BUSINESS MANAGEMENT

SEMESTER-II

UNIT – I

Management -Definition-Importance-Nature and scope of Management-Functions of

management - principles and importance of management- Administration and Management-
Scientific management- Contribution by Henry Fayol-F.W Maylors-Mary Parker follet-
McGregor and peter F.Drucker.

UNIT – II

Planning- Meaning- Definition-Nature and Importance of planning – Steps in planning-

Limitation of planning – Forecasting –Decision making process – Types of decision –steps in
decision making.

UNIT – III

Organization – Meaning _ nature and Importance of organization _principles- Types of

organization – Organization chart- Departmentation- span of control Delegation and
Decentralisation- Authority relationship- Line, line and staff –Functional.

UNIT – IV

Directing - meaning-Elenments - Principles- Importance- Leadership- Meaning -

Definition - Nature and characteristics- Importance - leadership styles- Motivation - Meaning-
Definition nature and characteristics of motivation - Importance of motivation - Maslow need
hierarchy and McGregortheories.

UNIT – V

Co-ordination -Nature - Importance - Principles of Co-ordination control -Meaning-

Definition-Nature-Importance_-Problems – Stpes in control- Essentials of effective control –
Techniques of control.

1
TEXT BOOKS:

1. Principles of Management J.Jayasankar-Margham publication,Chennai.

2. Business management-Dinkar pagare-sultan chand & Sons New Delhi.

REFERENCE BOOKS:

1. principles of management- k. Sundar, Vijay Nicole Imprints Pvt Ltd, Chennai-91

2. principles of management- S.A Sherlekar Himalaya Publishing House , Mumbai
3. principles of management- P.C Tripathi & Reddy-Tada Mc. Graw Hill , New Delhi.
4. Principles and Practice of management- L.M Prasad Sultan Chand & Sons, New Delhi.
5. Principles of Management- G. Murugesan Laxmi Publications, New Delhi

2
 BUSINESS MANAGEMENT
UNIT-I
Management Meaning
“Management” is a wider term. It carries different meanings depending on the
context in which it is used. It is variously described as an “activity”, a “process”, and a “group of
people “vested With the authority to make decisions.
 Management refers to all those activities which are concerned with
 Formulation of objectives plans and policies of the collective enterprise
 Assembling men, money, materials, machines and method for their accomplishment.
 Directing and motivating the men at work.
 Co-coordinating the physical and human resources.
 Supervising and controlling performance.
 Securing maximum satisfaction for both employer and employee and providing the
public with best possible services.

Definitions:
 “Good management or scientific management achieves social objectives with the best use
of human and material energy and time, and with satisfaction for participants and the
public.”_ -Mary Cushing Niles
 - Management is the “art of directing and inspiring people”- James D.Mooney and Alen
C. Reiley
 “management is what a manager does”_ Louis Allen
 To manage is to “forecast and plan, to organize, to command, to coordinate, and to
control.”-_ Henry Fayol

Nature (OR) Feature of Management

The salient features which highlight of nature of management is as follows
 Management is purposeful: Management exists for the achievement of specific objectives.
It is a means towards the accomplishments of predetermined goals. The success of
management is measured by the extent to which the desired objectives are attained.
 Management is the integrative forces: the essence of management lies in co-ordination of
individual efforts in to a team. Management reconciles individual goal with organizational
goals. It integrates human and other resources.
 Management is social process: management is done by people through people and for
people. It is a social process because it is concerned with interpersonal relations.

3
 Management is social process: management has to deal with human behavior under
changing dynamic condition. Therefore it depends upon wide knowledge derived from
several disciplines like engineering, sociology, physiology, economies, anthropology etc.
 Management is a continues process: Management is dynamic and on going process. The
cycle of Management is continues to operate go long as mere is organized action for the
achievement of goals.
 Management is intangible: Management is unseen or invisible force. It cannot be seen but
its can be felt everywhere in the form of business.
 Management is an art as well as a science: it contains a systematic body of theoretical
knowledge and it also involves the practical application of such knowledge.
 Management is a group of activity: It is the essential part of the group activity. As no
individual can satisfy all his desires himself he has to unite with his fellow beings and work
in an organized group to achieve individually.
 Management is a profession: Management is a profession because it processes the qualities
of a profession.
 Management is a goal oriented: Management aims to achieve economic and social
objectives (profit as service motive) group effects in Management is are always directed
towards the achievements of some predetermined goals.
 Management is a factor production: Management is focus of production that is required to
Co-ordinate the other factors of production for the accomplishment of pre-determined
goals.
Management is a system of authority: Management is a process of directing men to perform
latest authority to accomplish the work from others is Implied in the every concept of
management. Authority is the power to get the work done from others and to compel them to
work in a certain manner.

4
IMPORTANCE OF MANAGEMENT

1. It helps in Achieving Group Goals - It arranges the factors of production, assembles

and organizes the resources, integrates the resources in effective manner to achieve goals.
It directs group efforts towards achievement of pre-determined goals. By defining
objective of organization clearly there would be no wastage of time, money and effort.
Management converts disorganized resources of men, machines, money etc. into useful
enterprise. These resources are coordinated, directed and controlled in such a manner that
enterprise work towards attainment of goals.
2. Optimum Utilization of Resources -Management utilizes all the physical & human
resources productively. This leads to efficacy in management. Management provides
maximum utilization of scarce resources by selecting its best possible alternate use in
industry from out of various uses. It makes use of experts, professional and these services
leads to use of their skills, knowledge, and proper utilization and avoids wastage. If
employees and machines are producing its maximum there is no under employment of
any resources.
3. Reduces Costs - It gets maximum results through minimum input by proper planning and
by using minimum input & getting maximum output. Management uses physical, human
and financial resources in such a manner which results in best combination. This helps in
cost reduction.
4. Establishes Sound Organization - No overlapping of efforts (smooth and coordinated
functions). To establish sound organizational structure is one of the objective of
management which is in tune with objective of organization and for fulfillment of this, it
establishes effective authority & responsibility relationship i.e. who is accountable to
whom, who can give instructions to whom, who are superiors & who are subordinates.
Management fills up various positions with right persons, having right skills, training and
qualification. All jobs should be cleared to everyone.
5. Establishes Equilibrium - It enables the organization to survive in changing
environment. It keeps in touch with the changing environment. With the change is
external environment, the initial co-ordination of organization must be changed. So it
adapts organization to changing demand of market / changing needs of societies. It is
responsible for growth and survival of organization.

5
Scope of Management (components of Business Management)

6
 The field of Management is very wide. The operational areas of Business Management may be
classified in to four categories.
 Marketing Management
 Production Management
 Financial Management
 Personal Management
1. Production Management
Production Management: A business unit is established for the production and distribution of
goods or services. Planning, organizing, controlling and the production function. So as to
produce the right quantity at the right time and at the right cost. It includes the activities
A. Developing the product
B. Location and layout of land and building.
C. Selection of personnel
D. Operation of purchase and shortage of material
E. Planning and control of factory operation.
F. Inventory control and quality control.
G. Research and development.
2. Marketing Management : It refers to the identification of consumer’ s need s and supplying
them the goods and services which can satisfy these wants. It involves the following
A. marketing research to determine the needs and expectation of consumers.
B. planning the suitable product
C. setting appropriate price.
D. selecting the right channel of distribution
E. promotional activities like advertisement
3. Financial Management: .Financial Management seems to ensure the tight amount and type of
funds to business at the right time and at reasonable cost. It comprises the all activities.

7
 A. Estimating the volume of funds requires for both long term and short term needs of
business.
B. Selecting the appropriate sources of funds.
C. Raising the required funds at the right time.
D. Proper utilized and allocation of raised funds or maintain safety and liquidity of funds
credit worthiness and profitability of the financial resources.
E. Administration of earning the financial management involves planning, organizing &
controlling of the financial resources.
4. Personnel Management: Personnel Management involves planning, organizing and
controlling the human resources of an organization. It consists of the following activities:
A. Manpower planning
B. Recruitment
C. Selection
D. Training.
E. appraisal
F. promotions and transfers
G. Compensations
H. Employee welfare service
I. Personnel records research etc.
Conclusion: Thus management involves planning, organizing, directing, and controlling
productions, marketing, finance and personnel.

Function of management:
The following figure show the functions of management
1. Planning:
It is the primary function of management planning involves determining the
objectives and selecting a course of action to achieve the. Planning is deciding in advance
what is to be done when and where it to be done how and by whom it is to be done. The
process of planning involves the following steps.
1. Gathering information
2. Determining of objectives
3. Developing planning premises
4. Formulation of policies programmers budgets etc to achieve the objectives
5. Implementing of planning
2. Organizing:
Once plans are formulate the next step is that of ‘organizing’. Organizing
involves establishing authority responsibility, relationship among the members of the enterprise.
Though organizing a manager brings together the material and human resources required for the
achievement of discussed goals.
1. To identify the work to be performed.
2. To classify the work
3. To assign his group of activities
4. To delegate authority and fix responsibility
5. To co-ordinate these authority responsibility, relationship of various activity.
3. Staffing:
Staffing refers to placement of Right person in the right job. It consists of planning, recruitment.
Selection, training, promotion, transfer, approval, integration and maintenance of employees.

8
Staffing is a continuous process because of turnover, retirements, new acquisition on account of
expansion.
4. Directing:
Directing is managerial function of guiding, supervising, motivation and leading people
towards the attainment of planned target of performance. Directing involves the following steps:
1. Issuing orders and instruction
2. Supervising people at the work
3. Motivation
4. Communication
5. Leadership
5. Controlling:
It is the process of ensuring that the organization is moving in the desired direction
and that progress is made towards the achievements of goals. The process of controlling involves
the following:
A. Establishing standards for measuring work performance.
B. Measurement of actual performance and comparing it with the standards.
C. Finding variances between the two and the reasons thereof.
D. Taking corrective action for deviations. So as to ensure attainment of objectives.
6. Decision making
Every employee of an organization as on takes a number of decisions every day.
Decision making helps in the smooth functions of organization.

7. Innovation:
Continuous changes are being made in the business. Consumer is satisfied through
innovation. It includes developing new material, new production, new package, new design of
production and cost reduction.
Conclusion
Thus the works of planning organizing, controlling will alone get the work actually
accomplished but people should also have interest to accomplish their respective task.
The difference between Management and Administration can be summarized under 2
categories: -

1. Functions
2. Usage / Applicability

On the Basis of Functions: -

Basis Management Administration

Meaning Management is an art of getting things done It is concerned with formulation of

through others by directing their efforts broad objectives, plans & policies.
towards achievement of pre-determined goals.

Nature Management is an executing function. Administration is a decision-

9
 making function.

Process Management decides who should as it & how Administration decides what is to
should he dot it. be done & when it is to be done.

Function Management is a doing function because Administration is a thinking

managers get work done under their function because plans & policies
supervision. are determined under it.

Skills Technical and Human skills Conceptual and Human skills

Level Middle & lower level function Top level function

On the Basis of Usage: -

Basis Management Administration

Applicability It is applicable to business concerns It is applicable to non-business concerns

i.e. profit-making organization. i.e. clubs, schools, hospitals etc.

Influence The management decisions are The administration is influenced by

influenced by the values, opinions, public opinion, govt. policies, religious
beliefs & decisions of the managers. organizations, customs etc.

Status Management constitutes the Administration represents owners of the

employees of the organization who enterprise who earn return on their
are paid remuneration (in the form of capital invested & profits in the form of
salaries & wages). dividend.

HENRY FAYOL (father of Management) 1841-1925

Henry Fayol was French industrialist. He was born in France in 1841. He graduated in
1860 and joined as Munning engineer and become the chief managing directors of France
Munning Company because of these outstanding abilities.
On the other 1918 he returned from the company from 1918-1925. Henry fayol worked
hard to populist his book “General and Industrial Management” he has out his own experience.
He is also known as “Father of Principles of management”. He presented 14 Principles of
management as general to the management process and management practice.

