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BA6111- PRINCIPLES OF MANAGEMENT

PRINCIPLES OF MANAGEMENT

UNIT 1:

Definition of Management:

Manage = Man (human)+ Age( experience)

Management: It is a wide term. It is variously described as an activity, a

process, and a group of people vested with the authority to make

decision.

Some important definitions:

1. Allen Louis : Management is What a manager does.Comments:

a) A person performing a managerial job in any group-Endeavour might becalled by a variety of names e.g. the head, the president, the secretarythe CEO, the manager ,the administrator etc.All these are managers performing of certain managerial jobs in

different context and condition.

b) The managerial job, in general, could be analyzed in terms of certainmanagerial function.

1. Planning2. Organizing3. Staffing4. Directing5. Controlling

Including co-ordination as the essence of manager ship.

2. Management is the art of getting work done out of others,working in a group- Harold Koontz

Management is an art of making people work in an effective and efficientmanner.

Effectiveness: it is the ability to choose appropriate goals and achieve them.

( doing the right things)

Efficiency: it is the ability to make the best use of the available resources in

the process of achieving goals.( doing things right)

G.Alex Rajesh, A.P, SUDHARSAN ENGINEERINGCOLLEGE

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3. Management is art of directing and inspiring people.- Jamesmoony:

4. To manage is to forecast and plan, to organize to command, toco-ordinate, to control.-Henry Fayol

Summing up:

Management refers to all those activities which are concerned with:-

Formulation of objectives, plan and policies of the collectiveenterprise.

Assembling men, money, material, machine and methods oftheir accomplishment.

Directing and motivating the men at work

Coordinating the physical and human resources

Supervising and controlling performance; and

Securing maximum satisfaction for both employer and employee

and providing the public with the best possible services.Nature and Characteristics or features of management:

1. Management as an activity ( or a process):

A manager performs a managerial activity. The managerial activity is,

in fact the managerial job i.e. the task performed by a manager or the group

of managers is an enterprises.

INPUT PROCESS OUTPUT

5m Planning Achievement of

goals

Men Organizing Profit/loss

Money Staffing Performance of the firm

Machine Directing

Materials& Controlling

Materials

i. The managerial process is a continuous one.ii. The managerial process is, in the present-day-times,

regard as a social process.


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iii. The management process is an integrating process. Itintegrates 5Ms for carrying out of the operations of anenterprise and for achieving and stated objectives. Thatway the management might be able to extract maximumoutput from a minimum of inputs.

iv. The management process is communication.2. Management is a universal process: the process of management can

be noticed in all spheres of life. The basic characteristics of management

activity are the same in all type of organization. The management activity is

basically the same everywhere.

3. Management is factor of production: management is regard as

factors of production. Just as land, labour. Capital and organization.

4. Management is goal-oriented: the most important goals of all

management activity is to accomplish the objectives of a enterprise. These

objectives may be economic, socio-economic, social and human.

Management at different levels seeks to achieve these in different ways.

5. Management is intangible: management has been called the unseen

force, its presence in evidenced by the result of its efforts. Thus feeling of

management is results-management.

6. Management is purposeful: management deals with the achievement

of something. Commonly, managerial success is measured by the extent to

which the objectives an are achieved.

7. Decision-making: management process involves decision-making, that

is it involves the evaluation and selection of alternatives.

Evolution of management.

1. Pre- scientific management -1880 AD2. Scientific management (1880- 1920)3. Human Relation period (1920-1950)

4. Modern management period (1950- present)I.PRE-SCIENTIFIC MANAGEMENT- 1880 AD

1. ROMAN CATHOLIC CHURCH:


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The Roman Catholic Church was one the most effective formal organization

in the history of the western civilization. The church had a set of well-defined

objectives and effective and efficient organizational set-up to achieve them.

Division work based on specialization and employment of staff officers to aid

and advises the line managers were some of the striking features of the

management of the Roman Catholic Church.

2.. ROBERT OWENS (1771-1858)

-Robert owens, a successful textile mill manager and social reformer, was for

treating the workers in a fair way.

-According to him, workers ought to be provided with incentives and

motivations by way of improved working conditions, fair wages, and a sense

of security so as to ensure co-operation and maximum production.

3.CHARLES BABBAGE (1792-1871)

-Charles Babbage, a scientist mainly interested in mathematics, contributionto the management theory by developing the principles of cost accountingand the nature of relationship between various disciplines.-He concentrated on production problems and stressed the importance of a)

division and assignment of work on the basis of skill and b) the means of

determining the feasibility of replacing a replacing manual operations with

automatic machinery.

II. SCIENTIFIC MANAGEMENT (1880-1920)

1.HENRY FAYOL (1841-1925)-He was a French mining engineer who turned a leading industrialist and

successful manager and rose to the position the chief management director.

-In his famous work, General and industrial administration, Fayol has listed

14 principles of administration.

-He evolved and general theory of administration to be applied in any field of

organized activity, particularly at the top level of management.


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-He is father of management

2.F.W TAYLOR (1856-1915)

-He has earned for himself an important place in the management thought.

-He is called the father of scientific management movement which seeks to

apply scientific method to the problem of management.

-Taylor published the following articles:

-i.A Piece Rate System, ii. Shop Management iii. On the Art of Cutting

Metals and The Principles of Scientific Managementwhich was published in

1911.

-

3. FRANK GILBERTH (1868-1924)

-Frank bunker Gilberth and Lillian Moller Gilberth were a husband and wife

team. They made significant contributions to motion study, fatigue studyand

work simplification.

-He analysis of the ob convinced him that many of the body movements

could be eliminated or combined to simplify the job and to increase

productivity.

-He found the most efficient and economical motions for each task. Thisincreased the workers moral and productivity and reduced his fatigue.4. HENRY L. GANTT (1861-1919)

-He was an associate of Taylor at Midvale and Bethlehem steel works.

-He developed the techniques of work scheduling and control.

-His significant contribution was the famous Gantt chartwhich is still used for

scheduling and control of work.

-He also developed the Task and Bonus Plan under which a minimum wage is

guaranteed to all workers irrespective of output.

-He believed that is all problems of management, the human element is the

most important.


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III. HUMAN RELATIONS PERIOD (1920-1950)

1. GEORGE ELTON MAYO (1880-1949)-He was a professor of industrial psychology at the Harvard Business School.

He published several books and papers, e.g i. Human Problem of an

Industrial Civilization, Management and Morale, The Social Problem of an

Industrial Organization, Training for Human Relation etc.

-He served as the leader of the team which carried out the famousHawthorne Experiments, these experiments were conducted in theHawthorne plant of West Electric Company in Chicago (USA) from 1927 to1932.

-Hawthorne Experiments may be classified into four stages:i. Illumination experimentsdesigned to Asses the effects of

illumination on employee efficiency.ii. Team room experimentdesigned to judge the influence of working

conditions (duration of rest periods, length of the work week, wageincentives, etc) on worker performance. These were experimental innature.

iii. Interviewing studies- undertaken to improve employee attitudes.These were psychological in nature.

iv. Observational studies carried out to understand the factorsinfluencing informal organization of work groups. These were

sociological in nature.

IV. MODERN MANAGEMENT PERIOD 1950 at present

1. DOUGLAS MCGREGOR (1906-1964)-He was a professor of management at the MIT(USA).-He is known for the development of motivation theory. He developedTheory X and Theory Y.-He advocated motivation by participation and job enrichment.

