GE3751 PRINCIPLES OF MANAGEMENT

UNIT II
PLANNING
Nature and purpose of planning – Planning process – Types of planning – Objectives – Setting
objectives – Policies – Planning premises – Strategic Management – Planning Tools and Techniques
– Decision making steps and process.
NATURE AND PURPOSE OF PLANNING
 Planning is the Basic management function that involves setting of goals and deciding the
best method to achieve them.
 Planning provides a basis for the other major functions of management: organizing, leading
and controlling.
 Manager with his subordinates sets the required goals, establishes the policies, standard
methods, develops program strategies and schedules to achieve the goals.
 The plan must be flexible so that it can be modified due to change in working environment
and new information.
Definition
1. Koontz defined it as "Planning is an intellectual process, the conscious determination of
course of action”
2. George Terry defines it as "Planning is the selecting and realizing of facts in the visualization
and information of proposed activities believed necessary to achieve desired results"
3. Louis A. Allen defines it as "Planning involves the development of forecast, objectives,
policies, programs, procedures, schedules and budgets"
Objectives of Planning
i) To anticipate future conditions and problems in advance.
ii) To choose economical alternatives.
iii) For making efficient and effective management.
iv) To avoid duplication, overlapping, cross purpose working.
v) To check and control the overall performance.
vi) To co-ordinate distinct activities to a common goal.
vii) To improve productivity.
viii) Planning provides the basis for other functional activities.
Nature of Planning
A) Contributing to Mission and Goal
Every plan must be directed towards the accomplishment of the goal and hence the mission of the
enterprise.
B) Foundation of Management
The managerial functions-organizing, leading and controlling are also objected to achieve the
organization's goal. Planning function of management comes first in all above managerial functions.
Planning and controlling cannot be separated. Planning provides the standard and degree of control.
C) Range of Planning
Planning is basic management function. Planning varies with authority and policies laid by
superiors. All managers from chief executive officer of company to supervisors plan their activities.
The planning differs according to the level in the organization.
 Top management planning is called as strategic planning. Strategic plans are detailed action
steps mapped out to reach strategic goals.
 Middle management plans are called as tactical plans. Tactical plans support
implementation of the strategic plan.
 First level management plans are called the operational plans. Operational plans support
implementation of tactical plans and achievement of operational goals.
Fig: shows nature of planning.
 Dimensions of Planning
Five dimensions of corporate business plan are
1. Time
2. Entity
3. Organization
4. Elements
5. Characteristics
1. Time
A business plan may be either short range or long range. A plan may be executed year after year on
rolling basis. If needed it can be extended to get the opportunities to correct or revise.
2. Entity
The objective on which the plan is focused is called entity of plan. The entity can be production
quantity or a new product. A plan can have multiple entities and may be related with finance,
marketing, research, manpower. The goals or objectives are often stated in terms of these entities.
3. Organization
A plan deals with the company and is divided into functional groups. Functional division of plan
helps to fix the responsibility for execution. Corporate plan is a master plan consisting of several
functional plans.
4. Elements
A corporate plan consists of several elements. The plan begins with mission and goal of the
organization. It provides direction, policy statements, style of functioning, rules, procedures.
The budgets are prepared for sales, production, stocks and resources. The success and failure of
plans are decided by the performance of plans.
5. Characteristics
A corporate plan has no definite characteristics. A plan is characterized by quantitative, qualitative,
flexible, rational, goals, resources, investments, schedules. The plan is based on some assumptions
about the future, strength and weaknesses.
PLANNING PROCESS
Planning is the management function that involves setting goals, formulating missions and
objectives then deciding how best to achieve them.
Managers make extensive use of decision making skills, various planning and decision aids in
carrying out the planning function. Plans provide a reasonable approach for achieving objectives.
Planning process involves following steps:
1. Mission
2. Goals
3. Plans
4. Goal Attainment
An overall view of planning process is shown in Fig.

Mission
 The mission of an organization is organizations purpose or fundamental reason for existence.
 A mission statement is a broad declaration of the basic, unique purpose and scope of
operations that distinguish the organization from other organizations of its type.
Goal / Objectives
A goal is a future target or end result that an organization wishes to achieve.
A goal is a statement of a specific, desired performance result with a time frame. A well-written goal
should state what is to be accomplished and by when.
Elements of Effective Goals
Goals must be defined clearly and effectively to support organizational performance. SMART
criteria of effective goal is preferred i.e. to be effective the goal should be Specific, Measurable,
Accepted, Realistic and Time-framed as illustrated below.
 Specific enough for focus and feedback
 Meaningful enough to engage participants
 Accepted by the participants
 Realistic but challenging
 Time-framed
Effective goals provide all the benefits and advantages to the organization as below:
i) A criteria for decisions.
ii) A blue print for performance.
 iii) A basis for feedback.
iv) Focus attention on right agenda.
v) A basis for co-operation and team work.
OBJECTIVES
Objectives are the aims, purpose or goals that an organization wants to achieve over a period of
time.
Characteristics of objectives
1. Objectives have a hierarchy.
2. Objectives form a network.
3. An organization may have multiple objectives.
4. Objectives have a time span.
5. Objective may be tangible or intangible.
6. Objectives of an organization must confirm to the general needs of the society.
Developing Plans
Plans provide the standard and degree of control. Goals and plans are closely related. Goals are
desired results and plans are the means to bring about those results.
Depending on the period or duration the plan can be categorized into three different types:
i) Short Range Plans Upto 1 year
ii) Intermediate Range Plans - 1 to 5 years
iii) Long Range Plans Above 5 years
Goals Attainment
Setting goals and developing plans will lead to goal attainment ultimately organizational efficiency
and effectiveness. Plans are efficient if they achieve their purpose at a reasonable cost.
TYPES OF PLANNING
 Strategic Plans
 Tactical Plans
 Operational Plans
Strategic Plans
 Strategies are the large scale action plans for interacting with the environment in order to
achieve long term goals.
 Strategic plans focus on the broad future of the organization and incorporate both external
environment demands and internal resources into the actions managers need to take to
 achieve the long term goals of the organization.
 Strategic plans are long term plans including its products, services, finances, technology
and human resources
Tactical Plans
 Tactics are means needed to activate a strategy and make it work.
 Tactical plans translate strategic plans into specific goals for specific parts of the
organization. They have shorter time frames and to be narrower in scope.
Operational Plans
 Operational plans translate tactical plans into specific goals and actions for small units of the
organization and focus on the near term, typically 12 months or less.
 These plans are the least complex of the three and rarely have an impact beyond the
department or unit for which the plan was developed.

