound judgment.

According to Koontz, O'Donnell and Weihrich, "Planning is an intellectually demanding process; it requires the conscious determination of courses of action and the basing of decisions on purpose, knowledge and considered estimates".

Planning is a process which involves anticipation of future course of events and deciding the best course of action. It is a process of thinking before doing. To plan is to produce a scheme for future action; to bring about specified results, at specified cost, in a specified period of time. It is deliberate attempt to influence, exploit, bring about, and control the nature, direction, extent, speed and effects of change. It may even attempt deliberately to create change, remembering always that change (like decision) in any one sector will in the same way affect other sectors.

Planning is a deliberate and conscious effort done to formulate the design and orderly sequence actions through which it is expected to reach the objectives. Planning is a systematic attempt to decide a particular course of action for the future, it leads to determination of objectives of the group activity and the steps necessary to achieve them. Thus, it can be said that planning is the selecting and relating of facts and the making and using of assumptions regarding the future in the visualization and formulation of proposed activities believed necessary to achieve desired results.

Planning is thus deciding in advance the future state of business of an enterprise, and the means of attaining it. Its elements are :

1. What will be done – what are the objectives of business in the short and in the long run?

2. What resources will be required – This involves estimation of the available and potential resources, estimation of resources required for the achievement of objectives, and filling the gap between the two, if any.

3. How it will be done – This involves two things : (i) determination of tasks, activities, projects, programmes, etc., required for the attainment of objectives, and (ii) formulation of strategies, policies, procedures, methods, standard and budgets for the above purpose.

4. Who will do it – It involves assignment of responsibilities to various managers relating to contributions they are expected to make for the attainment of enterprise objectives. This is preceded by the breaking down of the total enterprise objectives into segmental objectives, resulting into divisional, departmental, sectional and individual objectives.

5. When it will be done – It involves determination of the timing and sequence, if any, for the performance of various activities and execution of various projects and their parts.

While planning does not guarantee success in organizational objectives, there is evidence that companies that engaged in formal planning consistently performed better than those with none or limited formal planning and improved their own performance over a period of time. It is very rare for an organization to succeed solely by luck or circumstances. Some of the reasons as to why planning is considered a vital managerial function are given below :

1. Planning is essential in modern business : The growing complexity of the modern business with rapid technological changes, dynamic changes in the consumer preferences and growing tough competition necessities orderly operations, not only in the current environment but also in the future environment. Since planning takes a future outlook, it takes into account the possible future developments.

2. Planning affects performance : A number of empirical studies provide evidence of organizational success being a function of formal planning, the success being measured by such factors as return on investment, sales volume, growth in earnings per share and so on. An investigation of firms in various industrial products as machinery, steel, oil, chemicals and drugs revealed that companies that engaged in formal planning consistently performed better than those with no formal planning.

3. Planning puts focus on objectives : The effectiveness of formal planning is primarily based upon clarity of objectives. Objectives provide a direction and all planning decisions are directed towards achievement of these objectives. Plans continuously reinforce the importance of these objectives by focusing on them. This ensures maximum utility of managerial time and efforts.

4. Planning anticipates problems and uncertainties : A significant aspect of any formal planning process in collection of relevant information for the purpose of forecasting the future as accurately as possible. This would minimize the chances of haphazard decisions. Since the future needs of the organization are anticipated in advance, the proper acquisition and allocation of resources can be planned, thus minimizing wastage and ensuring optimal utility of these resources.

5. Planning is necessary to facilitate control : Controlling involves the continual analysis and measurement of actual operations against the established standards. These standards are set in the light of objectives to by achieved. Periodic reviews of operations can determine whether the plans are being implemented correctly. Well developed plans can aid the process of control in two ways.

First, the planning process establishes a system of advance warning of possible deviations from the expected performance. Second contribution of planning to the control process is that it provides quantitative data which would make it easier to compare the actual performance in quantitative terms, not only with the expectations of the organization but also with the industry statistics or market forecasts.

6. Planning helps in the process of decision making : Since planning specifies the actions and steps to be taken in order to accomplish organizational objectives, it serves as a basis for decision-making about future activities. It also helps managers to make routine decisions about current activities since the objectives, plans, policies, schedules and so on are clearly laid down.

Q.8. What are the advantages and limitations of Planning? What should be done to overcome its limitations?

Ans. ADVANTAGES AND LIMITATIONS OF PLANNING

The importance of formal planning has already been discussed. A vigorous and detailed planning programme helps managers to be future oriented. It gives the mangers some purpose and direction. A sound blue print for plans with specific objective and action statements has numerous advantages for the organization which are as follows :

1. Focuses Attention on Objectives : Since all planning is directed towards achieving enterprise objectives, the very act of planning focuses attention on these objectives. Laying down the objectives is the first step in planning. If the objectives are clearly laid down, the execution of plans will also be directed towards these objectives.

2 Ensures Economical Operation : Planning involves a lot of mental exercise which is directed towards achieving efficient operation in the enterprise. It substitutes joint directed effort for uncoordinated piecemeal activity, even flow of work for uneven flow, and deliberate decisions for snap judgement costs. This helps in better utilization of resources and thus minimizing costs.

3. Reduces Uncertainty : Planning helps in reducing uncertainties of future because it involves anticipation of future events. Effective planning is the result of deliberate thinking based on facts and figures. It involves forecasting also. Planning gives an opportunity to a business manager to foresee various uncertainties which may be caused by changes in technology, taste and fashion of the people, etc. Sufficient provision is made in the plans to offset these uncertainties.

4. Facilitates Control : Planning helps the managers in performing their function of control. Planning and control are inseparable in the sense that unplanned action cannot be controlled because control involves keeping activities on the predetermined course by rectifying deviations from plans. Planning helps control by furnishing standards of control. It lays down objectives and standards of performance which are essential for the performance of control function.

5. Encourages Innovation and Creativity : Planning is basically the deciding function of management. It helps innovative and creative thinking among the managers because many new ideas come to the mind of a manager when he is planning. It creates a forward looking attitude among the managers.

6. Improves Motivation : A good planning system ensures participation of all managers which improves their motivation. It improves the motivation of workers also because they know clearly what is expected of them. Moreover, planning serves as a good training device for future managers.

7. Improves Competitive Strength : Effective planning gives a competitive edge to the enterprise over other enterprises that do not have planning or have ineffective planning. This is because planning may involve expansion of capacity, changes in work methods, changes in quality, anticipation tastes and fashion of people and technological changes, etc.

8. Achieves Better Coordination : Planning secures unity of direction towards the organizational objectives. All the activities are directed towards the common goals. There is an integrated effort throughout the enterprise. It will also help in avoiding duplication of efforts. Thus, there will be better coordination in the organization.

Limitations of Planning : Sometimes, planning fails to achieve the expected results. There are many causes of failure of planning in practice. These are discussed below :

1. Lack of reliable data : There may be lack of reliable facts and figures over which plans may be based. Planning loses its value if reliable information is not available or if the planner fails to utilize the reliable information. In order to make planning successful, the planner must determine the reliability of facts and figures and must base his plans on reliable information only.

2. Lack of initiative : Planning is a forward looking process. If a manager has a tendency to follow rather than lead, he will not be able to make good plans. Therefore, the planner must take the required initiative. He should be an active planner and should take adequate follow up measure to see that plans are understood and implemented properly.

3. Costly process : Planning is time consuming and expensive process. This may delay action in certain cases. But it is also true that if sufficient time is not given to the planning process, the plans so produced may prove to be unrealistic. Similarly, planning involves costs of gathering and analyzing information and evaluation of various alternatives. If the management is not willing to spend on planning, the results may not be good.

4. Rigidity in organizational working : Internal inflexibility in the organization may compel the planners to make rigid plans. This may deter the managers from taking initiative and doing innovative thinking. So the planners must have sufficient discretion and flexibility in the enterprise. They should not always be required to follow the procedures rigidly.

5. Non-acceptability of change : Resistance to change is another factor which puts limits on planning. It is a commonly experienced phenomenon in the business world. Sometimes, planners themselves do not like change and on other occasions they do not think it desirable to bring change as it makes the planning process ineffective.

6. External limitations : The effectiveness of planning is sometimes limited because of external factors which are beyond the control of the planners. External strategies are very difficult to predict. Sudden break-out of war, government control, natural havocs and many other factors are beyond the control of management. This makes the execution of plans very difficult.

7. Psychological barriers : Psychological factors also limit the scope of planning. Some people consider present more important than future because present is certain. Such persons are psychologically opposed to planning. But it should not be forgotten that dynamic mangers always look ahead. Long-range wellbeing of the enterprise cannot be achieved unless proper planning is done for future.