10
Principles of management
1.Division of work: Division of work makes it possible to specialists in a single thing rather
than doing everything by oneself. The principles of division of work can be applied at all levels
of in the organization.
2. Authority and responsibility: Authority and responsibility are closely related. Authority is
the power to command others. Responsibility is the kind of amount or work expected from a man
by his superior when ever authority is excessive responsibility arises.
3. Discipline: Discipline is essential for the smooth running of any business. Discipline can be
achieved only if (A) Good superiors at all levels
(B) Agreements are as clear and fair as possible
(C) Punishments are rationally applied.
4. Unity of command: According to this principle one subordinate should receive orders from
only one superior. Backward situations will arise if two superiors with the same powers are
allowed to control the same subordinates
5. Unity of direction: Unity of direction means that efforts of all members of the organization
should be directed towards the achievement of common goals.
6. Sub-ordinate of individual Interest to group interest:
An individual has his own interest and an organization has its own interest. According to Fayol
efforts should be made to co-ordinate individual interest with group interest.
7. Remuneration of personnel:
The amount of remuneration and the methods of payment should be just and fair and should
provide maximum satisfaction to both employees and employers.
8. Centralization: Centralization and decentralization of authority should be done carefully.
The degree of centralization of authority should be based upon the optimum utilization of all
facilities of the personnel.
9. Scalar chain: (Flow from authority from top to bottom)

11
 It refers to the chain of super loss ranging from highest authority to the lowest level in the
organization. All upward and downward communication should pass through the scalar chain.
In the figure it ‘B’ wants to talk to H, usually the message gads to through C, D,E ,F, and G, but
if it very urgent. B can talk to H without passing through the chain. This is called Gang Plank
Principles double ladder method.
10. Order: This principle is concerned with the arrangement of things and the placement of
people. There should be a place for everyone and should be in his place. This is followed to
avoid loss of material and time.
11. Equity: it refers to the treatment of employees equally. Managers should be impartial in their
dealing with their sub-ordinates. Equality helps to create cordial relationship between manager
and work.
12. Stability of tenure of personnel: Employee cannot work efficiently unless job security is
assured to them. An employee cannot render worthwhile service if he is removed from the job
before he gets accustomed to it.
13. Initiative: Employee at all levels should be giving the opportunity to take Initiative and
excursive judgment in the formulation of plans. It develops the interest of employees in the job
and provides job satisfaction to man.
14. Expirit de corps (union Is Strength): It refers to harmony and mutual understating among
the members of an organization. Union is strength and unity is the staff is the foundation of
success in any organization. This can be achieved through proper common and co-ordination.
Conclusion
Thus the principles of management by Henry Fayol are considered essential for today’s
management of all the organization. It can be changed over a period.

Principles of scientific Management:

According to F.W.Taylor the principles of scientific management are as follows

1. Science not rule of thumb: It means the replacement of old methods of doing work. The
nature of work performed by each other should be clearly determined.
2. Harmony in group action: Dissatisfaction of any worker is too avoided in the group action.
It is eliminated through scientific selection training and strategic planning and placing of
workers.

12
3. Co-operation: There should be co-operation between the management workers also between
different department workers should help the management to get larger profits better quality
products and lower cost of production. Management also should give fair wages to workers.
4. Maximum Out put: Maximum output is achieved through division of work. It results in
increasing profits to the Management and wages and bonus to the workers. Management should
provide standard materials tools and working conditions to perform the work efficiently.
5. Distribution of work: The work and responsibility should be distributed between worker
and management. The management should design work and the workers are free to perform the
work.
6. Development of each person to the maximum: when the worker is improved it automatically
results in the increase of production. “Maximum Production in the place of restricted
production”. Production is the Motto of scientific management.
7. Mental revolution on the part of management and workers
Scientific management involves a complete mental revolution on both the sides that is workers
and management. This is foundation for scientific management.

Elements of Scientific Management

Taylor advocated the following elements of scientific management.
A. Work Study: Work study is related to analyzing the work to perform by eliminating
unnecessary operations and finding out a quicker way doing it. This eliminates wasteful
and unnecessary operations reduce effort and increase productivity work study included.
 Time study
 Motion Study
 Fatigue study.

13
 1. Time study: Time study is done by analyzing a job into parts and asking an average
worker to perform it, after which his time is recorded.
2. Motion study: it is conducted by studying the physical movement of the body. Made in
performing a job are recorded with the help of micro motion camera. The basic objective
is to eliminate unnecessary movement so that over fatigue is avoided through motion,
study. The best way of doing a “Job” is determined.
3. Fatigue study: Fatigue study is conducted to find out as to after how much time of
performance a person become tired. The basic purpose is to allow suitable rest pauses to a
worker to enable him to maintain his efficiency on job performance.
B. Scientific selection and training of workers: A carefully designed selection procedure
is carried out and personnel is selected and assigned jobs. According to their skills and
competence further selected workers must not be imparted adequate training and given
subsequent orientation programmers.
C. Standardization of raw materials, tools and working conditions: Taylor implies two
types of standardized quality of production depend mostly on the raw material, tools
machine and other facilities. Another standardized deal with providing work facilities and
work condition to all workers doing a similar type of job.
D. Functional Foremanship: Tayol compares the functional foremanship with students in a
classroom. Instead of a single teacher teaching all the subject is being taught by a
specialized teacher
E. Differential piece rate system of wages payment: To give a positive as well as
negative motivation to produce the standard operation Taylor devised a scheme of wages
payment known as differential piece rate system which characterized by
1. A standard output is determined in advance through science and work study.
2. Two rates are established
A. A higher rate per unit of o/p
B. A lower rate per unit o/p
3. Workers who achieve the standard o/p or more are considered to be paid the higher
rate.

Is management an Art or A science discuss

Management consists of both the elements as science and an art. As science the management
provides a body of principles or laws for guidance in the solution of specific management
procedure. As an art it deals with the application of skill & effects for producing desirable
results.
Management as an Art.
Art involves the practical application of personal skills and knowledge to achieve
correct result. It is the practical way of doing specific things. Art is essentially creative and the
success of an artist is measured by the results to be achieved. It requires continuous practice over
a long period of time.
E.g. A carpenter making furniture out of wood. Goldsmith making gold in to ornaments are
example of an art. Thus the main elements of art are
1. Personal skill: Management is an art as one his personal sill and knowledge in solving many
complicated problems to attain the enterprise goal.
2. Practical knowledge: A person cannot be called a manager ever if he is well-versed with the
principles of management unless he is unable to apply these principles in proactive while taking
management decision.
3. Result oriented approach: management aims at reaching maximum productivity at minimum
cost. In this since it result oriented approach.
14
4. Regular practice. : Manager always try to attain higher and higher goals in order to reach the
stage of absolute perfection. This efficiency and effectiveness is attained through regular
practice.
5. Creativity: Like any other art management is creative it brings out new situations and
converts resources in to output.
Management as a science
Management as a science refers to the application of scientific methods in making decision. It
involves obtaining of complex valid and reliable information in respect of problem under. The
essential elements of science are as follows.
1. Systematic body of knowledge: it is systematic body of knowledge in that sense that it
establishes causes and effect relationship between different.
2. Principles and different: it contains underlying principles and theories developed
through continuous observation experimentation and research.
3. Universal applicability: They can be applied under situations based on a few
expectations which can be logically explained. The principles are verifiable and lead
predictable results.
4. Teaching and learning process: The organized body of knowledge can be though and
learned in the class room and outside. Physics, chemistry, and mechanics are Eg. For
science. Thus management is science because it contains all the feature of science.
5. Management is a science as well as art
Thus the management is neither an art nor a science but a combination of both.
Management theory (science) is foundation to Management practice (art)
Management theory cannot be an effective manager, unless he knows how to apply
management unless he knows how to apply management theory in real business situation.
The science of management is like medicine which is learned in a college but prefer
through practices in a clinic or hospital. Thus the theory and practice of management go
side for the effective functioning of an organization.

QUESTION BANK
1. Describe the scope of management.
2. Explain the function of management.
3. Enumerate the nature of management.
4. Explain Principles of scientific Management:
5. State the difference between administration and management.

15
 UNIT-II
PLANNING
INTRODUCTION
The first and the foremost function of the management are planning. Simply stated, planning is
deciding in advance what should be done. It is future oriented. To attain is goal of profit
maximization, the business has to produce and sell goods
Meaning
The basic objective of planning is to work in a systematic manner so that the goal of the
enterprise can be achieved with maximum efficiency. Planning eliminates the tendency to work
at random. Effectiveness planning facilities early achievement of objectives, which depends
upon the efficiency of the planner.

Definitions:
According to Knoontz and O’ Donnel, “Planning means deciding advance what to do, when to
do it, and who is to do it. It bridges the gap from where we are to where want to go. It makes it
possible for things to occur which would not otherwise happen”.
Planning is deciding the best alternative among others to perform different managerial in order to
achieve the predetermined goal.”- HENRY FAYOL

What are the features of planning? (OR) what is Nature of planning? (OR) what are the
basic characteristics of planning?

Planning is the primary functions of management: Planning is the starting point of a

management. It is only planning which gives meaning to all other managerial functions, namely
organizing, staffing, coordinating and controlling. Without planning the other function cannot be
effectively performed.
It is goal oriented: The good of every business is to make profit. Planning helps to attain the
goal in the most effective and efficient manner. Planning provides for a systematic approach and
eliminates a random approach towards work. It safeguards the business against idle time loss,
loss due to surplus labour and so on.
It is all pervasive: planning is done by every one at every level of a management. Namely top,
middle and lower levels. Top level managers prepare long term plans for the business as a whole.
Middle level managers prepare departmental plans. The lower level managers prepare plans to
carry out the daily routine.
It is intellectual activity: planning is the mental activity. It involves application of mind and
intelligence to attain, in a systematic manner, the organizational objective. Sound planning
depends on the availability of knowledgeable person in the organization.
It is the future oriented: planning is required to attain the future goals of an organization. Past
happenings provide the basis for plans. As future is uncertain, a plan must make suitable
provisions to meet any crises.
It requires an integrated approach: There must be link between plans of different
departments. The productions plans of a business must be in tune with its financial plan. As the
plans of different departments are interrelated and interdependent a co-ordinate approach is need
for the successful; implementations of each plan.
It is continuous process: It means that a stage will never come when the need for planning will
not be felt at all. Planning is required as long as we live in this world. As far as business is
concerned planning is needed as long as there are business activities. Once a plan period end, the
plan period starts.

16
What is the importance of planning? (OR) what are the merits of planning (OR) what are
the advantages of planning:

1. It focuses on objective: Once the objective of the business has been fixed, the next step is to
prepare a plan for its effective accomplishment. The enterprise objective cannot be realized
oversight. It has to be achieved gradually over a certain period. The annual target can be
successfully achieved if only the weekly and monthly targets are attained. The planning helps to
aim and hit and avoids beating around the bush.
2. It helps to avoid no work or work presser situation: It the absence of planning, the workers
in an organization may have to work even beyond working time due to the volume of work
particularly towards the end of the year. Some time they may not have any to do. Thus, absence
of planning leads to no work or work pressure situations in an establishment. Planning helps to
distribute work evenly through out the year.
3. It helps to avoid wastage of resources: planning makes it possible to make optimum use of
the available resources namely- time, money, materials and machines. This is possible as the
employees and the executives know before and what they have to do. As the daily target of each
is known in advance resources are required only to the extent of the work to be done each day.
4. It ensures efficiency as well as effectiveness: efficiency is ensured by doing right thing and
effectiveness is achieved by doing this right. Planning helps to do not only the right things but
also things right. Planning ensure optimum utilization of the available resources and avoids
wastage of the same.
5. It reduces risk and uncertainty: planning is for future use and future is uncertain. While
planning future uncertainties are anticipated and adequate provisions are made to meet or over
come the same.
6. It provides for coordination: The work done in any organization is teamwork. Different
departments participate in the process of goal attainment. Planning makes the responsibilities of
each individual and department ever cleat. Only when each individual does his part well it will
be possible to reach the target of the whole enterprise.
7. It facilitates control: planning without control is useless and control without planning is
meaningless control helps the enterprise to know whether the plan has been successfully
implemented and the objective has been achieved. The task of control required the establishment
of standards against which the actual performance is measured. Deviations are noted and
corrective actions are taken.
8. Planning also provides scope of decentralization: Dispersal of authority throughout the
organization is what is known as decentralization. Planning helps the managers to involve the
subordinates in the process of target attainment. The managers will be able to assign work to
every subordinate and the latter become responsible to former on the work done by him. Each
subordinate has authority to carry at his duties. The authority had been delegate to him by his
superior.