2. PETER F. DRUCKER (1909-TILL DATE)

-Drucker is now a professor of social sciences at Claremont graduate school,California.-His most popular book is The Practice of Management publishedin 1954-He introduced the concept ofMBO (Management By Objectives) and self-control in early fifties.-He has emphasized creative and innovative management and he is againstbureaucratic management


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-He has identified three important phases in organizing activity analysis,decision analysis and relation analysis.

SCHOOLS OF MANAGEMENT THOUGHT(OR)

DIFFERENT APPROACHES TO MANAGEMENT.

Management thoughts have been termed as pattern approaches, or

schools of management. Each of these employs certain beliefs, views, and

formats.

1.Empirical Approach: it bases its methods on a close study of past

managerial experiences and management cases. Studies experience throughcases. Identifies successes and failures. Main contributors to this approach

are Earnest Dale, Moony and Rellay, Urwick and many other

management practioners.

2. Human Behaviour Approach: a) this approach draws heavily its

concepts from psychology and sociology. b) Emphasis is placed on getting

greater productivity through motivation and good human relations. c)

Motivation, leadership, communication, participative management and group

dynamics are the core of this approach.

Beginning from the famous Hawthorne Experiments,

contributions have come from many psychologists and sociologist notably

from Maslow, Hers berg. McGregor etc

.

3. Social System Approach: The organization is essentially a cultural

system composed of people who work in co-operation. a) Relationships exist

among the external and internal environment of the organization. b) Co-operation among the group members is necessary for the achievement of

organizational objectives. The real pioneer of social systems approach is

Chester Barnard.


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4. Decision Theory Approach: It concentrates on rational decisions and it

is real job of every manager in the organization. Decision of what to achieve

and how to achieve it are the vital characteristics and challenges of every

manager. Major contributors are Simon, Forrester Cyert etc.

5.Mathematical approach: This school visualizes management as alogically entity. The action can be expressed in terms of mathematicalsymbols, relationships and measurable data. The major contributors includedin this school are Newman, Russel Ackoff etc.

6.Social Technical system approach: This approach views an

organization as two systems a) a social system and b) technical system,

which necessarily interact. By Trist and Bamforth.

7.Systems approach: the system approach of management is of recentorigin, having developed in late 1950. The system approach has made a

significant contribution on management discipline and practices. Systems

have boundaries, but they also interact with the external environment; i.e.,

organizations are open system.

8.Group Behaviour approach: emphasis on behavior of the people ingroups. Based on sociology and social psychology. The study of large groups

is often called organization Behaviour.9.Mckinseys framework: the seven S are 1. Strategy, 2.structure,

3.systems, 4.style, 5.staff, 6.shared values, 7. skills

Management VS administration

There has been a controversy on the use of the two terms-

management and administration.

Administration is different from management: Administration is ahigher-level activity while management is a lower level management.Administration is a determinative function concerned with thedetermination of objectives and policies while management is anexecutive function involving the implementation of polices.


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Administration Management

1. Legislative and determinative

function.

2. Determination of objectivesand policies

3. Provides a sketch of theenterprise.

4. Influenced mainly by publicopinion and other outsideforces.

5. Mainly a top level function

6. Involves thinking andplanning

1.executive function

2.Implementation of policies

3.provides the entire body

4.influenced mainly byadministrative decisions

5.mainly a lower level function

6.involves doing and acting

BOD

MD

Production manager

Plant superintendent

Supervisor

LEVELS OF MANAGEMENT:

The different levels of management may be classified into three categories

Levels of management:


Administration

Managem

ent

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Board of directors

Managing director

Production Finance marketing HR manager

Manager Manager manager manag

Plant chief account branch manager training officer

Superintend

financial officer

Foremen sales officer

clerks

Workers salesmen

Management /industrial management has got the following activity levels.


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1.Top-level management:

-Top level management includes a) Board of Directors b) ManagingDirector, c) Chief executive, d) General manger, e) Owners, f)Shareholders.

Setting basic goals and objectives. Expanding or contracting activities

Establishing policies

Monitoring performance

Designing/Redesigning organization system

Shouldering financial responsibilities etc.2. Upper Middle Management

-Upper Middle Management includes a) sales executive (manager),

production executive, financial executive, R&D executives, Accounts

executive

- Establishment of the organization.

Selection of staff for lower levels of management

Installing different departments

Designing operating policies and routines

Assigning duties to their subordinates etc.3.Middle Management

It includes a) Superintends, Branch manager, General foreman, etc.

- To cooperate to run organization smoothly- To understand interlocking of departments in major policies- To achieve coordination between different parts of the

organization- To conduct training for employee development- To build an efficient company team spirit

4. Lower Management

It includes a) Foremen, Supervisors, or charge-hands, office

superintendent, inspectors, etc.

- Direct supervision of workers and their work- Developing and improving work methods and operations- Inspection function- Imparting instruction to workers- To give finishing touch to the plans and policies of top

management- To act as a link between top management and the operating

force (i.e workers)


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- To communicate the feeling of workers to the top management.5. Operating Force

It includes a) Workers, rank and file workman, skilled, semi-killed and

unskilled.

- To do work on machines or manually, using tools, etc- To work independently (in case of skilled worker) or under the

guidance of supervisor.

MANAGEMENT SKILLS:

By managerial skills, we mean the skills or qualities desired in managers, the

possession of which would enable them to act better as practicing managers.

1. Technical skill:- Technical skill might be termed as technical expertise.- It is an imperative sill for managers at the lower level

management. Because it is actually these people who guide andsupervise work of operators under their subordination.

- Accordingly, it may range from knowledge regarding operationand repair of a machinery, storage of materials, to training ofsubordinates.

2.Human skill:

- By human skill we mean the ability to tactfully deal with human

beings and mould their behavior at work in the desired manner to

help attain the common objectives of the enterprise-most

effectively and efficiently.

- A manager has to provide effective supervision, motivation andleadership that part of his subordinates.

- A human skill is equally needed by all manages- from highest tothe lowest authority in the management hierarchy.

- Application of human knowledge and skill may involve

motivating the sales force to achieve revised targets, orpersuading the subordinates to effect economies, and so on.3. Conceptual skill

- It is concerned with concepts or ideas.- It is imperative for top management level, necessary for the

middle management level and desirable for the lower levelmanagement


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- Application of conceptual knowledge and skills may involveformulation of a plan to introduce a new product, to explore newmarkets, or trying out new methods of production.

Skills and Management Level

Top ----------------------------------------

---------------------------

Middle

---------------------------

Lower -------------

MANAGERIAL ROLES:

Many managers, especially at the top and middle management levels,

perform some such functions, as could not, properly, be called

management functions.

I. Interpersonal roles:


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a) Figurehead: i. Attending the wedding ceremony of an employee of the

organization.

ii. Entertaining VIP visitors and taking them to lunch or dinner.

iii. In this role the manager performs duties of a legal orceremonial nature, such as welcoming visitors, giving testimonials to

employees.

b) Leader: In this role the manager provides the dynamic force and

direction to his subordinates by means of guidance and motivation.

c) Liaison:

i. Dealing with public grievances and complaints for bettermentof public relations.

ii. The manager maintains or helps to maintain a link of theenterprise with outside parties; which is necessary forcollecting useful information for the enterprise and developinggood relations of the enterprise with important sectors ofsociety.

iii. Liaison helps the manager to establish mutually helpfulhorizontal relationship

II. Informational roles:

a) Monitor:

i. In this role the manager receives and analyses information formthe outside world and from within the organization, fortransmission to appropriate people.

b) Disseminator:

i. The information received from outside and from within theorganization is analyzed from the point of view of its relevance.The relevant information is then passed on to the appropriatepersons both within and outside the organization.

ii. Manager performs the role of a disseminator in the sense that heshares the information and experience with others.

c) Spokesman:

i. The manager acts as a representative of the organization totransmit information to the outside world.

ii. When he negotiates with the trade unions or talks to the pressperson, he acts as a spokesman of the organization.