MEASURES TO OVERCOME LIMITATIONS OF PLANNING

Some people say that planning is a mere ritual in the fast changing environment. This is not a correct assessment on managerial planning. Planning may be associated with certain difficulties such as non-availability of data, lethargy on the part of the planners, rigidity of procedures, resistance to change and changes in external environment. But these problems can be overcome by taking the following steps :

1. Setting Clear-cut Objectives : The existence of clear-cut objectives is necessary for efficient planning. Objectives should not only be understandable but rational also. The overall objectives of the enterprise must be the guiding pillars for determining the objectives of various departments. This would help in having coordinated planning in the enterprise.

2. Management Information System : An efficient system of management information should be installed so that all relevant facts and figures are made available to the mangers before they perform the planning function. Availability of right type of information will help in overcoming the problems of complete understanding of the objectives and resistance to change on the part of the subordinates.

3. Carefully Premising : The planning premises constitute a framework within which planning is done. They are the assumptions of what is likely to happen in future. Planning always requires some assumptions to be made regarding future happenings. In other words, it is a prerequisite to determine future settings such as marketing, pricing, Government policy, tax structure, business cycle, etc. Before giving the final shape to the overall business plan. Due weightage should be given to the relevant factors at the time of premising. It may be pointed out that the premises which may be of strategic significance to one enterprise may not be of equal significance to another because of size, nature of business, nature of market, etc.

4. Business Forecasting : Business is greatly influenced by economic, social, political and international environment. The management must have a mechanism of forecasting changes in such environment. Good forecasts will contribute to the effectiveness of planning.

5. Dynamic Managers : The persons concerned with the task of planning should be dynamic in outlook. They must take the required initiative to make business forecasts and develop planning premises. A manager should always keep in mind that planning is looking ahead and he is making plans for future which is highly uncertain.

6. Flexibility : Some element of flexibility must be introduced in the planning process because modern business operates in an environment which keeps on changing. For achieving effective results, there should always be a scope to make necessary addition, deletion, or alternation in the plans as is demanded by the circumstances.

7. Availability of Resources : Determination and evaluation of alternatives should be done in the light of resources available to the management. Alternatives are always present in any decision problem. But their relative plus and minus points are to be evaluated in the light of the resources available. The alternative which is chosen should not only be concerned with the objectives of the enterprise, but also capable of being accomplished with the help of the given resources.

8. Cost-Benefit Analysis : The planners must undertake cost-benefit analysis to ensure that the benefits of planning are more than the cost involved in it. This necessarily calls for establishing measurable goals, clear insight to the alternative courses of action available, premising reasonable and formulation of derivative plans keeping in view the fact that environment is fast changing.

Q.9. What do you understand by formal organization? How does it differ from an informal organization? Explain the various steps in the process of organizing.

Ans. Formal organization refers to the structure of relationships deliberately built up by the top management to realize the objectives. In this form instructions, responsibility, authority, accountability, lines of command, and positions and authority are clearly defined and declared. Each person is aware of his duties and authority. Every subordinate is expected to obey his supervisor in the formal chain of command. Each individual is fitted in the organization like a cog in the machine. It is designed after careful identification, classification and assignment of business activities. So, it is conscious creation of relationships.

Informal organization refers to the network of personal and social relationships which arise spontaneously when people working together interact on personal whims, likes and prejudices. Such relations are not created by the top management and they are not recognized formally. The informal groups sometimes run parallel to the formal ones. Informal relations are not portrayed on organization charts and manuals. An informal organization provides an opportunity to workers to come close to each other, develop a feeling of cooperation and coordination among themselves.

Difference Between Formal and Informal Organizations

The difference between formal and informal organizations can be enumerated briefly as below :

1. Formation : Formal organization is deliberately created by management. It is the result of a conscious and deliberate effort involving delegation of authority. On the other hand, informal organization arises spontaneously and no conscious efforts are made to create it. It takes place on the basis of relationships, caste, culture, occupations and on personal interests etc. No delegation of authority is essential in informal organization.

2. Basis : A formal organization is based upon rules and procedures, while an informal organization is based upon attitudes and emotions of the people. It depends on informal, social contacts between people working and associating with one another.

3. Nature : A formal organization is stable and predictable and it cannot be changed according to the whims or fancies of people. But an informal organization is neither stable nor predictable.

4. Set up : A formal organization is a system of well defined relationships with a definite authority assigned to every individual. It follows predetermined lines of communication. On the contrary, an informal organization has no definite form and there are no definite rules as to who is to report to whom. Even a low-placed employee may have an informal relationship with an officer far above him in the formal hierarchy.

5. Emphasis : In a formal organization, the main emphasis is placed on authority and functions. In an informal organization the stress is on people and their relationships.

6. Authority : Formal authority is attached to a position and it flows from top to bottom. Informal authority is attached to a person and it flows either downwards or horizontally.

7. Existence : A formal organizations exists independently of the informal groups that are formed within it. But an informal organization exists within the framework of a formal structure.

8. Rationality : A formal organization operates on logic rather than on sentiments or emotions. All activities follow a predetermined course.

As an association between like-minded people, an informal organization has little rationality behind it. In an informal organization, activities are influenced by emotions and sentiments of its members.

9. Depiction : Formal organization can be shown in an organization chart or a manual. But an informal organization cannot be depicted in the chart or manual of the enterprise.

Q.10. What does Staffing mean? Explain its nature and process.

Ans. Staffing can be defined simply in the terms of finding the right aspirant/candidate and fitting him/her in the right job.

It takes account of matching of skills and knowledge of the employees with the requirements of the job in question, i.e., job specification or job description. Staffing is the next step - after the recruitment and selection processes are duly carried out (necessarily on the basis of individual performances in various tests, interviews, etc.) - towards proposed hiring.

In a broader scope, it therefore includes forecasting of manpower, strategizing, manpower planning et al, and it may or may not include a host of other recruitment activities as well, which is beyond the general context of this article. It's also about managing or placing the existing manpower; reallocating and relocating people (resources) as per the need of the companies: their assignments and projects, and other professional duties/tasks included.

Nature of Staffing Function

Staffing is an important managerial function- Staffing function is the most important mangerial act along with planning, organizing, directing and controlling. The operations of these four functions depend upon the manpower which is available through staffing function.
Staffing is a pervasive activity- As staffing function is carried out by all mangers and in all types of concerns where business activities are carried out.
Staffing is a continuous activity- This is because staffing function continues throughout the life of an organization due to the transfers and promotions that take place.
The basis of staffing function is efficient management of personnels- Human resources can be efficiently managed by a system or proper procedure, that is, recruitment, selection, placement, training and development, providing remuneration, etc.
Staffing helps in placing right men at the right job. It can be done effectively through proper recruitment procedures and then finally selecting the most suitable candidate as per the job requirements.
Staffing is performed by all managers depending upon the nature of business, size of the company, qualifications and skills of managers, etc. In small companies, the top management generally performs this function. In medium and small scale enterprise, it is performed especially by the personnel department of that concern.

The Staffing Process

Manpower requirements- The very first step in staffing is to plan the manpower inventory required by a concern in order to match them with the job requirements and demands. Therefore, it involves forecasting and determining the future manpower needs of the concern.
Recruitment- Once the requirements are notified, the concern invites and solicits applications according to the invitations made to the desirable candidates.
Selection- This is the screening step of staffing in which the solicited applications are screened out and suitable candidates are appointed as per the requirements.
Orientation and Placement- Once screening takes place, the appointed candidates are made familiar to the work units and work environment through the orientation programmes. placement takes place by putting right man on the right job.
Training and Development- Training is a part of incentives given to the workers in order to develop and grow them within the concern. Training is generally given according to the nature of activities and scope of expansion in it. Along with it, the workers are developed by providing them extra benefits of indepth knowledge of their functional areas. Development also includes giving them key and important jobsas a test or examination in order to analyse their performances.
Remuneration- It is a kind of compensation provided monetarily to the employees for their work performances. This is given according to the nature of job- skilled or unskilled, physical or mental, etc. Remuneration forms an important monetary incentive for the employees.
Performance Evaluation- In order to keep a track or record of the behaviour, attitudes as well as opinions of the workers towards their jobs. For this regular assessment is done to evaluate and supervise different work units in a concern. It is basically concerning to know the development cycle and growth patterns of the employeesin a concern.
Promotion and transfer- Promotion is said to be a non- monetary incentive in which the worker is shifted from a higher job demanding bigger responsibilities as well as shifting the workers and transferring them to different work units and branches of the same organization.

UNIT III

Q.11. What is meant by directing? Explain in brief the importance of directing. Describe the essential elements of the managerial function of directing.

Ans. The managerial function of directing is a very important function in the management of any enterprise. It helps the managers in ensuring quality performance of jobs by the employees and achievement of organisational goals. It involves supervision, communication and providing leadership to the subordinates and motivating them to contribute to their best of capability. In this lesson we shall learn about this function in detail.