STRATEGIC MANAGEMENT
Strategic planning of technology is must to assure future profitability. Technology can be
divided into three major categories.
1. Base Technology
2. Key Technology
 3. Pacing Technology
1. Base Technology
The technologies that any firm must master for becoming effective competitor in the market. Only
enough efforts are invested to maintain competence.
2. Key Technology
The key technology provides competitive advantage. The manufacturer adds unique features or
functions into the product to improve the efficiency on priority basis.
3. Pace Technology
The pace technology can be the key technology for tomorrow. A critical balance is needed between
key technology and pace technology that is important for sustaining current competitive position and
to create future vitality.
Essentiality of Strategic Planning
In order to keep business progressive, some factors are to be considered essentially. Those factors
are:
1. Market forces
2. Technological change
3. Complex diversity of business
4. Competition
5. Environment

POLICIES
Policies are general statements which guides manager’s thinking in decision making function.
Eg: Customer Service Policy
PLANNING PREMISES
 Planning premises are basic planning assumptions regarding future and political environment. It
includes assumptions derived from assessments of future trends and possibilities.
 Planning premises are pre-requisites of planning process and makes it more effective.
 Koontz defined it as "Planning premises are anticipated environment in which plans are expected
to operate".
Categories of planning premises
1. Tangible and intangible premises.
2. Internal and external premises.
3. Foreseeable and unforeseeable premises.
4. Controllable, uncontrollable and semi-controllable premises.

DECISION MAKING STEPS AND PROCESS

 Decision is a course of behavior, action about what must or must not be done.
 Decision making is a basic function of management. Decisions help in translating management plans,
policies and objectives into concrete actions.
 Decision making is essential for all managerial functions Planning, organizing, directing & controlling.
Decision making is the process of selecting and implementing alternatives consistent with a goal.
 Entire process from setting the decision goal to making sure the goal has been achieved is called
decision making.
Steps in Decision Making Process:
1. Identify the Problem
The first step in the decision making process is identifying the problem. Identifying the problem involves
three main activities.
i) Scanning: Monitoring the work condition for changing circumstances that can indicate the emergence
of problem.
ii) Categorize: Attempts to categorize the situation as a problem or non-problem.
iii) Diagnose: Gathering additional information and diagnose the problem's nature and causes.
2. Generate Alternative Solution
The second step in decision making process is developing alternatives. A problem can be solved by
different alternative solutions. Manager has to develop alternative solutions. Before selecting any specific
solution a manager has to think on all the alternative possible solutions.
The most familiar technique of enhancing creativity is Brainstorming
3. Evaluating and Choosing an Alternative
Evaluating those alternatives, to identifying the strengths and weaknesses of each option.
Each alternative should be evaluated systematically according to general criteria’s like feasibility, quality,
acceptability, costs, ethics etc.
1) Feasibility refers to the extent to which an alternative can be accomplished with given related
organizational constraints e.g. time, technology, budget.
2) Quality refers to how effectively an alternative solves the problem under consideration.
3) Acceptability is the degree to which concerned people will be affected by implementing the alternative
and people willing to support alternative.
4) Costs are the monetary expenditures and other resources required to implement any alternative.
5) Ethics refers to the compatibility of an alternative with the social and moral responsibility.
4. Implement and Monitor the Chosen Solution
A decision is just a choice until it is implemented and monitored. Implementation of decision reveals its
effectiveness and significance in achieving the desired goals.
Once it is implemented, the decision must be monitored to ensure that the alternative put into action is
moving the organization closer to its goals. It is only monitoring phase that confirms that the organization
goals have been achieved.

Steps and Activities in Decision Making Process:

Types of Decisions:
Business Decisions can be classified into:
 Programmed Decisions
 Non-Programmed Decisions
 Influences on Decision Making
Three general characteristics influence Decision Making:
 Decision making Characteristics
 Problem Characteristics
 Decision Environment Characteristics