III. Decisional roles:


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a) Entrepreneur:

i. A manager assumes the role of an entrepreneur when heinitiates any change in technology or work methods.

ii. Example: manager makes a decision to acquire new machine or

modify work methods.b) Disturbance handler:

i. In this role the manager is a troubleshooter, rushing in to providespeedy solution to a crisis. Breakdown of a machine, disputebetween subordinates, strike call by labour union, withdrawal ofcredit facility by suppliers of material, loss of a valued customer.

c) Resource allocator:

i. The manager has to determine the distribution of organizationalresources such as 5Ms.

ii. Accordingly, setting of a time schedule for the completion of a job, or approval of expenditure on a particular project is thefunctions which the manager performs in the role of a resourceallocator.

d) Negotiator:

i. The managers role as a negotiator consists in settlementof terms and conditions with various parties-particularlyoutside the enterprise.

ii. A role could be--Settlement about wage, working conditions, bonus,

workers participation in management etc. with labour

union.

-Settlement about price, delivery of goods, after-sales

service and other issue with major customers.

-Bargaining with suppliers of raw materials or goods.

HENTRY FAYOLS CONTRIBUTION TO MANAGEMENT:

a) Introduction to fayol and his workHenry Fayol (1841-1925) was a French mining who turned a leading

industrialist and successful manager. He was a mining engineer in a

French mining and rose to the position of the chief Managing Director.

Fayols classification of business functions:

Technical activities (relating to production)


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Commercial activities (relating to buying, selling orexchange)

Financial activities (relating to search for and optimum useof capital i.e., finances)

Security activities (relating to protection of the properties

and personnel of the enterprise) Accounting activities(( relating to a systematic recording of

business transactions, including statistics also)General principles of management:

Fayol advocated fourteen principles of management.

1. Division of Work: division of work leading to specialization result inincreased human efficiency; as through the application of this principle,much more production is possible with the same amount of humanefforts.

It results in efficient use of resources and increases productivity. This isapplicable to both managerial and technical functions.

2. Authority and responsibility: it is the power inherent in a managerial

position which enables a manager to command subordinates to work towards

the attainment of enterprise objectives. Responsibility, is the reverse of

authority; whose essence is an obligation owed by a subordinate to the

superior for the proper performance of the job for which authority is granted

to the former.

3. Discipline: discipline is absolutely necessary for the smooth running of

an organization. Discipline means following rules, regulations, policies and

procedures by all employees of organization.

4. Unity of command: an employee should receive orders from one

supervisor only to avoid possible confusion and conflict. This principle is

useful in the clarification of authority responsibility relationships.

5. Unity of direction: all the activities must be aimed at one common

objective. It implies that for each group of activities having the same

objective. There must be one head and one plan.

6. Subordination of individual interest to general interest: the

interest of one employee or group should not be given importance over the

interest and goals of organization.


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7. Remuneration of personnel: remuneration of personnel is the price

paid or payable to people managers and workers- for their service rendered

towards the attainment of the enterprise objectives.

8. Centralization authority: it refers to a reservation of decision-making

authority at top levels of management. Decentralization, on the other hand,means a dispersal of authority from the central (top-level) points to middle,

and specially lower level of management.

9. Scalar chain

Management may be regarded as a chain of superiors. There should be

an unbroken line of authority and command through all levels from the

highest ( i.e., general manager)to the lowest ranks (employee).

10. Order: this promotes the idea that everything (e.g. materials) and

everyone (human being) has his place in the organization.

Materials and human beings should be arranged such that right

material (think)/ person is in the right place.

11. Equity of treatment:

- Managers should have fairness in treatment for all his subordinates

-Manger should deal with his subordinates with kindness and justice.

-This will make employees more loyal and devoted towards the

management.

12. Stability

-Stable and secure work force is an asset to the enterprise, because

unnecessary labour turnovers are costly.

-An average employee who stays with the concern is much better than

outstanding employees who merely come and go.

-Instability is the result of bad management.

13. Initiative:

-Mangers should sacrifice their personal vanity in order to permit their

subordinates to exercise their own initiative.


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-A manager should encourage his subordinates to take initiative.

14. Esprit de corps

-This principle of management emphasizes the need for teamwork (harmony,

and proper understanding) among the employees and shows the importanceof communications in obtaining such teamwork.

- It is unity of strength

Contribution of F.W.Taylor

He is called that father of scientific management.

Taylors scientific management is popularly called as Taylorism.

Scientific management involves the application of a scientific

approach to management decision-making; and discarding at thesame time, all unscientific approach as like-rule of the thumb, a hitor miss approach and a trial and error approach.

Definition of scientific management:Scientific management consists in knowing what you (i.e

management) want men to do exactly; and seeing to it that they do itin the best and the cheapest manner.

Principle of scientific management:1. Science, not the rule of thumb.The basic principle of scientific management is the adoption of a scientific

approach to managerial decision making; and a complete discard of allunscientific approaches, hitherto practiced by management.2. Harmony, not discordHarmony refers to the unity of action; while discords refer to differences inapproach.3. Co-operation, not individualismCo-operation refers to working, on the part of people, towards the attainmentof group objectives; while regarding their individual objectives assubordinate to the general interest.4. Maximum production, in place of restricted production.His view the most dangerous evil of the industrial system was a deliberate

restriction of output.5. Development of each person to the greatest of his capabilities.Management must endeavor to develop people to the greatest of theircapabilities to ensure maximum prosperity for both employees andemployers.6. A more equal division of responsibility between management andworkers.


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This principle of scientific management recommends a separation ofplanning from execution.

7. Mental revolution on the part of management and workers.

It involves a complete mental revolution on the part of both sides to industryviz workers and management.

AN OUTLINE STRUCTURE OF TAYLORS SCIENTIFIC MANAGEMENT1. Separation of planning and doing.

Before Taylor scientific management, worker himself used to decidehow he had to work and what instruments were necessary. Taylor hasemphasized that planning function should be separated from actualperformance and should be given to specialists.2. Job analysis:

There is one best way of doing a job which requires least movement,

consequently less time and cost. In very industry, this way should bedetermined which involves time, motion and fatigue study.i. Time study: Time study involves the determination of time amovement takes to complete. The movement, which takes minimumtime, is the best.ii. Motion study: it involves the study of movements in parts which areinvolved in doing a job and thereby eliminating the wasteful movementsand performing only necessary movements.iii. Fatigue study: this indicates that the workers feel fatigued afterputting in work for a certain period and they are not able to do the workat their full capacity. Thus, they should be provided appropriate rest at

appropriated intervals. The fatigue study shows the time and frequency ofrest.

3. Standardization of raw materials, tools and workingconditions:

i) Raw materials, tools, machines and other facilities of work must be ofa reasonable good qualityso that the quality of production is reasonable.

ii) Another variety of standardization which Taylor refers to isuniformity in providing work facilities and work conditions to all workers,doing a similar type of job.