What are the limitations of planning? (OR) what are the drawbacks of planning’s? (OR)
what are demerits of planning?
1. Uncertain nature: the elements of uncertainty cannot be totally eliminated in planning.
Plans are meant for future use, but future happening cannot be accurately foreseen. A
sudden change in the policy of the government losses due to natural calamities like
earthquake. Flood etc can destroy even carefully prepared plans.
2. Expensive: preparation and implementation of any pan is expensive and only in terms of
time but also in terms of efforts and money required. Formulation of plan requires

17
 collection of data form different source analysis and evaluation of the various courses of
action, in order to take a decision on the best course of action.

3. Rigidity: It always necessary to strictly adhere to the plan in so far as the daily work
routine in and enterprise is concerned. Lack of flexibility in plans leads to monotony.
4. Loss of initiative: The staff in an enterprise shall perform their duties in the way they
are expected to do in the plans. As a result, they are reduced to machines. There is no
scope for the display of skills by individuals and this leads to loss of initiative.
5. Ignorance of subordinate’s interest. Plans are prepared to attain the organizational
goals in the most effective manner. In doing so often the interest, preference, capabilities
and attitudes of the employees are ignored. As a result, the subordinates do not give their
wholehearted support to the implementation of the plans.
6. Complacent attitude: There is always a feeling that once the plan is prepared, the target
of the enterprise can easily be attained. The success of every plan depends much on the
effectiveness with which it is implemented. A plan is only means to the end and not ends
itself.
What are steps to make planning effective? (OR) How planning can be made effectively?
The success of planning depends upon the effectiveness with which the forecast has
been made. If the forecast is accurate here is very possibility that the plan will be success.
Flexibility must be introduced in the plan. Whenever necessary so that the employees can work
with sustained interest and effort.
All members concerned with organization must be involved in the tasks of preparing
the plan. The viewpoints of the employees, who are actually going to perform the tasks, must be
secured and their ideas may be incorporated in the plans. If found suitable.
The plan should not be prepared to focus on the financial goals of the business alone It must have
something for the employees. There must be some provisions in the plan to reward efficient
workers.
The plan must be realistic. The plan must but expect too much out of every person.
18
The plan must be communicated effectively to all the subordinates participate willingly in the
performance of the tasks.
A coordinate effort on the part of every department is required for the success of the plan. To
achieve this, the department concerned shall work with proper understand.

What are the steps in planning? (OR) Explain the process of planning? (OR) what are the
stages involved planning?

1. Identifying business opportunities: it is necessary to make an analysis of both the

internal and external environment to know the trends in the near future. Business
activities are influenced by the internal as well as external factors. Government
regulations, technological changers, availability of material and labour and extent of
competition are some of the important factors affecting business prospects.
2. Establishment of objectives: The second step in the planning process is to establish the
organizational objectives in tune with the opportunities identifies, taking in to account the
resources available. The overall objective of the enterprise must be stated along with the
specific objectives of individual departments and division in the organization.
3. Determinations of planning premises: planning premises are the assumption made
about the future a happening. As a planning is for future is uncertain, certain assumptions
about the future become necessary. Employee attitudes, technology sued, managerial
decisions, making process etc re some of the factors influencing the internal environment
of the business. The external environment, on the other hand is influenced by such
Factors as demand, buyer behavior, competitors actions, government regulations,
suppliers actions, technological changes and so on.

19
 4. Identifying the alternative course of action: There are alternative ways of carrying out
any task just as there are different routes to reach a destination point. To attain the
objective of business, different courses of action may be available.
5. Evaluating the alternative course of action: once the alternative course of actions is
identified, the next step is to evaluate the same. Evaluation means studying the merits and
demerits of each. Each alternative should be examined carefully to decide on its
suitability, availability of funds, availability of skilled persons, demand, completion,
tastes and preferences of the buyers are some of the factors that guide in the selection the
alternatives.

Forecasting & planning

What do you mean by Forecasting? Or Define forecasting
Forecasting is the technique of estimating the relevant future events and problems
on the basis of past and present behavior or happenings. Forecasting requires the use of various
statistical techniques. At the same me all the forecast does not require the same type the
statistical analysis or techniques. It depends upon an analysis of past events and current
conditions with views to draw conclusions about future events.

Definitions:
“Business forecasting refers to the statistical analysis of the past and current movement in the
given time series so as to obtain clues about the future pattern of these movements.” - Neter and
wasserman
“A forecast is prediction and its purpose is to calculate and predict some feature event or
condition – Webster’s new collegiate dictionary.

What is the importance of forecasting?

1. Pivotal role in an organization: planning is the backbone of effective functioning of an
organization. Many organizations have failed because of lack of forecasting or faulty
forecasting. The reason is that planning is based on accurate forecasting
2. Development of a business: Business is established in order to achieve specified
objectives. The specified objective can be achieved by performing certain activities. The
performance of these depends upon the proper forecasting. So the development of a
business or an organization is fully based on the forecasting.
3. Implementation of project: Many entrepreneurs implement a project on the basis of
their experience. Forecasting helps an entrepreneur to gain experience and ensures his
success. In this way, forecasting is an important factor, which enables the entrepreneur to
get success.
4. Primary to planning: planning decides the future course of action. Planning cannot be
done without forecasting. The information required for planning is supplied by
forecasting. So forecasting is the primary to the planning
5. Co-ordination: forecasting helps the management executives in effective co-ordination
indirectly. Forecasting helps to collect the information about internal and external factors.
Thus collected information provides a basis for co-ordination.
6. Effective control: management executing can ascertain the strength and weakness of
subordinates to employees through forecasting. Then the executive can take appropriate
action to the subordinates. So forecasting can provides clues about risk and uncertainties.
The management executives can save the business and get success by taking appropriate
action.

20
 7. Key to success: all business organization is facing risks. Success is the reward for facing
risks and functioning under uncertainties. Risk and uncertainties could be reduced with
the help of forecasting. Forecasting provides clues about risk and uncertainties .The
management executives can save the business and get success by taking appropriate
action.
What are the characteristics of forecasting? (OR) what are the features of forecasting?
1. Forecasting is concerned with future events.
2. Forecasting is necessary for planning process. Planning is not possible without
forecasting.
3. The impact of future events has to be considered in the planning process.
4. Forecasting is guessing of future events. Therefore, the future events that might happen
could be guessed only to some extents.
5. Personal observations also help forecasting.
6. The analysis of various factors may require the use of scientific, mathematical and
statistical techniques.
7. The application of scientific, mathematical and statistical techniques is much more
reliable that the use of ordinary tools for obtaining conclusions.

State the difference between forecasting and planning?

No Forecasting Planning

1 Forecasting is the basis for planning. Planning is basis for future course of action.
2 No decision can be taken without the help Planning helps to arrive at certain decisions,
of Forecasting. they are regarding what is to be done, how is
to be done.
3 Forecasting is done at the middle or level Planning is done at the top level of
of Management. management.

4 A few members are involved in A large number of persons are involved in

forecasting process. planning process.

5 Forecasting does not stimulate activity Planning stimulates some activity to achieve
among employees. the objective of the organization.

6 Forecasting is a tool of planning. Planning is not a tool of forecasting.

7 Forecasting is done by experts. Planning can be done any person.

Decision making
What is meant by decision- making?
Decision making involves choosing a particular course of action after considering the
possible alternatives. Management and decision – making are inseparable. Managers use the tool
of decision- making for discharging their duties. Whatever a manager does, he can do it by
taking some decision- the selection for suitable course of action from a number of alternatives.
Define decision- making?
“Decision- making is the selection based on some criteria from two or more alternatives; -
George R.Terry
“A decision may be defined as a conscious choice among alternative courses of action”-Philip
kotler.
21
 “Decision- making is the work a manager performs to arrive at conclusions and judgments”-
Allen

Describe the process or steps of rational decision- making?

1. Identifying problem: The first step in the decision- making process is recognizing a
problem. It involves defining and formulating the problem clearly and completely.
’Defining a problem in most instances is a tie consuming task, but it is well spent”-
T.Haimann.
2. Analyzing problems: The identified problems should be thoroughly analyzed and
information related to it should be collected. This will help the management to get a clear
idea of the problem.

22
 3. Developing alternative solution: Unless and otherwise alternatives are developed a
solution may not be good. The sound decision necessitates the consideration of all
alternatives. This step involves the identification of limiting factors because it will enable
the management to search for those alternatives which will overcome the limiting factors.
4. Evaluating the alternatives: After developing various alternatives, the next step is to
evaluate them and select the right one, while comparing them various factors like
quantitative or tangible and qualitative or intangible are to be considered.
5. Deciding the best course of action: The next step is deciding the best alternative. The
economy risk factors, the limitation of resources, feasibility of its implementations etc.,
should be taken into account at the time of deciding the best. Koon’tZ O’Donnell
suggested 3 bases
a. Past experience
b. Experimentation
c. Research and analysis
6. Conversation of decision into action: Once a decision is made, it should be converted
into action i.e. implemented. Implementation involves the following steps
a. Communication the decisions to all the employees.
b. Assigning responsibility of carrying out the decision to certain employees.
c. Developing procedures for the purpose or execution for decision
d. Developing feedback mechanism to check on the progress of the implantation
7. Control: controlling involves
a. Comparing the actual with expected results.
b. Finding out deviations.
c. Analyze the reasons for deviations
d. Taking necessary steps to modify the decisions if necessary.
What are the characteristics of features of decision-making?
1. It is based on rational thinking.
2. It is a goal oriented process.
3. Decision- making is a selection process in which the best possible alternative is chosen.
4. It is a mental process and decisions are logical debates.
5. It affects the, present and future
6. It is a tool of management on it depends the success and failure of the enterprise.
7. It can be both positive and negative i.e., it may be to perform some activities.
8. It is the responsibility of the manager at different levels.
9. Decision –making is for future course of action based on past experience and present
conditions.
Explain the various types of decision (OR) Briefly explain the types of decisions?
Types of decision:
Decisions can be classified in number of ways. Some of them are as follows.
1. Programmed and non programmed decision: Programmed decisions are those that
are made in accordance with some policy, rule or procedure so that they do not have to
be handled each time they occur. These decisions are generally repetitive, routine and are
obviously the easiest for manager to make.
Ex: pricing ordinary customer’s order, determining salary payments to employees etc.

23
 Non- programmed decisions are novel and non-repetitive. If a problem has not arisen
before or if there is no cut and dry method for handling it, then it must be handled by
non-programmed decisions.
2. Major and minor decisions: A decision which has a long-range impact, like
replacement of men by machinery or diversification of existing product lines must be
rated as very major decision. Decisions, which are rare and have no precedents as guides
may be regarded as major decisions.
3. Routine and strategic decisions: routine. Tactical or house keeping decisions are
supportive of rather than central to the company’s operations. They relate to the present.
Their primary purpose is to achieve as a high a degree of efficiency as possible in the
companies on going activities.
Ex: Better lighting’ parking facilities, etc.
Strategic decisions are those, which are not of a routine nature. It requires lengthy
deliberation and large funds and is taken by manager’s higher levels.
Ex: lowering the price of the product, Installation of an automatic plant etc.
4. Individual and group decisions: individual decisions are take where the problem is of a
routine nature, where the analysis of a variable is simple and where definite procedure to
deal with the problem exists. Inter department decisions are also taken by groups
consisting of managers of the departments affected by the decisions.
5. Simple and complex decisions: When variables to be considered for solving a problem
are few, the decisions are simple. When they are many, the decisions is complex
These are the various types of decisions. According to the nature of the problem arise
these types of decisions are applied to get a better solution to a problem.

What are the factors considered in decision-making?

The factors are to be considered while making managerial decision may be
 Tangible factors
 Intangible factors
Tangible Factors are those, which can be easily identified and measured namely profit,
production, sales,
Purchases, inventory level. Etc.
Intangible factors are subjective in nature and cannot be precisely measured like- consumer
satisfaction, employee attitude, Manager subordinate relationship etc.