PLANNING TOOLS AND TECHNIQUES

Managers use a variety of planning tools such as
 Budgets
 Managements By Objectives (MBO) are based on factors like
 creativity,
 system approach,
 sensitivity,
 analysis and
  modelling.
 Benchmarking
 SWOT Analysis
 Porters Five Forces
 Boston Matrix (Product and Service Portfolio)
Budgets
Budgets are used to quantify and allocate resource to specific activities. Budgets are proposed and set
annually. There are several types of budgets.
 Capital expenditure budget - specifies the amount of money to be spent on specific items that
have long term use and require significant amounts of money to acquire. These items might
include such things as equipment, land or buildings.
 Expense budget - includes all the primary activities on which the unit or organization plans to
spend money and the amount that is allocated for each item. Virtually all profit and nonprofit
organizations have expense budgets, both for planning and for control purposes.
Management By Objectives (MBO)
Second major planning tool is management by objectives (MBO). MBO is a system in which specific
performance goals or objectives for individuals are jointly determined by the individual and his or her
immediate boss.
Specific time frames are attached to these objectives, and feedback provided.
MBO starts at the apex of the organization, the corporate then determines divisional and departmental
objectives which are broken down into targets for sections and individuals.
MBO has four basic components
1. Specific goals
2. Participation decision making
3. Explicit time periods and
4. Feedback on performance.
MBO specifies the performance goals that an individual hopes to attain within an appropriate length of
time. MBO is also referred as appraisal by results or performance objectives.
The objectives that each manager sets are derived from the overall goals and objectives of organization. A
guided self-appraisal system driven by MBO is set and implemented. The objectives are future affairs
which the organization strives to achieve and are structured into hierarchy.
The key to MBO is the mutual relationships between the superior and the subordinate in setting realistic
objectives for the subordinate.
Importance of MBO
  MBO is employed in almost all large companies in India and
 It minimizes friction between employee and management.
 MBO reduces the conflict between personal and organizational goals, also it provides job
satisfaction to the subordinates.
 Leads to commitment towards attainment of objectives.
Advantages of MBO
1. Encourges co-operation and motivation towards achieving targets.
2. MBO leads to better understanding between superior and subordinate.
3. The causes of successes achieved in attaining objectives can be identified and analysed.
4. Performance appraisal becomes possible.
5. MBO results in better team work.
6. MBO can be related to training and management development programmes.
7. Subordinate's personal achievements are recognised.
8. MBO improves employee commitment towards work and company objective.
9. MBO improves productivity.
10. MBO ensures better utilization of resources.
11. MBO helps in planning and decision making.
12. MBO is useful in development of employee performance.
13. MBO helps in coordinating departmental work in achieving company
Disadvantages of MBO
1. Devising MBO programmes is extremely time consuming.
2. MBO increases paper work.
3. There may be ambiguities in goal setting.
4. Rewards may not match with efforts.
Features of MBO
The important features of MBO are listed below:
1. MBO is comprehensive planning and control technique.
2. MBO provides coordinated efforts in specific direction by all levels of management hierarchy.
3. MBO leads to Better performance.
4. Employees of all levels are contributing with their best, the overall production increases.
5. MBO reduces the conflicts between the management and employees.
 GE3751 PRINCIPLES OF MANAGEMENT

UNIT III
ORGANIZING
Nature and purpose – Formal and informal organization – Organization chart – Organization structure –
Types – Line and staff authority – Departmentalization – delegation of authority – Centralization and
decentralization – Job Design - Human Resource Management – HR Planning, Recruitment, selection,
Training and Development, Performance Management, Career planning and management.

ORGANIZING

Organizing is the management function that focusses on allocating and arranging human and non-human
resources so that plans can be carried out successfully.

Different tasks must be assigned to different people and their efforts must be co-ordinated. This involves
co-ordination of tasks and the various ways to accomplish it.

In management process organizing function provides a valuable tool for promoting innovation and
facilitating needed changes. Organizing is also concerned with building, developing and maintaining
working relationships.

Definitions of Organizing
 "Organizing is process of establishing a structure for the organization so that it helps the manpower
of organization to function systematically, to fulfill the organization goals effectively.

"Organizing is the process of defining and grouping the activities of an enterprise and establishing
the authority relationships among them."

"Organization is the process by which individuals, groups and facilities are combined in a formal
structure of tasks and authority."

Principles of Organizing

A principle is a general rule to be applied for any particular condition exists. Some important principles
are listed below -
1. Objective
2. Span of control
3. Scalar principle
4. Unity of command
5. Unity of direction
6. Responsibility and authority
7. Division of work
8. Line and staff relationship
9. Effective communication
10. Balance and flexibility

Factors Affecting Span of Control

Factors that determine the effective span of control are:
1. Capacity of superior
2. Capacity of subordinates
3. Nature of work
4. Types of technology
5. Delegation of authority.
6. Clarity of plans
7. Communication technique
8. Standard of performance
9. Geographical closeness to employees
10. Direction and co-ordination.
Nature of Organization
1. The organization structure differs from company to company.
2. An organization is a specified group of people with a common objective.
3. Everyone within organization is assigned with some responsibility and duties.
4. Organizing is process of defining and grouping of activities of the firm.
5. Organization ensures maximum utilization of available resources.
6. Organization motivates people to increase productivity and efficiency.
7. Organization facilitates administration.
8. General structure of organization is like a pyramid i.e. organization structure begins from chief
executive at the top and down to the workers of all levels.

Purpose of Organization
1. To make growth and diversification.
2. To facilitate administration.
3. To stimulate independent, creative thinking and initiative through well defined areas of work.
4. To co-ordinate efforts of all departments.
5. To assign responsibility and authority.
6. To ensure optimum use of manpower and resources.
7. Organization eliminates duplication of work and enhance co-ordinated efforts.
8. Organization provides a frame work where management functions.
9. Organization provide a strong foundation so as to give strength to the business.
10. To maintain proper dignity of employee by using human capital,
11. Increase productivity and efficiency by providing material, equipment and authority with
encouragement to show maximum efficiency.

FORMAL AND INFORMAL ORGANIZATION

Formal Organization
* A formal organization has a well defined structure that may describe its authority, purpose,
accountability and responsibility relationships.
* The structure also defines the channels through which communications take place. All organization
members have clearly specified jobs. The hierarchy of objectives are clearly stated.
Formal organizations are durable and planned. The formal organizations are relatively inflexible due to
their hierarchy.
Characteristics of Formal Organization
 Well defined rules and regulations.
  Bound by delegation.
 Arbitrary structure.
 Determination of objectives and policies.
 Limitation on activities of people.
 Strict observance of principles co-ordination.
Informal Organizations
Informal organization refers to what people do of their own in relation to their needs, emotions and
attitudes. Because of friendship, kindship or close relationships human beings associate themselves in
groups of their own choice.
Informal organization is loosely organized, flexible and spontaneous. Membership in informal
organizations may be gained either consciously or unconsciously.
The exact nature of relationships among the members and goals of organization are unspecified. Peoples
are not bounded by procedures and regulations.
Under informal organization likes and dislikes are more important than delegation of authority and
responsibility. Freedom of action is the silent feature of this organization.
Informal organization may extend not only to individuals but also to groups within and outside the
organizational set up.
Characteristics Features of an Informal Organization
 Informal organization develops spontaneously.
 It is based on informal authority that attaches to the person, not to the position.
 It provides satisfaction of social needs.
 It provides a good channel of motivation and communication.
 It has great impact on productivity and job satisfaction.