4. Scientific selection and training of workers.Selection of workers should be on scientific basis. A worker

should be given worker which he physically and technically most suitable.Training should be provided to workers to make them more efficient5. Diiferential piece-rate system:

In order to motivate worker-positively as also negatively toproduct the standard output. The inherent features of this scheme are: -i. A standard output for each worker is determined in advance

through scientific work-studies.ii. Two rate of wage-payment are established.


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a) A higher rate per unit of outputb) A lower rate per unit of output.

6. Financial incentives:Worker can be motivated by financial incentives. Taylor himself applied

differential piece rate system which is of a highly motivating nature. The

wage should be based on individual performance and o the position which heoccupies.7. Economy:

While applying scientific management, not only scientific and technicalaspect should be considered but adequate consideration should be given toprofit and economy.8. Function foremanship:The scheme of functional foremanship recommended by taylor, is, in fact,

an introduction managerial specialization at the shop level. In this systemeight persons are involved to direct the activities of the workers.

Planning function executive function

Route clerk instruction time & shop gang speedrepair inspector

Card clerk cost clerk disciplinarian boss boss boss

WORKERS

TYPES OF ORGANISATION:

The nature of authority-responsibility relationships found in anorganisation makes for a particular pattern of the organizational structure.Types:

I. Line Organisation.

This is the oldest type of organisation. Under it, the persons having thegreater decision-making authority are placed at the top and thosehaving the least decision-making authority at the bottom.

It consists of direct vertical relationships.


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It does not make provision for staff specialists.

Operation of this system is simple

Existence of superior-subordinated relationship

The boss gives instructions directly to his subordinates.

Superior at each level makes decisions within the scope of him

authority.

Shareholders

Authority

Flow Directors

M.D

Production Finance Marketing Personnel

Manager Manager Manager Manager

Works accounting advertising Training

Manager officer section section

Workers clerk salesman HR executive

Line Authority

Types of Line Organisation:

1. Pure line organization:


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The activities at any one level are the same and all theindividuals perform the same type of work and the divisions ordepartments are made for the sake of control and direction.

Example, at the lowest levels of an organisation all the workersmay be engage in a similar activity, but for better control and

supervision.

Works manager

Foreman Foreman Foreman Foreman

Dept.No.1 Dept.No.2 Dept.No.3 Dept.No.4

workers workers workers workers

2. Departmental Line Organisation:The whole unit is divided into different departments that are

convenient for control purposes.

All the departmental managers enjoy equal status and workindependently.

For example, in the production, there may be a number of foremen

each in charge of a sub-department and controlling a certain number of

workers.

Factory superintended

Foreman Foreman Foreman Foreman

Shearing Dept. Press Dept. Welding Dept Finishing

Dept


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Workers workers workers workers

Advantages of line organisation

1. Simplicity:

It is the simplest and the oldest type of organisation.

It is easy to establish and operate.

It is also easy to explain the workers.2. Flexibility

As each executive has full authority and responsibility for his job,required changes can be made quickly and easily.

The adjustments in the organization can be easily made to suit thechanging conditions.

3. Quick decision:

Managers can take decisions quickly and act promptly as no staffofficers are to be consulted and there is adequate authority at everylevel.

4. Unified control:

There is unity of command and control according to which anemployee can be given orders by one superior only.

All activities affecting a department are under the control of oneexecutive.

5. Fixed responsibility:

Every person knows from whom he gets orders and to whom he isaccountable.

Every executive can be held fully responsible for the actions of hissubordinates.

6. Effective discipline:

Singleness of responsibility and control ensures strong disciplineamong the employees.7. Economy:

It less expensive in terms of overhead costs, as there are no staffspecialists.


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8. Speed action:

Because of a clear division of authority and responsibility, as also unity

of command and control, decisions can be made and executedpromptly.

Limitation of line organization:

1. Overburdening:

Key executives are overloaded with administrative work.

Top executives have to be superman to effectively control diverseactivities.

As the business grows in size, executives find it impossible to copewith their duties in the absence of staff assistance.

2. Instability:

The success and survival of the enterprise depends upon a fewindividuals. There is little scope for expansion of business beyond theircapabilities.

Loss of key executives may put the future of the concern in jeopardy.3. Lack of specialization:

There is no scope for specialization as one individual cannot be expert

in all function. Lack of specialization and over dependence on subordinates lower

efficiency of operation.4. Autocratic control:

As each department is under the complete control of one executive,there is danger of authoritarian. There is possibility of favouritism.

5. Delayed communication:

Subordinates hesitate to offer suggestions and to criticize a wrongdecision taken by the superior.

II. LINE AND STAFF ORGANISATION:

Line authority:


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Responsibility for proper performance of work is not delegated. Butauthority can be delegated and the term line is used to indicate theline of authority.

Staff authority:

Staff is a stick carried in the hand for support. Staff authority means authority to support the line authority.

Staff authority denotes a non-executive relationship where personnelwith expertise provide assistance to the line management, but only inan advisory capacity.

STAFF STAFF

LI

N

E

Body of Members

Board of Director

Personnel manager Private

Secretary

Taxation expert Chief Executives PRO


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Labour expert Account

Officer

Production manager finance manager marketing

Manager

Subordinates subordinates subordinates

LINE

STAFF

Advantages of Line and Staff Organisation:

1. Discipline:

Unity of command is maintained, as staff is not given executiveauthority.

2. Expert advice:

Line executives, and through them the enterprise as a whole, benefit agreat deal from the expert advice and guidance provided by the staffofficers.

3. Balance decisions:

With information and advice provided by staff specialists, line executescan take better and more sound decisions.

4. Relief to line executives:


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The staff officers look after the detailed analysis of each importantmanagerial activity which is a big relief to the line officers.

Disadvantages of line and staff organisaiton:

1.Conflicts:

Staff may undermine line authority while line may ignore staff. Thismay lead to friction between them.

2. Advice ignored:

As the staff officers lack authority to put their recommendation intopractice, the line executives may ignore their advice.

3. Expensive:

It is expensive in terms of overheads as two separate sets of personnelare required.

4. Conflict between line and staff:

The allocation of responsibility between line and staff may not be veryclear.

Staff advice may be confused with line authority creating confusionand disorder.

Line and Staff authority:

Line authority Staff authority

1.It refers to those

positions and elements of

the organisation, which

have the responsibility and

authority, and areaccountable for

accomplishment of primary

objectives

2.line elements provide

decision authority and a

central means for the flow

1. It refers to those

elements which have

responsibility and authority

for providing for providing

advice and service to line inattainment of objectives.

2. Staff elements facilities

the decision process by

bringing expert and

specialized knowledge..


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of communication through

scalar chain of authority.

3.line managers make the

salient decisions by

exercising commandauthority.

3.staff officials advise and

counsel.

Example: production manager in an industrial concern is a line

manager, since he is directly responsible for achieving certain

production targets. But an industrial engineer is a staff man as he

gives advice to all production methods and quality control

techniques.

CONFLICT BETWEEN LINE AND STAFF.The major source of line and staff conflict is the difference in their

viewpoints and perception. Conflicts arise when any of them fails to

appreciate the view of the other. When a conflict between line and staff

arises both the parties try to explain the causes of conflict in terms

behaviour of the other.

The viewpoints of both line and staff on this conflict are given below.

a) The line viewpoint: the line managers have the following to say about

the staff people.