While managing an enterprise, managers have to get things done through people. In order to be able to do so, they have to undertake many activities, like guide the people who work under them, inspire and lead them to achieve common objectives. An office manager, for instance, has to supervise the activities of his subordinates, i.e., typists, office assistants, dispatchers, accounts clerks, etc. He has to issue instructions to them and describe and illustrate the work and related activities. He has to tell them what to do, and how to do it.

The office manager can plan, organise and appoint people, but he cannot get things done, unless he assigns specific duties to his subordinates and motivates them to perform well. All these activities of a manager constitute the directing function. Thus, directing is concerned with instructing, guiding, supervising and inspiring people in the organisation to achieve its objectives. It is the process of telling people what to do and seeing that they do it in the best possible manner. The directing function thus, involves:

• telling people what is to be done and explaining to them how to do it;

• issuing instructions and orders to subordinates to carry out their assignments as scheduled;

• supervising their activities;

• inspiring them to meet the mangers expectation and contribute towards the achievement of organisational objectives; and

• providing leadership.

Managers plan and take decisions. They organise to define the work and create suitable positions in the enterprise. People are employed to perform the jobs, but the actual work of getting the job done comes under the directing function. Thus, directing is ‘management in action’. It is through the exercise of this function that managers get things done through people.

IMPORTANCE OF DIRECTING

Plans remain mere plans unless they are put into action. In the absence of direction, subordinates will have no idea as to what to do. They will probably not be inspired to complete the job satisfactorily. Implementation of plans is, thus, largely the concern of directing function. As a function of management, directing is useful in many ways.

• It guides and helps the subordinates to complete the given task properly and as per schedule

• It provides the necessary motivation to subordinates to complete the work satisfactorily and strive to do their best

• It helps in maintaining discipline and rewarding those who do well

• Directing involves supervision, which is essential to make sure that work is performed according to the orders and instructions

• Different people perform different activities in the organisation. All the activities are interrelated. In order to co-ordinate the activities carried out in different parts and to ensure that they are performed well, directing is important. It thus, helps to integrate the various activities and so also the individual goals with organisational goals

• Directing involves leadership that essentially helps in creating appropriate work environment and build up team spirit.

ELEMENTS IN DIRECTING

Communication, Supervision, Motivation and Leadership are the four essential elements of directing. In the subsequent sections we shall discuss about the nature and significance of each of these components.

COMMUNICATION

Communication is a basic organisational function, which refers to the process by which a person (known as sender) transmits information or messages to another person (known as receiver). The purpose of communication in organisations is to convey orders, instructions, or information so as to bring desired changes in the performance and or the attitude of employees. In an organisation, supervisors transmit information to subordinates. Proper communication results in clarity and securing the cooperation of subordinates. Faulty communication may create problems due to misunderstanding between the superior and subordinates. The subordinates must correctly understand the message conveyed to them.

Thus, in communication:

• there are two parties, one is known as the sender and the other is known as receiver;

• there is a message sent by the sender to the receiver; and

• the receiver receives the message and understands it.

Communication does not always flow from supervisor to subordinate. It can also be from a subordinate to a supervisor. For example, subordinates can pass information to the supervisor about the faults/problems at the assembly line. Thus, it is a two way process.

After the employees have been instructed regarding what they have to do and how to do, it is the duty of the manager to see that they perform the work as per instructions. This is known as supervision. Managers play the role of supervisors and ensure that the work is done as per the instructions and the plans. Supervisors clarify all instructions and guide employees to work as a team in co-operation with others. Supervisors solve most of the routine job-related problems of subordinates. Supervisor, thus, performs the following functions:

• clarifies orders and instructions issued to subordinates and ensures that they have understand and follow these fully;

• ensures that subordinates have the required facilities to perform their jobs;

• keeps a watch and guides the activities of subordinates in performing their jobs;

• broadens the horizon of his subordinates by making them aware of the wider aspects of their day-to-day work;

• coordinates the work of different subordinates under him; and

• detects errors and omissions and ensures their rectification.

Though supervision is required at all levels of management, it is of great importance at the operational level i.e., at the level of first line supervisor. Managers at this level devote maximum time in supervising the work of subordinates. Though the top or middle level managers also supervise the work of their subordinate managers, but it is the first line supervisors who are in direct and constant touch with operatives i.e., workers in the factory and clerical staff in the office. Thus, they are directly responsible for getting the work done through most of the employees in an organisation.

MOTIVATION

Motivation is one of the important elements of directing. Issuance of proper instructions or orders does not necessarily ensure that they will be properly carried out. It requires manager to inspire or induce the employees to act and get the expected result. This is called motivation. It is a force that inspire a person at work to intensify his willingness to use the best of his capability for achievement of specify objectives. It may be in the form of incentives like financial (such as bonus, commission etc.) or, non-financial (such as appreciation, growth etc.), or it could be positive or negative. Basically, motivation is directed towards goals and prompt people to act.

LEADERSHIP

While motivation is the process through which employees are made to contribute voluntarily to work, leadership is the ability to persuade and motivate others to work in a desired way for achieving the goal. Thus, a person who is able to influence others and make them follow his instructions is called a leader. For example, in an organisation the management decides to install some new machines to which the workers are resisting. However, one of the workers takes the initiative, explains the fellow workers the benefits of working with the new machines and moulds them to accept the management’s decision. Now he is said to be leader as he is able to influence a group of workers who followed him. In practice, the managers have to guide and lead their subordinates towards the achievement of goals, and so, to be an effective, a manager has to be a good leader. Leadership is the process, which influences the people and inspires them to willingly accomplish the organisational objectives. The main purpose of managerial leadership is to get willing cooperation of the workgroup in pursuit of the goals.

Q.12. What is meant by control? Explain various steps of the process of control.

Ans. Managerial planning results in the framing of objectives and laying down of targets. To achieve the objectives, a proper organisational structure is designed; people are assigned the various tasks; and are directed to perform their respective jobs. The actual performance is then assessed from time to time to ensure that what is achieved is in conformity with the plans and targets. This exactly is the controlling function. Thus, controlling as a function of management refers to the evaluation of actual performance of work against planned or standard performance and taking the corrective action, if necessary.

According to Henri Fayol, “Control consists in verifying whether everything occurs in conformity with the plan adopted, the instructions issued and principles established.”

According to Brech, “Control is checking current performance against predetermined standards contained in the plans, with a view to ensure adequate progress and satisfactory performance, and also recording Planning and controlling are closely related and depend upon each other. Controlling depends upon planning because planning provides the targets or standards against which actual performance can be compared. Controlling, on the other hand, appraises planning. It brings out the shortcomings of planning and helps to improve upon the plans. For example, in a factory, 10 workers are required to cut steel sheets into small round pieces. The work plan prescribes that each worker should cut 40 pieces in a day (240 pieces per week). After a week, the manager finds that, out of 10 workers, 6 were able to cut only 200 pieces each and 4 could cut only 180 pieces each. In order to find out the causes of this deviation he evaluates the physical facilities provided to workers in the work place.

On being satisfied with these conditions, the manager concludes that the target of 240 pieces per week is too high for workers to achieve. Therefore, it should be revised from 240 to 200 pieces per week. Thus, the manager revises the plan because the control exercise indicated that standard he had fixed was unreasonably high and beyond the reach of the workers. It may be noted that in order to exercise effective control, managers should not only have the standards but also see that information on the gaps between actual and standard performance is made available and action taken to rectify the deviations, if any. This is essential because, without such information, managers will not be able to measure the deviations and, without corrective action, the entire control process would be a meaningless exercise.

You should also make a note that controlling does not simply involve checking the quantity of work done but also includes checking the quality of performance, the time taken and the cost incurred. In the above example, suppose each worker could cut 240 pieces per week but most of the pieces were not of the specified size or there was an excessive wastage of steel sheets. This would result in unnecessary loss to the organisation. Hence, the managers have to take steps so that the quality of work is improved and the wastage is reduced.

Thus, controlling involves

(i) knowing the nature, quantum and time frame of the work;

(ii) comparing the performance with the plan;

(iii) analysing deviation, if any;

(iv) taking corrective steps; and

(v) suggesting revision of plans, if necessary.

PROCESS OF CONTROL

The process of control consists of various steps. Look at the following example.

Ram is employed in a garments manufacturing company. His job is that of sewing trousers. His supervisor specifies that he should sew 20 trousers in a day. This is the first step of the control process, i.e., fixation of standards. At the end of the day, the supervisor counts and finds that Ram has completed only 18 trousers. Thus, the “measurement of performance” is the second step in the control process. Then he compares it with the standards. This is the third step of the control process called “comparison of performance with standards”. While comparing the performance of the other workers he finds that the two workers have produced less than the standard. When the supervisor tries to ascertain the reasons for the poor performance, he find that machines on which the other two workers were working had developed some fault. This is the fourth step in controlling and is known as “ascertaining reasons for deviation”. Then, in order to avoid such unexpected defects in machinery in future, the supervisor decides that everyday there will be an inspection of all tools and equipments. This is “corrective action”, which is the fifth and last step in controlling.