Explain the method of decision- making. (OR) explain the methods of decision- making?
 Break-even analysis: break even analysis is concerned with the determination of that
level activity of a business at which total costs and total revenue are equal. Break –even
point is the point at which business neither makes profits not suffer any loss. Break-even
analysis is helpful in making decisions regarding the level of production necessary to
make profits and also avoid losses.
 Cost benefit analysis: Under this, method, the benefits are likely to accrue, as result of
proposal, are compared with the cost incurred. The decision to accept the proposal is
made only if the benefit exceeds the cost.
 Intuition: Business decision is based on intuition too. It is just a mental calculation that
a particular phenomenon is going to happen. It is based on the manager’s inner feeling
and convictions. Intuition helps to take quick decision. Decisions on certain not so
important matter may be making by this approach.

24
 Past experience: A decision made in the past over a particular issue may be applied may
be if a similar situation arises in the future. A decision made once become a precedent
and can be applied in identical.
 Trial and error approach: The decision maker has to try out all the alternative course
of action in order to select the best. The method cannot be used under all circumstance. It
is a time consuming method and may prove to be expensive also.
 Sampling method: This method is widely used in different areas of business research,
example: marketing research, quality control etc. In this approach, a study of the samples,
drawn from the population or universe is made. Based on the finding of sample study,
decisions are made about the population.

 Decision tree: Decision tree is a graphical representation of the alternatives available in

a given decision situation together with outcomes of each alternative. With the help of
probability the pay off are calculated. The alternative with highest pay may be finally
selected.
Question Bank
1. Describe the importance of Planning?
2. State the difference between forecasting and planning?
3. What are the features of planning? (OR) what is Nature of planning?
4. Explain the various types of decision?
5. Explain the Forecasting& Decision Making?
6. What are the characteristics of forecasting
7. What are the steps in planning? (OR) Explain the process of planning?

25
 UNIT-III
ORGANISATION

What is organization? Or Define Organization

Introduction:
The word organization has come form the word “organism” which means a structure
of interrelated and interdependent parts. The parts or components of organization consist of men,
machines, materials, methods money, functions authority and responsibility. The task of the
organization is unite or integrate these components of the purpose of attaining the common goal.

Meaning:
Organization is the detailed arrangement of work and working conditions in
order to perform the assigned activities in an effective manner. Organization can be compared to
human bode. The human body consists of hands, feet, eyes, ears, nose, fingers, mouth, etc. The
organization consists of different departments. Each department performs its work independently
and cannot be substitute to another.
Definitions:
Haney. “Organization is harmonious adjustment of specialized parts for the
accomplishment of some common purpose or purposes”.

26
 McFarland: “An identified group of people contributing their efforts towards the
attainment of goals is called an organization”.

Explain the nature of an organization? (OR) what are the characteristics/ Features of an
organization?
1. Division of labour: The division of labour results in the creation of specialized person
because a person does the same work again and again. No wasted of time, energy and
resources are some of the advantages of division of labour. In addition to this, the
division of labour results in the increase of quality output and quantity of product without
any additional capital.
2. Co-ordination: Different persons are assigned different works in an organization. But all
the works are performed to achieve the objectives. It implies tat there is a need of co-
ordination among the workers in an organization. Each and every department or section
of the organization should have relationship with each other to get mutual co-operation.
3. Objectives: The objectives of the organization should be defined clearly. The objectives
cannot be achieved without the existence of a good organization structure. In turn, the
organization cannot exist without objectives of a long period.
4. Authority- responsibility structure: An organization means an arrangement of position
of executives adopting a rank system. In other words, a subordinate has one boss and
superior has control over the subordinate specifically. The position of each of the
executive is defined with regard to the extent of authority and responsibility vested in him
to discharge the duties.
5. Communication: Every organization has its own communication system and the
methods. The success of management depends upon the effective system of
communication. The reason is that each and every person working in an organization
should know the techniques of communication and the importance of communication.
The channels of communication may be divided in to formal, informal, downward and
upward or horizontal.

State the importance of organization. Or what are advantages of organization? or explain

the significance of organization.
Organization is needed for an effective and successful organization. Thus the following are
importance of organization.

27
 Organisation encourage specialization
Specialization is the direct result of organization. Specialization helps in increasing the
productivity and efficiency.
1. Organisation eliminates the problem of duplicating and overlapping
Proper and clear division and delegation of authority and responsibility avoids duplication
and overlapping.
2. Organisation brings order and cohesiveness
Determining clear line of authority will bring I order in the concern. Everything in its place
and a place for everything can be introduced by organizing the concern.
3. Organisation improves administration
Administrative policies and day-today operation of the enterprise will become effective and
functional with the installation of proper organization.
4. Organisation stimulates creative thinking
A good Organisation will provide maximum opportunity for the creative people to develop
their ideas for the benefit of the concern. It also provides the ways and means of doing things
in a better way.
5. Organisation facilitates effective communication
With the clear –cut definition of authority, an organization can develop the most efficient
channels of communication.
6. Organisation helps in providing a balanced emphasis on various activities
Organisation by clearly defining the importance of activities through division,
departmentation, etc., can give more priority of urgent and important problems.
7. Organisation helps to build up and expand the enterprise
An organized enterprise can build up a team of executives and workers. Who can develop it
much faster? Organized team efforts will help in expanding the firm.
8. Organisation helps in the smooth delegation of authority

28
 Executive can delegate the authority downwards so that he can get the things done smoothly.
It also helps in fixing up the responsibility for the tasks. A good organization will clearly
define the authority responsibility relationships.

Explain the Principles of an Organization?

The principles of organization may be termed as a tool used by the organization. Some
experts like Taylor, Fayol and Urwick have given the principles of organization. They are briefly
discussed below:
1. Principle of definition: It is necessary to define and fix the duties, responsibilities and
authority of each worker. In addition to that, the organizational relationship of each worker with
others should be clearly defined in the organized set up.
2. Principle of Objective: The activities at all levels of organization structure should be geared
to achieve the main objectives of the organization. The activities of the different departments or
sections may be different in nature and in approach, but these should be concentrated only for
achieving the main objectives.
3. Principle of Specialization or division of work: Division of work means that the entire
activities of the organization are suitably grouped into departments or sections. The department
or sections may be further divided into several such unites so as to ensure maximum efficiency.
This will help to fix up the right man to the right job and reduce waste of time and resources.
The work is assigned to each person according to his educational qualification,
experience, skill and interests. He should be mentally and physically fit for performing the work
assigned to him. The required training may be provided to the needy persons. It will result in
attaining specialization in a particular work or area.

4. Principle or co-ordination: The objectives of the organization may be achieved quickly

whenever coordination exists among the workers. At the same time each work can be done
effectively by having coordination. The final objective of all organization is to get smooth and
effective co-ordination.
5. Principle of authority: When many persons are working together in one place, there will be a
difference of power and authority. Of these persons, some will rule and others will be ruled.

29
Normally, maximum of powers are vested with the top executives of the organization. These
senior members should delegate their authorities to their subordinates on the basis of their
ability.
6. Principle of explanation: While allocating duties to the person, the extent of liabilities of the
person would be clearly explained to the concerned person. It will enable the person to accept
the authority and discharge his duties.
7. Principle of efficiency: Each work can be completed efficiently wherever the climate or the
organizational structure facilitates the completion of work. The work should be completed with
minimum members, in less time, with minimum resources wand within the right time.
8. Principle of uniformity: The organization should make the work distribution in such a
manner that there should an equal status and equal authority and powers among the same line
officers. It will avoid the problems of dual subordination or conflicts in the organizational set
up. Besides, it increases co-ordination among the officers.
9. Principle of unity of command: This is also sometimes called the principle of responsibility.
The organizational set up should be arranged in such a way that a subordinate should receive the
instruction or direction from one authority or boss. If there is no unity of command in any
organization set up, the subordinate may neglect his duties. It will result in the non-completion
of any work.
10. Principle of continuity: It is essential that these should be re-operation of objectives, re-
adjustment of plants and provision of opportunities for the development of future management.
This process is taken over by every organization periodically.
11. Principle of span of control: This is also called span of management or span of supervision
or levels of organization. This principle is based on the principle of relationship. Span of
control refers to the maximum number of members effectively supervised by a single individual.
The number of members may be increased or decreased according to the nature of work done by
the subordinate or the ability of the supervisor. In the administration area, under one executive,
nearly four or five subordinates may work. The lower level or the factory level, under one
supervision, the twenty or twenty-five number of workers may work. The span of control
enables the smooth functioning of the organization.
12. The scalar principle: This is also called chain of command or line of authority. Normally,
the line of authority flows from the top level to bottom level. It also establishes the line of
communication. Each and every person should know who is his superior and to whom, he is
answerable.
13. Principle of joint decisions: In the business organization, there are number of decisions
taken by the officers to run the business. If a complicated problem arises more than one member
examines the problems and takes the decisions. Whenever the decision is taken jointly, the
decision gives the benefit for a long period and the decision is based on various aspects of the
organizational set up.
What are the types of organization? (Or) What are the classifications of organization? (or)
Characteristics advantages and disadvantages of formal organization?
The organization can be classified on the basis of authority and responsibility assigned to the
personnel and the relationship with each other. In this way, an organization can be either formal
or informal. Organisation structure is primarily concerned with the allocation of tasks and
delegation of authority. The various forms of authority relationship are listed below.

1. Line organization
2. Functional organization
3. Line and staff organization
4. Committees
30
1. Line organization: Line organization is the oldest type of organization structure. It is
also known as military or scalar organization. Line organization is a scalar organization
with downward delegation of authority. There will be a direct relationship between the
superior and subordinates. It will have a chain of command from top to bottom. Line
organization may be of two types. In pure Line organization the nature of work is similar
and departments are created only to facilitate supervision and control. In departmental
Line organization the nature of work differs in each department.

General Manager

 

Production Manager

 

Assistant Manager

 

Foreman

 

Workers

31
Advantages:
1. Line organization is easy to establish and operate
2. Decision making will be easy and prompt
3. The authority and responsibility of each person is clearly defined.
4. Communication between superiors and subordinates flow in a direct vertical line.
5. The direct line of command ensure unified control
6. It is most economical and results in increase efficiency
7. There will be an effective. Co-ordination and understanding within each department
Disadvantages:
1. There is no scope for specialization in line organization. The managers are responsible
for all function.
2. The executives will be overburdened with full details, which can reduce their
effectiveness.
3. The line authority is autocratic in approach. It requires high level of obedience o the part
of subordinates. As a result, there is a cope for Favoritism.
4. As one executive controls and entire organization the scope for them spirit is little. In
addition, lack of initiative on the part of subordinates leads low morale.
5. Suitability:
1. Line organization is suitable for Small concerns with few subordinates
2. Routine type organization and
3. Industries with automatic machines.
2. Functional / Staff organization:
This is also called functional foremanship by F.W.Taylor. Hence the organization is
divided into a number of functional areas. Each function is managed by an expert in that area.
Each functional area serves all other areas in the organization, the executive of a particular
function issued orders throughout with respect to his function only. For example, the personal
manager will decide the relating to salary, transfers, etc. for every employee in the organization.

Board of Director

Managing Director

32
Advantages:
1. It helps in increasing the benefit of specialization and division of labour
2. Every functional head looks after one functional only and therefore, burden of top
executives reduced.
3. There is join supervision of work. As a result functional control becomes more efficient.
4. Recruitment, selection and training of manager are simplified in functional organization.
Disadvantages:
1. A person is a accountable to several superiors. It weakness the control over the workers.
2. Executives at lower level do not get this opportunity of all-round experience. This may
create the problem of stability.
3. As a large number of specialists are required functional organization is expensive.
3. Line and staff organization:
Line and staff organization is a combination of line and functional structures. Here, line
authority flows in a vertical line as in the line organization. In addition, staffs specialists are
attached to line position to advice them on important matters. These specialists do note have
power to command subordinates of other departments. They are purely of advisory nature.