Comparison of Formal and Informal Organization:

ORGANIZATION CHART
An organization chart is a graphical model of the formal structure of an organization. The chart indicates
the relationship between the various departments of the organization.
The boxes in the organization chart represent formal organization positions and the lines between boxes
represent lines of authority among positions. It also indicates the line of communication and downward
flow of authority throughout all the levels of management hierarchy. The flow of accountability is
upwards throughout all the levels of management.
The organization chart shows job titles and indicates manager subordinate relationships. A typical
organization chart is shown:
Need of Organization Chart
Various reasons or purposes to have an organization chart are as follows
1. It assigns responsibilities to individuals.
2. It helps identity control properly.
3. It makes the management functions simpler.
4. It serves as a framework of budgeting and scheduling.
5. It helps to give sense of security.
6. It outlines fundamental relationships.
7. It outlines basic authority.
8. It serves as a basis for directives.
9. It helps to improve communication channels.
10. It can be referred as reference document for various purposes.
Advantages of an Organization Chart
1. It shows organizational activities and identifies persons responsible for them.
2. It indicates clear reporting relationships pointing out who is accountable to whom.
3. It defines scope and limit at the job explaining tasks to be performed at each position.
4. It tells about the inter-relationship of positions.
5. It helps to resolve complexities within organization.
6. It can be used to introduce organizational relationships to new employees.
Limitations of Organizational Chart
1. Organizational chart does not represent human relationships between superior and subordinates.
2. It can introduce obstacles in relationships.
 3. It shows only formal authority relationships and omits many significant informal and informational
relationships.
4. It does not provide as to the authority existing at any point in the structure.
5. For any change in hierarchy or creation of new position results in reorganizing the chart.

ORGANIZATION STRUCTURE
* Organizational Culture is a system of shared beliefs and values that develop within an organization and
guide the behavior of its members. "The way we do things around here" - Basic assumptions, Values,
symbols, rituals (usual behavior), myths (beliefs) and practices.
1. Culture is a perception (based on what is seen, heard or experienced)
2. Culture is shared (described by all in similar terms)
3. Culture is descriptive (it describes rather than evaluates)

Dimensions of Organizational Culture

Seven dimensions (principles, components) describe an organization's culture.
* The seven components are:
1. Attention to Detail
2. Outcome Orientation
3. People Orientation
4. Team Orientation
5. Aggressiveness (being fearless and enterprising)
6. Stability (maintaining the existing situation)
7. Innovation and Risk Taking.
Fig. shows these seven components of organization's culture.
1. Attention to Detail It is degree to which employees are expected to exhibit precision, analysis and
attention to detail.
2. Outcome Orientation: It is degree to which managers focus on results or outcomes rather than on how
these outcomes are achievement.
3. People Orientation: It shows degree to which management decisions take into account the effects on
people in the organization
4. Team Orientation: It indicates degree to which work is organized around
5. Aggressiveness: It defines degree to which employees are aggressive and competitive rather than
cooperative.
6. Stability: It states degree to which organizational decisions and actions emphasize maintaining the
status quo.
7. Innovation and Risk Taking: It is degree to which employees are encouraged to be innovative and to
take risks.

ORGANIZATION TYPES:
The primary function of organization structure is to allocate the works through delegation of authority.
According to the organization structure, organization can be categorized into three different types -
i) Line organization/military organization
ii) Functional organization
iii) Line and staff organization
iv) Matrix organization
v) Committee organization.

Line Organization

LINE AND STAFF AUTHORITY

Line Authority
* Line departments have line authority, which is authority that follows the chain of commands established
by the formal hierarchy.
* The clearer the line of authority is an enterprise to every position, the clearer will be the responsibility
for decision making and effective communication. This is called as scalar principle in organization.
* The line authority follows the scalar principle i.e. superior exercises direct supervision over a
subordinate. An organization without an effective authority structure is like an individual without
discipline.
Staff Authority/Functional Authority
Staff departments have functional authority, which is authority that is delegated to an individual or a
department to control specified processes or matters related directly to their respective functions.
For example, in the structure for a bank, the line departments receive their authority through the chain of
command connected to the president. The bank's staff departments have functional authority in relation to
other departments i.e. authority only in their area of staff expertise.
Staff departments facilitate vertical coordination by making their considerable expertise available where it
is needed, rather than following the strict chain of command.
Functional authority is not restricted to any particular type of department or manager. It may be exercised
by line, service or staff head.
Line and Staff Conflicts
The line and staff conflict frequently arises because of following reasons.
i. When line and staff positions are not configured properly.
ii. When line and staff department size is not proportionate.
iii. Responsibilities of line and staff departments are not defined clearly.
iv. Line and staff department are not motivated or encouraged properly.
v. Lack of co-ordination between line and staff departments.
The line and staff personnel must operate unitedly as a team with joint accountability for final results.

DEPARTMENTALIZATION

Departmentation means dividing and grouping the activities and employees of an enterprise into various
departments. It is a process of division of total work of an enterprise into individual functions and
subfunctions.

A department is a distinct area, division or a branch of an enterprise over which a manager has authority
for the performance of specified activities.

Under departmentation, the total employees and subordinates is divided into small groups and the span of
control is also reduced.

Due to departmentation controlling, directing, assigning responsibilities, accountability becomes easier.

Departmentation Strategies
Departmentation is used to facilitate management and administration. There are different varieties of
Departmentation Strategies:
1. Departmentation based on function.
2. Departmentation based on method/process.
3. Departmentation based on product.
4. Departmentation based on territory.
5. Departmentation based on customer.