Let us now discuss these steps in detail.

1. Establishment of Standards

Setting standard is the first requirement of control. Standards arise out of plans and provide the basis of comparison. There can be different types of standards, e.g., number of units to be produced per hour, cost of production per unit, permissible quantity of scrap and wastage per day, quality of the products and so on. As far as possible, the standards should be laid down in quantitative terms. A quantitative standard provides a concrete measure and helps in comparison. It is equally important that the standards fixed are realistic and attainable, neither too high nor very low. If these are too high, employees will be discouraged. On the other hand, if these are too low, the organisation will operate at a lower efficiency level leading to higher cost.

When standards may not be achieved fully, a range of tolerable deviations should also be fixed. This can be expressed in terms of minimum and maximum limits. Performance within the permissible range may not require any corrective action.

2. Measurement of Performance

When standards are established, the next step is to measure the performance at regular intervals. Measurement is not difficult in case of physical operations, e.g., units produced, cost incurred, time spent, etc., as these can be easily measured. Performance can be measured by observations, inspection and reporting. Generally, at lower levels, a detailed control is exercised at frequent intervals on the basis of observation and inspection. For higher levels of management, reports are prepared at regular intervals. Performance should be measured as early as possible so that if a corrective action is called for it may be taken in time.

3. Comparison of Performance with standards

The next step in the control process is comparison of actual performance against the standards. In case the standards set are well defined and can be measured objectively, comparison becomes very simple. But, in case of activities where, it is difficult to develop measurable quantitative standards, the measurement and appraisal of performance becomes difficult. Comparison of actual and standard performance may lead to three possible outcomes: actual performance may be (a) equal to, (b) more than, or (c) less than the standard. If actual performance is equal to the standard, managers need not take any action but where deviations are noticed, corrective action becomes necessary. The managers should ascertain whether these deviations are within the permissible range or outside it. Corrective action becomes necessary only for deviations which fall outside the permissible range.

4. Detecting the reasons for deviations

Before taking any corrective action, managers should try to ascertain the reasons for the occurrence of deviations. The fault may be that standards fixed were unattainable rather than the subordinate’s inefficiency. Again, the deviations might have been caused by the nature of instructions issued by the manager rather than due to the subordinate’s mistake. Hence, it is essential that the reasons, which caused the deviation, be ascertained to determine the appropriate corrective action.

5. Taking corrective action

Once the causes for deviations become known, the next step is to go in for a corrective action which may involve revision of standards, changing the methods of selection and training of workers or providing better motivation. As stated earlier, managers should concentrate only on major deviations. The minor deviations, i.e., deviations within permissible range, should not be a cause of anxiety. The rectification of deviations from the standards should be undertaken promptly so that further losses are avoided.

Q.13. Explain briefly why coordination is called essence of management? Co-ordination is needed at all levels and in all functional areas of management. Comment.

Ans. In every organisation, different types of work are performed by various groups and no single group can be expected to achieve the goals of the organisation as a whole. Hence, it becomes essential that the activities of different work groups and departments should be harmonised. This function of management is known as ‘co-ordination’. It ensures unity of action among individuals, work groups and departments, and brings harmony in carrying out the different activities and functions so as to achieve the organisational goals efficiently.

In other words, coordination is the orderly arrangement of individual and group efforts to provide unity of action in the pursuit of a common goal. In an organisation, for example, the purchase department buys raw materials for production, the production department produces the goods, and the marketing department to procures orders and sells the products. All these departments must function in an integrated manner so that the organisational goal is duly achieved. Thus, coordination involves synchronisation of different activities and efforts of the various units of an organisation so that the planned objectives may be achieved with minimum conflict.

“According to Brech, Coordination is balancing and keeping together the team by ensuring suitable allocation of tasks to the various members and seeing that the tasks are performed with the harmony among the members themselves.”

SIGNIFICANCE OF CO-ORDINATION

The significance of co-ordination as a function of management mainly arises from the fact that work performed by different groups, units or departments form integral part of the total work for which an organisation is established. Without harmonised effort or unity of action, achievement of goals in some departments may run counter to that of the other departments, or the timing of achievements may not fit in properly. This has to be avoided and the managers have to prevent overlapping and conflict so as to achieve unity of action.

With increasing size and scale of operations, the significance of co-ordination becomes more important. This is because of the following reasons -

(a) When there is growth in size and the volume of work, there will be more people and work groups. So there is greater possibility of people working at cross purposes as the unit and sub-unit goals may be considered more important by them than the organisational goals. Not only that, the large size may also lead problems of supervision and communication. Hence coordinating the activities in a large concern becomes a major task for the managers.

(b) Large organisations generally tend to have activities located at different places, which may not permit frequent and close interaction among people. Hence, the need for coordination becomes greater and it becomes a major responsibility for the managers.

(c) Growth in size of an organisation is often combined with diversification of business activities. This may be due to new unrelated products being added to the existing products. As a result, there may be more division and sub-division of activities. At the same time, there is an increase in the number of managerial levels and vertical division of responsibilities. All these make coordination more difficult as well as important.

In view of the importance of coordination in an organisation, it is sometimes called the ‘essence’ of management. It is a function of managers in all departments and branches of an organisation, and applies at all levels of management. It ultimately helps in reconciliation of goals, total accomplishment of business objectives, maintenance of harmonious relationship between different groups and ensuring economy and efficiency in the organisation.

Q.14. How you will define the leadership? Discuss the main leadership styles with their application.

Ans. It is difficult to define the term “leadership”. However, as a starting point, we may proceed with the workable definition that a leader is one who leads others and is able to carry an individual or a group towards the accomplishment of a common goal. He is able to carry them with him, because he influences their behaviour. He is able to influence their behaviour, because he enjoys some power over them. They are willing to be influenced, because they have certain needs to satisfy in collaboration with him. French and Raven have proposed the following bases of power for a person exerting influence:

1. Legitimate- That the targets of influence, followers or sub-ordinates understand that the power the leader enjoys is legitimate and they should comply with his orders in order to meet their own goals.

2. Reward-That the followers know that the leader has the power to grant promotions, monetary inducements or other rewards if his orders are complied with.

3. Coercive- That the followers know that if the leader’s orders are not complied with, he has the power to hire, fire, perspire and discharge the followers.

4. Expert- That the followers know that the leader possesses specialist’s knowledge in the field they lack it.

5. Referent- That the followers feel attracted towards him because of his amiable manners, pleasing personality or they feel that he is well connected with high-ups.

It is apparent then that the first three power bases indicate positional power, which one derives from one’s position. The other two indicate personal power, which is based on the individual’s own characteristics. In any case, the leader exercises his influence because of one or more of these types of power and obtains compliance from the followers. How far he succeeds in his attempts will depend upon several other factors that we will discuss during the course of this lesson.

Leadership is, therefore, regarded as the process of influencing the activities of an individual or a group in efforts towards goal achievement in a given situation. This process, as Heresy and Blanchard suggest, can be explained in the form of the following equation:

L = f (L, F, S,)

That is, the leadership is a function of the leader(L), the follower(F) and other situational variables( S). One who exercises this influence is a leader whether he is a manager in a formal organization, an informal leader in an informal group or the head of a family. It is undoubtedly true that a manager may be a weak leader or a leader may a weak manager, but it is also equally probable that a manager may be a true leader or a leader may be true manager. A manager who is a true leader as well is always desirable. Situational variables include the whole environment like the task, the group, organizational policies, etc.

Leadership Styles

Leadership style is the way a managerial leader applies his influence in getting work done through his subordinates in order to achieve the organizational objectives. The main attitude or belief that influences leadership style is the perceived role of the manager versus the role of the subordinates. It depends upon the role of the leader whether he likes to work more of a colleague, facilitator and decision maker and on the other hand the response of the subordinates would determine the particular style to be in application. Broadly speaking, there are three basic leadership styles: -

1. Autocratic or Dictatorial Leadership: In this leadership style the leader assumes full responsibility for all actions. Mainly he relies on implicit obedience from the group in following his orders. He determines plans and policies and makes the decision-making a one man show. He maintains very critical and negative relations with his subordinates. He freely uses threats of punishment and penalty for any lack of obedience. This kind of leadership has normally very short life.

2. Democratic Leadership: In this case, the leader draws ideas and suggestions from his group by discussion, consultation and participation. He secures consensus or unanimity in decision-making. Subordinates are duly encouraged to make any suggestion as a matter of their contribution in decision-making and to enhance their creativity. This kind of leadership style is liked in most civilized organization and has very long life.