33
Advantages:
1. The advice of various assistants enables line managers to discharge their responsibility
more effectively.
2. Staff carries out detailed investigation and supply information to line executives.
Therefore the burden of to executives is reduces.
3. Regular expert advice and adequate information helps line executives to take better
decisions. As every executive concentrates in one field, they expertise in their field of
activity
4. Stability of the enterprise not only depends on top executives alone.
Disadvantages:
1. There may be confusion and conflicts between line and staff authorities
2. Staffs personal are not accountable for the results. Therefore, they may not take their
tasks seriously.
3. Line and staff organization is expensive for small firms because several experts have to
be employed.
4. In practice, it is very difficult to define clearly the authority relationship between line and
staff.
4. Committee organization A committee means groups of persons formed for a stated purpose.
It may be standing committee or converted for a special purpose. Committees are a valuable
form of organizational structure.
Example: Board of Directors
Finance committee

Characteristics:-
1. Plurality of persons., Limited scope, Authority structure, Executive or non executive
34
Types of committees:-
1. Study or adhoc committees: A standing committee is a permanent committee, which is
virtually always present in the organization. An adhoc committee is a temporary special-purpose
committee, which is appointed to deal with any specific problem or issue.
2. Executive or advisory committee: An executive committee is one which is charged with the
responsibility of making and executing its decisions.
An advisory covers only examines a specific problem in all its details, and makes
recommendations.
3. Line or staff committee: A line committee is responsible for controlling and co-coordinating
a specific business functions. A staff committee, only acts in an advisory capacity, having no
authority to implement its decision.
4. Formal or informal committee: A formal committee is constituted as per organization
policies and rules, deriving it authority from the same policies and rules. An informal committee
is not as per any policies or rules of the organization and it has no formal authority as such.
Merits:
1. Group judgment
2. Effective co ordination
3. Involvement of diverse interest groups.
4. Management development.
5. Tool of managerial strategy.
Demerits:
1. Expensive, Time consuming compromise decision, Lack of accountability etc
2. Free form organization.
3. A free –form organization is in many ways similar to the project and matric organization.
IT is also described as an organic or ad hoc organization.
Project Organization:-It may be successfully adopted if it is necessary to manage a small
number of large projects. Each project team has specialists in different fields. The project
manager would co-ordinate the activities of the team members.
Merits:
1. It can be designed to suit individual projects.
2. It makes use of specialized knowledge and skill wherever required.
3. It fixed responsibility on individuals on the work done by them.
Demerits:
1. The project manager may have a tough time dealing with specialists from different fields.
2. Evaluation of performance of the various specialists also poses problems for the project
manager as he may not be well versed in engineering, R & D, accounts and so on.
3. Decision – making is also difficult for the project manager who may be pressurized by
the specialists.
4. The time within which the project has to completed will put pressure on every individual.
Matrix organization:
According to Stanley Davis & Paul Lawrence, Matrix organization is any organization
that employees a multiple command system that includes not only the multiple command
structure, but also related support mechanism and an associated organizational culture and
behavior pattern. It is also called as multiple command system.
Merits:
Dual benefits, better planning and control, Environmental adaptively, Flexibility, Better
motivation, Development of personnel

Demerits:
35
 Complex relationships, power struggle, Excessive emphasis on group decision – making,
6. Formal Organisation
The formal organization represents the classification of activities within the enterprise, indicates
who reports to whom and explains the vertical journal of communication, which connects the
chief executive to the ordinary workers. In other words, and organizational structure clearly
defines the duties, responsibilities, authority and relationships as prescribed by the top
management.
The inter-relationship of staff members can be shown in the organization chart and
manuals under formal organization.
Characteristics of formal organization
The important characteristic of a formal organization are given below:
1. It is properly planned.
2. It is bases on delegated authority.
3. It is deliberately impersonal.
4. The responsibility and accountability at all levels of organization should be clearly
defined.
5. Organizational charts are usually drawn.
6. Unity of command is normally maintained.
7. It provides for division of labour.
Informal organization
Informal organization is an organizational structure which establishes the relationship on
the basis of the likes and dislikes of officers without considering the rules, regulations and
procedures. These types of relationships are not recognized by officers but only felt. The
friendship, mutual understanding and confidence are some of the reasons for existing informal
organization. For example, a salesman receives orders or instructions directly from the sales
manager instead of his supervisors.
Characteristics of formal organization
1. Informal organization arises without any external causes i.e., voluntarily.
2. It is a social structure formed to meet personal needs.
3. Informal organization has no place in the organization chart.
4. It acts as an agency of social control.
5. Informal organization can be found on all levels of organization within the managerial
hierarchy.
6. The rules and traditions of informal organization are not written but are commonly
followed.
7. Informal organization develops from habits, conduct, customs and behavior of social
groups.
8. Informal organization is one of the parts of total organization.
9. There is no structure and definiteness to the Informal organization.

What are the functions of organization? (OR) Explain the process of organization? (OR)
Explain the various steps in organization?
1. Determination of activities: It includes the deciding and division of various activities
required to achieve the objectives of the organization. The entire work is divided into various
parts and again each part is sub divided into various sub-parts. For example, the purchase work
may be divided into requisition of items, placing of an order, storage and so on.
2. Grouping of activities: The next function of organization is that the identical activities are
groups under one individual or a department. The activities of sales such as canvassing,

36
advertisements and debt collection activities are grouped under one department i.e., sales
department.
3. Allotment of duties to specified persons: In order to ensure effective performance, the
grouped activities are allotted to specified persons. In other words, the purchasing activities are
assigned to the Purchase Manager; the production activities are assigned to Production Manager;
the sales activities are assigned to Sales Manager and the like. Besides, adequate staff members
are appointed under the specified persons. The specified persons are specialized in their
respective fields. If there is any need, appropriate training would be provided to such persons.
4. Delegation of authority: Assignment of duties or allotment of duties to specified persons is
followed by delegation of authority. It will be very difficult for a person to perform the duties
effectively, if there is no authority to do it. While delegating a authority, responsibilities are also
fixed. Thus, the Production Manager may be delegated with the authority to produce the goods
and fixed with the responsibility of producing quality goods.
5. Defining relationship: When a group of persons is working together for a common goal, it
becomes necessary to define the relationship among them in clear terms. If it is done, each
person will know who is his boss, from whom he has to receive orders and to whom he is
answerable. In another sense, each boss should know what authority he has and over which
person.
6. Co-ordination of various activities : The delegated authority and responsibility should be co-
ordinated by the Chief Managerial staff. The reason is that there must be a separate and
responsible person to see whether all the activities are going on to accomplish the objectives of
the organization or not.

SPAN OF CONTROL & DELEGATION OF AUTHORITY

What is span of control? (Or) Define span of control.
Span of control is also known as span of supervision and span of management. Span of
management means the number of people managed by a single officer in an organization. In
order to avoid overburden to the officers, it is essential to determine the span of control of the
executive officers. In an average firm, an executive can efficiently control up to five or six
subordinates.
Haniton was the first person who introduced this concept in his book, “The Soul and
Body of the Army”. The concept span of control refers to the number of subordinates that
managers can manage effectively.
Normally, the members exercising span of control are decreased at top level management
and increased at the bottom level management.
What are the Basic elements of organization?
The following are the key elements of organization process.
1. Departmentation
2. Delegation
3. Decentralization.

Subordinate Training
The better the training of subordinates, the fewer the number of necessary superior-sub
ordinate relationship. Well trained subordinates require not only less their manager’s time but
also less contact with their managers.

What are the factors determining span of control – analyze?

An appropriate span of control for a manger depends upon various factors which are
listed below:
37
1. Nature of work: Some of the works are repetitive in nature and does not require any extra-
ordinary talent to perform. In such cases, the supervisor or the executive can control a large
number of subordinates.
2. Capacity of superior:
A better qualified and experienced superior can supervise more number of employees
effectively. The capacity of a superior depends on factors like his ability to understand
complicated problems and ability to get along with people.
3. Capacity of subordinates:
Efficient and trained subordinates will perform their jobs efficiently without much help
from the manager. Thus, capable and competent subordinate facilities a wider span of control.
4. Level of supervision:
Whenever the subordinates perform the work manually, the span of control may be
increased. It means the degree of span of control can be increased at bottom level and decreased
at the top level management.
5. Time available of supervision:
Most of the executives or supervisors will spend a lot of time for the operating work and
administrative duties like planning and organizing activities. They may supervise the
subordinates in the remaining available time. So, they and control lesser number of subordinates
than the person who spends full time for their supervision.
6. Fixation of responsibility:
In case the responsibility of subordinates is clearly defined, he need not contact the
superior for getting guidance and instruction. Then the superior can supervise large number of
subordinates.
38
7. Using standards:
Standards are used in an organization to detect the errors or faults in the performance of
work. So, there is need for an executive to spend more time in watching the performance of the
subordinate. The executive can control more number of subordinates.
8. Communication Technique:
Use of electronic and other devices speeds up communication there by increasing the
span of management.
9. Staff assistance:
Use of staff assistance like private secretary, can reduce the workload of manager,
thereby making him to handle to more subordinates.
10. Geographical dispersion of subordinates:

If the subordinates to be assigned to a manager are located in one area, the supervisor can
supervise more number of people. If they are dispersed at different locations, span of control is
relatively smaller.

What do you mean by DELEGATION OF AUTHORITY / POWERS given to the

authority?

No individual can perform all the activities himself. Therefore, the total work of an
organization is divided among different persons. Every individual is given some authority so
that he can accomplish his task. Thus, authority is the right to act or direct the action of there
and giving them some powers to do it.

39
What are the Characteristics of delegation of Authority?
1. Delegation takes place when a superior grants discretion to a subordinate.
2. A manager cannot delegate the entire authority to his subordinates.
3. A manager retains the authority to take policy decision and to exercise control over the
activities of subordinates.
4. The extent of delegation of authority depends upon several factors, viz, the ability of the
subordinate, the philosophy of management, the confidence of the superior in his
subordinates etc.,
5. Delegation does not imply reduction in the authority of a manager. He can reduce or take
back the delegated authority.

Explain the Advantages / Importance of Delegation?

Delegation is the dynamics of management and the essence of sound organization. Once
a man’s job grows beyond his capacity, his success lies in his ability to multiply himself through
other people.
1. Reduces manager’s burden: Delegation relives the managers for performing duties of a
routine nature, they are able to concentrate on important responsibilities.
2. Develops subordinates: Due to delegation of authority, subordinates make important
decisions and perform varied tasks, by broadening their understanding and capacity,
subordinates denotes their executive talents.
3. Provides motivation: Delegation increases the job satisfaction of employee and encourages
them to look forwards to promotion in the future, so it serves as a motivational device.
4. Provides continuity: Delegation helps to ensure continuity in business because managers at
lowest levels are enables to acquire valuable experience in decision making. They gain
40
 competence to fill higher positions in the organization. Thus, delegation ensures continuity
business.

PROCESS:
Explain the delegation process?
The process of delegation consists of the following steps:

1. Determination of results expected: First, a manager has to define the results he wants to
obtain from his subordinates for achievement of organizational objectives.
2. Assignment of Duties: The manager has to decide what pat of the work he will perform and
what will be transferred to his subordinate. Duties should be assigned according to the
qualification, experience and aptitude of the subordinates.
3. Granting of authority: Duties cannot be performed without granting of the necessary
authority. Hence, enough authority must be granted so that subordinates can perform their
duties. By granting authority subordinates are permitted to use resources to take decision and
to exercise discretion.
4. Creation of Accountability: The subordinates to whom authority is delegated must be made
answerable for the proper performance of assigned duties and for delegated authority. The
extend to accountability depends upon the extent of delegation of authority and
responsibility. Thus, responsibility authority and accountability are three fundamental
components of delegation.

What are the principles of delegation?

1. Delegation of go by expected results : before delegating authority to his subordinates, the
superior must be clear about the tasks that he wants them to perform so as to realize the expected
41
results the extent the authority depends upon the nature and quantum of work to be done. If the
tasks to be performed by the subordinates are not properly determined by the superior, he may
not be able to decide on the extent of authority required.
2. Responsibility is absolute: a superior can delegate only authority and not responsibility.
For the performance of or by his subordinates the superior is responsible to his own superior.
For ex., the sales manager of a concern is responsible, for the performance of the sales man
working under him, to the general manager, it, therefore, goes without saying that the superior
has to constantly monitor the performance of his subordinates.
3. Authority to match responsibility: There should always be parity between authority and
responsibility i.e., one must equal to the other. If authority given to a subordinate is more than
his responsibility there may be a tendency to misuse the authority.
4. Unity of command: The principle says that a subordinate should be assigned duty or
responsibility by one superior only. He is also accountable to that superior alone.
5. Clarification of the limits of authority: the subordinates should know the limits of his
authority. While delegating to his subordinate.