1. Departmentation based on function:

The functional structure is the most common form of organizing. In all business concerns there are
primary functions. The division of roles and reporting responsibilities are based on functions such as
production, marketing, finance, research and development etc.
* Departmentation based on function is shown in Fig.

Advantages
1. There is logical reflection of functions.

2. It follows principles of specialization.

3. It is a good mechanism for control.
4. It maintains power and prestige of functions performed.
5. Training is simplified.
Disadvantages
1. It is not suitable for an enterprise operating over large area.
2. Responsibility for profits tends at top.
3. There are possibilities of centralization in decision making.
4. Co-ordination among departments become difficult.
2. Departmentation based on Method / Process
This method of departmentation is used in manufacturing organizations where machines / processes need
special skills for operating them.
There are a number of processes involved in manufacturing organizations. Various process are assigned to
different departments. For example allocating areas in the plant for manufacturing gears, presses.
Similarly, a separate department for electronic data processing may be desired. This type of structure is
mainly motivated by cost and economic considerations.
Fig. shows departmentation based on method or process.

Advantages
1. Economic advantage can be achieved.
2. It uses specialized technology.
3. It requires special skills.
Disadvantages
1. Co-ordination among departments is difficult.
2. Responsibility for profit is at the top.
3. Departmentation based on Product
Product departmentation involves establishing each product or group of related products as relatively
autonomous integrated unit within the frame work of organization.

It is used where specialization is required with respect to specific products of the company. For example,
a company may deal with number of product lines such as chemical, drug, foodstuffs, cosmetics etc. and
may have separate divisions for each of the product line.
Fig. shows product wise departmentation.
Advantages
1. Greater emphasis on product lines.
2. Can provide better customer service.
3. Responsibility for profit is divided.
4. Multiple growth and diversity of product and services.
Disadvantages
1. A customer has to deal with different sales persons.
2. Cost for infrastructure set up is increased.
3. Duplication of activities.
4. Controlling of all product lines is difficult.
4. Departmentation based on Territory / Geography
* Departmentation based on territory is useful for large-scale enterprises having activities which are
physically or geographically spread out.
It encourages local participation in decision making and takes advantage of economics of localized
operations.
* Geographical divisionalisation involves the grouping of the primary activities in terms of the geographic
region or area to be served. It is most suitable for catering to customers in different localities. Fig shows
departmentation by territory.

* This pattern of departmentation is more suitable for sales and production, not for finance since it is
usually concentrated at the head quarters.
Advantages
1. It generates regional expertise and managers can tackle customers and better competation.
2. It places responsibility of lower management level.
3. It reduces costs of operation and maintenance because of the proximity to the territory of operation.
4. It gets benefits of lower freight, lower rents and lower labour cost.
5. It provides special attention to the needs and problems of local market.
6. It improves co-ordination on a regional basis.
7. It improves face to face communication with local customers.
8. In this type of organization the manager in the territory has to carry out many different functional and
managerial activities. It thus provides a better training ground for managers.
Disadvantages
1. It requires higher cost of co-ordination and control from headquarters.
2. It results in more managerial levels which increases overhead cost.
3. It is not suitable for departments like finance, where no gains are possible through specialization on
local markets.
4. It increases problems of top management control.
5. Departmentation based on Customers
* Departmentation based on customers involves grouping activities so they reflect a primary interest in
customers. The departments are organized to look after various categories of customers. Interests of
individual buyers such as industrial buyers, wholesalers, government, public undertakings are looked after
by separate departments. Fig: shows departmentation based on customers.

Advantages
1. It provides greater specialized customer service.
2. It is very useful where marketing channels are considerably different for various customers.
3. It develops expertness in customer area.
Disadvantages
1. There may not be enough work leading to under employment of facilities and manpower specialized in
terms of customer groups.
2. Problems of co-ordination may cause difficulties.
3. It leads to unequal development of customer groups.
4. It requires expertise in customer problems.

DELEGATION OF AUTHORITY
Delegation of authority is assigning a part of manager's work to others, along with both the responsibility and the
authority to achieve results.
Delegation involves moving decision making authority and responsibility from one level of the organization to the
next lower level.
* Delegation allows the hierarchy to be both more efficient and more effective by solving the problem at lowest
possible level.

Elements of Delegation
The process of delegation involves three essential elements -
i) Grant of authority
ii) Creation and assignment of responsibility
iii) Establishing accountability or obligation
* The delegator grants authority i.e. superior gives a permission for alloted work with rights to carry the alloted
work. The delegator then assigns duties to subordinates.

* The delegator creates an obligation or accountability for terms of conditions and standards.
Principles of Delegation
Basic principles of delegation are as under:
1. Equality between authority and responsibility
2. As authority and responsibilities are related with each other to facilitate administrative functions. If excess
authority is delegated than the responsibility, people will misuse the authority and if excess responsibility is given
than the authority, the result can never be achieved.
2. Expecting results as responsibility
The responsibility should be specific on a specific person. The authority should be delegated to the most competent
person. Delegation of authority should be counted in terms of responsibility.
3. Unity of command
* To avoid confusion, conflicts and duplication of work, the orders,, instructions and guidelines should flow to a
subordinate from a single superior. Multiplicity of accountability leads to many problems.
4. Delegation of responsibility
* Only authority and responsibility can
5. Overlapping of responsibility
While delegating the authority, the duties and responsibilities must not be overlapped.
6. Limits of authority
The area and extent of authority delegated should be defined and clarified exactly.

Types of Delegation
* Delegation can be of two types:
1. Over delegation.
2. Under delegation.
1. Over dellegation
When superior over burdens their subordinates due to insecure ability to perform any task and poor time
management for the task is called over delegation.
2. Under delegation
When superior assigns very less responsibility to their subordinates due to false assumptions and due to lack of trust
in subordinates is called under delegation.