3. Laissez-faire Free Rein Leadership: Quite contrary to autocratic leadership style, in this leadership style the leader depends entirely on his subordinates to establish their own goals and to make their own decisions. He let them plan, organize and proceed. He takes minimum initiative in administration or information. He is there to guide the subordinates if they are in a problem. This kind of leadership is desirable in mainly professional organization and where the employees are self-motivated. Leader works here just as a member of the team.

Q.15. What is the concept of motivation? Explain the theories of motivation.

Ans. The word motivation is derived from motive, which is defined as an active form of a desire, craving or need, which must be satisfied. All motives are directed towards goals and the needs and desires affect or change your behaviour, which becomes goal oriented. For example, if you ordinarily do not want to work overtime, it is quite likely that at a particular time, you may need more money (desire) so you may change your behaviour, work overtime (goal oriented behaviour) and satisfy your needs. Viteles defines motivation as: “Motivation represents an unsatisfied need which creates a state of tension or disequilibria, causing the individual to move in a goal directed pattern -towards restoring a state of equilibrium, by satisfying the need.”

Organizations are made of people. Organizations have to be concerned with what should be done to achieve sustained levels of performance through people. This necessitates assigning close attention to ensure how individual can best be motivated through such means as incentives, rewards, leadership and the work they do and organizational context within which they carry out the work. The objective of developing an appropriate motivational atmosphere is to ensure that the people in the organization are adequately motivated to deliver performance in accordance with the expectations of the management. Various model suggests that motivation is initiated by the conscious or unconscious recognition of unsatisfied needs. This need will lead to the desire for achieving something that satisfy the needs. Goals are established and behaviour pathway is selected which will achieve the goal. If the goal is achieved, the need will be satisfied and the goal directed behaviour is likely to be expected for satisfying the same needs later.

Motivation is a process, which accounts for an individual’s intensity, direction and persistency of efforts towards attaining a goal. This is one of the most frequently researched topic in Organizational Behaviour. We can call motivation as a fluid subject and therefore there is a necessity to motivate employees continuously with more innovative ways time an on. Therefore, history tells us development of several motivation theories. Perhaps each one of them has a background or and environment in which it has been successful under the circumstances.

THEORIES ON MOTIVATION

Expectancy Theory

It was put forth by Vroom (1964). It can be described as follows: “Whenever an individual chooses between alternatives which involve uncertain outcomes, it seems clear that his behaviour is affected not only by his preferences among the outcomes but also by the degree to which he believes these outcomes to be possible. An expectancy is defined as a momentary belief concerning the likelihood that a particular act will be followed by a particular outcome.

The strength of expectations may be traced on past experiences. The theory proposes that, motivation is likely only when a clearly perceived and usable relationship exists between performance and outcome, and the outcome is seen as a means of satisfying needs. This explains why extrinsic motivation (e.g.: bonus) work only if the link between efforts and rewards is clear and the value of the reward is worth the effort. It also explains why intrinsic motivation can be more purposeful than extrinsic motivation.

Victor Vroom’s expectancy theory is one such most widely accepted theory of motivation currently in use. This has the strength of a tendency to act in a certain manner, which depends upon the strength of an attractiveness of that outcome to the individual. In other words, theory says that, an employee will be motivated to exert high level of effort when he believes that efforts will lead to a good performance appraisal. And this will lead to organizational rewards in many ways, which in turn will satisfy the personal goals of the employees. The employees expectation is in the form of promotion, an increment in salary or a certificate or incentive. etc. The theory, therefore, concentrates on three types of relationships.

i. Efforts performance relationship :- The individual presides the probability that exerting a particular amount of efforts leads to performance.

ii. Performance reward relationship:- The individuals degree of belief that performing at a particular level will lead to reaching a desired outcome.

iii. Rewards personal goals relationship :- This is the degree to which the organizational rewards satisfy an individual goals or need and the attractiveness of those potential rewards for the individuals.

Expectancy theory explains or rather helps to explain why some workers are not motivated on their jobs and restrict themselves to minimum and necessary work.

To summaries, the key to expectancy theory is understanding of the individual goals as well as the linkage between his efforts and performance and the performance and rewards and lastly between the rewards and individual goals satisfaction. However, the theory definitely recognizes that, there is no particular principle for explaining everyone’s motivation.

As far as the effectiveness of this theory is concerned, it has been validated with high degree of priority probably because every individual’s goal satisfaction cannot be understood, realized clearly. Perhaps there are no recognized methods that may surface the truth. More so the organization’s policy also may not suit this theory, particularly where seniority comes as a rule.

Maslow’s Hierarchy of Needs

This theory is one of the most famous hypothesizing that within every human being there exists 5 needs in a hierarchical structure. These needs are

i. Physiological : This includes hunger, sex, shelter, thrust and a few bodily needs.

ii. Safety : This includes protection from physical and emotional harm as well as security.

iii. Social: This includes acceptance, belongings, affection as well as friendship.

iv. Esteem: This includes the internal esteem factors such as autonomy, achievement and self-respect. Similarly the external esteem factors include status, recognition and attention to physiological need.

v. Self-actualization : This means drive to become what one is capable of becoming. This, therefore, includes self-fulfilment, growth and achievement of one’s potentiality.

Maslow’s hierarchy of needs can be shown diagrammatically in the form of a pyramid with base as physiological needs and ending with self-actualization at the top as shown below.

The author of the theory separated these 5 needs in two categories, namely lower order needs that are satisfied externally which include physiological and safety needs and the high order needs which are satisfied internally incorporating social, esteem and self-actualization needs.

Though Maslow’s theory received recognition widely from managers, there is a criticism that the organizations did not either follow or support the need structures as proposed by Maslow. Perhaps this might be due to stringent organizational policies in the past or the recognition by the organizations about the importance of this theory.

His theory, based on needs, suggested a need hierarchy that apply to people. He says that an individual’s needs involve physiological needs, safety needs, social needs, esteem needs and self actualization. The theory states that when a lover need is satisfied, the higher level need becomes dominant and the individual’s attention is turned to satisfying higher level. He used to say that, Man is a wanting animal and only unsatisfied needs can motivate behaviours and the dominant need is the prime motivator of behaviour.

The main implication of Maslow’s Theory is that higher order needs for esteem and self fulfilment provide greater impetus to motivation. They grow in strength when they are satisfied, while the lower needs decline in strength on satisfaction.

To summarize, we learn that, there is organization to understand the needs of people at various levels and appropriately provide motivational inputs suitable to their requirements.

Herzberg’s Two Factor Model

He, in 1957, suggested a two-factor model based on the study of accountants and engineers. His observations were as below:

Employee’s wants can be divided into two groups. The one group that includes salary, working conditions etc, which, if not satisfied, creates dissatisfaction, though do not lead to explicit motivation. On the other hand, there are factors such as rewards, advancement, career progression etc, which give positive satisfaction. His theory has been heavily criticized by many. His model provides an overall picture of the factors that generally satisfy the employee and those which positively motivate the employees.

Herzberg’s two-factor theory

This is also known as motivation-hygiene theory. Herzberg was a psychologist and he believed that, an individual’s relation to work is basic and ones attitude towards work can determine success or failure. He got the response for his questionnaire answered by several employees. His intention was to identify what the employee’s want from their job.

He also expected from them the situation in which they felt exceptionally good or bad about their jobs. This resulted into certain characteristics constantly related to job satisfaction and others to job desertification. Factors that lead to extreme dissatisfaction, in order of merit in terms of frequency where organizational policies and administration, type of supervision and the relation with supervisor, work environment, salary followed by comparatively low factors like status, personal relationship, etc. Alternatively, the factors relating to high satisfaction included similarly in order of importance achievements, recognition, work involvement, responsibility as well as advancement and growth. 69% of factors contributing to dissatisfaction were hygienic in nature. And 19% hygienic factors contributing to job satisfaction were hygienic in nature, the remaining factors in both the categories were respectively 31% and 81% and were motivator factors. Herzberg argued that the response strongly indicated that opposite of satisfaction is not dissatisfaction because removing dissatisfaction characterizing does not necessarily make the job satisfying. Therefore, his conclusion was that, job satisfaction factors are separate and distinct from those that lead to job dissatisfaction. And therefore elimination of factors for job dissatisfaction by managers may not necessarily help or create motivation. And therefore conditions around the job such as supervision quality, pay, company policies, physical working condition, relations with other and jobs security are called hygiene factors.