DECENTRALISATION
Define decentralization.
Decentralization refers to the systematic effort to delegate authority to the lowest levels.
It is associated with democratic management where an individual worth is respected.
Henry Fayol states that “every thing that goes to increase the subordinate’s role in
decentralization. Everything which goes to reduce it s decentralization”. According to Louis
Allen, “Decentralization is the systematic and consistent delegation of authority to the levels
where the work is performed.

42
What are the factors determining decentralization & centralization - discuss
1. Uniformity of Action: The desire to get uniform policy with respect to quality, price, credit
and service favors centralization of authority.
2. Costliness of Decision: Costliness of decision usually determines the extent the
decentralization. The more costly the decision to be made. The more likely that the decision
by top management.
3. History of the enterprise: Companies, which grow from within a limited condition, have a
tendency to centralize authority. But, if it has expanded through amalgamation it is likely to
be more decentralized.
4. Management philosophy: The philosophy of top management influences the degree of
decentralization.
5. Desire for independence: When the top executive believes individual freedom, there will be
a high degree of decentralization. But if top management is conservative. They will prefer
centralized authority.
6. Availability of managers: The availability of competent managers largely determines the
extent of decentralization of authority. Adequate training of managers is the obey solution to
decentralization.
7. Size of the organization: In a large and complex organization, there is greater need for
decentralization. But in a relatively small and simple organization, centralization of authority
provides better results.
8. Business dynamics: The fast changing nature of business with its expansion and complexity
force the managers to delegate authority and thereby decentralize authority. In a slow-
moving business, tendency to centralize authority is quite natural.

State the difference between delegation and decentralization.

No Delegation Decentralization
It means concentration of authority in In means dispersal of authority throughout the
1 the hands of a few at the top. organization.
2 It is a process It is the end result of delegation.
It refers to the relationship between a It refers to the relationship between the top
3. superior and his subordinates. management and the different departments and
4. Delegation is important to get things division of an enterprise.
done by the subordinates. Decentralization is optional. The top
5 management may not favor the proposal to
The particular superior who has decentralize.
delegated authority to his The top management exercise overall control.
subordinates exercise control over The superior at each level exercise control over
him. his immediate subordinates.

43
Types of delegation:
General delegation:
In the case of delegation of the authority, the subordinate has the authority to perform any
function that may be necessary for the accomplishment of the overall enterprise goal.
Specific delegation: In this case the subordinate has the authority to perform only a specific
function
Written delegation: delegation made by written orders and instructions is what is known as
written delegation.
Unwritten delegation: delegation is based on customs or conventions
Formal delegation: In the case of formal delegation. Authority is delegated as laid down in the
organization structure.
Informal delegation: A subordinate performs a certain function although he is not officially
bound to do it. This he does because of the personal relationship he has with the superior who
has assigned the work to him.
Upward delegation: delegation is usually a downward process. i.e., only a superior delegates
authority to his subordinate. Upward delegation takes place when a subordinate assigns some
work to his superior.
Sideward delegation: sideward delegation takes place when a subordinate assigns certain work
to another subordinate working at the same level.

What are the benefits of decentralization? (OR) What is the importance of

decentralization?
1. Relief to top managers: With the dispersal of authority throughout the organization, the
general manager and various departmental managers need not worry about the routine
maters. They may approach their superiors only if their advice is needed on a very important
issue.
2. Prompt decisions: as the subordinates operating at every level have authority to make
decisions on matters that are within their control, there may not be undue delay in evolving
decisions.
3. Motivation of subordinates: since the subordinates have been given the authority to make
decisions pertaining to the work done by them they feel motivated. Such a motivated person
would certainly perform his duties with more interest and commitment.
4. Progress due to autonomy: under decentralization each department or division enjoys
autonomy, as there is not direct interference in its decision –making authority by the top
managerial personnel. Autonomy gives each department the freedom to act.
5. Effective communication: as the subordinates at different levels of the organizational
hierarch have decision-making authority, this result in effective communication throughout
the organization.

What are the disadvantages of decentralization? (OR) What are the limitations / demerits
of decentralization?
1. Lack of co-ordination: under decentralization the decision making authority is dispersed
at various levels of organizational hierarchy. This often poses the problem of co-ordination.
2. Expensive: under this system, every department has to be self sufficient, in terms of
infrastructure and trained personnel required to perform various functions. These factors
contribute to arise in cost of operations.

44
3. Lack of uniformity: decentralization may not provide scope for uniformity in policies or
practices of different departments of an enterprise and sometimes even with in a department.
This occurs because each one is bound to make decisions according to his perception.
4. Unsuitable for small enterprise: decentralization is possible only if the scale of
operation of the business is fairly large. It is unsuitable for a small concern.

Question Bank
1. Explain the decentralization.
2. Describe the span of control.
3. Define Organization.
4. Explain the Types of committees.
5. What are the functions of organization?
6. Explain the Types of delegation.
7. State the difference between delegation and decentralization

45
 UNIT – IV
LEADERSHIP

What do you mean by leadership? (Or) define leadership.

Meaning: A leader is a person who guides and directs others, called followers. Leadership is a
force that binds a group together and motivates it towards and desired goals. The efforts of
subordinates are to be channelized in the right direction. As leaders, they are not only
responsible for directing their followers but also responsible for attainment of goals of the
organization.

Definition:
“Leadership is generally defined as influences, the art of influencing people so that they
will strive willingly towards the achievement of group goals – Koontz O’Donnell.
“Leadership is the activity of influencing people to strive willingly for group objectives –
George R.Terry.

Explain the Nature / Characteristics of leadership?

Leadership is a process of influence.
Leadership is a function of stimulation
Leadership gives a feeling of contribution of common objectives.
Leadership is related to a particular situation.
Leadership is a shared experience.
Leadership is an ongoing activity in an organization.
What is the importance of Leadership? (OR) What are the advantages of Leadership?
46
To have team work: Leadership makes it possible for the employees to forget their individual
differences and work as a team for the attainment of organizational objective. It develops
co-operation and friendliness among the staff.
To guide: although the subordinates have potentials, they need to be properly guided to
contribute their best. The leader knows how to get optimum performance from each of the
subordinates working under him.
To motivate: Leadership is necessary to induce the subordinates to put in greater efforts. The
leader constantly motivates his subordinates to work for achieving the organizational.

To bring about changes: any organization has to be dynamic to accept changes caused by
political. Economic, technological and scientific factors. The leader of the enterprise
knows how to bring about such changes in his organization by getting the consent of the
subordinates staff.
To handle crisis: Leadership is essential for handling crisis of any kind, when an organization
faces a critical situation; the leader knows how to come out of it. The leader should be good
a crisis management.

State the difference between Leader and Manager:

No Leader Manager

1 A person becomes a leader by virtue of A person becomes a manager by virtue of his

his personal qualities official authority.

2 A leader has followers A manager has subordinates

3 The relationship between a leader and his The relationship between a manager and his
followers is informal. subordinates is formal.

47
4 A leader may strive for personal goal. A manager has to strive to attain the
organizational

5 Leadership is part of management. A Management is not a part of leadership. A

person with leadership qualities may not manager is a leader in view of his formal
always be a manager of an enterprise. authority.

6 Leadership qualities are to a greater extent Managerial qualities are acquired.

inherent or in born.

7 Leadership is possible both in formal and Management is possible only in a formal

informal groups. structure.

What are the qualities of a leader?

 Ability to analyze
 Emotional stability
 Self-confidence
 Foresight
 Sense of judgment
 Understanding
 Mental courage
 Capacity to motivate
 Ability to guide
 Communication skills
48
 Sociability
 Sound physical health
 Practicing what is preached
 Ambitious
 Positive thinking

What are the functions of a leader?

1. Planning: He has to prepare suitable plans for the effective functioning of his group.
2. Policy making: the leader has to evolve a suitable policy that guides his group in arriving at
decisions.
3. Execution of plans and policies: The leader has to instigate his followers to work in
accordance with the plans and policies in order to achieve the desired goal.
4. Controlling internal relations: the leader has to ensure that there is cordial relation among
his group members and that they work in an atmosphere of proper co-operation and co-
ordination. If there does any misunderstand the leader must do his best to set it right.
5. Representing the group: the leader has to represent his group both with in and outside the
organization and convey the feelings, sent items and the stand of his group on important
issues.
6. Providing reward and punishment: If any subordinate has performed his task well and is
sincere and committed to work, the leader shall reward such a person suitably. It may be
done by offering tangible and intangible benefits and likewise if a subordinate is found to be
insincere and shrinking duties, the leader has to take disciplinary actions against him.

49
7. Settlement of disputes: the leader has the duty to amicably settle any dispute between him
and his group members and also among the group members. He can always use his position
to resolve any crisis.
8. Role model: the leader must set an example to his followers. He must practice what he
preaches. He must say what he does and do what he says.
9. Inseparable form the group: the leader must so lead his followers that he and his group
must be considered as one and the same. He must be seen as a symbol of the group.
10. Adherence to value system: the leader must have certain values and beliefs and must adhere
and also make his followers adhere to the same.
11. Answerability: The leader becomes accountable or answerable not only for his actions but
also for those of these followers.

Describe the Types / Styles of leadership?

1. Autocratic leadership:
Autocratic leaders keep the decision –making authority and control in their own hands
and assume fall responsibility for all actions. They are work centered. The subordinates are
required to implement instructions of their leaders without questions. These leaders exercise
close supervision over subordinates.
Advantages:
 It permits quick decisions a single person take a decision.
 It provides strong motivation and rewards to a manager who executes this style.
 Many subordinates try to work under centralized authority and strict discipline.
Disadvantages:-
 People dislike this style especially when the motivation style is negative.
 It leads to frustration, conflict.
 There is more dependence and less individuality in the organization.
2. Democratic Leader: Democratic Leader also known as participative leadership. He does not
make unilateral (one side’s decisions). He provides scope for his followers to participate in the
decision making process. He allows his subordinates to discuss the problem and put forth their
50
views freely. The final decision will be make on the consensus of all. If any subordinate does
anything opposed to the interest of the group, the other members of the group make the initiative
to correct him.
Merits:
 As the followers are able to participate in decision making process, they feel motivated.
 The decision finally made is mutually acceptable.
 There is no resistance form the subordinates.
 It improves the job attitude of the subordinate staff.
 As the subordinates do not have ill feeling of any kind, the labour management
relationship is bound to improve.
Demerits:
 There may be delay in arriving at decision.
 It is suitable only if the subordinate are all capable of making worthwhile suggestions.
 Sometimes, it may be difficult to evolve a solution that is acceptable to every one.
3. Participative leadership:-
This style is also called democratic, consultative. Participation is defined as, mental and
emotional involvement of a person in a group situation, which encourages him to contribute to
group goals and shares responsibility in them.

Merits:
 It reduces resistance to change and increase acceptance of new ideas.
 It improves the attitude of employees towards their job and organization
 It increase co-operation between management and workers.
 Employee productivity is high.
 Subordinates share the responsibility with the superior and try to safe guard him also.
Demerits:
 It leads to delay in decision.
 There must be total trust on the part of the management as well as employees.
 Some group member may fell alienated if their ideas are not accepted.
 Time consuming, as too many view points and ideas make the decision more difficult.

4. Laissez – faire / free rain leadership:-

In this type of leadership the leader is just a figure in the top and does not give any direction.
But delegates the authority to the subordinates, to plan, motivate, control and otherwise be
responsible for their actions.
Merits:
 It creates an environment as well as team spirit.
 Highly creative with free and informal work environment.
 It is useful where people are highly motivated and achievement oriented.
Demerits:
 It may result in disorganized activity, which may lead to inefficiency and chaos.
 In security and frustration may develop due to the lack of specific decision making
authority and guidance.
 Team spirit may suffer due to non-cooperation of members.
 Some members might put own interest above the group interest.
5. Paternalistic leadership:-
51
This type of leader serves as the head of the family and treats his followers like his family
members. He assumes a paternal or fatherly role to help guide and protect the followers. He
provides them with good working conditions, fringe benefits, welfare facilities and services.
6. Functional leader: a functional leader is one who is an expert in a particular field of activity.
He as risen to the position of a leader by virtue of certain skills that the possesses. The leader
expects the subordinates to perform to his level and if the followers are not very serious about
their work, he may demand performance.
Merits:
1. The very presence of an expert is beneficial to the followers and the organization.
2. As functional leader is a specialist in a particular field of activity, the subordinates can
certainly enrich their job knowledge and skill, provided they are as committed and sincere as
their leader is.
Demerits:
1. The functional leader is a taskmaster. He only believes in work.
2. The functional leader will not be able to go down to his level of an average worker and offer
any help.
3. The leader, sometimes demand performance forms his followers. This may frustrate them.
4. Misunderstanding may also arise between the leader and his followers.
7. Institutional leader: an institutional leader is one who has become a leader by virtue of his
official position in the organizational hierarchy. Ex: a person appointed as the general manager
of a concern. An institutional leader may not be an expert in this field of activity. He, therefore,
may not be able to provide expert guidance to his followers. But he has to secure performance
from them. He may therefore, become demanding and there by incur the displeasure of his
subordinates.
Merits:
1. He has official authority to act.
2. He can demand performance from subordinates irrespective of his own credentials and
subordinates are officially answerable to him. He may initiate action against a subordinate
who is shrinking duties.
Demerits:
1. As the institutional leader may not be an expert in his field of activity, he will not be in a
position to offer proper guidance to his followers.
2. Although the leader has the official right to demand performance form his followers, he may
not have the moral right at his own credentials are less.