1. Staff authority undermines line authority and interferes in the work ofline managers.

2. Staff authorities are not acquainted with the practical problems of the

enterprise, as they are only academics.3. As staff officers are specialists only in a specific area, they cannot see

the whole picture objectively.4. Advice given by the staff is not always sound. Advice is only theoretical

and unrealistic.5. Staffs take credit if the programme (as per the advice of the staff) is

successful and blame the line if it is not successful.


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b) The staff viewpoint: staff authorities have the following complaints

against line officers:

1. Line officers do not make proper use of advice given by itself.2. Line officers reject the advice without giving reasons.

3. Line officers are slow to accept new ideas and they resist change.4. Staff authorities feel that they do not have authority to get their ideasimplemented.

Improving Line and Staff Relationship:1. The limits of authority of both line and staff should be prescribed

clearly.2. Staff authority should be restricted to a purely advisory role.3. Line officers should give due consideration to staff advice. They should

state reasons in case they cannot accept the advice.

4. Line should value the special skills of staff and similarly the staffshould try to appreciate the difficulties in implementing new ideas.5. The advice of staff should be realistic and practicable.6. Both line and staff should try to understand can others responsibilities

and difficulties and try to co-operate with each other for theachievement of enterprise objectives.

III. COMMITTEE ORGANISATION

A committee is a group of people who meet by plan to discuss or

make a decision for a particular subject.

A committee means a group of persons formed for a stated purpose. It

may be a standing committee, or convened for a special purpose.

There may be executive committee, finance committee, audit

committee, bonus committee, grievance committee, etc.

Characteristics:

1. A committee is a group of person. There should be at least two personsand no limitation on the maximum.

2. A committee is charge with dealing specific problems and it cannot goin for actions in all spheres of activities.

3. A committee may be constituted at any level of organisation.


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4. Members of committee have authority to go into details of theproblems.

Types of Committee:

1. Standing or Ad Hoc committee:

Standing: it exists continuously for indefinite period. Ad hoc committee: it is constituted for a specific purpose or to solve a

specific problem.2. Decision-making committee.

It is one which is charged with the responsibility of making andexecuting its decisions.

3. Line and staff committee.

Line committee: it is responsible for controlling coordinating a specificbusiness function having executive authority over the subordinateswithin a formal chain of command.

Staff committee: only acts in an advisory capacity, having no authorityto impalement its decisions.

4. Formal and informal committee:

Formal: it is duly constituted by organizational rules, regulations withspecific authority.

Informal: it is not as per any policies or rules of the organisation, and ithas no formal authority as such.

Advantages of committee organisation:

1. Pooling of knowledge and experience.

2. Facility of coordination

3. Motivation through participation

4. Easy communication

5. A tool of management development

6. Consolidation of authority.

Disadvantages of committee organisation:


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1. High cost2. Slowness in decisions3. Dividend responsibility4. Misuse of committee.

IV. MATRIX ORGANISATION:

When an enterprise undertakes a large number of small projects; amatrix organisaiton is more suitable. A matrix organisation ischaracterized by two major features:

i. It undertakes a large number of small projects;

ii. There is a dual line of command, in a matrix organisation.

Matrix organisation = Dual line of command + matrix culture + matrixbehaviour.

Matrix organisation represents a combination of functionaldepartmental organisation and project organisation.

Different project managers share resources and authority withfunctional heads.

When one project is over; its personnel and resources are diverted tosome new project.

General Manager

Production Finance Marketing

personnel

Manager Manager Manager

manager

Project

Mgr 1

Project


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Mgr 2

Project

Mgr 3

Project

Mgr 4

-- Authority of project manager --- Authority of functional

head.

Advantages:

1. It is oriented toward end results2. Professional identification is maintained3. Pinpoints product-profit responsibility

Disadvantages:

1. Conflict in organisation authority exists2. Possibility of disunity of command exists

3. Requires manager effective in human relations.V. STRATEGIC BUSINESS UNIT (SBUs)

Companies have been using an organizational device generallyreferred to as a strategic business unit (SBU).

SBUs are distinct little businesses set up as units in a larger companyto ensure that a certain product or product line is promoted andhandled as though it were an independent business.

In some cases companies have also used the device for a majorproduct line. Occidental Chemical Company, for example, used it forsuch products as phosphates, alkalies, and resins.

Generally a business unit must meet specific criteria. An SBU, forexample must:

1. Have its own mission, distinct from the mission of other SBUs,2. Have definable groups of competitors,3. Prepare its own integrative plans, fairly distinct from those of

others SBUs,4. Manage it resources in key areas, and5. Have a proper size- neither too large nor too small.


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General

manager

business manager

Production accounting Marketing sales product

Manager Manager Manager Manager

development

Works man works works

Manager manager manager

Altanta Chicago dallas

Regional Regional Regional

manager manager manager

new york chicago los angeles

Product product product


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Manager manager manager

A B C

Key elements of organisation

process:

1. Departmentation.2. Delegation3. Decentralization.

1. DEPARTMENTATION:


Organis

ation

Process

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Departmentation may be defined as the process of grouping individual

jobs into departments.

It involves grouping of activities and employees into departments soas to facilitate the accomplishment of organizational objectives.

Once the total work of an enterprise is divided into individual functionsand sub-functions, these functions are grouped together into workunits on a particular basis.

Need and importance of Departmentation:

1. Specializations:

When every department looks after one major function of business,division of work becomes possible.

It enables an enterprise to avail of the advantages of managerialspecialization.

2. Expansion:

Grouping of activities and personnel into departments makes itpossible to expand an organisation to an indefinite degree.

3. Autonomy:

The feeling of autonomy provides job satisfaction and motivationwhich in turn lead to higher efficiency of operation.

4. Fixation of responsibility:

It enables each person to know the specific part he is to play in thetotal orgnisation.

The responsibility for results can be defined more precisely and anindividual can be held accountable for performance.

5. Appraisal:

Appraisal of managerial performance becomes easier when specifictasks are assigned to departmental personnel.

The sources of information, the skills and competence required fortotal managerial decisions can be located.

6. Decentralization facilitates:

Many departmental heads may be granted full powers to run theirdepartments efficiently through systematic departmentation.

7. Managerial development:


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It simplifies the training and development of executives by providingthem opportunity to take independent decisions and to exerciseinitiative.

8. Administrative control:

Standards of performance for each and every department can beprecisely determined.

Bases or Types of Departmentation:

1.DEPARTMENTATION BY FUNCTIONS:

This is a very popular method of departmentation.

It refers to grouping of activities of the enterprise into major functional

departments like production, marketing, accounts, personnel etc. The process of the functional differentiation may take place through

successive levels in the hierarchy. The process can continue as long asthere exists a sound basis for further differentiation.

M.D

General Managers


Production financial marketing recruitment

Planning planning research section

Engineering budgeting market training


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Planning officer

Accounting

Tool & sales wage

Equipment management administration

Costing

General data collection advertising employee

Production processing sales promotion

welfare

Advantages of Functional Departmentaion:

1. It follows the principles of specialization. It can employ experts in thevarious functional areas and thus can achieve specialization easily.

2. It facilitates delegation of authority3. It permits effective control over performance4. It eliminates costly duplication of effort.5. It is economical, simple and easy to understand.6. It represents a very natural and logical way of grouping activities.7. It facilitates co-ordination both within the functions and at the

interdependently level.

Disadvantages of Functional Departmentation:

1. It results in excessive work and responsibility for the departmentalheads.

2. It hampers coordination between different functions.3. It carries specialization a bit too and thus a functional manager

becomes an expert in handling problems of that particular functionalone.