In the present context, many of these factors have depleted to a great extent. Similarly, the other side of the two factor theory also is becoming mild and therefore this theory may not carry as much vantage as it did during the twentieth century. The critiscism on this theory perhaps as indicated below may also be one of the factors for curtailing its importance at present. It is as indicated below.

i. Herzberg procedure is limited by his methodology because people generally take credit themselves when things go well and blame failure on extrinsic environment.

ii. No quantitative satisfaction asserting an employee may dislike a part of his job yet he thinks it is acceptable.

iii. The theory ignores situational factors and is said to be not in line with the early research.

iv. His theory does not give high profile of reliability because special efforts are to be made by the researchers in interpretation of the responses.

v. Herzberg assumed a relationship between satisfaction and productivity but he looked only at satisfaction and not productivity in research methodology he adopted.

Attribution Theory

It is concerned with how we explain our performance after we have invested considerable effort and motivation in a particular task. Four types of explanations may be used to account for either success or failure - ability, effort, task, difficulty or luck. e.g.: if success or failure is explained in terms of efforts, then high motivation may follow. On the other hand, if failure to achieve the level of performance is explained in terms of task difficulty or bad luck, the results may be a loss of motivation. Incorrect attribution may be the result of inadequate feedback, communication, appraisal and guidance. Attribution errors can create many problems in work situation.

This has the relevance to application of perception concept to organizational behaviour. Our per ceptions of people differ from those of inanimate objects such as machines, buildings, etc. because we are able to make inferences about the actions of people unlike about inanimate objects. It is imperative that, non-living objects are subjected to laws of natures and they do not have beliefs, motives or intentions but people do have.

The attribution theory proposes to develop explanation of the ways in which we judge people differently depending upon what meaning we attribute to a given behaviour. The theory suggests that, on observing an individual’s behaviour, we try to determine whether it was internally or externally caused. That determination largely depends upon:

i. Consensus

ii. Consistency and

iii. Distinctiveness

Internally cause behaviours are those that are under the persona control of the individual. Externally caused behaviours are seen as resulting from outside cause. When everyone is faced with a similar situation and responds in the same way, it means the behaviour shows consensus. Consistency of a person lies in the response which is the same way over different times. The more consistent the behaviour as well as the more is the consensus, the more is the observer inclined to attribute both to the internal causes.

Distinctiveness means whether an individual displays different behaviours in different situations. Depending upon whether the behaviour is usual or unusual, the observer gives the behaviour an external or internal attribution.

The attributional theory incorporated what are known as errors as biases that distort attributions. The tendency to underestimate the influence of external factors and overestimate the influence of internal factors when making judgments about the behaviour of others results in causing fundamental attribution errors. Similarly, the tendency for individual to attribute their own success to internal factors while casting the blame for failures on external factors results in self-serving bias. This theory was developed in the developing countries of the West and therefore they may not be perhaps accepted in the other parts of the world due to the traditions with which the people are governed in the remaining atmosphere. This theory can perhaps be connected to perceptions. The factors that influence perceptions are of three categories, namely;

i. Factors in the perceiver: These are attitudes, expectations, experience, interest and motives.

ii. Factors in the target: They are proximity, motion, novelty, similarity, size, etc.

iii. Factors situationally: Social setting, time and work setting.

All these interlinked have to contribute to the attribution theory positively.

Equity Theory

It is concerned with the perceptions people have about how they are being treated as compared with others. To be dealt with equitably is to be treated fairly in comparison with another group of people or a relevant other person. This theory attempts to say that, people will be better motivated if they are treated equitably and demotivated if they are treated inequitably.

There are two forms of equity. Distributive equity is concerned with the fairness with which people will feel they are rewarded in accordance with their contributions and in comparison with others. On the other hand, procedural equity is concerned with the perception employees have about the fairness with which organization procedures in areas such as performance appraisal promotion and discipline are being operated.

In 1990, identified five factors that contributed to perception of procedural fairness were identified. They are:

* Adequate consideration of an employee’s view point.

* Suppression of personal bias towards the employee.

* Applying criteria consistently across employee.

* Providing early feedback to employees concerning the outcome of decisions.

* Providing employees with an adequate explanation of the decision made.

UNIT IV

Q.16. What do you mean by social responsibility of a business?

Ans. Social responsibility of business refers to what the business does, over and above the statutory requirement, for the benefit of the society. The word responsibility connotes that the business has some moral obligations to the society. The term corporate citizenship is also commonly- used to refer to the moral obligations of business to the society. This implies that, just as individuals, corporates are also integral part of the society and that their behaviour shall be guided by certain social norms. The operations of business enterprises affect a wide spectrum. The resources they make use of are not limited to those of the proprietors and the impact of their operations is felt also by many a people who are in no way connected with the enterprises. The shareholders, the suppliers of resources, the consumers, the local community and society at large are affected by the way an enterprise functions. Hence, a business enterprise has to be socially very responsive so that a social balance may be struck between the opposing interests of these groups. Goyder argues: Industry in the twentieth century can no longer be regarded as a private arrangement for enriching shareholders. It has become a joint enterprise in which workers, management, consumers, the locality, Government and trade union officials all play a part. If the system, which we know by the name private enterprise, is to continue, some way must be found to embrace many interests, which go to make up industry in a common purpose. Later, in 1978, while delivering the C.C. Desai Memorial Lecture, he reiterated his plea that if the corporation has to function effectively, it has to be accountable to the public at large; and he sought to equate the suggestion of a responsible company with the trusteeship concept advocated by Gandhiji, the aim of which was to ensure that private property was used for the common good. The declaration issued by the international seminar on the social responsibility of business held in India in 1965 also co-related the Gandhian concept of trusteeship with the social responsibility of business as "responsibility to customers, workers, shareholders and the community." There has been a growing acceptance of the plea that business should be social1y responsible in the sense that the business enterprise, which makes use of the resources of society and depends on society for its functioning, should discharge its duties and responsibilities in enhancing the welfare of the society of which it is an integral part. H.S. Singhania classifies the nature of the social responsibility of business into two categories. The manner, in which, a business carries out its own business activity. The first involves the acceptance of the fact that business is not merely a profit-making occupation but a social function, which involves certain duties, and requires that appropriate ethics are followed. For example, a business must obey all the laws, even when they are disagreeable; it should produce the maximum goods of good quality, ensure smooth supplies at competitive prices, pay taxes, shun malpractices, pay a fair wage to employees and a reasonable dividend to shareholders. It is also the duty of a business to undertake new investment and promote the dispersal of economic activity through ancillarisation and the setting up of industries in backward areas so as to spread enterprise and take employment to the doorsteps of labour. In addition to its commercial activity, business also plays a role in promoting social welfare activity, even directly.

The contemporary view of social responsibility of business is substantially broader and benevolent than the classical one. According to the classical view, business has only economic objectives and no other responsibility beyond that. Milton Friedman, a Nobel economist and a proponent of this view, argues that "there is one and only one social responsibility of business-to use its resources and engage in activities designed to increase its profits so long as it stays within the rules of the game, which is to say, engages in open and free competition, without deception or fraud Few trends could so thoroughly undermine the very foundations of our free society as the acceptance by corporate officials of a social responsibility other than to make as much money for their stockholders as possible. This is a fundamentally subversive doctrine. The contemporary view of business is an ecological one according to which business is an integral part of the society to serve a social purpose. Proponents this view like Davis and Blomstorm hold that business is a social institution, performing a social mission and having a broad influence on the way people live and work together. According to Steiner and Steiner, a reasonable approach to social responsibility is as follows:

1. Each business must take into account the situation in which it finds itself in meeting stakeholder expectations.

2. Business is an economic entity and cannot jeopardize its profitability meeting social needs.

3. Business should recognize that in the long run, the general social good benefits everyone.

4. The social responsibility expected of a business is directly related to its social power to influence outcomes.

5. Social responsibility is related to the size of the company and to the industry it is in.

6. A business should fickle only those social problems in which it has competence.

7. Business must assume its share of the social burden and be willing to absorb reasonable social costs

Q.17. How can you evaluate the social responsibilities of business in Indian economy?

Ans. The Indian business sector presents a mixed picture as far as social responsibility is concerned. Shri J.R.D. Tata, who was instrumental in conducting the first social audit in India and perhaps in the world, was of the opinion that while on the side of production, of growth, of efficiency, Indian industry, on the whole, did remarkably well, usually against odds and in spite of crippling infrastructural shortages unknown in advanced countries, on the distributional side, however, its record was often poor and, in some respects, dismal, judged by the size of the black-market, the volume of black money and the general corruption that pervaded our economic life. True, many a time the imperfections on the distribution side-mostly hoarding and black-marketing - mercilessly gouge the unfortunate consumer. "Although it is the trader rather than the manufacturer who is mainly responsible for such diversion of goods and for the resulting heavy burden imposed on the consumer, the fact remains that, to that extent, corporate management of even of large Indian industries has, perhaps unavoidably, failed in the important obligation of ensuring that their -goods reach the consumer at fair prices". It is high time the producer realised that his responsibility does not end with producing goods and services; he should ensure that whatever is produced reached the ultimate consumer in time and at reasonable prices. It is gratifying to note that a number of leading companies in India have shown recognition of the social responsibility of the corporate sector. The business community has been instrumental in setting. up hundreds of institutions of public service like schools, colleges, management institutes, dispensaries, hospitals, technological institutes, research institutes (medical, scientific and technological), libraries, dharamshalas, cultural institutions, institutes for the dumb, deaf and blind, museums and places of religions worship. Some of the leading enterprises have extended welfare measures like health and medical facilities to people of the surrounding villages. Many businessmen have risen up to the occasion to help the victims of droughts, floods, earthquakes and other natural calamities.