MOTIVATION
Introduction:
Motivation means inducing or inspiring the personnel to fulfill their duties effectively and
co-operate for the accomplishment of common objectives. It is essential for securing maximum
or peak performance in an organization. This can be achieved by providing the following:
1. Promotions and monetary incentives
2. Good working conditions
3. Welfare facilities
4. Job security
5. Appreciation for workers performance.
Define motivation.
Definition
According to Edwin B Flippo, “Motivation is the process of attempting to influence
others to do their work through the possibility of gain or reward”.
52
 Koontz and O’Donnel defines it as “Motivation is a general term applying to the entire
class of drives, desire, needs, whishes and similar forces that induce an individual or a group of
people to work”.
What are the different characteristics of Motivation?
1. Endless Process :
Human wants are unlimited. A person works day and night for satisfying these wants.
Since wants are endless, satisfying these wants is an unending process. Hence,
motivation can also be called as an endless process.
2. Psychological phenomenon :
Motivation is a psychological phenomenon. It generates within an individual and it can
not be forced from outside.

3. Indivisible human body :

A worker cannot be motivated in parts. For the successful motivation, he should be
treated as an indivisible unit taking into account all his urges and aspirations.
4. Change of frustration :
A man becomes frustrated if he fails in satisfying any of his basic needs in spite of his
best efforts. To motivate such a frustrated man, his basic needs are to be fulfilled.
5. Need based ways :
Motivation may be provided in several ways depending upon the needs, emotions and
sentiments of workers.
6. Achievement of goals :
Goals and motives are inseparable. Hence, every person should be motivated to achieve
the goal.

Explain the Benefits or Merits of Motivation?

1. Maximum utilization of factors of production :

53
 Workers perform the work sincerely through the inspiration of motivation. This creates
the possibility of maximum utilization of factors of production viz., labour and capital.
2. Willingness to work :
Motivation influences the willingness of people to work. A man is technically, mentally
and physically fit to perform the work but he may not be willing to work. Motivation
creates a willingness on the part of workers to do the work in a better way.
3. Reduced absenteeism :
Financial incentive schemes coerce the workers to work more. Financial incentive
scheme is framed in such a way that monetary benefits are given on the basis of number
of hours engaged. This reduces absenteeism.
4. Reduced labour turnover :
Motivation has both financial and non-financial incentive schemes. This helps to retain
the existing laborers. The enterprise can plan its activities on long-term basis with the
help of reduced labour turnover.
5. Availability of right personnel: Financial and non-financial incentives not only retain
the existing employees but also attract the employees from outside the enterprise. In
other words, right people are attracted from outside to work for the enterprise.
6. Good employee relations :
Due to motivation, efficiency, productivity and wages of the employees will increase.
Hence, the labour problems such as absenteeism, labour turnover, indiscipline, grievances
etc., are considerably reduced. Thus motivation helps to maintain good labour relations.
7. Way for co-operation :
A motivated person rush to work for the betterment of the organization. Hence, he will
not hesitate to work united with other workers. Thus motivation also lays down a basis
for co-operation.
8. Benefit to the employees :
By motivation, all the members want to improve their skill and knowledge. By this, they
can contribute more to the progress of the organization. If the organization grows, they
will get more and will be able to satisfy their personal needs.
9. Building of good labour relations :
Motivation helps to solve the labour problems of absenteeism, labour turnover,
indiscipline and grievances. This ensures building of good labour relations.
10. Increase in the efficiency and output :
Both workers and management have got benefits from motivational plans. On the one
hand, wages of the workers increase corresponding to the increase of output and
efficiency. On the other hand, the productivity of the organization and its profits
increases due to consolidated efforts of the motivated people.
11. Sense of belonging :
A proper motivation scheme promotes closer rapport between enterprise and workers.
The workers begin to feel that the enterprise belongs to them and consider its interests
and their own. Thus, there is no difference between workers and enterprise.
12. Basis of co-operation :
Efficiency and output are increased through co-operation. The co-operation could not be
obtained without motivation, so, motivation is a basis of co-operation.
13. Helps in realizing organizational goals :
Organizational goals are achieved quickly through motivation. Motivated employees
have a feeling of total involvement in the performance of organization task. Employees
may work whole –heartedly for the realization of organizational goals.
14. Improvement upon skill and knowledge :
54
 Employees have promised efficient job performance or completion. Hence, the
employees may improve upon their skill and knowledge required for the job.
15. Economic process :
Motivation minimizes the wastage of human and other resources and helps to achieve its
goal in an economical and efficient manner.

Explain the Maslow’s need hierarchy theory?

Abraham Maslow’s Theory
As per this theory, there are five types of needs which induce man to action. The priority
orders in satisfying these needs are as follows:
1. Physiological needs :
Physiological needs are the basic needs which are important for human survival. These
needs are at the top level of hierarchy because only if these needs are satisfied to a certain
level, the human body can operate efficiently. It includes food, clothing and shelter. It is
meaningless to talk to a starving person about love and affection.

2. Safety needs :
Once the physiological needs are satisfied to a reasonable level, other level of needs
become important. This need is felt by people who feel threatened by the fear of loss of
job or support, illness or any other such unexpected events. Only because of this, they
seek job security, insurance, pensioner benefit etc.
3. Social needs :
After the first two needs are satisfied, social needs become important in the hierarchy.
Social need is the need to seek affiliation or affection on ones fellow beings. Every
55
 person likes to have meaningful relations with others. If any person is compelled to stop
the association with other people, he will vigorously oppose it and take steps to have
relations with others. Informal groups in the organization satisfy this need of the
employees.
4. Esteem needs :
According to Maslow, most people feel the need to be rated higher than others. They
also seek recognition and respect on that account. These needs which are concerned with
self confidence and self respect are the esteem needs. The satisfaction of these needs
produces a feeling of self confidence, prestige, power and control. On the other hand, a
person who is deprived of these needs feels frustrated and creates social problems.
5. Self actualization needs :
According to Maslow, it is desire to become more and more of what one is and to become
everything that one is capable of becoming. A man with high intensity of achievement
needs will be restless unless he can find fulfillment in doing what he is fitted to do.
Evaluation of Maslow’s theory
1. Human needs arise in a particular sequential order and not at random
2. Safety needs are not important until the physiological needs are satisfied
3. Once a need is satisfied, it creates to be a motivating factor
4. There can be a limit to physiological and safety needs but not to social esteem and self
actualization needs
What is the criticism of Maslow’s theory?
1. The order of the need may not follow the sequence suggested.
2. Maslow has not given a classification of general human needs rather than the specific job-
related needs of workers
3. Maslow has not explained the relationship between the satisfaction of certain needs and its
impact on productivity.
4. It is not correct to assume that certain higher order needs become dominant only after the
preceding level needs have been fully satisfied.
5. By splitting the human needs into different categories the theory suggests that motivation can
be a piecemeal exercise which is not correct.

McGregor’s “X” and “Y” Theories of motivation

Explain the McGregor’s “X” and “Y” Theories?
These theories McGregor are based on assumptions about basic human nature. One set of
assumption is that people are good, hardworking, creative and responsible.
On the other hand, another set of assumption is that they are bad, lazy, unimaginative and
irresponsible. Both these assumptions are not fully correct, because human beings are neither
completely good nor completely bad.

56
X” theory
This is the traditional theory of management philosophy. According to it, one who is in
power is the supreme. No one has the authority to suggest or ask anything. The workers have to
obey the orders of the superiors.
Assumptions of “X” theory
1. Most people have a deep aversion to work.
2. They don’t want to take the responsibility.
3. They like to be directed by the superiors.
4. They do not work with interest.
5. They do not have any capacity to solve organizational problems.
6. They are not ambitious to improve their work.
7. Their only goal is physiological and safety needs.
8. They must be coerced, controlled, directed and threatened with punishment for achieving
the goals.
“Y” Theory
It is the exact opposite of “X” theory. “X” theory totally minimizes the role of workers in
the managerial process where as “Y” theory keenly emphasizes active partnership and
cooperation of workers and management in the managerial process. According to this theory,
workers are not habitual work shriekers. It is wrong to think that they work for the fear of
punishment. If they are properly motivated, they would accept responsibility, show creativity
and achieve the goal.
Assumptions of “Y” theory

1. The average human being does not dislike work. It is as natural as play or rest.
2. An average man not only accepts responsibility but also seeks it.
3. Workers may be encouraged to display initiative and creativity in solving organizational
problems.
57
 4. There is no need for external control or threat of punishment for achieving the goals.
5. The workers are not satisfied by money alone.
6. If the management provides a right environment, workers will develop a sense of
belonging to the organization and will do all the things necessary to achieve the goal.

Distinction between theories “X” and “Y”

Theory “X” Theory “Y”

People, in general, have an inherent dislike People love to do their work provided they
for work are given the proper environment

Most people are not ambitious and do not With proper motivation people can certainly
voluntarily accept any responsibility be made to accept responsibility

People, in general lack creativity If the management has a positive outlook, it

can certainly encourage the workers to
display their creative ideas and skills.

Satisfaction of physiological and safety needs Workers do many things to satisfy their ego
alone is important and also to display their potentials

Close supervision is necessary Workers are good at self - direction

58
Question Bank
1. Explain the importance of leadership .
2. Describe the leadership styles.
3. Define Organization.
4. Explain the characteristics of motivation.
5. What are the importance of motivation?
6. Explain the Maslows needs hierarchy.

59
 UNIT-V
CO-ORDINATION

Define co-ordination (or) what do you mean by co-ordination

Introduction and Meaning
Co-ordination means integration of group efforts in the organization to achieve its
objectives. In the classical school of management, co-ordination is considered as a separate
function of management. But it is more accurate to say that co-ordination is the essence of
management.

Definition:
According to Reiley and Mooney, “coordination is the orderly arrangement of group
effort, to provide unity of action in the pursuit of common purpose”. According to Hery Fayol,
“to coordinate is to harmonise all the activities of a concern so as to facilitate its working and its
success”.

What are the features of co-ordination? (Or) What is the nature of co-ordination? What
are the characteristics of co-ordination?
1. The need for co-ordination arises due to interdependent: in a business organization, the
activities of the different departments are interrelated and interdependent. These need to
properly co-ordinate.
2. IT aims at attaining the common goal: although the different departments in an enter pose
work according to their own agenda, it is only through co-ordination that the overall enterprise
objective is achieved.
3. It is the duty of every manager: every manager has the duty to secure co-ordination. For this
he should bot mind the activities of his department alone? He should find out the needs of those
departments whose activities his department influence.
60
4. It does not arise spontaneously: co-ordination of enterprise activities does not happen
spontaneously. All the individuals and department will have to work together to secure co-
ordination. It requires conscious efforts.
5. It may be performed by specialists appointed for the purpose: normally the task of co-
ordination is performed by the department managers themselves. But in a large concern task of
securing co-ordination may be entrusted to a specialist or to a group of experts.
6. It is an on going activity: as long as there is planning and execution, there will be co-
ordination. The different activities of the enterprise need to be co-ordinate as and when they are
performed.

Explain the different types / steps of co-ordination.