Characteristics of Effective Delegation

The characteristic features of delegation are listed below :
i) Delegation is assigning a part of manager's work to the subordinate.
ii) Delegating authority to subordinate does not mean the loss of authority.
iii) The delegated authority can be modified as and when needed also it can be withdrawn under certain
circumstances.
iv) The authority can be delegated to the subordinate of the upward, downward or sideways.
v) Only authority and responsibility can be delegated but not its accountability.
vi) Delegation can be general or specific in nature.
vii) Delegation of authority can be communicated either in written or orally to the subordinate.
viii) The process of delegation is an art, but it is to be practiced scientifically.
 Difficulties in Delegation
Delegation of authority, though it is a simple process but there exists difficulties or problems while delegating the
authority.
i) Lack of confidence in subordinates
If the manager has less or no confidence in the subordinates ability to perform assigned job, he will not delegate the
authority.
ii) Lack of team spirit among the members of organization.
iii) Lack of ability to direct and guide on the part of managers affects delegation.
iv) If the manager doesn't have adequate control over subordinates.
v) The subordinate may not accept the authority and new challenges due to fear of committing mistakes.
vi) Lack of working facilities for delivering the duties may affect accepting the responsibility.
vii) Defective and inadequate planning also policy of organization.

CENTRALIZATION

* Decision makers who have the authority, control, and responsibility for the entire organization is located
in one central office (the headquarters) are called as centralization. It is a rule which means that the power
of decision making of the organization remains under control of the top level management.

"Centralization is the systematic and consistent reservation of authority at central point in an

organization."

Types of Centralization

There are three types of centralization:

1. Departmental centralization,

2. Centralization of performance

3. Centralization of management.
 1. Departmental Centralization: Specialized activities are carried out by a single department, such as,
maintenance of a whole plant, staff recruitment by HR department etc.,

2. Centralization of Performance: If the operations of a company are restricted to a single geographical

location, it characterizes centralization of performance.

3. Centralization as an aspect of management: This implies restricted delegation and exclusivity of

decision-making by the top management.

Advantages of Centralization

1. Centralization is convenient regarding coordination with different individuals and units.

2. Probably, the higher management might be extra professional and experienced that, may lead to
effective and efficient decision making.

3. Regarding decision-making, the higher management possesses a broad perception as per various
situations.

4. It can help avoid the duplication of efforts performed different units across the organization.

5. The leadership that seems strong and efficient is promoted.

DECENTRALIZATION

* Decentralization of authority is the extent to which power and authority are delegated to lower levels in
an organized structure. Opposite of decentralization is centralization of authority. The centralization of
authority is the extent to which power and authority are retained at the top organizational levels.
 Fig: Authority patterns in an Organization

Factor affecting Decentralization

1. Cost lines of decision

2. Desire of uniformity

3. Size of organization

4. History of enterprise

5. Management philosophy

6. Availability of managers

7. Control techniques

8. Decentralized performance

Merits of Decentralization

Major advantages or merits of decentralization are:

1. Reducing burden of top executives:

Encouraging decision making at lower levels tends to ease the heavy work-loads of executives, leaving
them more time to focus on major issues.

Demerits of Decentralization

1. Uniform policy about decentralization cannot be implemented.

2. Organization complexity increases.

3. Upper management loses some control in organization.

4. Decentralization may be limited by inadequate control techniques and planning and qualified managers.

5. External forces like-labour union, tax policies, government control may restrict smooth functioning.

HUMAN RESOURCE MANAGEMENT

* Human Resource Management (HRM) is a strategic approach to the management of an organization's most
valuable assets the people working, who individually and collectively contribute for achieving its objectives.

Purpose of HRM

i) To enable management to achieve organizational objectives through its workforce.

ii) To utilize the manpower to its full capacity and potential.

iii) To integrate human resource policies with business plans and reinforce an appropriate culture as necessary.
iv) To create conditions in which innovation, team working and total quality can flourish.

Principles of HRM

Effective and successful HRM is highly cost effective and profitable aspect of management. Organizations have
general obligations to their staff.

* The management of the human resource is recognised as an area of high expertise. The HRM is based on following
principles:

1. Employees are valued assets:

* The most fundamental belief of HRM is that sustainable competitive advantage is achieved through people.
Therefore, they should be considered not as variable costs but as valued assets in which to invest, thus adding to their
inherent value.

2. Strategy and culture:

* The organizational effectiveness can be increased significantly by human resource strategies and by culture of
organization.

3. Emphasis on commitment rather than compliance:

The optimum utilization of human resource will be achieved by developing consistent and coherent policies which
promote commitment to the organization.

4. Emphasis on the key role of line management:

HRM is owned by line managers who alone have the responsibility for managing their staff. The role of the HR
function is to enable line managers fulfil their HRM responsibilities effectively.

Functions of HRM

* The HRM activities play a key role in any organization. The important functions of HRM are discussed below.

i) Formulating HRM strategy

ii) Restructuring of organization

iii) Training and development

iv) Resourcing

v) Human resource planning

vi) Compensation and reward

Fig: Functions of Human Resources Management.

HR PLANNING or Manpower Planning

Manpower planning is an important function of Human Resource (HR) department. Manpower management is
essential in major sub processes like planning, organizing, staffing, directing and controlling.

Manpower planning is the process by which a firm insures that it has the right number of people and right kind of
people, at right places, at right time, doing things for which they are economically most useful.

Manpower planning is related to following activities.

a) Establishing and recognizing future job requirements.

b) Assured supply of qualified participants.

c) Development of available manpower e.g. training, experience and carrier planning.

d) Effective utilization of available work force.