One of the important externalities of industrialisation is the serious ecological damage it has inflicted. The problem of environmental pollution caused by industries is very serious in a number of places in our country. Though some enterprises have taken pollution abatement measures, many - both in the private and public sectors - continue to be major offenders against the environment. In fact, some of the public sector enterprises are notorious for their irresponsibility in this matter. As J.R.D. Tata has rightly pointed out, high standards of behaviour and the discharge of social obligations should be expected of or demanded from, not only business and industry but from all economic groups in the country whose actions have an impact on the public weal. This applies in particular to trade unions which, both in India and abroad, have, in recent years, acquired and often misused enormous economic powers, exceeded only by the Government's own. The millions of man-days of production lost in India every year owing to labour unrest and the violent form, which such unrest has taken in many cases, clearly indicate the need for a new approach to trade unionism and recognition of its social obligations.

The participation of labour in management has been suggested as a remedy for many a causes of industrial unrest. While it is a welcome suggestion, it should be ensured that the "collaboration" between labour and capital does not become instrumental in exploiting society.

The social responsibility of business is usually advocated for the private sector, presumably on the assumption that the public sector is socially quite responsible. But the fact remains that the public sector in India has yet to prove that it is more responsive to society than the private sector. In some cases, in fact, the record of the public sector is more dismal than that of the private. As far as the pollution of the environment is concerned, the public sector is as guilty as the private.

Many public sector enterprises in India have undoubtedly failed to discharge their primary responsibilities - increase in the productivity and production, efficiency in the provision of the services, etc. This is reflected in the mounting losses of many public enterprises. Some may argue that the public sector is not, and should not be, profit-motivated. But gone are the days of such philosophy. It has been clearly laid down that the public sector should generate surplus to finance our future development programmes. The huge losses incurred by the Indian public sector are not the result of any charity; they are the inevitable outcome of inefficiency, irresponsibility and mismanagement at various levels. The failure of the public sector in discharging its primary duties has made the plight of the common man worse than it would have been, for it resulted in shortages, higher prices and more taxes. There is also a very wide gap between the sweet expectations from the public distribution system designed to save the Common man from the clutches of the "unscrupulous private sector" and the bitter experiences of the way the public distribution system functions. The least saidabout the efficiency of the service of the public sector transport undertakings the better. In our country a social audit is indeed, perhaps, more for the public sector than the private sector.

The Sachar Committee suggested that companies in the public sector, which were very much a part of the total corporate sector and accounted for about 70 per cent of the total investment in the corporate sector, must reckon with the social cost and social benefits arising out of any given investment. As a matter of fact, social cost-benefit analysis is accepted as one of the prime considerations for making any investment in the public sector. It is natural, therefore, to expect from the private corporate sector that, in the matter of investment, it will also show a similar consideration of social cost and social benefit. The accountability of the public sector to the people through parliament must find its parallel in the private sector in the form of social accountability, at least to the extent of informing the public about the extent and manner in which it has or has not been able to discharge its social obligations in the cause of its own economic operations. It is in this sense that the social responsibility of business, as far as the private sector is concerned, is another name for social accountability and is, in our view, a mere extension of the principle of public disclosure to which the corporations must be subject. It has also been repeatedly emphasised that the report on social responsibility of the company should not be in a vague or general manner, but should have an element of particularisation and certainty.

Q.18. What is Management of Change?

Ans. Management of change is a systematic way to deal with change within an organization in order to effectively deal with the change and to capitalize on change opportunities. Change management includes adapting to the change, controlling the change and effecting new change. Management of change requires an organization to take a proactive approach to change.

Effective management of change is crucial if an organization is to adapt and thrive. All organizations encounter changes that they are unable to control. Developing a structured methodology to deal with change allows businesses to effectively cope with environmental changes. Changes that are likely to impact an organization may include competitive threats, changes to the economy, workplace regulations and governmental policies. Management of change involves the application of a structured system to provide a competitive advantage, as the marketplace is forced to adapt to the changing environment.

A business enterprise operates in a constantly changing environment. Changes in business environment create uncertainties and risk and also produce opportunities for growth. An enterprise has to change and adjust itself in the ever changing environment. Sound management moulds not only the enterprise but also alters the environment itself to ensure the success of the business. Many of the giant business corporations of today had a humble beginning and grew continuously through effective management.

An individual originates a change request. Qualified personnel, normally independent of the MOC originator, review the request to determine if any potentially adverse risk impacts could result from the change, and may suggest additional measures to manage risk. Based on the review, the change is either authorized for execution, amended, or rejected. Often, final approval for implementing the change comes from another designated individual, independent of the review team. A wide variety of personnel are normally involved in making the change, notifying or training potentially affected employees, and updating documents affected by the change.

Organizations usually have written procedures detailing how MOC will be implemented. The results of the review process are typically documented on an MOC Review form. Once the change is approved, it can be implemented. Potentially affected personnel are either informed of the change or provided more detailed training, as necessary, prior to start-up of the change. Follow-on activities, such as updates to affected elements, are assessed to identify which are required before start-up, and which may be deferred until after start-up. All such activities are tracked until completed.

Higher risk situations usually dictate a greater need for formality and thoroughness in the implementation of an MOC protocol, for example, a detailed plan that specifies exactly how changes are identified, reviewed, and managed. Companies having lower risk situations may appropriately decide to manage changes in a less rigorous fashion, for example, through a general policy about managing changes that is implemented via informal practices by trained key employees. Facilities that exhibit a high demand rate for managing changes may need greater specificity in the MOC procedure and a larger allocation of personnel resources to fulfil the defined roles and responsibilities. Lower demand situations can allow facilities to operate an MOC protocol with greater flexibility. Facilities with a sound culture may choose to have more performance-based MOC procedures, allowing trained employees to use good judgment in managing changes in an agile environment. Facilities with an evolving or uncertain culture may require more prescriptive MOC procedures, more frequent training, and greater command and control management to ensure good MOC implementation discipline.

The first step in the change process is to identify the need for change and the area of change as to whether it is a strategic change, process-oriented change or employee-oriented change. This need for change can be identified either through internal factors or through external forces that may be in place. Once the need for change is identified, the following general steps can be taken to implement such change.

(i) Develop new goals and objectives : The managers must identify as to what new outcomes they wish to achieve. This may be a modification of previous goals due to changed internal and external environment or it may be a new set of goals and objectives.

(ii) Select an agent for change : The management must decide as to who will initiate and oversee this change. A manager may be assigned this duty or even outside specialists and consultants can be brought in to suggest the various methods to bring in the change and monitor the change process.

(iii) Diagnose the problem : It is important to gather all pertinent data regarding the area or the problem where the change is needed. This data should be critically analyzed to pinpoint the key issues. Then the solutions can be focused on those key issues.

(iv) Select methodology : Because of natural resistance to change, it is very important to chart out a methodology for change which would be correct and acceptable to all. Members’ emotions must be taken

into consideration while devising such methodology.

(v) Develop a plan : This step involves putting together a plan as to what is to be done. For example, if the company wants to develop and implement a flexitime policy, it must decide as to what type of workers will be affected by it or whether flexitime should be given to all members or only to some designated workers.

(vi) Strategy for implementation of the plan : In this stage, the management must decide on the “when”, “where” and “how” of the plan. This includes the right timing of putting the plan to work, how the plan will be communicated to workers in order to have the lesser resistance and how the implementation will be monitored.

(vii) Implementation of the plan : Once the right timing and right channels of communication have been established, the plan is put into action. It may be in the form of simple announcement or it may require briefing sessions or in-house seminars so as to gain acceptance of all the members and specially those who are going to be directly affected by the change.

(viii) Receive and evaluate feedback : Evaluation consists of comparing actual results to the set goals. Feedback will confirm if these goals are being met so that if there is any deviation between the goals and the actual performance outcomes, then corrective measures can be taken.

Q.19. Are all managers change agents? Discuss. Identify the role of change agents in an organization.