1. Internal co-ordination
It is the establishment of relationship with a view to co-ordinate the activities of all the
managers, executives, divisions, sub-divisions, branches and other workers.
Internal co-ordination is also sub-divided into the following two types:
i) Vertical co-ordination: Vertical co-ordination refers to that co-ordination in which a
superior authority co-ordinates his work with that of this sub-ordinates and vice versa. Sales
manager co-ordinates his work with the activities of the sales supervisor. Similarly, the
sales supervisor is required to have co-ordination and cordial relationship with his superiors.
ii) Horizontal co-ordination: Horizontal co-ordination refers to the establishment of a
relationship between the persons of the same status. For example, co-ordination between
the departmental heads, supervisors, co-workers, etc.

61
2. External co-ordination:
External co-ordination is the establishment of a relationship between the employees of
the organization and outsiders of the organization. This relationship is established for the benefit
of the organization as a whole.
The work of the establishment of a relationship between the employees of the organization and
the outsiders is entrusted to a person who is designated as public relations officer.

What are the techniques available for achieving co-ordination?

1. Understanding the goals: The goals of the organization should be clearly defined and every
individual in the organization must understand the objective and his role in achieving the
objectives.
2. Authority and responsibility: The line of authority and responsibility should be clearly
defined as that superior may have proper control over the subordinates. Then only he can co-
ordinate the efforts of this subordinates.
3. Policies and procedures: the policies, procedures, rules and regulations of the organization
must be such that they improve the conditions and tie-together the day to day decisions, actions,
and work methods in the organization.
4. Good communication system: A good organization system can promote mutual
understanding and co-operation among various groups and individuals in an organization.
Hence, it forms the basis for co-ordination.
5. Good organization of committees: The organizing of committees also contributes to
effective co-ordination since it defines the authority to integrate clearly.
6. Organising or committees: The organizing of committees also contribute to effective co-
ordination. The committees discuss in detail the problems, proposals and solutions and try to
integrate the entire person. The decisions of the committees can be easily implemented.
7. Voluntary co-operation: The voluntary co-ordination of the employee’s gives effective and
long-lasting co-ordination.
8. Appointment of co-coordinators: Appointment of special co-coordinators, staff groups or
liaison officer is also a method for effective co-ordination, because his only work is co-
ordination.
9. Link between departmental functions: The functions of departments in an organization are
interlinked. So, if the function of one department is such that it facilities the functioning of
other. Then this will lead to effective co-ordination.
10. Periodic meetings: Periodic staff meetings and conferences are highly effective in
promoting co-ordination, because all the problems can be solved by discussion.
11. Good leadership: Good leadership also contributes to co-ordination. A good leader induces
the subordinates and gets their co-operation for better performance.
12. Re-organising departments: Co-ordination can also be achieved by reorganizing different
departments by regrouping the activities, project management and planning techniques.

Briefly explain the principles of Co-ordination.

1. Early start
The coordination should be started even from the planning function of management. The
management should prepare the plan after consulting the concerned officials. By this, the
preparation of a plan and its implementation will be very easy for the management.
2. Personnel contract
Oral communication brings two persons very close. It means, there is a possibility of
personal contact. An agreement may be arrived on methods, actions and achievement of
62
objectives through personal contact, ideas, views, opinions, recommendations, feelings, etc. are
conveyed to the receivers effectively through personal contact.
3. Continuity
Co-ordination is a must so long as the organization continues to function. Co-ordination
is the key stone of the organizational structure. So, co-ordination starts with planning and ends
with controlling.

4. Reciprocal relationship
The principle states that all factors in a situation are reciprocally related. Each factor
influences other factors and are influenced by the other factors. Thus, the action of one
employee influences the action of other employees and vice versa.
5. Dynamism
The external environment of business influences the internal activities of the business.
Besides the internal activities and decisions are changed according to the circumstances
prevailing. So cooperation is modified according to the external environment and internal
actions and decisions.
6. Simplified organization
Simplified organization also facilitates effective coordination. The management can
arrange the departments in such a way, to get better co-ordination among the departmental heads.
If two sections or two department’s functions are most similar in nature, these two departments
are put under one executive in charge. These facilities to get better co-ordination.
7. Self co-ordination
According to this principle, the function of one department affects other departments and
in turn, is affected by the functions of other department. The same department modifies its
functions in such a manner that it may affect other departments favorably. In this way, co-
ordination is achieved.
63
8. Clear-cut objectives
The departmental heads should know clearly the objectives of the organization. So, the
management must take necessary steps to explain the objectives to the departmental heads. This
is very useful in achieving the common objectives of the organization collectively.
9. Clear definition of authority and responsibility
The management should clearly define the authority and responsibility of each individual
and of each department. This will facilitate effective co-ordination in an organization. Besides,
it will reduce conflicts among the individuals.
10. Effective communication
Effective communication is necessary for proper co-ordination. The individual and
departmental problems can be solved with the help of co-ordination.
11. Effective supervision
Effective leadership also helps in proper co-ordination. Leadership creates confidence in
the minds of subordinates and increases the morale of the subordinate.

Enumerate the Importance of co-ordination?

1. Unity in diversity: In any organization there are a lot of employees who are having different
habits, background and viewpoints. The activities of these different personalities are to be
organized so as to achieve the objective. Co-ordination is necessary for creating unity in
diversity.
2. Channelising the energies and skills: Co-ordination is essential for channelizing the
energies and skills of work groups along determined lines.

64
3. Relation between departments: An organization is divided into departments, division etc.
Coordination is necessary to have a link between the functions of different department of
divisions.
4. Integrating the work of specialists: In modern days, there is specialist in all the
organization. Though they are expert in their work, they know very little about others job.
Hence, they develop problems with others. So coordination is necessary to co-ordinate the
efforts of specialists.
5. Integrating the individual and department goals: Co-ordination plays a vital role in
integrating the individual goal or departmental goal to achieve the organizational goal.
6. Smooth flow of action: In any organization there is flow of information, resources, activities
and authority. Coordination ensures smooth, consistent and congruent flow of action.
7. Better relation: Co-ordination is necessary to harmonise relations between various groups in
the organization.

CONTROLLING

What do you mean by controlling? (OR) Define controlling?

Without control, there is no use for the other functions of management. Control is any
process that guides activity towards some predetermined goals. The purpose of control is to
maximize the use of scarce resources and to achieve purposeful behavior of organization
members.

According to Knoontz and O’Donnel, “Controlling is the measurement of

accomplishment against the standards and the correction of deviations to assure attainment of
objectives according to plans”.
Haynes and Massie define “Control is any process that guides activity towards some pre-
determined goal. The essence of the concept is in determining whether the activity is achieving
the desired results”.

Explain the nature / features / Characteristics of ideal control system?

1. Commonly suitable system: All the firms are not alike. Hence the control systems required
for them also differ. So the control system should be appropriate to the nature, needs and
circumstances of a concern.
2. Immediate action: Time is an important element in enforcing the control system. The
subordinates should send the reports about the performance of work to the managers promptly.
The managers should send the instructions for corrective action immediately. Delay in them
might prove harmful to the organization.
65
3. Prediction: A good control system will make it possible to think try to prevent the situations
for the deviations rather that making corrective actions.
4. Flexibility: The control system should be flexible enough to incorporate future changes,
improvement etc., with out much dislocation.
5. Suitability: The control system should be objective oriented and should be in accordance
with the organizational structure, plan, policies and programmes.
6. Simple and inexpensive system: A good control system should be easily installed and
economically maintained.
7. Understandable system: A control system should be easy to understand and operate.
8. Detecting deviation: A control system should not be only detect the deviation but also
provide solution to the problems that causes deviation.

Enumerate the different steps involved in controlling?

1. Establishing or fixing of standards: The fixing of standards is necessary because only if

there is a standard we can compare the actual with the standard and decide the future course of
action. Without any fixed stands, we can not find the deviation.
The standard is defined as a yardstick consisting of a specific set of factors relating to a
particular organization or department. It may be in the form of a specification or measurable
quantity to provide guidelines for acceptable levels of performance. The standards may be
classified as tangible standards and intangible standards.

66
Tangible standard is one which is specific, definite and clearly intelligible; It is possible for the
persons concerned to know when the standard is reached. Example: cost standards, revenue
standards, programme standards.
Intangible standard is one which cannot be precisely measured, assessed or quantified.
Examples: Employee morale, consumer satisfaction.
2. Measurment and comparison of performance: After setting the standards, the next step in
the control process is to ensure that the performance at various levels is as per those standards.
The performance such as production unit, sales, profit etc. which is quantitative can be measured
accurately and easily. The performance which is qualitative and intangible such as human
relations, employee morale etc., can not be measured easily. For such purposes, psychological
tests and opinion surveys are applied.
3. Correction of deviations: This is the last step in the control process. After the deviations
and causes for deviation are found out, the manager has to decide the remedial action. The
success of the entire control system lies on the implementation of remedial action.

Explain the various types of Managerial Control?

1. Standardising control: Controls are used to standardize performance for increasing
efficiency. Costs may be reduced by time and motion studies, inspections and work schedules.
2. Preserving Control: company assets are protected or preserved through the allocation of
responsibilities. Proper account is maintained for assets and usage of assets are controlled and
put under strict supervision.
3. Delegation of authority control: Control puts some limits to the usage of delegation of
authority. The approval of the top management is necessary to use the delegation of authority.
Policy manual, procedure manual and internal audits are some of the techniques included in this
control.
4. Measurement control: Controls are used to measure the job performance. Performance is
measured through special reports, budgets, standard cost and production per hour or per
employee.
5. Motivating control: Controls are designed to motivate the employees of organization.
Motivation includes promotions, rewards for best opinions and operation, profit sharing and the
like.

What are the needs of Control?

1. Judging the accuracy of standards:
The actual performance should be compared with the fully accurate standards. But it is very
difficult for a large and complex organization to establish the fully accurate standards because of
the lack of timely information. In such a case, the control is necessary to judge the accuracy of
standards.
2. Minimise dishonest behavior:
An honest person may tempt to misbehave in the absence of control. Only an efficient control
minimizes the dishonest behavior on the part of employees.
3. Better performance:
Employees will become lazy in the absence of control. Control facilitates to get better
performance and regulate the efforts of the employees.

67
Explain the essential requirements of effective controlling system?

1. Feedback: Feedback is the process of adjusting future actions based upon the information
regarding past performance. If feedback practice is followed by the management, the control
process will be very easy.
2. Objective: control should be objective. It means there is a certainly of control. The impartial
appraisal of performance is necessary for certainty of control.
3. Suitability: The control system should conform to the nature of deviations. The control
technique may be used, if there is any need.
4. Prompt reporting: The deviations from standards should be informed without any delay. If
there is any delay caused, exercising control will be of no use.
5. Forward looking: Effective control system must focus how the future actions will conform to
plans. In other wards, the control system should provide an aid in planning.
6. Pointing out exceptions: The control system points out the deviations. But all the deviations
do not have equal impact. If the deviations have high impact, the control system should pay
direct attention to them. Then, the management can take corrective actions.
7. Flexible: The standards or criteria should be altered from time to time. The reason is that the
standards should conform to the present requirements. Hence, the control system should be
flexible in accordance with the changed standards or criteria.
8. Economy: The benefits derived from the control system should be more than the cost of
exercising such a control system.
9. Intelligible: The control system should not be a complicated one. The control system should
be easily understood by an ordinary layman of the organization.
10. Suggest remedial action: The effective control system should disclose the places of failure,
persons for failure and how they have been dealt with.
11. Motivation: A good control system should be employee centered. The control is designed to
secure positive reactions from employees. If large deviations are found, the employees will be
properly directed and guided instead of being punished. The very purpose of control is
prevention and not punishing.
What are the benefits of control?
1. It ensures attainment of enterprise objective
2. It highlights the quality of plans
3. It ensures successful implementation of plans
4. It ensures that employees work with commitment
5. It provides scope for delegation.
6. It facilitates co-ordination.
7. It promotes efficiency.
What are the problems of control?
1. Problem in setting a realize standard.
2. Resistance from employees.
3. Lack of good system of communication.
4. Degree of change.
5. Problem in setting qualitative standards.
6. Delay in taking corrective action.
7. Expensive.

Question Bank
1. Explain the principles of co-ordination.
2. Describe the importance of co-ordination.
68
3. Explain essential of effective control.
4. Explain the techniques of control.

69
70
71