Objectives of Manpower Planning

1. To help the organization reach its goals.

2. To ensure effective utilization and maximum development of human resources.

3. To ensure respect for human beings. To identify and satisfy the needs of individuals.

4. To ensure reconciliation of individual goals with those of the organization.

5. To achieve and maintain high morale among employees.

6. To provide the organization with well-trained and well-motivated employees.

7. To increase to the fullest the employee's job satisfaction and self-actualizațion.

8. To develop and maintain a quality of work life.

9. To be ethically and socially responsive to the needs of society.

10. To develop overall personality of each employee in its multidimensional aspect.

11. To enhance employee's capabilities to perform the present job.

12. To equip the employees with precision and clarity in transaction of business.

Importance of Manpower Planning

1. Key to managerial functions The four managerial functions, i.e., planning, organizing, directing and
controlling are based upon the manpower.

2. Efficient utilization Efficient management of personnels

3. Motivation Staffing function not only includes putting right men on right job, but it also comprises of
motivational programs, i.e., incentive plans to be framed for further participation and employment of
employees.

4. Better human relations Staffing function also looks after training and development of the work force
which leads to co-operation and better human relations.

5. Higher productivity Productivity level increases when resources are utilized in best possible manner.
Higher productivity is a result of minimum wastage of time,

Manpower Planning Process

Manpower planning process considers four categories of employees.

1) Existing staff

2) New recruits

3) Potential staff

4) Leavers

Each of these categories requires different decisions to be made by managers concerned. These includes

Manpower planning process involves following steps

1) Identify demand for manpower.

2) Assess personnel supply (existing and potential).

3) Forecast manpower requirement.

4) Periodic review.

Advantages of Manpower Planning

1. Skilled and flexible workforce.

2. Ability to respond to change.

3. Stability in the core of the workforce.

4. Reduced need to recruit externally.

5. Improvement in quality of products/services.

6. Higher productivity.

RECRUITMENT

Recruitment means securing human resources for organization. The principle purpose of recruitment
activities is to attract sufficient and suitable potential employees.
Recruitment is defined as the process of searching for prospective employees and stimulating them to apply
for jobs in concern.

Sources of Recruitments
The sources of recruitment for different categories of employees are classified as -
1. Internal sources
2. External sources

Internal Sources
Internal sources of recruitment means recruiting the employee within the organization,
Internal recruitment is implemented through Promotions and Transfers.
Promotion is defined as the movement to a position in which responsibilities, rights and prestige are
increased.
Promotion involves an increase in rank and results in higher earnings but increased earnings are not
essential in promotion. Many organizations have systematic promotion plans as per seniority.
Transfer involves the shifting of an employee from one job to another without special reference to
changing responsibilities or compensation. There may be change in responsibilities, duties and pay.

External Sources
When large vacancies are to be filled, external sources of manpower supply are preferred. The principal
sources of external recruitments are mentioned below.
1. Employment agencies
Many organizations have shifted their recruitment responsibilities to outside agencies called employment
offices, agencies or services.
Advantages
1. Established as the normal method for filling certain vacancies.
2. Less administrative work for employer.
Drawbacks
1. Can produce staff who are likely to stay for a short time.
2. Not trusted by employers.
2. Advertisements
Most employers deal with an advertising agency to help with drafting advertisements and placing them in
suitable media. Choosing the appropriate medium for advertisement is important.
A) Internal advertisement
Advantages
1. Maximum information to all employees.
2. Opportunity for all internal candidates.
3. If an internal candidate is appointed there is a shorter induction period.
4. Speedy and cost effective.
Drawbacks
1. Limited number of candidates.
2. Internal candidate not matched against those from outside.
3. Chances of favourism

B) Vacancy lists outside Premises

Advantage
1. Economical way of advertising.
Drawback
1. Vacancy list likely to be seen by few people.

C) Advertising in national press

Advantages
1. Advertisement reaches to large people.
2. Some national newspapers are the accepted medium for search by those seeking particular posts.
Drawbacks
1. More cost.
2. Much of the cost wasted in reaching appropriate people.

D) Advertising in local press

Advantages
1. Recruitment advertisements more likely to be read by those seeking local A employment.
2. Little wasted circulation.
Drawback
1. Local newspapers appear not to be used by professional and technical people seeking vacancies.

E) Advertising in technical press

Advantages
1. Reaches a specific population with minimum waste.
2. A minimum standard of applicant can be guaranteed.
Drawbacks
1. Relatively infrequent publication may require advertising few months before when the post to be filled.
2. The advertisement is inappropriate when a non-specialist is required.
3) Campus recruitments
* The organizations maintain a close liason with the technical institutes, universities and schools of
technology. They frequently visit for recruitment purpose.
Advantages
1. Most candidates of similar requirements are present at one place.
2. Interview can be arranged at short notice.

4) Trade unions
Trade unions assists in recruiting the staff. Recruiting through trade unions improves the co-ordination and
better labour relations.

5) Intermediaries
Intermediaries are actually jobbers or labour contractors. At the time of recruitment the job contractors are
usually consulted.

Alternatives for Recruitment

* Recruiting a new employee may be most obvious tactic when a vacancy occurs. But recruiting always is
not appropriate. Some options to the recruitments are listed below.
1. Reorganize the work.
2. Working overtime.
3. Mechanize the work.
4. Stagger the hours.
5. Make the job part time.
6. Sub-contract the work.
7. Use an external agency.

Staffing

Staffing process is flow of activities which results in continuous staffing of organizational positions at all levels.
Staffing process involves manpower planning, job analysis, job description, recruitment, selection, training and
development.

Staffing can be defined as fulfilling the manpower needs of the organization in an efficient manner.

* Fig. illustrates the stages associated with the staffing process.

 Manpower planning
 Recruitment
 Selection
 Training

Fig: Staffing process

Selection:
Selection is a process of making choice of individuals possessing the required qualifications and skills necessary to
perform the job successfully.