Ans. The change agents are those factors that are responsible for bringing about the change in the individual behaviour patterns. This is the most important type of change since other types of changes such as in strategy, structure or process can always be introduced simply by the management and most often these changes are accepted by the workers and also because behaviour is a highly complex phenomenon and it may require a number of strategies to make desirable changes in human behaviour. These change agents may either be the initiators of change or serve as catalysts for such change. Four types of change agents have been identified.

(i) Outside Pressures : These are pressures from the external environment and are directed towards change in the entire organization. These may be in the form of government intervention if there are serious quality or safety defects. The government may also get involved if there are labour strikes for a long period of time

or mass demonstrations against the organization.

(ii) Internal organizational development : This can come slowly and through and within the organization itself. This may include redefinement of goals as well as participative goal setting such as MBO (Management by Objectives), work redesign, team development and so on.

(iii) Individual change : This change is the modification of behaviour within the individual where personal goals may be better served in the changed environment of the organization. For example, in a government job, if a person who is habitually coming late to work without any obvious repercussions or reprimands, might change his behaviour if the organization starts taking notice of such tardiness in a negative way.

(iv) Changes from central management : The organizational change may come from the top management who may be convinced about its necessity and may direct the structural, strategic or technological changes that would be beneficial to the organization and its members.

There have been a number of change agents that have been at work in changing the organizational processes and structures. In America, for example, Ralph Nader, a consumer advocate has been responsible for many changes in the area of quality and safety of many products and especially in the automobiles. In addition, forces such as women’s liberation movement and strong labour unions have brought about changes that have affected the work ethics of the organizations and work roles of its members.

Similarly, in India where the bureaucratic structure is deeply embedded in the organizational system, changes are being brought about by government regulations and by social pressures to give more freedom to the workers, to bring about equal opportunity for employment, irrespective of religion or gender and to keep pace with the changing world in technological processes.

The change agent may be in the form of a consultant who helps the client find solutions to the organizational problems. It could also be in the form a trainer who trains the client to achieve a set of skills that could be used in bringing about the change for desired outcomes. This change agent must have certain characteristics which would identify it to be more effective than others.

Q.20. Management by Objectives (MBO) is considered to be the most effective tool of organizational effectiveness. Explain some of the contributions of the concept of MBO towards employee motivation.

Ans. A logical extension of goal setting theory is Management by Objectives, which involves systematic and programmatic goal setting throughout an organization. It is a process by which managers and subordinates work together in identifying goals and setting up objectives and make plans together in order to achieve these objectives. These objectives and goals are consistent with the organizational goals.

George Odiorne has explained the concept of MBO as follows:

The system of management by objectives can be described as a process whereby the superior and subordinate managers of an organization jointly identify its common goals, define each individual's major areas of responsibility in terms of results expected of him and use these measures as guides for operating the unit and assessing, the contribution of each of its members. Also known as Goal Management, MBO is based upon the assumption that involvement leads to commitment and when an employee participates in goal setting as well as setting standards for measurements of performance towards that goal, then the employee will be motivated to perform better and in a manner that directly contributes to the achievement of organizational objectives.

Some of the elements in the MBO process can be described as follows:

1. Central goal settings: The first basic phase in the MBO process is the defining and clarification of organizational objectives. These are set by the central management and usually in consultation with the other managers. These objectives should be specific and realistic. This process gives the group managers and the top mangers an opportunity to be jointly involved. Once these goals are clearly established, they should be made known to all the members of the organization and be clearly understood by them.

2. Manager-subordinate Involvement: After the organization goals have been set and defined, the subordinates’ work with the managers in setting their individual goals relative to organizational goals. Such joint consultation is important because people become highly motivated in achieving objectives that were set by them to start with. The goals of the subordinates are specific and short range and primarily indicate what the subordinate's unit is capable of achieving in a specified period of time. The subordinate must set goals in consultation with the individuals who comprise his unit. In this manner, everyone gets involved in the goal setting.

3. Matching, goals and resources: The objectives in themselves do not mean anything unless we have resources and means to achieve those objectives accordingly, management must make sure that the subordinates are provided with necessary tools and materials to effectively achieve these goals. If the goals are precisely set, then the resources requirements can also be precisely measured thus making the resource allocation easier. However, just as in goal setting, the allocation of resources should also be done in consultation with the subordinates.

4. Freedom of implementation: The manager-subordinate task force should have adequate freedom in deciding on the utilization of resources and the means of achieving the objectives. As long as these means are within the larger framework of organizational policies, there should be minimum interference by superiors.

5. Review and appraisal of performance: There should be periodic review of progress between manager and the subordinates. These reviews would determine if the individual is making satisfactory progress. They will also reveal if any unanticipated problems have developed. They also help the subordinates understand the process of MBO better. They also improve the morale of subordinates since the manager is showing active interest in the subordinate's work and progress. These periodic reviews are necessary since priorities and conditions are constantly changing and these must be periodically monitored.

The concept of MBO is very rich in terms of managerial implications. Managers have a responsibility to assign or set goals in such a manner so as to have the maximum motivational potential. The goals must be tailored to the individual needs and skills, since individuals differ so much in their concept of goals. This would create an optimal performance environment for the employees. When implemented properly MBO has some unique advantages. These are:

1. Since MBO is result-oriented process and focuses on setting and controlling goals, it encourages managers to do detailed planning. As the planning process is improved, it helps in a better overall management system.

2. The managers are required to establish measurable targets and standards of performance and priorities for these targets. Since the goals are set in consultation with subordinates, these are generally more difficult and challenging than if the superiors had imposed them. Additionally, since these targets are tailored to the particular abilities of the subordinates, it obtains maximum contribution from them thus providing optimum utility of human resources.

3. Both the manager and the subordinates know what is expected of them and therefore there is no role ambiguity or confusion.

4. It makes individuals more aware of company goals. Most often the subordinates are concerned with their own objectives and the environment surrounding them. But with MBO, the subordinates feel proud of being involved in the organizational goals. This improves their morale and commitment.

5. MBO often highlights the area in which the employees need further training. By taking keen interest in the development of skills and abilities of subordinates, the management provides an opportunity for strengthening' those areas that need further refinement thus leading to career development.

6. The system of periodic evaluation lets the subordinates know how well they are doing. Since MBO puts strong emphasis on quantifiable objectives, the measurement and appraisal could be more objective, specific and equitable. These appraisal methods are superior to trait evaluation, which is based upon such factors as liability, cooperation, loyalty and self-discipline, since they focus on results and not on some subjective intangible characteristics. This evaluation being more objective can be highly morale boosting.

7. It improves communication between management and subordinates. This continuous feedback helps clarify any ambiguities, refine and modify any processes or any aspects of goals. Also, MBO is a kind of control mechanism so that if there are any deviations discovered between the actual performance and the goals, these can be regularly and systematically identified, evaluated and corrected.

Some of the problems and limitations associated with MBO are as follows:

1. In the classical structure of our organizations, the authority flows from top to bottom. This creates rigidity and discipline, which generally lead to better performance. Hence the top management is usually reluctant to support the process of MBO in which their subordinates would take equal part. Accordingly, MBO can only succeed if it has the complete support of top management.

2. Subordinates may dislike MBO. They may be under pressure to get along with the management when setting goals and objectives and these may be set unrealistically high or far too rigid. This may lower their morale and they may become suspicious about the philosophy behind MBO. They may seriously believe that MBO is just another of the management’s trick to make the subordinates work harder-and become more dedicated and involved.

3. The emphasis in MBO system is on quantifying the goals and objectives. It does not leave any ground for subjective goals. Some areas are difficult to quantify and more difficult to evaluate. Thus, MBO rewards productivity at the cost of creativity.

4. There is considerable paperwork involved and it takes too much of the manager’s time. Too many meetings and too many reports add to the manager's responsibility and burden. Some managers may resist the program because of this increased paperwork.

5. The emphasis is more on short-term goals. Since goals are mostly quantitative in nature, it is difficult to do long range planning. This is so because all the variables affecting the process of planning cannot be accurately forecast over the long run due to continuously changing socio-economic and technical environment. This difficulty affects the stability of goals.

6. Most managers may not be sufficiently skilled in interpersonal interaction such as coaching and counseling which is extensively required.

7. The integration of the MBO system with other systems such as forecasting and budgeting is very poor. This makes the overall functioning of all systems very difficult.

8. Group goal achievement is more difficult. When goals' of one department depend upon the goals of another department, cohesion is more difficult to obtain. For example, the production department cannot produce a set quota if it is not sufficiently supplied with raw materials and personnel. Similarly sales department cannot meet its obligation in sales unless production department keeps pace with sales.

9. It takes a lot of time, perhaps three to five years, to implement the MBO program properly and fully and some research studies have shown that MBO programs can lose their impact and potency as a motivating force over time.

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