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4. This method does not facilitate proper and satisfactory handling ofdiversified product lines.

2. DEPARTMENTAION BY PRODUCT:

Each department looks after the production, sales and finance of oneproduct.

It is useful when product expansion and diversification, manufacturingand marketing characteristics of the product are of the primarysignificance.

This structural design is popular in multi-line large-scale enterprise;whose major objectives is production expansion and development.

M.D

General Managers


Motor division scooter division spare parts division


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Engineering accounting engineering accounting engineering

accounting

Production production production

Advantages:

1. The salesman has deeper product knowledge and this may lead tobetter customer service.

2. This method facilitates in ascertaining the performance of eachproduct line and , therefore, an unprofitable line can be dropped.

3. It facilitates effective coordination.4. T performance of each product division and its contributions to overall

results can be easily evaluated.

Disadvantages:

1. It necessitates employment of a number of managerial personnel.2. It makes the control work difficult3. There may be a duplication of activities.4. There is the extra cost of maintaining a sales force for each product

line.

3.DEPARTMENATION BY TERRITORIAL:

It is very useful to a large-scale enterprise whose activities aregeographically spread.

Banks, insurance, railways are examples of such enterprise.

Under this activities are divided into zones, divisions, and branches.

BOD

MD


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Northern western central eastern

southern

Region region region region region

Branch branch branch branch

I II III IV

Advantages:

1. It facilities the expansion of business to various regions.2. It facilities effective span of control3. It enable the enterprise to gain intimate knowledge about customers in

the local markets4. Since accounting results of each territorial regions can be compared

with each other, control and competitors.

Disadvantages:

1. It requires employment of a numbers of managerial personnel.2. It dilutes control from headquarters3. It may lead to duplication of activities.4. It is a costly system and hence small business concerns cannot afford

it.

4.DEPARTMENTATION BY CUSTOMERS:

It takes into account the needs of customers.

Examples: i.)a large cloth store may be divided into wholesale, retailand export divisions.

A commercial bank may be divided into a number of departments,each specializing in loan to farmers, traders, industrialists,professionals etc.


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M.D

General Managers


Wholesale exports retail

Advantages:

1. This system facilitates the company in meeting the widely variedneeds of customers.

2. It promotes specialization among the staff of the enterprise.3. The enterprise gains intimate knowledge of the needs of each category

of customers.


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4. Special attention can be given to the particular tastes and preferencesof each class of customers. Customers satisfaction enhances thegoodwill and sales of the enterprise.

Disadvantages:

1. There may be duplication of activities.2. There may be difficulty in co-ordination.3. There may be under-utilization of facilities and manpower, particularly

during periods of low demand.

5.DEPARTMENTAION BY PROCESS

Manufacturing enterprise often group activities around a process ortype it equipment and bring together people and materials at oneplace to carry out a particular operation.

For example, Textile mills.

Board of Directors

Chief Executive

Ginning Spinning Weaving Dyeing finishing

Dept dept dept dept dept

Advantages:

1. This method facilitates the use of costlier equipment in an efficientmanner.

2. The maintenance of departments is facilitated.


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3. There may be economy in operation.4. It enables effective performance control

Disadvantages:

1. This method requires more space and investment.2. This method is costly and hence small organizations cannot afford it.3. A breakdown is one process department may bring the entire

production system to a halt.

6.COMPOSITE OR COMBINED DEPARTMENTATION:

Each basis of departmentation has its own merits and demerits.

Therefore, the relative advantages and limitations of various types ofdepartmentation should be analyzed in the light of the needs andcircumstances of the particular enterprise.

That basis of departmentation is the best which facilitates theachievement of organizational objectives most economically andefficiently.

Managing Director

Works marketing finance

Manager manager manager --------- Functional

Consumer product industrial supplies

Division division -------------- product


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Domestic sales export sales

Manager manager --------------territorial

Private buyers Govt agencies --------------customers

PLANNING:UNIT II

Planning is said to be the first and foremost functions ofmanagement

The role played by planning is very vital in todays competitivescenario

Planning is decision making

Planning is thinking in advance what to do, when to do, how todo, where to do and it is to be done by whom

Planning reflects authority and decision making

All levels of management play a vital role in contributing to thesuccessful implementation of planning process.

Planning is the management function anticipating the future and conscious

determination of a future course of action to achieve the desired results.

Planning consists of both problems solving and decision-making.

Major components parts of planning:

1. Initial (or basic) planning: Which is concerned with thedetermination of the objectives.


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2. Subsequent (or route) planning: which is concerned with bestalternative course of action.

3. Final (or operational) planning: wherein, the planner would analyzethe technical, financial, personnel and other aspects involved inimplementing the pre-selected course of planning.

Meaning of planning:

Planning is a method or technique of looking ahead. It is a deliberate

conscious search used to formulate the design and orderly sequence of

actions through which it is expected to reach the objectives.

Nature of planning:

I. Constitutional features:

1. Planning is goal-oriented:

Planning has no meaning unless it contributes in some positiveway to the achievement of desired goals. All plans emanate fromobjectives.

The goals may be implicit or explicit but well-defined goals are

essential for efficient planning.2. Planning is reference in future:

In fact, it is matter of common sense to understand that allplanning is done for future; and in the context of futureconditions.

While planning, the planner has to do a forecasting of therelevant economic, social, political and technological condition;within framework of which the plan will have to operate.

Forecasting is the heart of planning.3. Planning is primary function:

All other functions of management are designed to attain thegoals set under planning.

Planning provides the basis for efficient organizing, staffing,directing and controlling,

4. Planning involves choice:


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Planning is basically a problem of decision-making or choosingamong alternative course of action.

Planning are decisions made after evaluation of alternativecourse of action.

5. Planning is intellectual process:

Planning is a mental process involving imagination, foresight andsound judgment.

It requires a mental disposition of thinking before doing andacting in the light of facts, rather than guesses

II. Operational Features:

6. Planning is all pervasive:

Planning is the function of each and every manager irrespectiveof the level and area of his/her operation.

Planning is an essential ingredient in management at allexecutive levels.

Managers at the top level prepare long-term plan for thecompany as whole, middle level managers formulatedepartmental and functional plans for medium term. At thelowest level, managers prepare operating and short-term plans.

7. Planning is both- long-range and short-range

Long-range planning usually covers a period ranging from 3

to 5 or 7 years, while plans for a period of upto 1 year (oreven 2 years) are regarded as short-range plans.

8. Planning is continuous:

Planning is an on-going and dynamic exercise.

As the assumptions and events on which plans are basedchange, old plans have to be revised or new ones have tobe prepared.

III. Desirable features:

9. Planning is actionable:

An ideal requirement of planning is that is must be actionable.


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A plan is not just a paper-plan which either is not capable ofimplementation or is never put into practice, for any reasonswhatsoever.

10. Planning is flexible:

A plan is capable of modification, revision or readjustment, future;when some of those future environmental factors change on which theplan is based.

11. Planning is an integrated system:

Ie. Various departmental plans, the plans of superiors andsubordinates and the long-range and short-range plans- all must beharmonized and fitted into an integrated structure of planning.

12. Planning is efficient:

The usual commercial cost-benefit formula is employed in the

context of planning also-for judging how far and to what extent, is aplan efficient or otherwise.

IMPORTANCE OF PLANNING:

1. Planning offsets future uncertainty and change:

A business concern has to work in an environment which is uncertainand ever-changing.

Planning helps the manager in carving out the future course of actionand this brings a higher degree of certainty.

2. It tackles increasing complexity in modern business:

To run a modern business undertaking, there is need for large numberof people with different specialization and complex machines.

3. It helps in co-ordination:

Planning is the best stage for the integration of diverse forces at work.

Sound planning interrelate all the activities and resources of anorganization.

The activities and efforts of various departments and division can beharmonized with the help of an overall plan.

4. Encourage innovation and creativity


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Innovation and creativity are prerequisites to continuous growth andsteady prosperity of business.

Planning is forward looking and it enables an enterprise to cope withtechnological and other developments.

Planning requires continuous monitoring of environment for new ideas

and developments.5. It facilities unity of action.

Under planning, policies, procedure and programmes arepredetermined and every decision and action should within theframework of predetermined policies and procedures.

6. It helps in avoiding business failure:

As planning involves the selection of vest objectives, unity of action,co-ordination of activities, economy in operation and offsetting offutures uncertainty and change, there is a great possibility of avoiding

business failures.

7. Gudies decision-making:

Planned targets serve as the criteria for the evaluation of differentalternatives so that the best course of action may be chosen.

By predicting future, planning helps in taking future-oriented decisions.

In the absence of plans there is no sound basis for making future-

oriented decisions.8. Improves competitive strength:

The enterprises which adopt planning will have a competitive edgeover other enterprises which do not have planning.

Planning enables the enterprise to discovers new opportunities andthereby shape its own future9. Facilitates control

Planning provides the basis for control. Plans serve as standards forthe evaluation of performance.

Sound planning enables management to control the events rather thanbe controlled by them.

STEPS IN PLANNING (OR PROCESS OR HOW TO MAKE A PLAN?)


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Plans are made in all types of enterprises- business and non- business.

Plans are made at all levels of management from the highest to thelowest.

1. Being watchful:

It could be referred to as a pre-step in planning or a desirable pre-condition for making a successful plan.

The management must, accordingly, initiate the planning process atthe most opportune moments expecting gains through the adage well-begun is half done.

2. Awareness of opportunities and problems:

The first step in planning is the awareness of the unexploited business

opportunities or the problem to be provided for in future.

3. Collecting and analyzing information:

The next step is to gather adequate information and data relating tothe planning to be made and analyze it to find out the cause-effectrelationship between the various factors.

4. Setting objectives:

Analysis and interpretation of data facilitate in determining theenterprise objectives.

Objectives must be specific and clear and should indicate the endresult of planning activity.

5. Determining planning premises and constraints:

Before plans are prepared the assumptions and condition underlyingthem must be clearly defined.

These assumptions are called planning premises and they can beidentified through accurate forecasting of likely future events.

Three types of planning premises:i. Controllable premises: These are under the control of

management ( eg. Policies, objectives, and resources ofthe enterprise).

ii. Semi-Controllable premises: these are partially underthe management control (e.g. trade union)

iii. Non-Controllable premises: it refers to the externalforces (e.g govt policy, political situation etc.).


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6. Finding out the alternative course of action:

After establishing the objectives and the planning premises, thealternative plans are developed.

For every plan there are a number of alternative and hence, allpossible alternatives to work out a plan for achieving the desiredobjectives should be found out for their evaluation.

Cost, risk and resources associated with different alternatives shouldalso be considered. Imagination and foresight are required to generateand evaluated policy alternatives.

7. Evaluation of alternatives and selection:

A critical evaluation of alternatives involves going into the plus andminus points of each alternative; and to find out the net worth of each

alternative-in terms of its contribution to the objectives of the plan. It is to evaluate all possible alternatives with reference to cost, speed,

quality, etc., and select the best course of action.

8. Selection of the best alternatives:

The management while selecting the best alternative might basedecision on one or more of the following bases:

a) Experience: the management might base its final selection of the best

alternative, on its experience. In fact, experienced manager knows what

types of alternatives he adopted in the past; and with what implications and

consequences.

b) Experimentation: in terms, of experiments with the best alternative; and

analyses the outcome of the experiment, before finalizing the decision.

9. Formulation of derivative plans:

A major plan, usually calls for a number of derivative plans; plansderived from the main plan. Derivative plans might also be called supporting or minor or secondary plans.

A plan e.g relating to the installation of a new plant for manufacturinga new product might call for the following derivative plans:-

i. a plan for design and manufacturing of the new product.ii. Plans of recruitment, selection and training of personnel for

operating the plant.iii. A plan for the repairs and maintenance of the plant.


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iv. A plan for advertising the product to be produced by the plant, etc.

9. Implementation of the plan:

The step, which gives a finishing touch to the planning process,is concerned with the implementation of the plan, which impliesputting the plan into action.

10. Follow-up action:

Though the planning process comes to a close with theimplementation of the plan; yet a desirable step, which yetremains to be taken, relates to the follow-up action on theimplementation of the plan.

Follow-up action implies watching the consequences (both goodand bad)- economic, social psychological etc.

PLANNING LEVELS

TOP STRATEGIC PLANS

MANAGEMENT -------------------------- long-range

Objective plans

Long range plans

Policies

MIDDLE ADMINISTRATIVE PLANS medium-

MANAGEMENT ------------------------------------ range

Organization plans

Motivation


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Managerial control

LOW OPERATIONAL PLANS short-

MANAGEMENT ----------------------------------- range

Rules plan

Method

Procedure

TOP LEVEL MANAGEMENT:

It is concerned with the strategic of courses of action, programme,policies, procedures and standards that will determine theprocurement, use and disposition of these resources.

MIDDLE LEVEL MANAGEMENT:

Examples: Research and Development, Marketing, Manufacturing, finance

etc.

LOWER LEVEL MANAGEMENT

Example: plans for finished goods inventories to meet current market

demands, plans to accelerate research projects which are behind schedule.

TYPES OF PLANNING:

In the process of planning several specific plans are prepared which may

broadly be classified into two categories: Standing and Single -Use plans

.

PLANS PLAN

STANDING PLAN SINGLE USE PLANS


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Mission Programmes

Objectives Project

Policies Schedules

Strategies Budgets

Methods

Procedure Standards

Rules

I. STANDING PLAN:

Standing plan or multi-use plans are the recurring plans and they areused repeatedly in situation of a similar nature. A standing plan is a standingguide to recurring problem and it is used again and again. It is also calledlong- term plans.

1. Mission:

The mission as a type of plan explains the most fundamental purposeof an enterprise.

For examplei. The mission of the government of a country might be eradication of

poverty.

ii. The mission of a manufacturing enterprise might be producing high

quality goods for the common men of society at the most affordable price

and so on.


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2. Objectives:

Objectives provide a sense of direction to the thinking process of theplanner; and to the action process of the operators of the plan

Objectives must be formulated keeping in view-

i. The mission of the enterprise, andii. The resources and limitation of the enterprise.

Objectives are known by different names, e.g goals, aims,purpose, mission, targets, etc.

Kinds of objectives:1. Market standing2. Innovation3. Productivity4. Physical and financial resources5. Profitability6. Manager performance and development

7. Worker performance and attitude and8. Public responsibility

MANAGEMENT BY OBJECTIVES: (MBO)

The philosophy of management by objectives (MBO) washighlighted in 1954 by Peter F. Drucker who stressed upon theneed for management by objectives and self-control.

MBO may be defined as a process in which a manager and hissubordinates jointly decide the targets and results to beachieved keeping in view the overall objectives of theorganization, jointly identify the Key Results Areas (KRA)periodically evaluate the actual results in terms of resultsagreed upon in advance.


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Steps in MBO process:

MBO is also known as Management By Results because results are to beevaluated in terms of objectives.

1. Preliminary setting of objectives at the top management level. Top management usually gives a start to launching of scheme of

MBO; by identifying the fundamental objectives of the enterpriseas a guide to superiors and subordinates throughout theorganization for setting their own objectives.

They constitute the basic and long-term ends towards which theactivities of all departments and individuals are directed.

The objectives that are set also indicate the measures forachieving the objectives.

2. Unit sub-goals

Once the corporate objectives are formulated, the short-terms

goals for each organizational unit e.g., division, department orbranch are established.

Such unit goals reflect what is expected of each unit.3. Individual targets.

After the corporate and unit goals are set up the next step is to fixperformance targets for each individual manager at various level ofthe organization.

Superiors and subordinates throughout the enterprise determinetheir individual objectives-through a process of mutual consultation.Such setting of individual objectives is the core aspects of MBO.

4. Matching goals with resources.

To make MBO scheme realistic, goals of individuals are comparedto the resources available for their implementation.

This helps the organization in allocating the resources in aneconomical way.

5. Recycling objectives.

Recycling objectives under MBO is done to take care of theinterconnection among related objectives.

Every manager calls periodical meetings of his subordinates todiscuss their performance and to jointly identify the steps tobetaken for improvements in future.

6. Performance of appraisal At the end of the year, a detailed discussion between a manager

and this subordinate takes place in which results of the unit areevaluated and the targets reviewed.

Merits and demerits of MBO:

Merits:


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1. Better managing.

MBO helps in better managing the organization. If forcesmanagement to think of planning for results.

Objectives also force managers to think how these can beachieved and what resources would require.

2. Clarity in organization. MBO tends to force clarification in organization roles and structures.

3. Commitment

MBO elicits commitment performance. If the objectives are set bypeople who are responsible for achieving them, they have a sense offeeling that they are achieving their own objectives.

4. Helps in Appraisal

MBO provides the measurement criteria to judge where one stands. Sothat corrective actions. If required, can be taken well in time.

Demerits:

1. Failure to teach the philosophy.

MBO seems to be easy on its face, but there is much to be understoodand appreciated by managers.

2. Problem of goal setting

Truly verifiable goals are difficult to set MBO requires verifiable goals.

For example, quantified goal setting for staff people is quite difficult.3. Emphasis on short-run goals:

In most of the organizations practicing MBO, there is a tendency toemphasis short-run goals.

4. Inflexibility:

Sometimes MBO presents the danger of inflexibility in the organization.5. Wastage of time:

MBO involves a wastage of a lot of valuable time of managers in jointconsultations; and they left with little time for efficiently dischargingtheir

STRATEGIES

The concept of strategy in business has been borrowed from militaryorganization.

Strategy is the complex plan for bringing the organization from agiven posture to a desired position in a future period of time.


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For example, if the management anticipates price-cut by competitors,it may decide upon a strategy of launching an advertising campaign toeducate the customers and to convince them of the superiority of itsproducts.

Strategy making process:

1. Environment analysis:First of all the external environment of the enterprise is analyzed to

determine the opportunities and threats for the enterprise.

2. Self-appraisal

The internal environment of the enterprise (resources, capabilities, etc) is

examined to know the strengths and weaknesses of the firm.

3. Strategic alternatives

Alternative strategies are developed to deal with the environmentalforces.

4. Strategic implementationDetailed operational plans are developed and communicated to

employees so as to execute the chosen strategy.

I. SWOT Analysis:

SWOT analysis is a key concept in the world of corporate planning, strategy

formulation and other practical spheres of management.

SWOT is also called TOWS by same management people. In fact, TOWSis SWOT; just written backwards.

Concept and purpose a SWOT analysis:

S Strengths

Internal environment


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W Weaknesses

O Opportunities

External environment

T Threats

1. The purpose of SWOT analysis is:

To capitalize (i.e. to take best advantage) on the strengths of thecompany.

To overcome the weaknesses of the company

To exploit fully the opportunities available in the external environment To manage successfully the threats posed by the external environment2. A brief account of environmental analysis:

i. Internal environmental analysisii.External environmental analysis

I. Internal environmental analysis

All that environment which is found within the business enterprise

itself, may be termed as the internal environment of business.

a) Philosophical environment, consisting of the mission, values, beliefs

and long-term goals of the enterprise and organizational culture.

b) Managerial environment, consisting of the management hierarchy,quality of management talents and the process of managerial development.c) Structural environments, consisting of -

- rules, policies and procedures of the organization- communication network- controlling techniques etc.

d) Production environment, consisting of-

- raw material availability and utilizations system- quality control system- technology available to the organization

e) Marketing environment, consisting of -

- marketing research system and procedures- advertising and other sales promotion techniques- training and compensation of salesmen.


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f) Personnel environment, consisting of-

- quantity and quality of manpower- type and nature of manpower planning

g) Financial environment, consisting of

- working capital management

- capital budgeting-techniques and procedures

h) Human relations environment, consisting of-

- line-staff harmony and conflicts- public relations etc- management labour relations

II. External Environmental analysis:

It would be the fitness of things, to first identify the salient features of

external environment -

It is quite difficult to identity specific factors comprised in this environment.

a) Legal factors:

Legal factors constitute the existing legal framework; as applicable to

business enterprise

- commercial laws,- industrial laws,- import-export laws- taxation laws

b) Political factors:

- political stability- taxation attitude towards business- policies of liberalization- ideology of the government towards business reflected in its

economic and business policiesc) social-religious-cultural factors:


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- population growth and trends- level of education in society- craze for a higher standard of living- consumer awareness- changing social and cultural value etc.

d) Competitive factors:

- Their patronage of business products (services) buying capacity,likes, dislikes, preference etc. vitally ensure profitability for thebusiness enterprise.

e) Technological factors:

-if they plan to adhere to the new technology, they may be

-problem of resource chrunch

-re-organizational problems

-resistance to organizational changes by workers

f) Financial factors

- policies of banks and financial institutions- stock market environment- structure of interest rates- foreign capital etc- control of central bank

g) Natural environment factors

- natural resources- climate- geographical features whether the area is hilly or plain etc.

TOWS MATRIX:

1. The WT strategy aims to minimize both weakness andthreats and may be called the mini-mini strategy. Forexample, form a joint venture, retrench or even liquidate

2. the WO strategy attempts to minimize the weaknesses andmaximize the opportunities.(mini-maxi)3. the ST strategy is based on the organizations strengths to

deal with threats in the environment. The aim is tomaximize the former while minimizing the latter.( maxi-mini)


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4. The most desirable situation is on in which a companycan use its strengths to take advantage of opportunities(the SO strategy). maxi-maxi

Internal factors

External

factors

Internal

strength (S)

e.g strength in

management,

operations, R&D

Internal

weaknesses (W)

e.g weaknesses in

areas shown in the

box strengths.

s

Decision-making: The Nature and Purpose of Organizing Basic

Departmentation- Line/Staff Authority and Decentralization-

Effective Organizing and Organizing Culture.


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Decision-making:

Decisions have to be made in determining specific objectives out of awhole lot of alternatives, in choosing the methods of work, in designingorganization structure, in selecting the mode

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