Steps in Selection Process:

TRAINING AND DEVELOPMENT:

Training is the process of developing skills, knowledge and changing attitudes so as to increase individual and
organizational effectiveness.
The education and training improves the employees standard so they can carry out the given test efficiently.
a) Education

Education is defined as activities which aim to develop the knowledge, skills, moral values and understanding.
Education motivates to understand the environment and develops the individual.
b) Training
Training is a planned process to modify attitude, knowledge or skill through learning experience to achieve effective
performance in an activity or range of activities. The training improves job performance.
Training is the act of increasing the knowledge and skill of an employee for doing a particular job.
Training is a continuing process in any organization. The main objective of training is to help organization to meet
its organizational objectives by increasing the value of its major resources i.e. its employee's.
c) Development
It concerns with developing an individual in all respects. Development of employee means the skillful provision and
organization of learning experiences in order to achieve business goal and growth.
All three terms relate to issues of knowledge, skill and understanding.
Objectives of Training
The training aims to define the gap between what is happening and what should happen. This gap is to be filled by
training.
 Fig. Objectives of training
* In any organization the fundamental objective of training is to increase the value of its major resource i.e. its
employees. These specific training objectives are -

1. Competencies and performance -

To develop the competencies of employees and improve the performance.

2. Future human resource requirements

To help people grow within organization in order that, as far as possible, its future needs for human resources can be
met from within the organization.

3. Less learning time -

To reduce the learning time for employees starting in new jobs on appointment, transfer, promotion. After training,
people are in position to adopt the new situation/quickly. A

4. Economy

Trained people will prove to be economical from organization point of view because of economic use of raw
materials and machines. The damages and wastage or scrap of material is also reduced.

5. Uniformity -

There will be uniformity in the work, product, and method of working which reduces misconception and ambiguity.

Advantages of Training

The advantages of training are as follows

i) A well trained employee will produce more hence productivity increases.

ii) The product quality improves.

iii) The products will be uniform and standard.

iv) Less supervision is required for trained employee.

v) Less wastage of raw materials and other damages.

vi) The trained employee will utilize the machinery and other resources efficiently.

vii) The hazards and accidents will be reduced.

viii) The trained employees are capable of accomodating change and introducing new technology

ix) Future requirements of human resource can be fulfilled.

x) The employee turnover will be reduced considerably.

Systematic Approach to Training

A systematic approach to training is needed which is directed towards specific task. A systematic training is
specifically designed to improve and develop the knowledge, skills and attitude required by individuals to perform
adequately a given task or job.

The systematic approach is most often expressed as a cyclical model which has four stages. The model implies that
links exist between each step and the process is cyclical and therefore the learning process is continuous.

The systematic approach is linked to scientific management. The four stages of systematic training cycle are shown
in Fig.

Stage 1: Identify training needs

* A training need arises due to the identified gap between the required knowledge, skills and experience for training
to be effective.
The training needs analysis, covers three levels in an organization. These are organizational level, job level and
individual employee. The areas and methods of

4 training are different at each level.

i) Organizational level / Corporate level -

The organizational level training needs come from the analysis of company

strengths and weaknesses as a part of corporate planning process.

* The knowledge skills and attitudes of all the employees at the organization, irrespective of their jobs/occupation
are required to develop as policy of company.

ii) Job / occupational level -

* The job or occupational needs are identified by analysing departmental human resource/plans and also by
conducting surveys in the form of questionnaires. Job analysis can be used to determine the knowledge and skills
required in specific jobs.

iii) Individual employee level -

* The individual training needs can be identified when an employee starts. a new job, by performance appraisal,
assessment centers and by self assessment or any specific incident.

The identification of training needs, its areas and methods are shown in Fig.

Step 2: Design Training Solution:

A list of training methods is presented below.
i) On-the-job training.

ii) In house courses.

iii) Planned experience outside the organization.

iv) Self-management training.

The on-the-job training is a popular choice among all above training. This training is a traditional approach which
simply means watching and training a trainee while they are undertaking their normal routine.

In-house courses are held in-house. This is a regular programme arranged for specific needs.

Planned experience outside the orgnizatation includes, visits and meeting with experts.

External courses are run by professional training providers e.g. consultants, trainers (specialists) and institutes.

Self-management learning means the individual will be involved in identifying their self-development needs and
encouraged to reflect their learning requirements.

Step 3: Implement Training Solution:

On-the-job training is appropriate for certain job requirements. The important advantages of on the job training are

i) It provides instant entry into the job.

ii) The trainees work, learn and develop expertise at the same time.

iii) They can see the result of their actions.

iv) The supervision is easy while they are learning.

v) They learn the small details which are omitted in training manuals.

There are also some disadvantages of on-the-job training. The disadvantage is

i) The information is passed on in a haphazard way by an expert supervisor who is. untrained in instruction
techniques.

Step 4: Evaluate Training Effectiveness:

Evaluating training effectiveness is the final stage of systematic approach to training. Evaluation of training is the
attempt to gain information on the effects of a training programme and to assess the value of training.

If there is reasonable proof that the training actually added value, then it is adopted further otherwise it becomes
waste of time and money. There are two main types of evaluation at various levels.

1. Subjective evaluation
2. Objective evaluation

The outline of training evaluation at different levels is given below.

Level 1: Here the reactions of trainees to the content and methods of training are evaluated. Also the opinion of
trainer is considered.

Level 2: Learning attained during the training ie. what the trainees learn and what was intended.

Level 3: Here the job behaviour in the work environment at the end of the training is evaluated, whether the learning
transfers to the job.

Level 4: The effect on the department after training. Has the training helped departmental performance ?

Level-5: Has the training affecte the ultimate well-being of the organization in terms of profitability or survival?

* For all above evaluation a variety of different appropriate methods are used. These are

a) Questionnaries, interviews, group discussion.

b) Tests, examinations, projects, case studies,

c) On the job performance.

d) Profitability, customer feedback.

The evaluation is performed by line managers, trainers and learners

Methods of Training

* Up to date training is required for those who actually work on machines and also to those who are newly employed
in the organisation.

Following are the training methods adopted for the workers or operators:

1. Induction and orientations/off the job training

2. By skilled and old workers

3. On the job training

4. Apprentice training

5. Vestibule schools.

PERFORMANCE MANAGEMENT: