Introduction to Management

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INTRODUCTION TO MANAGEMENT (Mgt 221)
PART ONE –
INTRODUCTION CHAPTER I:
MANAGEMENT AN OVERVIEW
1) Meaning And Definition Of Management
There are several definitions of Management; but they all are fundamentally the same.
Among the many, some are:
a) Management is the process of coordinating all resources through the five major
functions of planning, organizing, staffing, directing /leading and controlling to
achieve organizational goals/desired objectives. That is, it is the process of
achieving organizational goals through engaging in the five major functions of
planning, organizing, staffing, directing/leading and controlling.
In the above definition there are three key concepts

i) Coordination of all resources – managers should coordinate the
resources of an organization. These resources may be human or non
human.
ii) The five managerial functions – To coordinate the resources of an
organization a manager should employ/use the five managerial functions.
iii) Objectives – are the reason for the establishment of organizations and
management is useful for achieving these goals. Managing/management is
concerned with productivity: effectiveness and efficiency. There are points
to be meet, targets to be shot or places to be reached. All organizations
establish a variety of goals and direct their energies and resources to
achieve them.
- Profit oriented business → ROI goals
- Hospital → Patient care
- Educational institution → Teaching, research & community
service.
All organizations also have resources that can be used to meet these objectives.
Such resources can be classified into: human and non-human, and management is
the force that unifies these resources. It is the process of bringing them together
and coordinating them to help accomplish organizational goals.
b) Management is the art of getting things done through other people by making
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the atmosphere conducive for others. It is the process of getting things done
through others, and this process puts emphasis on both the objectives to be
attained and the people who will be pursuing them.
→ an effective manager focuses on both work and people.
→ the job of every manager is to achieve organizational goals through the
combined efforts of people.
c) Management is the utilization of scientifically derived principles to examine

and improve collective efforts or production.
- Management applies to any kind of organization, to managers at all
organizational levels.
- Without management, virtually no business could survive.
- Management increases the values of our resources.
d) Management is the process of achieving organizational goals through

engaging in the five major functions of planning, organizing, leading, staffing
and controlling. This definition recognizes that:
- Management is an ongoing activity
- Entails reaching important goals, and
- Involves knowing how to perform the five major functions of
management.
Managers – are those persons in the position of authority who make decisions
to commit (use) their resources and the resources of others towards the
achievement of organizational objectives.
* Everybody is the manager of his/her time, energy and talents.
Organization – is a group of two or more people brought together to achieve

common stated objectives.
Organization – two or more persons engaged in a systematic effort to produce goods
and/or services.
Managerial Functions Regardless of the type of firm and the organizational

level, all managers perform certain basic functions. These managerial functions
are Planning, organizing, staffing, directing/leading/ and controlling.
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i. PLANNING: is making decisions today about future actions. It
involves selecting missions and objectives and the actions to
achieve them; it requires decision-making, which is, choosing
future courses of action from among alternatives. No real plan
exists until a decision – a commitment of human or material
resources – has been made. Before a decision is made, all we have
is a planning study, an analysis or a proposal, but not a real plan.
 Planning bridges the gap between where we are to where we want to be in a
desired future.
 Planning identifies goals and alternatives. It maps out courses of action that
will commit individuals, departments and the entire organization for days,
months and years to come.
 Planning is the first managerial function that all managers engaged in
because it lays the groundwork for other managerial functions. Even other
managerial functions have to be planned.
- ii. ORGANIZING: is concerned with assembling the resources necessary to

achieve organizations’ objectives and establishing the activity authority
relationship.
 It is the management function that focuses on allocating and arranging human
and non-human resources so that plans can be carried out successfully.
Resources are allocated on the basis of major company goals.
 Planning has established the goals of the company and how they are to be
achieved; organizing develops the structure to reach these goals.
It is through organizing function that managers determine which tasks are to be

done, how tasks can best be combined into specific jobs, and how jobs can be
grouped into various units that make up the structure of the organization. It involves
creating job positions with assigned duties and responsibilities, arranging positions
into hierarchy by establishing authority–reporting relationship, determining the
number of subordinates each manger should supervise, determining the number of
hierarchical levels etc and thereby create an organization. Organizing is not done
once and then forgotten. As the objectives of the company change, they will influence
the structure of managerial and organizational relationship.
iii. STAFFING:. it involves filling and keeping filled the positions in the organization
structure. It is concerned with locating prospective employees to fill the jobs
created by the organizing process. It basically deals with inventorying the people
available, announcing vacancies, accepting, identifying the potential candidates for
the job, recruiting, selecting, placing, orienting, training and promoting both
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candidates and existing employees.
Staffing is concerned with human resource of the organization.
iv.Directing/LEADING: has been termed as motivating, influencing, guiding,

stimulating, actuating or directing. It is aimed at getting the members of an
organization move in the direction that will achieve its objectives.
Leading/leadership is the heart and soul of management. It involves influencing
others to engage in the work behavior necessary to reach organizational goals; i.e.,
it is influencing people so that they will contribute to organization and group
goals; it has to do predominantly with the human/interpersonal aspect of
management.
Leading is the most complex managerial function because it deals with complex
human behavior; and because most problems in organizations arise from people,
their desire and behavior. It includes communicating with others, helping to outline
a vision of what can be accomplished, providing direction, and motivating
organization members to put forth the substantial effort required.
v.CONTROLLING: is the measuring and correcting of activities of subordinates to

ensure that events conform to plans. It deals with establishing standards,
measuring performances against established standards and dealing with
deviations from established standards.
 Controlling is the process through which mangers assure that actual activities
conform to planned activities.
 It is checking current performances against predetermined standards
contained in the plan. Control activities generally relate to the measurement of
achievement.
2) Significance Of Management
Why do we study management?
There are different reasons to study management. These are:

 It is important for personal life.
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 Managers are universal: managers work in all types of organizations, at all
levels, and in all functional areas. These managers are responsible fo0r the
success or failure of the organizations.
 Societies depend on organizations/institutions for the provision of
goods and services. These institutions are guided by the decision of
few individuals /one or two/ designated as Managers.
 It affects the accomplishment of social, economic, political and organizational
goals. Management is the force that determines whether business
organizations and social institutions will serve us or waste our talents and
resources.
 Ever since people began forming groups to accomplish aims they could
not achieve as individuals, managing has been essential to ensure the
coordination of individual efforts.
 People currently not trained by management get themselves in managerial
positions and earn their livelihood, and the most common path to become
successful manager involves a combination of education and experience.
 Management is needed to coordinate and direct the efforts of individuals,
groups and the entire organization to achieve desired objectives. Management
is responsible for the success or failure of an organization. That is, when an
organization fails it is because of poor management, and when an organization
succeeds it is because of good management. Whenever and wherever there is
a group work having stated objectives, management is needed to direct and
coordinate their efforts. Without management effort will be wasted.
3) Levels Of Management
Is management the same throughout an
organization? Yes and No Yes: because all
managers perform the five managerial
functions.
No: because despite the fact that they perform all managerial functions, they perform
it with different emphasis and scope.
Managers all perform the same management functions but with different emphases
because of their position in the organization. Although all managers may perform
the same basic duties and play similar roles, the nature and scope of their activities
differ. These differences are the base for the classification of managers.
Managers can be divided based on two criteria. These are:

1) Levels of management (vertical difference)
2) Scope of responsibilities (horizontal difference)
I. Types of Managers based on levels of management

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An important determinant of a manager’s job is hierarchical level. Levels refer to
hierarchical arrangement of managerial positions or persons in an organization.
The number of managerial levels in an organization depends on the size of the
organization. In most organizations, however, there are three distinct levels. How
these levels are distinguished? What functions are performed at each level? And the
reporting relationships are some of the issues to be addressed.
Based on levels of management or hierarchy we do have three types of managers.

A manager’s assigned duties and the authority needed to fulfill those duties are
what determine management level.
i.Top Level Managers

Top-level managers are managers who are at the top of the organizational
hierarchy and are responsible for the entire organization. They are usually few in
number and include the organization’s most important managers - the CEO or the
president and his/her immediate subordinates usually called vice-presidents. But
the actual title may vary from organization to organization. They are few in number
because of the nature of the work they perform and economic problem. They deal
with the big picture, not with the nitty gritty. They are responsible for the overall
management of the organization. They establish company wide objectives or goals
& organizational policies. Furthermore, top management:
- Develop overall structure of the organization.

- Direct the organization in accordance with the environment.
- Develop policy in areas of Equal Employment Opportunity & employee
development.
- Represent the organization in community affairs, business deals, and
government negotiations.
- Spent much of their time in planning and dealing with middle level
managers and other subordinates.
- Work long hours and spend much of their time in meetings and on
telephone.
- Are persons who are responsible for making decisions and formulating
policies that affect all aspects of the firm’s operations.
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- Provide overall leadership of the organization towards accomplishment of
its objectives.
 They are responsible for the organization because objectives are established and
policies are formulated at the top.
 Top-level managers take the credit or blame for organizational success and failures
respectively.
ii. Middle Level Managers

Middle level managers occupy a position in an organization that is above first-line
management and below top management. They interpret and implement top
management directives and forward messages to and from first-line management.
- Regardless of their title, their subordinates are managers.

- Often coordinate and supervise the activities of lower level managers.
- Receive broad/overall strategies from top managers and translate it into
specific objectives and plans for First-Line Mangers/operating managers.
- Are responsible for the proper implementation of policies and strategies defined
by top level managers. They interpret and implement top management
directives and forward messages to and from first-line management.
- Their principal responsibility is to direct the activity that implement the policies of
the organization.
E.g. Academic deans, Division Head, Plant managers, Army captain
iii. First Level Managers/Supervisory Level managers

- Are those at the operating level or at the last level of management.
- Their subordinates are non managers.
- They are responsible for overseeing and coordinating the work of operating
employees.
- Assign operating employees to specific tasks.
- Are managers on which management depends for the execution of its plan since
their job is to deal with employees who actually produce the organization’s
goods and services to fulfill the plan.
- Are directly responsible for the production of goods and services.
- Motivate subordinates to change or improve their performance.
- Serve as a bridge between managers and non-managers.
- Spent much of their time in leading and little in planning.
- Are in charge of carrying out the day to day activities within the various
departments to ensure that short term goals are met.
E.g. Department Heads, supervisory personnel, Sales managers, Loan officers,
Foreman.
- Are often neither fish nor fowl – neither management nor labor because they
feel great deal of empathy for their subordinates (which stems from close
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personal contact and the fact that most supervisors have come up from the
ranks of labor) and they are there to reflect the company’s point of view to
their subordinates. And that is why First-Line Mangers are called “People in
the Middle”.
All managers carry out managerial functions. However, the time spent for each
function varies according to their managerial hierarchy. Top-level managers spend
more time on planning and organizing than lower-level managers. Leading, on the
other hand, takes a great deal of time for first-line managers. The difference in time
spent on staffing and controlling varies only slightly for managers at various levels.
Top
Controlling
Plannin
Organizin
Staffin
Directin
Middle
First-line
Organizational Hierarchy Time spent on carrying out managerial functions
Fig. 1.1 The relative importance of the managerial functions at

different levels
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II. Types of Managers based on scope of
responsibility
Based on the scope of responsibility/activities they manage, managers are divided
into two:
Functional Managers
i.
Functional managers are managers who are responsible for a department that
performs a single functional task and has employees with similar training and
skills.
Supervise employees (managers + workers) with specialized skills in specific areas

of operations such as accounting, payroll, finance, marketing, production, or sales
etc. They are responsible for only one organizational activity; i.e. their
responsibility is limited to their specialization/specification.
General Managers
ii.
General Managers are managers who are responsible for several departments that
perform different functions. They are responsible for the entire operations of the
organization without being specific.
Oversee a complex unit, such as a company, a subsidiary, or an independent

operating division. S/he will be responsible for all activities of that unit, such as its
production, marketing, sales and finance.
A small company may have only one general manager – its president or executive vice
president – but a large organization may have several, each at the head of a relatively
independent division.
5) Managerial Roles
Role is an organized set of behaviors that is associated with a particular office or
position. It is a pattern of behavior expected by others from a person occupying a
certain position in an organizational hierarchy.
A role is any one of several behaviors a manager displays as s/he functions in the
organization
When a manager tries to carryout the management functions, s/he must behave in a
certain way – to fill certain role. Managerial roles represent specific tasks that
managers undertake to ultimately accomplish the five managerial functions. Factors
which affect managerial roles are: manager’s formal job description, and the values
& expectations of other managers, subordinates and peers.
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Henry Mintzberg identified 10 managerial roles which are in turn grouped into
three categories: Interpersonal, Informational and Decisional Roles.
I.Interpersonal Roles involve developing and maintaining positive

relationships with significant others in the organization. It is communication
oriented. It includes:
i. Figurehead Role: managers perform symbolic duties of a legal or social

nature. The manager is the head of his work unit, be it division, section or
department. Because of this “lead person” position the manager represents his
work unit at ceremonial or symbolic functions.
The top level managers represent the company legally and socially to those
outside of the organization. The superior represents the work group to higher
management and higher management to the work group.
E.g. Signing documents, presiding at a ceremonial event, greeting visitors,

attending a subordinate’s weeding, taking a customer to lunch, university
president hands out a diploma for graduates – in all these cases the manager is
representing his/her organization.
ii. Leadership Role: The manager is the environment creator – s/he makes the
environment conducive for work by improving working conditions, reducing
conflicts, providing feedback for performance and encouraging growth. (Virtually
all managerial operations involving subordinates are examples for a leadership
role). The leader builds relationship and communicates with employees,
motivates & coaches them. As a leader, the manager is responsible for hiring,
training, motivating and encouraging employees/subordinates.
→ The leadership role is evident in the interpersonal relationship between
manager and his/her subordinates.
iii. Liaison Role/Coordinator role: The liaison maintains a network of

contacts outside the work unit to obtain information. The manager serves as a
link between the organization and the informants who provide favors and
information. S/he fulfills this role through community service, conferences, social
events, etc, participation is meetings with representatives of other divisions.
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Refers to dealing with the member of the organization superiors, subordinates,

peer level managers in other departments, staff specialists and outside contacts
such as clients.
The top management uses this role to gain favors and information, while the
superiors use it to maintain the routine flow of work.
II. Informational Roles focuses on the transmission of important information

to and from internal and external sources. It involves the following activities:
i. Monitor role: is also called information gathering role. This role refers to
seeking, receiving, screening and getting information. The manager is constantly
monitoring the environment to determine what is going on. The monitor seeks
internal and external information about issues that can affect the organization.
S/he seeks and receives wide variety of special information to develop through
understanding of the organization and the environment.
Information is gathered from news reports, trade publications, magazines,

clients, associates, and a host of similar sources, attending seminars &
exhibitions.
ii. Disseminator Role: what does the manager do with the information
collected? As the disseminator, the manager passes on to subordinates some of
the information that would not ordinarily be accessible to them. After the
information has been gathered (by monitor role), it has to be disseminated to
superiors, subordinates, peers and other concerned clients. The types of
information to be forwarded to members could be facts, opinions,
interpretations, and influences.
iii. Spokesperson/representative Role: the spokesperson transmits

information about the organization to outsiders. The manger is the person who
speaks for her/his work unit to people outside the work unit.
One aspect of this role is to keep superiors well informed and a second aspect is
to communicate outside the organization like press, government agencies,
customers and labor unions. Although the roles of spokesperson and figurehead
are similar, there is one basic difference between them. When a manager acts as
a figurehead, the manager’s presence is as a symbol of the organization, whereas,
in the spokesman role, the manager carries information and communicates it to
others in a formal sense.
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Thus, the manager seeks information in the monitor role, communicates it
internally in the disseminator role and transmits it externally in the
spokesperson role. The three informational roles, then, combine to provide
important information required in the decisional roles.
III. Decisional Roles: involve making significant decisions that affect the
organization.
i. Entrepreneur Role: (initiator of change) the manager acting as an

entrepreneur recognizes problems and opportunities and initiates actions that
will move the organization in the desired direction. In the role of entrepreneur,
the manager tries to improve the unit. Often s/he creates new projects, change
organizational structure, and institutes other important programs for improving
the company’s performance. The entrepreneur acts as an initiator, designer, and
encourager of change and innovation.
ii. Disturbance Handler Role: solution seeking role. In the role of

disturbance handler, the manager responds to situations over which s/he has
little control, i.e. that are beyond his/her control and expectation such as
conflict between people or groups, strikes, breachment of contract or
unexpected events outside the organization that may affect the firm’s
performance. The disturbance handler is responsible for taking corrective
action when the organization faces important, unexpected difficulties.
iii.Resource Allocator Role: deciding on the allocation of the organization’s

physical, financial and human resources. As a resource allocator, the manager
is responsible for deciding how and to whom the resources of the organization
and the manager’s own time will be allocated. This involves assigning work to
subordinates, scheduling meetings, approving budgets, deciding on pay
increases, making purchasing decisions and other matters related to the firm’s
human, financial, and material resources. The resource allocator distributes
resources of all types, including time, funding (finance), equipment and
human resources.
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iv. The Negotiator Role: representing the organization in all
important/major negotiations. Managers spend a great deal of their time as
negotiators, because only they have the information and authority that
negotiators require.
E.g. negotiations to buy firms, to get credit, with government, with suppliers, etc.
The Ten Managerial Roles

Category Role Activity
Interpersona Figurehead Perform ceremonial and symbolic
l duties such as
greeting visitors, signing legal
documents
Leader Direct and motivate
subordinates;
training, counseling,
and communicating
with
subordinates.
Liaison Maintain information links
both inside
and outside organization; use mail,

phone calls,
meetings.
Informationa Monitor Seek and receive information, scan
l periodicals and reports, maintain
personal contacts.
Disseminato Forward information to
r other organization
members; send memos and
reports, make phone calls.
Spokespers Transmit information to
on outsiders through
speeches, reports, memos.
Decisional Entreprene Initiate improvement projects;
ur identify new ideas,
delegate ideas, delegate
responsibility to others.
Disturba Take corrective action during
disputes or crises;
nce resolve conflicts among
handler subordinates; adapt to
environmental crises.
Resource Decide who gets resources;
allocator scheduling,
budgeting, setting priorities
Negotiator Represent department
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during negotiation of
union contracts, sales,
purchases, budgets;
represent departmental interests.
6) Managerial Skills And Their Relative Importance

A manager’s job is diverse and complex and it requires a range of skills. Skills are
specific abilities that result from knowledge, information, practice, and aptitude.
 Effective managers are essential to the performance of all organizations,

whether they have the ability to plan, organize, staff, lead and control business
operations effectively can determine a firm’s ultimate success or failure.
 Management success depends both on: a fundamental understanding of the
principles of management and the application of technical, human and
conceptual skills.
 Modern businesses are dynamic and complex, and competition in the market
place is fierce. Consequently, managers must be highly skilled to succeed. The
skills managers need can be classified as:
o Technical skill
o Human Relations skill
o Conceptual skill
1. Technical Skills – involve process or technique, knowledge and proficiency.

It is the ability to use the tools, procedures, or techniques of a specialized field. It
includes mastery of the methods, techniques, and equipment involved in specific
functions, such as engineering, manufacturing, or finance. Technical skill also
includes specialized knowledge, analytical ability, and the competent use of tools
and techniques to solve problems in that specific discipline.
- Is specialized knowledge and ability that can be applied to specific tasks.

- Is a skill that reflects both an understanding of and a proficiency in a
specialized field.
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-Technical skills are most important at the lower levels of management. It
becomes less important as we
move up the chain of command because when they supervise the others
(workers), they have to show how to do the work.
E.g. A surgeon, an engineer, a musician, a quality controller or an
accountant all have technical skill in their respective areas.
2. Human Relations /Interpersonal Skill – the ability to interact effectively

with people. It is the ability to work with, understand and motivate other people, either
as individuals or as groups. Managers need enough of human relationships skill to be
able to participate effectively and lead groups. These skills are demonstrated in the
way a manager relates to other people, including the way s/he motivates, facilitates,
coordinates, leads, communicates, and resolves conflicts. A manager with human skills
allows subordinates to express themselves without fear of ridicule and encourages
participation. A manager with human skills likes other people and is liked by them. This
skill is a reflection of the manager’s leadership ability.
Managers who lack human skills often are abrupt, critical, and unsympathetic
toward others. The results are often abrupt, critical, and unsympathetic response
from workers to management.
Because all work is done when people work together, human relation skills are
equally important at all levels of management.
3. Conceptual skills – involve the formulation of ideas. It refers to the ability

to see the big picture – to view the organization from a broad perspective and to see
the interrelations among its components. It includes recognizing how the various
jobs in an organization depend on one another and how a change in any one part
affects all the others. It also involves the manager’s ability to understand how a
change in any given part can affect the whole organization, ability to understand
abstract relationships, solve problems creatively, and develop ideas.
Conceptual skills are more important in strategic (long range) planning; therefore,
they are more important to top- executives than middle managers and supervisors.
Although all three of these skills are essential to effective management, their
relative importance to specific manager depends on his/her rank in the
organization. Technical skill is of greatest importance at supervisory level; it
becomes less important as we move up the chain of command. Even though human
skill is equally important at every level of the organization, it is probably most
important at the lower level, where the greatest number of management–
subordinate interactions is likely to take place.
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On the Other hand, the importance of conceptual skill increases as we rise in the
rank of management. The higher the manager is in the hierarchy, the more s/he
will be involved in the broad, long term decisions that affect large parts of the
organization. For top management, which is responsible for the entire organization,
conceptual skill is probably the most important skill of all.
 Technical skill deals with things, human skill concerns people and conceptual skill
has to do with ideas.
Top
Conceptual Skills
Technical Skills
Human Skills
Middle
First-line
Managerial Levels Managerial Skills
Fig. 1.2 Variation of skills necessary at different management levels
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4. Management: Science or Art?

Science is characterized by making conclusions based on actual facts and verifies
knowledge through cause-effect relationship. It can be generally learnt, thought,
and researched to know the universal truth. Managers can work better by using the
organized knowledge about management, and it is this knowledge that constitutes
a science.
Art is characterized by using common sense, personal feeling, beliefs, impulses, etc.
Management/Managing, like all other practices-music composition, engineering,
accountancy or baseball- is an art. It is know-how, skill or how to accomplish the
desired objectives with insufficient data and information or when there is limited
use of secondary sources of information. It is doing things in the light of realities of
a situation. Thus, management as a practice is an art; the organized knowledge
underlying the practice may be referred to as a science. In this sense/context
science and art are not mutually exclusive but are complementary.
Therefore, management in actual sense is neither an art nor science, but it

requires both to be successful, i.e., it is not pure art because it uses scientific
methods e.g. computer and it is not pure science because it uses intuition, judgment,
and creativity. Management is one of the most creative arts as it requires a vast
knowledge and the innovative skills to apply. Managers should develop new ideas,
techniques and strategies and be able to communicate them effectively in the work
environment. They should be able to make decisions even when there is shortage of
data. This leads us to the conclusion that ‘the art of management begins where the
science of management stops’. This underlines the importance of making managerial
decisions in the absence of sufficient data and information by using the decision
maker’s common sense.
5. Universality Of Management
Regardless of title, position, or management level, all managers do the same job.
They execute the five managerial functions and work through and with others to set
and achieve organizational goals. Managers are the same whether the organization
is private or public, profit making or non-profit making, manufacturing or service
giving, and industrial or small firms. Hence, management is universal for the
following reasons.
1. All managers perform the five managerial functions even if with different
emphasis.
2. It is applicable for all human efforts; be it business, non-business,
governmental, private. It is useful from individual to institutional efforts.
3. Management utilizes scientifically derived operational principles.
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4. All managers operate in organizations with specific objectives.
5. Management, in all organizations, helps to achieve organizational objectives.
In sum, management theories and principles have universal application in all kinds of
organized and purposeful activity and at all levels of management.
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CHAPTER TWO
THE EMERGENCE AND DEVELOPMENT OF MANAGEMENT

THOUGHT
A. Management in Antiquity and Pioneer Contributors
Management in Antiquity: - Management thought has been shaped over a period of

centuries by three major sets of forces. These forces are: Social, economical and
political in nature, and they continue to affect management theory even today.
Despite the inexactness and the relative crudity of management theory and science,
the development of management thought dates back to the days when people first
attempted to accomplish goals by working together in groups. Since pre-historic
times people have been managed in groups and organizations. Even the simplest of
hunting and gathering bands generally recognized rules and obeyed a leader or a
group of decision makers responsible for welfare of the band. As societies grew
larger and more complex, the need for organizations and managers became
increasingly apparent.
Attempts to develop theories and principles of management, however, are relatively

recent. In particular, the industrial revolution of the 19th century gave rise to the
need for a systematic approach to management. Some examples in ancient times
where management was effectively used include the following:
 Egypt - The construction of the Egyptian pyramid (5000-525 BC) is a testimony of

the ancient Egyptian organization and managerial abilities. The ancient Egyptians
constructed the pyramid by 100,000 labor forces for 20 years on 13 hectares of land
using 2,300,000 stones. This construction is equivalent with managing a city with a
population of 100,000 for 20 years.
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This construction shows how extensively Egyptians used the management functions
of planning, organizing, staffing, directing and controlling.
“Comparing the technology and information we have today, managers

of those days exceed managers of today.” Sisk
“The best managers in history are the ones who managed the building of the
pyramids."
Peter Drucker
 Romans - the ancient Romans also provided numerous illustrations of effective

management. Perhaps the most famous is the Emperor Diocletian's reorganization
of his empire. Assuming his position in A.D. 284, Diocletian soon realized that the
empire had acquired an unmanageable form. There were far too many people and
matters of importance for the emperor to handle individually. Abandoning the old
structure, in which all provincial governors reported directly to him, Diocletian
established more levels in the hierarchy. He reorganized the Roman Empire as:
Empire into 100 provinces with 13 dioceses and 4 major geographical areas. By
doing so he ruled Rome to its best time. The governors were pushed farther down
the structure and, with the help of other administrators; the emperor was able to
more effectively manage this vast empire. Here the levels of a management are
shown clearly: 4 geographical areas ----- 13 dioceses --- 100 provinces
After he divided Rome as such, he appointed 3 people on the divisions and the rest
for himself - Delegation of authority.
 Roman Catholic Church - was the most successful formal institution in the western
civilization. Rome achieved greater colonies using the Catholic Church.
Roman Catholic Church also made important contributions to early management

thought. One was the church's wide use of job descriptions for its priests,
presbyters, and other religious workers. Everyone's duties were clear, and the chain
of command (hierarchy of authority) that extended from the pope to the laity was
created. A second Roman Catholic Church contribution was that of compulsory staff
service, the requirement that certain members of the church hierarchy seek the
advice of the other hierarchs before making particular decisions. A third was the use
of staff independence, the assignment of certain advisors to key church officials.
Since these advisors were not removable by the official they could give advice they
considered best, without fear of reprisals from superiors.
In short, the most important contributions of Roman Catholic Church for the
development of management are on the areas of:
 Hierarchy of authority: there was a hierarchical structure from Pope - Bishop - priest - laity.
 Specialization of activities: there was a training to be Pope, Bishop, Priest and Laity.
 Use of staff managers:
- Compulsory staff service
- Staff independence
 Greece - Exhibited a real skill and capacity for management in the operation of
trading companies. They recognized the means to maximize output through the use
of uniform methods and motion study.
 Bible - Exodus 18:13-26; this passage tells how Jethro, Moses', father in-law,
observed Moses spending an entire day listening to the complaints and problems of
his people. Then Jethro advised Moses that he was doing more than one man should
and suggested specific steps to relief him of his burden. He first recommended that
''ordinances and laws'' should be taught to the people. In modern terms, the
origination needed a statement of policies, rules and procedures. Second, he
commended that leaders be "selected and assigned” to be rulers to thousands, and
rulers of hundreds, and rulers of fifties and rulers of tens. That was recommending
delegation of authority. Jethro’s third point, that these rulers should administer
all routine matters and should “bring to Moses the important questions,” forms
the basis of a well known control procedure: the principle of exception.
 In Ethiopia, the construction of obelisks of Axum, Castle of Gondar, Rock Hewn

Churches of Lalibela, the Wall of Harrar etc. are good examples that modern
management was practiced in ancient time.
Early Management Pioneers

(Contributors) Although examples of management practices go
back several thousand years, the development of management as a field of
knowledge is much more recent. Much of the impetus for developing management
theories and principles grew out of the industrial revolution, which spawned the
growth of factories in the early 1800s. With the proliferation of factories came the
widespread need to coordinate the efforts of large numbers of people in the continual
production of goods.
The challenge posed by the factories brought forth a number of individuals who began
to think in terms of innovative ways to run factories more effectively. This group,
known as the preclassical contributors to management focused largely on particular
techniques that might be applied to solve specific problems. They were followed by
individuals who began to develop broader principles and theories that make up major
view points, or schools of management: classical, behavioral, quantitative and
contemporary. Each of these major viewpoints encompasses several approaches that
have contributed to the development of the particular viewpoint.
PRE CLASSICAL CONTRIBUTORS
MAJOR CONTRIBUTORS
A number of individuals in the preclassical period of the middle and late 1800s began
to offer ideas that laid the groundwork for broader inquiries into the nature of
management that followed. Among the principal preclassical contributors are Robert
Owen, Adam Smith, Henery Poor, and Charles Babbage.
1. Robert Owen (1771 - 1858) - was a British industrialist and an owner-manager of

several successful cotton mills in Scotland.
At that period in history, working and living conditions for employees were very poor.
Child workers were common and the standard working day was 13 hrs long. Workers
were treated in much the same terms as tools and machines.
Owen was called industrialist and reformer because he was one of the first managers to
recognize the importance of human resource in an organization. Because of this he was
considered as ‘father of modern personnel management.’ His ideas laid the groundwork
for human relations movement. Owen was well ahead of his time in recognizing the
importance of human resources. He was particularly interested in the working and
living conditions of his employees. He said that workers in organizations need special
attention and dignity or respect. As a result, he introduced in his organization the
following:
 Reduce working hrs from 13 hrs to 10½ hrs a day,

 Set a minimum hiring age (10 year) to protect children from the abuses of employers,
 Provide meal, housing, and shopping facilities for employees,
 Improved working conditions in the factory
He argued, "Improving the condition of employees would inevitability lead to increased

production and profits".
2. Charles Babbage (Prof.) Built the first practical mechanical calculator and a
prototype of modern computers. Although English mathematician, Charles Babbage
(1792-1871) is widely known as "the father of modern computing". He also made direct
contributions to thinking about management. His management interest stemmed from
his difficulties with directing his various projects. He became convinced that the
application of scientific principles to work processes would both increase productivity
and lower expenses. Like the 18th century economist Adam smith, Babbage was
particularly enthralled with the idea of work
specialization. Work specialization is the degree to which work is divided into various
jobs. Smith had concentrated mainly on ways to divide jobs involving physical labor
into more specialized tasks, but Babbage carried the specialization idea a step further
by recognizing that not only physical work but also mental work could be specialized.
Furthermore, he was an early advocator of division of labor principle and the
application of mathematics as the efficient use of facilities and materials in production.
Babbage believed that each factory operation should be analyzed so that the various
skills involved in the operation could be isolated. Each worker would then be trained in
one particular skill and would be responsible only for that part of the total operation
(rather than for the whole task). In this way, expensive training time could be reduced,
and the constant repetition of each operation would improve the skills of workers and
enhance their efficiency.
Division of laborSpecialization/improve skills of

workers.
Reduce learning time and other expenses.
Emphasizing on efficiency of production, however, Babbage didn’t overlook the human

element of an organization. He said, “The relationship between management and
workers is the reason for the success or failure of the organization.” Babbage also had
some innovative ideas in the area of reward systems. He devised a profit sharing plan
that had two parts, a bonus that was awarded for useful suggestions and a portion of
wages that was dependent on factory profits. His ideas foreshadowed some modern
day group incentive plans, such as the Scanlon plan in which workers actively
participate in offering suggestions to improve productivity and then share in the profits
from resulting gains. He understood that a harmonious relation between management
and labor could serve to benefit both.
He was an avid proponent of:
 Division of labor
 Economies of scale in manufacturing
 Incentive pay
 Profit sharing
 Application of mathematical concepts in production
 Harmonious relationship between management and workers
Babbage laid the groundwork for much of the work that later became known as Scientific
Management.
3. Adam Smith: Smith made an important contribution to the development of
management thought regarding the impact of division of labor on manufacturing in his
book ‘The Wealth of Nations’ in 1976. His conclusion was specialization could lead to
increased efficiency. This is because:
 Specialization increases the dexterity in every particular work person.
 Specialization saves the time lost in passing from one species of work to another.
 Specialization helps to the invention of great number of machines, which
facilitates and bridge and enable one person to do the work of many.
Thus, managers were more interested in the mechanical side of the job. That is,
division of labor, coordination of activities, and control of operations.
B. CLASSICAL MANAGEMENT THEORY
The classical management theory emerged during the early years of this century; i.e., it
had its foundation during the Industrial Revolution, which began in England with the
invention of reliable steam powered machinery and its early applications. This new
technology, combined with the concentration of vast amounts of raw material and
labor, created a need for management. Its ideas represent the first well- developed
framework of management.
The classical viewpoint is a perspective on management that emphasizes finding ways

to manage work and organizations more efficiently. It is made up of two/three
different approaches: scientific management, administrative management (Classical
Organization) theory, and bureaucratic management. This viewpoint is labeled as
"classical" because it encompasses early works and related contributions that have
formed the main roots of the field of management.
There were two factors that had contributed for the emergence of classical
management theory. These are: the research or writings of pioneers such as Charles
Babbage, and the evolution of large-scale business management and practices.
The classical approach to management cab be better understood by examining it from

two perspectives. These two perspectives are based on the problems each examined.
One perspective concentrated on the problems of lower level managers dealing with
the everyday problems of managing the work force. This perspective is known as
scientific management. The other perspective concentrated on the problems of top
managers dealing with the everyday problems of managing the entire organization.
This perspective is known as classical organization theory.
1. SCIENTIFIC MANAGEMENT THEORY
Scientific management is an approach within classical management theory that

emphasizes the scientific study of work methods in order to improve worker
efficiency. It is a systematic study of work which originated in the USA in 1900s i.e., it
emphasizes on improving worker efficiency through the scientific study of work. Its
objective was to find the most efficient method for performing any task and to train
workers in that method.
The emergence of industrial revolution gave rise to factory production system and it in
turn caused management to focus on developing the most rational principles for
handling its people, machines, materials and money. This challenge took two forms: (1)
how to increase productivity (output/input) by making the work easier to perform, and
(2) how to motivate workers to take advantage of new methods and techniques. The
individuals who developed approaches for meeting these challenges helped lay the
foundation for what is known as scientific management.
Scientific management grew up from the research of 5 pioneers. They are Frederick W.
Taylor, Frank and Lillian Gilbreth, Henry Gantt and H. Emerson. Since Taylor played the
major role, he is called the father of scientific management.
Frederick W. Taylor (1856-1915) is known as "the father of scientific

management." Born to a relatively wealthy Philadelphia family, Taylor became an
apprentice pattern maker and machinist for a local firm before moving on to Medial
steel. At Midvale, his meteoric rise from laborer to chief engineer in 6 years gave him
an opportunity to tackle a serious problem that he had observed- soldiering by
workers.
At the beginning of 20th century business was expanding, resources were readily
available but labor was in short supply. The primary goal of management during that
time was to use the existing labor force efficiently, but there was no skilled manpower.
It is at this time that Taylor saw how to use the available resource efficiently. He didn’t
start new research rather he started to study the problems of the factory production
system. The following were some of the problems of the factory system production as
he called them:
1. Management had no clear concept of worker - management responsibility.
2. Virtually no effective work standards were applied
3. No incentive was used to improve labor’s performance
4. Managerial decisions were made based on intuition, rule of thumb methods or past
experience.
He was angry or he was impressed with the degree of “soldiering” - systematic,

deliberate delay in performance i.e., deliberately working at less than full capacity and
producing less rather than more, due primarily to (1) the workers’ fear that they might
work themselves out of a job if they produce more, (2) faulty wage systems set up by
management encouraged workers to operate at a slow pace. For example, pay by the
hour or the day mainly encouraged attendance rather than output. On the other hand,
companies that cut incentive pay when workers began to exceed standards also made
workers reluctant to excel, and (3) rule of thumb method permitted by managers.
These factors led Taylor to conclude that managers, not workers, were responsible for
the soldiering because it was up to the management to design jobs and wage systems
that could encourage productivity.
To counter the problem of soldiering and solve the problems of factory production
system, he timed each element of the work and standardized how much each workman
has to produce given the required resources per day or per month. After timing each
element of the work he said “the most efficient may of doing the overall work” and
came up with the “piece-rate pay system” - the differential rate system - instead of
paying similar amount of wage. He began increasing the wage (pay) of each worker
who met and exceeded standards or target level of output set for his/her job.
The interest target of Taylor was to utilize human and material resources efficiently
and effectively. In other words Taylor was very much obsessed with the idea of
maximizing efficiency in an organization in order to maximize profits.
The following are some of the studies he conducted.
1. Time and motion study
Objective: to standardize activities for workers/determine a full-day’s work
Time and motion study involves breaking down the task into various elements, or
motions, eliminating unnecessary motions, determining the best way to do the job, and
timing each motion to determine the amount of production that could be expected per
day (without allowances for delays).
In this study he wished to know how long it would and should take a machine or workman
to perform a
given process to produce a part using specified materials and methods under
controlled stations. He used stop - watch system to start and finish the test. This study
permitted the determination of practical, relatively
precise and reliable standards of output. That is, the study enabled him to set feasible
standards per man or machinery usually higher than the average of current
performance of that time.
2. Uniform method of routine tasks

Objective: to adjust worker with work.
It is intended to prepare and direct the effort of those responsible for establishing the
conditions under which these standards could be set and met. With this objective in
mind he worked out such techniques as: instruction cards, order of work cards,
material specialization, inventory control systems, material handling standards.
3. Functional foremanship study - which man for which work.

Objective: to scientifically select the best worker for a given job
It was concerned with assuring which man will be best for which job, considering his
initial skill and the potential for learning.
4. Individual Incentive
Objective: to determine the appropriate wage or salary
In order to solve the problem of wage systems that encouraged soldiering, Taylor also
advocated the use of wage incentive plans. His study reached higher pay would serve
as an incentive for workers that would result from the increased productivity. During
his (Taylor’s) time there was a reduction of rates if the workers earn beyond an
acceptable limit. But his view was that, having scientifically measured the worker’s jobs
and set rates accordingly, then efficient workers should be rewarded for their
productivity without limit.
After Taylor conducted the above studies in 1911 he wrote a book called principles of
scientific management. In his book he outlined four principles, the scope of which
represented a combination of mechanical, conceptual, and philosophical ideas:
1. Develop a science for each element of a job, which replaces the old rule-of-thumb1 method.
1 Rule of thumb is the usual practice at work organizational level, leaving workers to work
according to the initiative of them by managers.
2. Heartily cooperate with the workers so as to insure all of the work being done in
accordance with the principles of the science which has been developed.
3. Scientifically select and then train, teach and develop the worker, whereas in the
past a worker chose his/her own work and trained themselves as best he could for
their own and the company's -prosperity.
4. There is an almost equal division of work and responsibly between management and
workers. The management takes over all work for which they are better fitted than
workers, while in the past almost all of the work and the greater part of the
responsibility were thrown upon the workers.
Taylor testified, however, that in order for these principles to be successful “a

complete mental revolution” on the part of management and labor was required.
Rather than quarrel over whatever profits they were, they should both try to increase
production. By so doing, profits would be increased to such an extent that labor and
management would no longer have to compete for them. In short, Taylor believed that
management and labor had a common interest in increasing productivity.
Frank and Lillian Gilbreth (The first dual career couple) 1868-1972
The Gilbreths were contemporaries of Taylor and part of the original scientific
management pioneers. Their accomplishments still stand out for their devotion to a
single goal: the elimination of waste and the discovery of the ‘one best way’ of doing
work.
Frank started as a bricklayer and then achieved a considerable success as an

independent contractor and later as a management consultant. He was determined to
learn to lay bricks the ‘right’ way. He began developing his own ideas and work
methods. In the end, he was able to develop a method which cut the motions required
to lay bricks. In so doing, he identified 17 on-the-job motions and called them
‘THERBLIGS’. (Therbligs is Gilbreth spelt backwards with the transposition of one
letter). The on-the-job motions are: search, find, select, grasp, position, assemble, use,
disassemble, inspect, load/transport, pre-position, release load, transport empty, wait
when avoidable, avoidable delay, rest for overcoming fatigue, and plan and hold. For
his work, Frank was named as ‘The Father of Motion Study’.
In undertaking his work, Frank was greatly aided and supported by his wife, Lillian.
After he died, Lillian was determined to continue his work. She pioneered the field of
personnel administration. She argued that the purpose of scientific management is to
help people reach their maximum potential by developing their
skills and abilities. For her contribution to the field of management, Lillian was known
as ‘The First Lady of Management’.
Henry L. Gantt (1861-1919)

Gantt worked with Taylor at the Midvale Steel Company and was early proponent of
scientific management. If it wasn’t for him, scientific management might have been lost
in a storm of criticism. Gantt took every opportunity to humanize scientific
management such as, inventing a task and bonus system that offered foremen a bonus
for every worker who succeeded, which motivates foreman to show interest in their
employees and help them achieve as much as they could.
Gantt is perhaps known for his development of ‘Gantt Chart’ - a simple graph method
of scheduling work according to the amount of time required instead of the quantity of
work to be performed.
Contributions of Scientific Management

1. Specialization of activities increases productivity.
2. The methods of scientific management can be applied to a variety of
organizational activity, besides those of industrial organizations.
3. The efficiency techniques of scientific management, such as time and motion
studies, have made us aware that the tools and physical movements involved in a
task can be made more efficient.
4. The stress it placed on scientific selection and development of workers has
made us recognize the importance of both ability and training in increasing worker
effectiveness.
Limitations of Scientific Management

1. Taylor misread the human element
He equated people (worker) with machine; he said markers are extensions of machines, cops
of machines.
2. Taylor saw only money as a motivator.

He failed to recognize the complex nature of human behavior.
The notions of human behaviors that were prevalent in Taylor's time hampered
proponents of scientific
management. The then popular model of human behavior was that people were
“rational” and thus motivated primarily by a desire for material gain. This rationality
meant that they would therefore act in a
manner best suited to satisfy their economic and physical needs. Thus, Taylor and his
followers overlooked the social needs of workers as members of a group and never
considered the tensions created when these needs were frustrated. They assumed one
had only to tell people exactly what to do to increase their earnings and they would go
right ahead and do it, as “rational” people should. Financial gain, while significant, is
not the only thing that matters to workers.
3. The human desire for job satisfaction was overlooked. Workers usually are more
willing to go out for strike over job conditions rather than salary and to leave a job if
they were unhappy with it.
4. The application of scientific principles was not smooth.

Give money to workers and then work. If they don't work, penalize if not fire them out.
5. Taylor didn’t consider the organization as a whole but the production or the technical level.
6. Too often, increase in productivity lead to lay-offs or changes in piece rates which
leave workers producing more output for the same income. The higher wages and
better working conditions enjoyed by today’s workers don’t result solely from the
voluntary redistribution of increased profits by management instead because of the
tremendous growth of unionism.
2. Classical Organization Theory
Scientific management was concerned with increasing the productivity of the shop and
the individual worker. The other branch of classical management- classical
organization theory-grew out of the need to find guidelines for managing complex
organizations. That is, the classical organization theory focused on the management of
the entire organization unlike the scientific management theory, which focused on
production. Classical organization theory had two major purposes: (a) develop basic
principles that could guide the design, creation and maintenance of large corporations,
and (b) identify the basic functions of managing organizations. Henri Fayol, Lyndell
Urwick, Chester Bernard, Max Weber and others contributed towards the development
of classical organization theory. Henri Fayol’s work will be discussed here because his
ideas clearly explain classical organization theory.
Henri Fayol (1841-1925)
A French industrialist and a well-known contributor to the administrative management
theory, was born to a middle class family near Lyon-France. He is acknowledged as the
prominent contributor and founder of the classical organization theory.
On the basis of his experience as a top-level manager, Fayol was convinced that it
should be possible to develop theories about management that could then be taught to
individuals with administrative responsibilities. To him management (administration)
was not a personal talent but a skill that could be taught. His efforts toward developing
such theories were published in General and Industrial Management, which
originally appeared in monograph from in 1916 but attained prominence in the United
States after a second translation appeared in 1940.
Henri Fayol is the one who identified:

A. The major types of activities involved in an industry or a business as:
 Technical - producing and manning products
 Commercial - buying raw materials and selling products
 Security: protecting employees and property
 Financial – search for and optimum use of capital
 Accounting - recording and taking stock of costs, profits, and liabilities,
keeping balance sheets, profit and loss statements, etc
 Managerial – planning, organizing, commanding, coordinating and controlling
These six elements, he said, will be found regardless of whether the undertaking is
simple or complex, big or small.
Fayol’s primary focus was the managerial activity, because he put managerial skill had
been the most neglected, least understood but the most crucial aspect of business
operations. He defined managing in terms of the five functions: planning, organizing,
commanding, coordinating and controlling which all are similar to the present-day five
managerial functions of Planning, Organizing, Staffing, Directing, and Controlling.
B. Management as a separate field of study
Fayol said management is a discipline worth studying because he believed that
managerial ability could be applied to the home, the church, the military, the politics,
and industry. Adding he said there is a need for the introduction of formal managerial
training schools.
C. General management principles
In his managerial experience Fayol attempted to systematize the practice of
management to provide guidelines and directions to other managers. Part of his
thinking was expressed in the 14 principles of effective management. Noting that the
administrative function was concerned only with the human part of an undertaking,
Fayol hastened to explain in his monograph that he employed the word principles, not
laws or rules, because of the flexibility required in applying such concepts to people. In
his words, he said,
“I prefer the word principles in order to avoid any idea of rigidity, as there is
nothing rigid or absolute in administrative matters; everything is a question of
degree. The same principle is hardly ever applied twice in exactly the same way,
because we have to allow for different and changing circumstances, for human
beings who are equally different and changeable, and for many other variable
elements. The principles, too, are flexible, and can be adopted to meet every
need; it is just a question of knowing how to use them.”
The 14 principles that Fayol felt he had occasion to use most frequently were:
1.Division of labor
Division of work (labor) encompasses three basic concepts:
1. Breaking down a task into its components.
2. Training workers to become specialist in specific duties, and
3. Putting activities in sequence so one person’s efforts build on another’s
The theory is that the fewer the tasks a person does in his job, the more efficient,
skilled and effective he becomes. Yet there are limitations to how much that work
should be divided.
2. Authority and responsibility
Authority is the right to give orders, to exact obedience. Responsibility, on the other
hand, is a sense of obligation that goes with authority or a reward or penalty
accompanying the use of this power. Authority should be delegated only to
subordinates who are willing to assume commensurate responsibility. In later years
this principle would be called parity of authority and responsibility, indicating that the
two should always be equal.
3. Discipline
Members in an organization need to respect the rules and agreements that govern the
organization. To Fayol, discipline will result from good leadership at all levels of the
organization, fair agreements (such as provision for rewarding superior performance),
and judiciously enforced penalties for infractions. Fayol saw the necessity for discipline
and precise and exact obedience at all levels for the smooth running of a business.
4. Unity of Command
An employee should receive directives from only one superior. One person should have
one boss. S/he should receive orders from one boss and resort to the same boss.
Fayol believed that when an employee reported to more than one superior, conflicts in
instructions and confusion of authority would result, i.e., violating this principle
undermines authority and jeopardizes discipline and stability.
5. Unity of Direction
Where there are a group of activities with the same basic objective there must be one
coordinated plan to accomplish the coordination of effort, and one person at the head
of such coordination: ONE HEAD, ONE PLAN, ONE SET OF OBJECTIVES. This improves
coordination and ensures that energies are channeled in the proper direction. Unity of
command is related to personnel whereas unity of direction relates to the organization
of the 'body corporate' and asserts that all operations that have the same objective
move in the same direction under one unified plan and under the command of one
superior.
6. Subordination of individual interest to general interest/common good

In any undertaking, the goals and interests of an organization must take precedence
over those of individuals or groups of employees. The overall interest of the firm is
more important than the interest of any person or group of people who work for it.
7. Centralization
Centralization and its counter part, decentralization, mean how much authority is
concentrated at the top of the organization or dispersed throughout the management
hierarchy. Fayol believed that managers should retain final responsibility but also need
to give their subordinates enough authority to do their jobs properly. The problem is to
find the optimal amount of centralization. The appropriate degree of decentralization
or centralization depends on the situation and includes such factors as the nature of the
task and the abilities of subordinates.
8. Remuneration of personnel
Compensation or wages for the work done should be fair and equitable to both to
workers and the organization. Payment plans shouldn't lead to over payment but the
amount and method of payment should be fair to reflect the cost of living, general
economic condition, the demand for labor, the economic state of business and the value
of employees.
9. Scalar Chain (Chain of Command)

Scalar chain is the line of authority that extends from the top to the bottom of an
organization and defines the communication path. All organizational requests and
directives must follow this chain. This must be the route to be followed by all
communications via every link in the chain that starts from the bottom level of the
organization to the ultimate authority. This preserves the integrity of the hierarchy,
and ensures the unity of command.
The only time departure from the chain of command can be tolerated is when the
welfare of the organization is at stake. However, Fayol recognized the problem of red
tape in a large organization and the resulting inadvisability of always taking the long
formal route. To overcome this problem, Fayol prescribed the gangplank principle.
People at the same level of the hierarchy should be allowed to communicate directly,
provided that they have the permission from their superiors to do so and that they tell
their respective chiefs afterward what they have agreed to do.
10. Order
Order is best defined as “a place for everything (everyone) and everything (everyone)
in its/his place. Materials and people should be in the right place at the right time.
People in particular should be in the job or positions most suited for them.
11. Equity
In dealing with subordinates, managers should be friendly, fair, kind and lawful.
Kindness and justice on the part of managers will help employees to be loyal and
devoted workers.
12. Stability of tenure of personnel

Trained and experienced workforce and management are crucial for organizational
success. Both managers and workers need time to learn and master their jobs. The
longer these people stay in the organization or on their jobs, the higher their
belongingness to the organization or/and the greater their effectiveness will be. If they
leave or are removed within a short time, the organization will lose the
belongingness that it could
accrue and the learning time incurred. Therefore, labor turnover should be minimized
and stability nurtured. Note, however that some turnover is expected and is desirable.
Factors like retirement, death, dismissal or demotion because of incompetence could
lead to turnover.
13. Initiative
Members of an organization should be given the opportunity to demonstrate their
creativity, exercise their judgment, chart out their own plans of discharging their
responsibility within the bound of due respect for authority and discipline. To Fayol,
the keenest interest for an intelligent executive is to be able to scarify his personal
vanity and instill those under him with the attribute to bake initiative. This will provide
organizational members with a platform for realizing their capabilities to the fullest
and appreciate the active part they are playing. The organization in turn will enjoy high
quality and forward-looking decisions and better performance.
14. Esprit de corps

The gist of this principle is that ' in union there is strength.' Hence, workers,
management as well as employers should work as a team. It is the responsibility of
management to promote the spirit of cooperation rather than the spirit of divide and
conquer. Fayol made the point that it would be wise to divide the enemy forces but to
apply the same strategy on ones own team is a folly and calamitous. Fayol also said that
oral communications should be preferred to written directives and explanations
whenever possible for written communications could lack speed or clarity and breed
dubiety and reservation rather than trust and cooperation.
Contributions of Classical Organization Theory

1. The position Fayol took in distinguishing management as a discipline was worth studying.
2. The fourteen basic management principles he developed.
3. The five elements of administration, which with minor modifications today, are
called functions of management.
Limitations of Classical Organization Theory
1. Some of the principles are rigid- e.g. chain of command, unity of command.
2. The 14 principles are applicable in a relatively stable and predictable environment
and hence they are less appropriate in today's turbulent environment.

3. The principles of classical organization theorists are too general for today's
complex organizations. It doesn't provide guidance for deciding which principle

should take precedence over the other. E.g. unity
of command principle seems to contradict the principle of division of labor
(specialization), which states efficiency will be increased if one task is divided
among the members of a group.
Contribution and Limitation of Classical Management Theory

Contributions
1. Classical management theory had laid the foundation for later developments in
management theory. It laid the groundwork for modern management theory.
2. It identified key management processes, functions, principles and skills that are
recognized as such today.
3. It focused attention on management as a valid subject of scientific enquiry, i.e., as
a separate field of study.
4. It was the first attempt to study management from scientific perspective.
Limitations
1. The theory is more appropriate for stable, simple organizations than for the
today's dynamic and complex organizations.
2. It often prescribes universal principles that are not really appropriate in some
settings. E.g. chain of command
3. Many writers viewed organizations from mechanistic point of view than from social point
of view.
4. Many writers viewed employees as tools than human beings. E.g. Taylor
5. Economic motivation was seen as the only means to motivate workers to produce more.
Similarities and differences between scientific management theory and classical

organization theory
Similarities Fayol- division of labor

1. Both of them focused on division of labor.
Taylor- Functional
Foremans
hip Study
Fayol- remuneration of
2. Economic (job) security
motive only.
personnel Taylor-
differential pay system
Fayol- order
3. People must be adjusted
for work.
Taylor- uniform method of routine tasks
Fayol- division of labor, order
4. Efficiency the sole criterion.

Taylor- all the concepts
Differences
Classical organization theory focused on the management of the entire organization
and on the problem of the top level management whereas scientific management
theory focused on production level/shop level/ technical level and on the problem of
the lower-level management.
Frederick W. Dedicated to the refinement of scientific
Taylor (1856- principles and their applications to production
1915) efforts. Taylor was an early pioneer in time and
Classic motion study, whose objective was to remove
Scientific
fatigue and improve efficiency and output. He
advocated a system of pay based on output by
an individual worker (piece-rate pay). Taylor is
often called the Father of
Scientific Management.
Henry L. Promoted concern for workers and a movement
Gantt away from authoritarian management. He
(1861- introduced a task and bonus system of paying
1919) wages that paid a fixed for below standard work,
Classic Scientific a bonus if standards were met, and an additional
amount when standards were exceed. Gantt
asserted that methods improvements are best
when they are willingly adopted by the people
who must apply them. He was the
inventor of the Gantt chart for programming
production.
Henri Applied the scientific management concepts to
Fayol top management and administration. Fayol
(1841- developed the fourteen basic principles of
1925) management that underline all managerial tasks.
Classical He identified five basic management functions:
Administrative
planning, organizing, commanding (directing),
coordinating, and controlling.
3. Behavioral Management Theory
The behavioral management theory emerged partly because practicing managers
found the classical management approach/theory didn't achieve complete production
and work place harmony; because classical management theory viewed organizations
from the mechanistic view point and considered workers as cogs.
Classical management theorists focused on controlling and standardizing the individual

behavior, but it is difficult to standardize group or individual human behavior.
Practicing managers got problems in managing organizations because subordinates
and workers weren't behaving as expected by scientific/classical management theory.
As a result behavioral management theory merged opposing the ideas of classical
management theory, and emphasized on human relations- a general term used to
describe the ways in which managers interact with their subordinates- based on social
environment of work, individual and group behavior and interpersonal relationships.
They used concepts from psychology, sociology and anthropology to assist managers
understand human behavior in the work place. They focused on motivation,
communication, work group formation and leadership.
Behavioral management theory was stimulated by a number of writers and theoretical

movements. Among writers Abraham Maslow, Douglas Mc Gregor and Elton Mayo were
well-known. Of these Elton Mayo was the most prominent one. The behavioral school
of management had its origins in industrial psychology and sociology. It emphasizes
the interactions of people in an organization in order to understand the practice of
management.
The human relation movement marked the daybreak of behavioral science theory and
historically it represented a reaction to the dehumanization aspects of scientific
management theory. While the former emphasized human relationships in
organization, the later (task management) focused on the management of work (the
task) and aimed to achieve total efficiency and work place harmony: but in actuality
disorder and animus instead of agreement and friendliness continued. Despite then
adoption of scientific management, management as well as labor still encountered
serious problems because one seldom behaved as the other wanted to be. In short,
scientific management stood far from success in accomplishing its mission of achieving
a mental revolution in the minds of both the employers and the employees.
Consequently, since the human problem grew as crucial as the machine problems it
appeared essential to find a means that could help managers become effective in
dealing with people and thereby increasing people's productivity. To this end a series
of experiments were conducted in 1920s and early 1930s and these experiments
pointed the way to new approach to the problem of productivity.
The Hawthorne studies
The Hawthorne studies (1924-1932) had their roots in the logic of scientific
management. The initial purpose of these experiments was to study the effect of
physical factors such as illumination, rest periods, length of working days, and the
payment schemes up on productivity; because classical management theorists believed
that physical factors are determinants of workers productivity. The studies were
conducted at the Hawthorne plant of Western Electric Company in Illinois, USA. The
Hawthorne studies consist of four major experiments.
1. Illumination Experiments
The intention of this experiment was to learn if there was any correlation between
intensity of light and productivity. To this effect two groups of women were taken: the
experiment group - one subjected to variety in the intensity of light and the other a
controlled group which was exposed to constant illumination intensity. But in the end
the researchers were bewildered by their experiment since productivity not only
constantly increased in both the experimental and controlled groups following the
increase in the intensity of illumination in only the experimental room but also kept on
ascending in both rooms though the light was diminished so that it was barely enough
to see. After seeing this puzzle researchers concluded that illumination has little or no
effect on productivity.
2. Relay Assembly Test Room Experiment

In the relay assembly test room experiment, Mayo and his associates placed two groups
of six women (five assemblers and a layout operator) with an observer who was to
record everything that happened and to maintain a friendly atmosphere in separate
rooms. The six workers were told that the experiment was not designed to boost
production but merely to study various types of working conditions so that the most
suitable environment could be ascertained. They were instructed to keep working at
the regular pace. Researchers allowed the groups to choose their own rest periods
(were allowed to leave their work station without permission) and to have a say in
other suggested changes.
A number of variables were tried: salaries, coffee breaks (rest periods), refreshments,
workday and workweek, temperature, and noise. In one room job conditions were
varied and in the other they were not. Output went up in both the test room and
controlled room regardless of how the factors under consideration were manipulated.
However, when these changes were later terminated and original conditions
reestablished, output still remained high, indicating that the change in conditions was
not the only reason for the increase in output. Some investigators hypothesized that
the increases were related not to the rest pauses or shorter working hours but to the
improved outlook that the workers had toward their work.
Mayo and his associates concluded that such physical changes have no significant effect
on productivity, and said the change in supervisory management was the major
reason for the increase in productivity in the relay assembly test room study. That is,
assemblers were exercising relative self-direction and control, were subjected to the
observation of a single man, were allowed to talk freely among themselves and as a result
close relationship was maintained and a new social environment was created. In order
to gather
information on this idea, the management decided to investigate employee attitudes and
the factors to which they could be traced. The result was the massive interviewing
program.
3. The Massive Interviewing Program

After the first two phases, the researchers concluded that their attempt to relate
physical conditions of the job to productivity did not produce any significant results. So
they postulated that the human element in the work environment apparently had a
significantly greater impact on productivity than the technical and physical aspects of
the job. On the basis of their extensive interview program, the researchers proposed
that the work group as a whole determined the production output of individual group
members by enforcing an informal norm of what a fair day's work should be.
Over 20,000 interviews were conducted in the third phase of the studies. The
interviews begun by asking employees direct questions about supervision and the
work environment in general. Although the interviews made it clear that answers
would be kept in strict confidence, the responses to questions were often guarded and
stereotyped. The approach was therefore changed from direct to indirect questioning.
The employees were free to choose their own topics. A wealth of information about
employee attitudes resulted. The researchers realized that an individual's work
performance, position and status in the organization were determined not by that
person alone but also by the group members. Peers had an effect on individual
performance. In order to study this more systematically, the research entered its fourth
and final phase: The Bank Wiring Observation Room Study.
4. The Bank Wiring Observation Room Study

To test the premise formulated at the conclusion of the interview program, the
researchers conducted a final experiment. The procedure in this part of the study was
similar to that used in the relay assembly test room, except that nine males who
assembled terminal banks for telephone exchanges were selected.
This experiment focused on the effect of a group piecework incentive pay. The
assumption was that the workers would seek their own economic interests by
maximizing their productivity and that faster workers would pressure the slower ones
to improve their efficiency. However, the researchers found that pressure was actually
a form of social behavior. In order to be accepted in the work group, the worker had to
act in accordance with group norms and be a "rate buster" by overproducing or a
"chiseler" by under producing. The group defined what constituted a day's work, and as
soon as they knew that they could reach this output level, they slacked off. This process
was more marked among the faster workers than the slower ones.
The researchers concluded that the work group set the fair rates for each of its
members. They found no relationship between productivity and intelligence, dexterity,
and other skills. They concluded that the wage incentive plan was less important in
determining an individual worker's output than was group acceptance and security.
Findings and implications of Hawthorne

The Hawthorne studies constituted the single most important foundation for the
behavioral approach to management. The conclusions drawn from them were many
and varied.
1. Physical working conditions did not seem to explain the changes that were related in
productivity.
2. There are other factors other than physical factors and monetary incentives,
which affect productivity. Theses factors are social and psychological in nature.
o Social environment:
- Ability to talk to each other.
- The right to choose their rest periods.
- The right to leave the workstation without permission.
- The right to have a say in suggested changes.
o Psychological conditions
- Since they were selected as a member of the study group they felt social
acceptance, recognition, and social importance.
From this we can understand that human beings are social beings rather than
rational, economic beings. In addition we can understand that to be successful
managers should understand people along with the reward systems, machines and
tools (socio-technical aspect). That is, Human aspect must match with social aspect.
3. Workers are not motivated by the bodily needs only but also by social and psychological
needs.
4. A kind of managerial leadership capable of understanding individual and group
behavior and that would serve them through such skills as motivation and
communication is necessary.
5. Hawthorne Effect: a second finding, and probably the most widely cited, is the
Hawthorne effect, which is simply the observation that when people know that
they are being watched, they will act differently than when they are not aware of
being observed. The Hawthorne effect refers to the possibility that individuals
singled out for a study may improve their performance simply because of the
added attention they receive from researchers, rather than because of any
specific factor being tested in the study. Applying this concept to the increase in
productivity in the relay room, many modern psychologists contend that it was
not the changes in the rest pauses that led to increased output but the fact that
the workers liked the new situation, in which they were considered to be of some
significance. The attention given them led them to increase their output. The
Hawthorne effect thus seemed to lead to the decline in revery, but further
investigation indicated that it was apparently not the only factor involved.
Contributions and Limitations of Behavioral Management Theory

Contributions
1. It has changed managerial thinking. Managers are now more likely to recognize the
importance of people and to view workers as valuable resources than mere tools. Mayo
had rediscovered Owen's century old dictum.
2. It has provided important insights into motivation, group dynamics and other
interpersonal processes in organizations.
Limitations
1. The complexity of individual behavior makes prediction of that behavior difficult
2. Contemporary research findings by behavioral scientists are not often
communicated to practicing managers in an understandable form.
Modern approaches to
management
Traditional organizational theories used a highly structured closed system
approach. But modern theories have moved towards the open system approach. That
is, the classical and neo classical approaches focused on the internal management of
the organization. They didn't take into consideration the effect of the external
environment on the organization and vice versa.
While the classical and behavioral approaches continue to make contributions to

management, other viewpoints also have emerged. These are contemporary in the
sense that they represent recent major
innovations in thinking about management. Two of the most important
contemporary viewpoints are the systems and contingency theories.
1. Systems Theory
The systems theory approach is based on the notion that organizations can be
visualized as systems. A System is a set of interrelated parts that operate as a whole in
pursuit of common goals. The systems approach to management views organizations
and the environment within which they operate as sets of interrelated parts to be
managed as a whole in order to achieve a common goal.
According to the systems approach, an organizational system has four major components.
a. Inputs - are the various human, financial, equipment and informational
resources
required to produce goods and services.
b. Transformation process - are the organization's managerial and technological
abilities that are
applied to convert inputs in to outputs.
c. Outputs - are the products, services and other outcomes produced by the organization.
d. Feedback - is information about results and organizational status relative to the
environment. It is a key to system control.
Contemporary systems theory finds it helpful to analyze the effectiveness of

organizations according to the degree to which they are open or closed. There are two
types of systems: open and closed
Open system
It is one that continually interacts with its environment and therefore is well informed
about changes within its surroundings and its position relative to these changes. The
open system engages in such interactions in order to take in new inputs and learn
about how its outputs are received by various important outside elements.
It is a system which interacts with external environment and is dynamic and adaptive
with the change in the environment. It has permeable boundary between itself and the
broader supra system. E.g. social systems, biological systems
Organizations that operate closer to the open end of the system share certain
characteristics that help them survive and prosper. Some are: negative entropy,
differentiation, and synergy.
Entropy - refers to the tendency of systems to decay over time. Or, it states that
systems will decay overtime if they don't interact with the environment. It is a natural
process by which all things tend to breakdown or die. If a system does not bring in or
receive inputs and energy from its environment, it will eventually cease to exist.
In contrast, negative entropy is the ability of open systems to bring in new energy in
the form of inputs and feedback from the environment in order to delay or arrest
entropy, the decaying process. Organizations must monitor their environment, adjust
to changes, continuously bring in new inputs in order to survive and prosper.
Differentiation - is the tendency of open systems to become more complex. The

increased complexity usually stems from the addition of specialized units to handle
particularly troublesome or challenging parts of an environment.
Synergy - the main gist of this concept is "the whole is greater than the sum of its
parts." This means that an organization ought to be able to achieve its goals more
effectively and efficiently than would be possible if parts are operated separately. It
emphasizes on the importance of working together in a cooperative and coordinated
fashion. The simultaneous action of different parts of an open system functioning in a
harmonious and integrated manner produces more total effect than the sum of the
separated effort of individual parts.
Steady state - the balance to be maintained between inputs flowing in from the
external environment and the corresponding outputs returning to it. Organizations
should adapt to environmental changes. Steady state is the tendency of maintaining
equilibrium condition by making constant and proportional adjustment in response to
changes in its environment. An organization in steady state is not static, but in dynamic
form of equilibrium.
Closed system
A closed system is a system that does little or no interaction with its environment and
receives little feedback. It has rigid boundary.
E.g. physical systems, mechanical systems.
Subsystems - the parts that make up the whole of the system. Each system may be a
subsystem of a still larger whole until we reach the larger supra system.
Department, plant, industry, national economy, the world system sequential
relationship can show us the system-subsystem formation.
 According to the systems viewpoint, managers are likely to be more successful if
they attempt to operate their units and organizations as open systems that are
carefully attuned to the factors in the environment that could significantly affect
them. Hence, the system approach views organizations as open systems having
interdependence and interactions between the organization and its environment
and among various subsystems to exchange information and energy.
CONTINGENCY THEORY
The classical theorists like Taylor and Fayol, were attempting to identify " the one best
way" for managers to operate in a variety of situations. If universal principles could
be found, then becoming a good manager would essentially involve learning the
principles and how to apply them. Unfortunately, things were not simple. Researchers
soon found that some classical principles such as Fayol's unity of command could
sometimes be violated with positive results. Consequently, contingency theory began
to develop. Contingency theory is a viewpoint that argues that appropriate
managerial action depends on the particular parameters of the situation. Hence,
rather than seeking universal principles that apply to every situation, contingency
theory attempts to identify contingency principles that prescribe actions to take
depending on the characteristics of the situation. Contingency theory suggests that
appropriate managerial behavior in a given situation depends on or is contingent on a
wide variety of elements. Managerial decisions must be specific for specific situations
by recognizing the uniqueness of the environment. It states, "Nothing is best for all
situations."
The basic idea of contingency theory was that there is no one best way of managing.
Every organization is unique, exciting in a unique environment, with unique employees
and unique goals. Managerial practices and technique that are appropriate in one area
might not be appropriate in another. This is because the world is too complex to be
managed by a single approach in all situations.
INTEGRATIVE APPROACH
The objective of the integrative approach is to have integration between different
management theories. It states that classical, behavioral and other schools of
management are supplementary and the systems and contingency approaches can help
to integrate the various schools of thought. The initial premise of the integrative
approach is that before attempting to apply any concepts or ideas from the various
schools of management thought we must recognize the interdependence of units
within the organization, the effects of environmental influences, and the need to
respond to the unique characteristics of the situation that arises in terms of its unique
characteristics.
CHAPTER
THREE THE
PLANNING
FUNCTION
I. MEANING, NATURE AND IMPORTANCE
OF PLANNING The Meaning of Planning
o Planning – is the dynamic process of making decisions today about future

actions; and it is a selection or choice among alternatives as to: What missions or
objectives be achieved, What actions should be taken, What organizational
positions be assigned, How the end can be achieved, When to achieve it, Who is to
do it, Where to do it. It bridges the gap between where we are now and where we
want to be.
o Planning - is preparing today for tomorrow; it is the activity that allows

managers to determine what they want and how to get it: They set goals and
decide how to reach them. Planning focuses on the future: what is to be
accomplished and how.
Answers six basic questions in regard to any intended activity:
 What (the goal or goals).

 When (the time frame in which it will be accomplished)
 Where (the place or places where the plans or planning will reach its
conclusion).
 Who (which people will perform the tasks).
 How (the specific steps or methods to reach the goals).
 What resources (resources necessary to reach the goals).
o Planning is a process of deciding what to do and how to do it before action is required.

Planning involves selecting missions and objectives and the actions to achieve to them;
it requires decision-making that is, choosing from among alternative future courses of
actions. Managers who develop plans but do not commit themselves to action are
simply wasting time. The outcome of the planning function is a plan, a written document
that specifies the courses of action a firm will take.
Nature of Planning
Discussing the following points can highlight the nature of planning.
CHAPTER 3: 1
1. The contribution of planning to purpose and objectives
Every organization is established (exists) for the accomplishment of group purpose or
objective. So, the purpose of any plan and its derivatives or supporting plans is to
facilitate the accomplishment of organizational objectives.
2. The primacy of planning

All the five managerial functions - planning, organizing, staffing, directing and
controlling- are designed to support the accomplishment of organizational objectives.
However, planning precedes the execution of all other managerial functions, because all
other managerial functions must be planned if they are to be effective. This does not
mean that planning is the most important of all other managerial functions, because to
be important or useful all other functions have to accompany it.
Although in practice all the functions mesh as a system of action, planning is unique in
that it involves establishing the objectives necessary for all group effort. The entire gist
of initiating, exercising, and activating the managerial functions of organizing, staffing,
directing and controlling is to bring the objectives formulated during planning into
fruition. In fact, the concept of especially control would be unthinkable without planning
because any attempt to control without plans is meaningless, since there is no way for
people to tell whether they are going where they want to go (the result of the task of
control) unless they first know where they want to go (part of task of planning). Plans
thus furnish the standards of control. Since planning and controlling are so much
inseparable, they are treated as the Siamese twins of management.
3. Thepervasiveness /Universality of planning

Planning is a function of all managers, although the character and breadth of planning
varies with each manager’s authority and with the nature of policies and plans outlined
by superiors. That is, all managers-from presidents to first-level supervisors plan. Even
for personal life we plan. “It is difficult to call a person a manager if he or she doesn't
plan “Koontz
4. Planning and information

Basically no plan exists without information. To plan managers have to gather relevant
information from around the environment. Information is one of the valuable resources
for planning to exist.
CHAPTER 3: 2
5. Planning is a continuous process
Planning deals with the future and the future is full of uncertainties. Hence, planning is
subject to revision. It needs frequent revision in response to changes in the internal and
external environments of the organization. Therefore, so for as the organization is in
operation, planning is in continuous process. The more continuous the planning is, the
higher its efficiency is.
6. Planning is a means to an end

Planning is not an end by itself. It is a means to an end (meeting objectives). Planning is
an instrument that pushes people towards the achievement of objectives.
7. Plansare arranged in a hierarchy

Plans are first set for the entire organization. The corporate plan then provides the
framework for the formulation of divisional, departmental, and sectional goals. Each of
these organizational components sets its plans, programs, projects, budgets, resource
requirements, etc.
As shown in the figure below, unit plans are summed up to form sectional plans and
these in turn form departmental plans. Finally, the different divisional plans when
summarized at corporate level, form corporate plan.
Fig. Hierarchy of plans
Corporate/Strategic plans
Departmental/
divisional plans
Sectional plans
Operational plans
The Importance of Planning
1. Itprovides direction and sense of purpose

It is through planning that we can establish our objectives. Plans focus attention on
sepicifc targets and direct employees effort toward important outcomes. Once
organizations known what they can do and can't do over the future, they began to set
objectives based on their capacity and the order of activities needed to accomplish their
objectives. It provides direction and a common sense of purpose. This shared purpose
enables both employees and managers to coordinate, unite, and guide their actions.
2.It reduces uncertainties and anticipates the future/ preparing for change
Planning is based on systematic and careful forecasts of future states of the economy,
markets, technology, etc to reduce uncertainties to the extent they occur according to
CHAPTER 3: 3
expectation. Thus, it is while planning that the manager should consider the potential
areas for changes in the future; rather than merely reacting to it. Managers should cope
with changes in their own organizations and functions in their environment through
planning. Anticipating and preparing for possible future changes enables managers to
control their environment. In so doing, planning answers “what-if” questions. In
planning, managers develop several "what if" questions in order to reduce the risk of
unpredictable future, so far as we plan for the future. By asking what if questions
managers develop alternatives.
3. It provides basis for controlling

Standards /controlling mechanisms/ are developed during planning. It specifies what is
to be accomplished and provides a standard for measuring progress.
4.If forces managers see the organization as a system

While planning managers have to consider parts because the plan of one part
(department) affects the operation of the whole organization so far as parts of an
organization are interdependent.
5. It
promotes efficiency
Planning provides the opportunity for a greater utilization of the available
organizational resources - because in planning we determine how many resources are
necessary to reach the goals, and how to use these resources.
6. It
provides the base for cooperative and coordinated efforts
Management exists because the work of individuals and groups in organizations must
be coordinated, and planning is one important technique for achieving coordinated
effort. Planning provides the basis for organized and coordinated effort by defining the
objectives of the organization and the means for their achievement.
CHAPTER 3: 4
7. Developing managers
The act of planning involves high level of intellectual activity. Those who plan must be
able to deal with abstract and uncertain ideas and information. Planners must think
systematically about the present and the future. Through planning, the future state of
the organization can be improved if its managers take an active role in moving the
organization toward that future. Planning then implies that managers should be
proactive and make things happen rather than reactive and let things happen. Through
act of planning, managers not only develop their ability to think futuristically but, to the
extent that their plans are effective, their motivation to plan is reinforced. Also, the act
of planning sharpens manager's ability to think as they consider abstract ideas and
possibilities for the future. Thus, both the result and the act of planning benefit both the
organization and its managers.
8. It
provides guideline for decision making
Decisions in an organization will be made in alignment with the plans and in accordance
with desired outcomes. Managers make decisions on problems of recurring nature
based on strategies and policies of the organization. Through specifying the actions
necessary to accomplish the goals of the organization, planning serves as a framework
for decision-making. It forces managers to make analytical thinking and evaluate
alternatives through improved decisions.
Limitations of Planning
a.Planning is risky
This is because of uncertainties in the future and absence of accurate and adequate data.
b. It is a difficult and complicated task

Planning involves complex and interdependent decisions. Thus requires patience and
commitment from those who are involved in the planning process. In addition to this,
rapid changes in technology and customers’ tastes and preferences will also make
planning difficult and exceptionally complex.
c. It is expensive and time consuming

Planning requires financial, physical, human, and time resources. The collection of the
necessary data from various sources, the analysis, organizing and interpreting data
consume time and requires a huge amount of financial outlay.
d. It is affected by external factors

External factors can put strain on the success of planning. These factors could be
external impositions, government intervention, natural calamities, import-export
policies, taxation and labor laws that can limit the success of planning.
II. ORGANIZATIONAL OBJECTIVES

 Objectives are the important ends of planning toward which organizing, staffing, leading
and controlling are aimed.
 Objectives are the important ends toward which organizational and individual efforts or
CHAPTER 3: 5
activities are directed.
 Objectives are essential starting points in planning because they provide direction for all
other managerial activities.
 While enterprise objectives are the basic plan of the firm, department may also
have its own objectives. Its objectives naturally contribute to the attainment of
enterprise objectives, but the two sets of objectives may be entirely different.
E.g. Objective of Business – To make a certain profit by producing a given line of home
entertainment equipment.
Objective of manufacturing department - To produce the required number of TV sets
of given design and quality at a
given cost.
These two objectives are consistent, but they differ in that the manufacturing department
alone cannot ensure accomplishing the company’s objectives.
Goals and objectives can be used interchangeably.
 Mission/Purpose - denotes the reason for the existence of an organization.

- denotes the organizations fundamental reason for existence.
Purpose and mission can be used interchangeably.
 Target – identifies specific qualitative or quantitative ends (points).
In short Mission/ purposes, objective, goals/ Targets differ in scope.

Purpose/missions  objective  Targets/goals
Nature of Objectives
1. Goals are predetermined or stated in advance.
2. Goals describe future desired results toward which present efforts are directed.
3. Goals should be specific and measurable. If possible, goals should be expressed in
quantitative terms.
CHAPTER 3: 6
4. Goals should have defined time period. They should specify the time period over
which goals will be achieved and measured. However, the long-range objectives
should provide the direction for short-range objectives.
5. Objectives should be continually adjusted in light of environmental changes.
However, too frequent changes and adjustments may cause confusion and disruption
of plans, strategies, policies, budgets, etc.
6. Goals should be challenging but realistic. If a goal is too difficult employees may
give up. If too easy, and routine type they may not feel motivated. Therefore, goals
should be set within the existing resource base and not beyond the department’s
time, equipment, labor, and financial resources. This gives workers job satisfaction
and a great desire to work hard. A difficult job is something beyond the resource
capacity of the organization and the individual employee. It ends up with failure to
achieve the stated goals.
7. Objectives have hierarchy
In planning, broader and more comprehensive objective with long time frame will be
formulated at the very top. These top- level objectives must successfully be broken
down to more specific and shortsighted sub-objectives because moving the
organization to goal attainment calls for achieving these sub-objectives which are the
means by which objectives are attained. Each level of objective stand as ends relative
to the levels below it and as a means relative to the level above it.
In short, like all management activities objectives have hierarchy. It ranges from the
broadest organizational objectives to specific /individual objectives. Organizations
typically have three levels of goals: strategic, tactical, and operational.
Strategic goals - are broadly defined targets or future end results set by top-level
management. Such goals typically address issues relating to the organization as a
whole rather than specific divisions or departments and may sometimes be stated in
fairly general terms. Strategic goals are sometimes called official goals because they
are formally stated by top management.
Tactical goals - are targets or future end results usually set by middle management
for specific departments or units. Goals at this level spell out what must be done by
various departments to achieve the results outlined in the strategic goals. Tactical
goals tend to be stated in more measurable terms than is sometimes true of strategic
goals.
Operational goals - are targets or future end results set by lower management that
address specific, measurable outcomes required from lower levels.
The three levels of goals can be thought of as forming a hierarchy of goals. With a
hierarchy, goals at each level need to be synchronized so that efforts at the various
levels are channeled ultimately toward achieving the major goals of the organization.
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In this way, the various levels of goals form a means-end chain, in which the goals at
the operational level (means) must be achieved in order to reach the goals at the
tactical level (end). Likewise, the goals at the tactical level (means) must be reached
in order to achieve the goals at the strategic level (end).
8. Multiplicity of objectives
Even though there is only one broad and overall organizational objective, there are other
multiple (many) objectives that are under umbrella of the overall plan which are directed to
attain the overall plan. It would have been relatively easy to achieve an objective and sub-
objective had an organization had only a single basic objective. But in reality organizations
do have a multitude of objectives and a attempt to disregard this fact can invite failure to
organizations.
E.g. Organizational (Broad) objective: profit maximization

Satisfaction of customers
Other objectives Research &
development
Employee
development
9. Integrating character
In order to achieve the broad organizational objective there should be harmony or
integration among objectives.
Multiple Objectives  Integration  Network of objectives
10. Network of objectives

Objectives of an organization form network, that is, objectives are interrelated and
interdependent. The union of the individual objectives to form an overall objective
makes network of objectives. If there were no network of objectives, it would be very
difficult to achieve organizational objectives because people with their individual
objective will pursue their activity as right and coordination can never be possible.
11. Primacy of objectives

Objectives are primary to organization because they are the very reason for the existence of an
organization.
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Benefits of Objectives
i. Objectives provide basis for the performance of all managerial functions. They serve as
a benchmark for the formulation of plan, policies, strategies, rules, budgets, procedures,
etc. Organizing exists when there are objectives and courses of action required for
implementing plans, organizing signifies the need for staffing by creating jobs and
positions and coordinating all organizational efforts to desired results.
ii. Objectivesprovide guidelines for action. They help clarify expectations. When goals are
set, organization members are more likely to have a clear idea of the major outcomes
that they are expected to achieve. Without goals, organization members can all be
working very hard but may collectively accomplish very little as if they were rowers
independently rowing the same boat in different directions and together making very
little progress. Goals direct and channel employees’ efforts by describing future desired
results. They provide focus and direction for employees by prescribing what ‘should be’
done. And, they also help to allocate resources and tell employee how and where to
direct their strongest efforts. Goals are basic for cooperative and organized effort.
iii. Objectives
can limit employee activities. They serve to prescribe what ‘should be
done’ and ‘what should not be done’ by the employees.
iv. Objectives
provide a unique identity for organizations. Organizations have unique
characteristics. They have their own values and identities that help one to differentiate
them from others in the industry.
v. An organization’s goal can serve as a source of employee motivation. It helps to uplift

their morale. By presenting a challenge, goals tell what characterizes success and how to
achieve it. Accomplishment of organizational goals provides employees a sense of
achievement and satisfaction. The added motivation develops from meeting goals,
feeling a sense of accomplishment, and receiving recognition and other rewards for
reaching targeted outcomes. On the other hand, managing employees based on the
accomplishment of objectives rather than on the tasks and activities of every worker
(management by objectives-MBO) can serve as an incentive to employees.
vi. Objectives
provide performance standards and bases for control. Control is the function
of measuring, comparing and evaluating performance against predetermined standards.
Thus, control will be meaningless in the absence of standards provided by objectives.
How Goals Facilitate Performance

In order to make use of goals, managers need to understand just how goals can facilitate
performance. Goals facilitate performance if they have the following components: goal
content, goal commitment, work behavior, and feedback.
Goal Content: Goals that are effective in channeling effort toward

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achievement at the strategic, tactical, and operational levels have a content that
reflects five major characteristics. Goals should be challenging, attainable, specific
and measurable, time limited, and relevant.
Goal commitment: A critical element in using goals effectively is

getting individuals and/or work groups to be committed to the goals they must
carry out. Goal commitment is one's attachment to, or determination to reach, a
goal. Without commitment, setting specific, challenging goals will have little impact on
performance. Research indicates that five major factors positively influence goal
commitment: supervisory authority, peer and group pressure, public display of
commitment, expectations of success, and incentives and rewards.
Work Behavior: Given goals and commitment, how does the goal-setting
process ultimately influence behavior? Research so far suggests that goal content
and goal commitment affect an individual's actual work behavior by influencing
four work behavior factors: direction, effort, persistence and planning.
Direction: Goals provide direction by channeling attention and action toward activities
related to those goals, rather than to other activities. Thus goals to which we are
committed can help us make better choices about the activities that we will undertake.
Effort: In addition to channeling activities, goals to which we are committed boost
effort by mobilizing energy. As indicated by the research on goal setting, individuals
are likely to put forth more effort when goals are difficult than when they are easy.g
Persistence: Persistence involves maintaining direction and effort on behalf of a goal
until it is reached, a requirement that may involve an extended period of time.
Commitment to goals makes it more likely that we will persist in attempting to reach
them.
Planning: In addition to the relatively direct efforts on direction, effort and persistence,
goals also have an important indirect effect on work behavior by influencing planning.
Goal setting affects planning because individuals who have committed themselves to
achieving difficult goals are likely to develop plans or methods that can be used to attain
those goals. With easy goals, however, little planning may be necessary.
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Feedback: feedback to employees as to their performance will let them know if
they have worker as to the expectation. By comparing their performance with the set
goals, managers should give feedback on employees’ performance that will help them
evaluate themselves and direct their effort towards achievement.
III. The Planning Process
Like other managerial activities planning has its own processes or series of steps. These
steps are interrelated and there is no rigid boundary between or among these steps,
and one is the base for the other.
1. Establishing objectives
As objectives provide the direction for all other managerial functions, especially
planning, objective setting is an important first step in the planning process. Objectives
specify the expected results and indicate the end points of what is to be done, where the
primary emphasis is t be placed, and what is to be accomplished by the network of
strategies, policies, procedures, rules, budgets, and programs. They provide the
direction necessary for achievement and without them there is little to keep a manager
from simply wandering in all directions. Objectives are then, the ‘guiding light’ for the
entire management process.
Objective setting is a three steps process, which involves assessing the present
situation, anticipating future conditions, and then setting the objectives. It is only after
the managers have at least the rudimentary knowledge about their capabilities and
available opportunities that objective setting does make sense.
Organizations do not have one set of objectives, which each manager attempts to
achieve. Rather, setting objectives involves establishing objectives for the entire
organization, each subordinate work unit, and the long range as well as the short range.
The hierarchy of objectives starts at the top of the organization with overall
organizational objectives and proceeds downwards with narrower and more specific
objectives for each level managers, derived from the objectives at the level
Objectives developed by organizational levels and peer managers should be compatible

with one another. Top-level management should set the stage for goal setting by lower
level management, thereby ensuring maximum use of resources. Enterprise objectives
give direction to the major plans which define the objective of every major department.
Major department objectives, in turn, control the objectives of subordinate departments
and so down the line.
2. Developing premises
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Planning premises are assumptions about the environment within which the plan is to
be carried out. Once objectives are established managers have to investigate the
company's environment to know factors that facilitate or block the attainment of these
objectives. This involves examining the external and internal factors which affect the
performance of the organization: the external environment (for Treats and
Opportunities) through PEST analysis and internal environment (for Strengths and
Weaknesses) through Self-Audit.
 Strengths are internal competencies possessed by the organization in comparison

with the competitors. These include structure and policies of the organization,
location, financial soundness, knowledge of personnel, qualities of facilities, and so
on.
 Weaknesses are attributes of the organization which tend to decrease its competence in
comparison to its competitors.
 Threat is reasonably probable events which if it were to occur, would produce significant
damage to the organization.
 Opportunity is a combination of circumstances, time, and place which if
accompanied by a certain course of action on the part of the organization, is likely to
produce significant benefits.
The key element of planning at this stage is forecasting. It is based on the forecasts made in
different areas that premises are made.
Because the future is so complex, it would not be profitable or realistic to make

assumptions about every detail of the future environment of a plan. Therefore, premises
are, as a practical matter, limited to assumptions that are critical, or strategic, to a plan,
that is, those that most influence its operation.
3. Determining alternative courses of actions

Alternatives are courses of actions that are available to a manager to reach a goal. In
developing alternatives, a manager should try to create as many roads to the objective
as possible. Usually the most common problem is not finding alternatives but reducing
number of alternatives so that the most promising may be analyzed.
4. Evaluating alternative courses of action

Having sought out alternative courses, managers evaluate the benefits, costs and effects
of alternative courses in light of their weight to goals and premises. Because there are
so many alternative courses in most situations and there are numerous variables
CHAPTER 3: 1
and limitations to be considered, evaluation can be exceedingly difficult. This is a step in
planning process that operations research and mathematical as well as computing
techniques have their primary application to the field of management.
5. Selecting a course of action

This is the point at which the plan to be adopted is chosen or selected. It is the real point
of decision-making. The analysis of each alternative’s disadvantages, benefits, costs and
effects should result in determining one course of action that appears better than the
others. If no one alternative emerges as clearly the best, consideration should be given
to combining parts or the entire content of two or more alternatives. Whatever the
course chosen, it should be one that gives you the most advantages and the fewest
serious disadvantages.
6. Formulating derivative plans

At step 5 planning is ended. Formulating derivative plans means formulating other plans based
on one major plan.
7.Numberizing plans by budgeting

Numberizing plans is converting them into budgets. Plans will have meaning when they
are changed into numbers. Budgeting is the means of adding various plans together and
set important standards against which planning process can be measured.
8.Implementing the plan

After the optimum alternative has been selected, the manager needs to develop an
action plan to implement it. This is a step where by the entire organization will be in
motion or real operation. All the planning in the world will not help an organization
realize objectives if plans cannot be implemented. Implementation involves
determining who will be involved, what resources will be assigned, how the plan will be
evaluated, and the reporting procedure.
9. Controlling and evaluating the results

Once the plan is implemented, the manager must monitor the progress that is being
made, evaluate the reported results, and make any modifications necessary. The
environment that a plan is constructed in is constantly changing, so the plans may have
to be modified. Or modification may be needed because a plan was not quite “perfect”
when it was implemented. Hence, managers need to make certain that the plan is going
according to expectations and making necessary adjustments.
IV. Types of Plans

Plans can be classified on different bases or dimensions. These are:
- Scope/breadth dimension,
- Time dimension, and
- Use/repetitiveness
i. Scope/Breadth Dimension
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Scope refers to the comprehensiveness of the plan, or it refers to the level of
management where plans are formulated. This dimension creates hierarchy of plans.
Based on scope/breadth we can classify plans into: Strategic, Tactical and Operational.
Strategic Plan: is organization wide plan that is formulated or developed by top-level

management in consultation with the board of directors and middle level management.
It applies to the entire organization.
- Looks ahead over the next two, three, five or more years.
- Develops the direction for the entire organization.
- Is primarily concerned with solving long-term problems associated with external
environmental influences.
- Establishes overall objectives and positions for an organization in terms of its environment.
The following are distinguishing characteristics of strategic plan.

1. It requires looking outside the organization for threats and opportunities.
2. It requires looking inside the organization for strengths and weaknesses
3. It takes a longer view, i.e. it covers a relatively long time horizon > 5 years.
4. It tends to be top management responsibility, but it reflects a mentality useful at all
levels.
5. It is expressed in relatively general non-specific terms.
Strategic plans address such questions as:

- What business are we in?
- What business should we be in?
- Where will we be in ten years if we continue doing what we are now doing?
The difference between a firm would like to be (where we want to be) and where it will
be if it does nothing is called the Planning gap. Strategic planning is primarily
concerned with closing that gap.
 The success or failure of an organization depends up on the success or failure of
strategic plans. It makes premises for tactical plans.
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Tactical Plan: refers to the implementation of activities and the allocation of resources
necessary for the achievement of the organization’s objectives.
- is an intermediate plan that helps to reduce long range planning into intermediate
one by increasing the amount of specificity and making the actions goal oriented.
Tactical plans are specific and more goal oriented than strategic plans. Middle level
management in consultation with lower level management develops them.
- Tactical plans are the means charted to support the implementation of the strategic plans
and achievement of tactical goals.
They are concerned with shorter time frames and cover a narrower scope (narrower range
of activities).
- Structures a firm’s resources to achieve maximum performance.
- Concerned with what the lower level units within each division must do, how they
must do it, and who will have the responsibilities for doing it.
- Tactical plans make premises for operational plans.
- is narrower in scope than strategic plan and wider than operation plan; but more
detailed than strategic plan and less detailed than operational plan
E.g. what is the best pricing policy?
Which city or town is suitable for marketing our products?
Operational Plan: is concerned with the day to day activities of the organization and is
made at the lower level management in consultation with middle level management.
Operational plans spell out specifically what must be accomplished to achieve
specific/operational goals. It is concerned with the efficient, day-to-day use of resources
allocated to a department manager’s area of responsibility.
- Operational plans have relatively short time frame (< 1 yr). It is the most detailed
(more specific) and narrowest plan compared to the above two; because it is to be
implemented day-to-day.
E.g. –What production technique is best?

- What materials are needed for operation?
 Unless operational goals are achieved in organizations, tactical and strategic plans
will not be successful and goals at those levels will not be achieved.
ii. Time Dimension

Time dimension refers to the time periods for which the planning is intended. Based on
the length of time a plan covers, we do have three types of plans: Long-range (five years
or more), medium-range (between one and five years) and short-range plans (one year
or less).
 Time dimension and scope dimension are the same except the former is about
the length of time that the plan covers and the later about the level of
CHAPTER 3: 1
management where the plan is formulated.
All strategic plans are long-

range plans. All tactical
plans are medium-range
plans. All operational plans
are short-range plans.
iii. Use
Dimension
Use dimension refers to the extent to which plans will be used on a recurring basis, i.e.
based on how repeatedly/frequently a given plan is used. Based on this dimension we do
have two types of plans: standing plans and single use plans.
Standing Plans: are plans that provide an ongoing guidance for performing recurring
activities.
- They are plans which are formulated to be used again and again for the day-to-day
operation of the organization. That is, repetitive situations or actions require the
development of such plans. They become necessary when the same kinds of actions
are to be taken over and over again. Standing plans become valuable under relatively
stable situations.
Once established, standing plans allow managers to conserve time used for planning
and decision-making because similar situations are handled in a predetermined,
consistent manner.
E.g. A bank can more easily approve or reject loan requests if criteria are established in
advance to evaluate credit ratings, collateral assets, and related applicant information.
The major types of standing plans are policies, rules and procedures.
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a.Policies: is a general guide that specifies the broad parameters within which
organization members are expected to operate in pursuit of organizational goals.
- Policies are general statements or understandings which guide or channel thinking
and actions in decision-making to achieve organizational objectives.
Not all policies are “statements”, they are often merely implied from the actions of managers.
Policies have the following characteristics:

1. Policies define an area within which a decision is to be made and ensure that the
decision will be consistent with and contribute to an objective.
2. Policies help to decide issues before they become problems; make it unnecessary to
analyze the same situation every time it comes up and unify other plans.
3. Policies tell us what to do in a general sort of way.
4. Policies provide discretion within limits since they are guides to decision-making.
Policy is a means of encouraging discretion and initiative, but within limits. The
amount of freedom will naturally depend up on the policy and in turn will reflect
position and authority in the organization.
5. Policies must be flexible.
 Policies are usually established formally and deliberately by top managers of the
organization. They can also emerge informally and at lower levels in the
organization from a seemingly consistent set of decisions on the same subject made
over a period of time.
Policies are established at the top because:

a. They feel it will improve the effectiveness of an organization.
b. They want some aspect of the organization to reflect their personal values (E.g.
Dress codes)
c. They need to clear up some conflict or confusion that has occurred
at a lower level in the organization. Examples of policy:
1. Except for token gifts of purely nominal or advertising value, no employee shall
accept any gift from any supplier at any time.
2. Hiring university trained engineers
3. To promote from within
4. We accept returned merchandise
b. Rules:
spell out specific required action or non-actions, i.e., actions that must be or
must not be taken, allowing no discretion, in a given situation.
E.g. No smoking, cheating is prohibited.
 A rule is an ongoing, specific plan for controlling human behavior and conduct at work.
 The purpose of policies is to guide decision-making by marking off areas in
which managers can use their discretion. Although rules also serve as guides, they
allow no discretion in their application.
 Rules are the most explicit of standing plans and are not guides for thinking or
CHAPTER 3: 1
decision-making. Rather, they are substitutes for them. The only choice a rule leaves
is whether or not to apply it to a particular set of circumstances.
c.Procedures: are statements that detail the exact manner in which certain activities
must be accomplished. They put the precise order of activities to be carried out to do a
task and thus, procedures are chronological sequences of required actions. They
provide detailed step-by-step instructions as to what should be done. Procedures
prescribe exactly what actions are to be taken in a specific situation and specify the
chronological sequence of activities. For example, material procurement, university
admission, bidding, etc.
When we compare the above three, policies, procedures and rules, we can understand
that all are alike in the sense that they are directives to guide people’s behavior to the
desired ends and they are plans which are to be followed in the future. Conversely,
procedures and rules are different from policies in that the formers are guides to
actions while the latter are guides to thinking. So, procedures and rules render no
freedom and hence should be used when we want to discourage initiative or repress
thinking. But, policies must permit freedom within limits and hence are used when
people’s involvement, participation or initiative is desired.
Though both rules and procedures repress thinking, they are different. Unlike
procedures, rules (1) guide actions without specifying a time sequence (2) spell out
that a certain action must or must not be taken. Procedures, however, specify a time
sequence. In fact a procedure may be looked upon as a sequence of rules. A rule,
however, may or may not be part of a procedure.
Single use plans: are plans aimed at achieving a specific goal that, once reached, will
most likely not recur in the future and dissolved when these have been accomplished.
- Are designed to accomplish a specific objective usually in a relatively shorter period of time
and it is non repetitive.
- They are detailed courses of action that probably will not be repeated in the same form in
the future.
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The major types of single use plans are programs, projects, and budgets.
E.g. A firm planning to build a new warehouse-location, construction costs, labor availability,
zoning restrictions.
a. Programs: is a comprehensive plan that coordinates a complex set of activities related to a

major non-recurring goal.
- Are a complex of goals, policies, procedures, rules, task assignments, steps to be
taken, resources to be employed and other elements necessary to carryout a given
course of action
- Single use plans may use standing plans and other single use plans to be effective.
Single use plan = Standing plans + Single use plans
 A program may be as large in scope as placing a person on the moon or as

comparatively small as improving the reading level of fourth grade students in a
school district. Whatever its scope, it will specify many activities and allocations of
resources within an overall scheme that may include such other single use plans as
projects and budgets.
* A program may be repeated with modification but not as it is.
b.Projects: is a plan that coordinates a set of limited scope activities that do not need to
be divided into several major projects in order to reach a major non-recurring goal.
- Projects are the smaller and separate portions of programs. Each project has
limited scope and distinct directives concerning assignments and time. Each
project will become the responsibility of designated personnel who will be given
specific resources and deadlines.
E.g. Building a warehouse can be taken as a program. In the warehouse example,
typical projects might include the preparation of layout drawings, a report on
labor availability, and recommendations for transferring stock from existing
facilities to the new installation.
c. Budgets: are statements of expected results expressed in numerical terms.

- Are statements of financial resources set aside for specific activities in a given period of
time.
- Budget is a single use plan that commits resources to an activity over a given
period. It may be expressed in Birr, labor hours, units of product, machine hrs, or
any other numerically measurable term.
- It may be referred to as a “numberize” program.
Budgets are also control devices. However, making a budget is clearly planning.
Characteristics of a
Good Plan Every sound
business plan must have these
CHAPTER 3: 1
characteristics:
 Objectivity
Planning should, first all, be based on objective thinking. It should be factual, logical
and realistic. It should be directed to achieving organizational goals rather than
personal objectives.
 Futurity
Since a plan is a forecast of some future action, it must have the quality of futurity;
otherwise, it has little value as a basis for future action. If a plan is to be effective, it
must foresee with reasonable accuracy the nature of future events affecting the
industry and the firm. The inability to foresee future events, a human limitation that
we cannot overcome, is the weak link in planning process.
 Flexibility
Because no one can foresee the future, plans must have flexibility. They must adjust
smoothly and quickly to changing conditions without seriously losing their
effectiveness. The more difficult it is to predict the future, the more flexible the plans
must be.
 Stability
 Stability is related to flexibility. A stable plan will not have to be abandoned because
of long-term changes in the company’s situation. It may be affected by long-range
developments, but it should not be changed materially from day to day.
 Comprehensive
 A plan must be comprehensive enough to provide adequate guidance, but not so
detailed as to be unduly restrictive. It should cover everything required of people,
but not in such detail that it inhibits initiative.
 Simplicity and clarity
 Although a good plan must be comprehensive, it should also be simple. A simple plan
seeks to attain its objective with the fewest components, forces, effects and
relationships. A plan should not be ambiguous. Lack of clarity makes understanding
and implementation difficult.
 Contingency planning is the development of alternative plans for use in the event
that environmental conditions evolve differently than anticipated, rendering original
plans unwise or unfeasible.
 Planning staff- is a small group of individuals who assist top-level managers in
developing the various components of the planning process.
CHAPTER 3: 2
CHAPTER FOUR
DECISION-MAKING
Meaning:
- Decision-making is a rational choice or selection of one alternative from among a set

of alternatives; i.e. it is the act of choosing one alternative from among a set of
alternatives.
- Decision-making is the management function that consists of choosing one course of action
from all the available alternatives.
Decision-making is part of every aspect of the manager’s duties, which include planning,
organizing, staffing, leading and controlling, i.e. decision-making is universal. In all
managerial functions decision-making is involved. All managerial functions have to be
decided. For example, managers can formulate planning objectives only after making
decisions about the organization’s basic mission. Even though in all managerial
functions decision-making is involved, the critical decision-making is during planning
because planning identifies the objectives of the organization; i.e. decision must be
made to identify the objectives/missions of an organization. In the planning process,
managers decide such matters as what goals or opportunities their organization will
pursue, what resources will be used, who will perform each required task etc. The
entire planning process involves managers in a continual series of decision-making
situations.
Decision-making has three elements (parts)

1. When managers make decisions; they are choosing or selecting from among alternatives.
2. When managers make decisions, they have available alternatives. When there
are no alternatives, there is no decision- making, rather it become mandatory.
3. When managers make decisions, they have purpose in mind. The purpose in mind is
organizational objectives.
THE DECISION-MAKING PROCESS

Decisions are organizational responses to problems. Every decision is the outcome of a
dynamic process that is influenced by multitude of forces. So decision-making has its
own processes / series of steps. The process is a sequential process rather then a series
of steps.
1.Identifying problems
A necessary condition for a decision to exist is a problem - the discrepancy between an
actual and desired state; a gap between where one is and where one wants to be. If
problems do not exist, there will be no need for decisions; i.e. problems are
prerequisites for decisions. How critical a problem for the organization is measured by
the gap between levels of performance specified in the organization’s goals and
CHAPTER 4: DECISION 1
objectives and the level of performance attained; i.e. it is measured by the gap between
level of performance specified (standards set) and level of performance attained. The
problem is very critical when the gap between the standard set and actual performance
attained is very high. To locate problems, managers rely on several different indicators:
- Deviations from past performance. A sudden change in some established pattern of
performance often indicates that a problem has developed. When employee turnover
increases, sales decline, selling expenses increase, or more defective units are
produced, a problem usually exists.
- Deviation from plan. When results do not meet planned objectives, a problem is
likely. For example, a new product fails to meet its market share objective, profit
levels are lower than planned, the production department is exceeding its budgets.
These occurrences signal that some plan is off course.
- Out side criticism. The actions of outsiders may indicate problems. Customers may
be dissatisfied with a new product or with their delivery schedules; a labor union
may present a grievance; investment firms may not recommend the organization as a
good investment opportunity; alumni may withdraw their support from an athletic
program.
Decision makers face three types of problems:

 A crisis problem is a serious difficulty requiring immediate action. An example of a
crisis is a severe cash flow deficiency that has a high potential of evolving into serious
losses, and a customer protest against the quality of a product.
 A non-crisis problem is an issue that requires resolutions but does not simultaneously
have the importance and immediacy characteristics of a crisis. Many of the decisions
that managers make center on non-crisis problems. Example of such problems is a
factory that needs to be brought into conformity with new state antipollution
standards during the next three years and an employee who frequently is late for
work.
 An opportunity problem is a situation that offers strong potential for significant
organizational gain if appropriate actions are taken. Opportunities typically involve
new ideas and novel directions that could be used, rather than difficulties that must be
resolved. Non-innovative managers tend to focus on problems rather than
opportunities.
Confusions are common in problem definition because the events or issues that attract
the manager’s attention may be symptoms of another more fundamental and pervasive
difficulty than the problem itself. That is, there may exist confusion on the identification
of a problem and its symptoms. The accurate definition of a problem affects all the steps
that follow. Managers once they have identified problems, they have to try to diagnose
the cause of the problem. Causes unlike symptoms are seldom apparent.
This step has three general stages: scanning, categorization, and diagnosis.
1) Scanning stage: involves monitoring the work situation for changing
circumstances that may signal the emergence of a problem. At this point the
manager may be only vaguely aware that an environmental change could lead to a
problem or that an existing situation constitutes a problem.
2) Categorization stage: entails attempting to understand and verify signs that
there is some type of discrepancy between the current state and the desired state.
At this point the manager attempts to categorize the situation as a problem and a
no problem, even though it may be difficult to specify the exact nature of the
problem, if one exists.
3) Diagnosis stage: involves gathering additional information and specifying both
the nature and the causes of the problem. Without appropriate diagnosis, it is
difficult to experience success in the rest of the decision-making process. At the
diagnosis stage, the problem should be stated in terms of the discrepancy
between current conditions and what is desired; the cause of the discrepancy
should be specified.
2. Developing Alternatives
Before a decision is made feasible alternatives should be developed. This is a search
process in which relevant internal and external environment of the organization are
investigated to provide information that can be developed into possible alternatives. At
this point it is necessary to list as many possible alternatives solutions to the problem as
you can. No major decision should be made until several alternative solutions have been
developed. Decision-making at this stage requires finding creative and imaginative
alternatives using full mental faculty. The manager needs help in this situation through
brainstorming or Delphi technique.
3. Evaluating Alternatives
Once managers have developed a set of alternatives, they must evaluate them to see
how effective each would be. Each alternative must be judged in light of the goals and
resources of the organization and how well the alternative will help solve the problem.
In addition, each alternative must be judged in terms of its consequences for the
organization. Will any problems arise when a particular course of action is followed?
Such factors as worker’s willingness…
4. Choosing an Alternative
Based on the evaluation made managers select the best alternative. In trying to select an
alternative or combination of alternatives, managers find a solution that appears to offer
the fewest serious disadvantages and the most advantages. The purpose of selecting an
alternative is to solve the problem so as to achieve a predetermined objective. Managers
should take care not to solve one problem and create another with their choice.
A decision is not an end by itself but only a means to an end. This means the factors that
lead to implementation and follow –up should follow solution selection.
5. Implementing and Monitoring the Chosen Solution

For the entire decision-making process to be successful, considerable thought must be
given to implementing and monitoring the chosen solution. It is possible to make a
"good' decision in terms of the first five steps and still have the process fail because of
difficulties at this final step.
Implementing the Solution: A decision that is not implemented is little more than an
abstraction. In other words, any decision must be effectively implemented to achieve
the objectives for which it was made. Implementing a decision involves more than
giving orders. Resources must be acquired and allocated. Decisions are not ends by
themselves they are means to an end; so proper implementation is necessary to achieve
that end.
Monitoring the solution: Monitoring is necessary to ensure that things are progressing
as planned and that the problem that triggered the decision process has been resolved.
Effective management involves periodic measurements of results. Actual results are
compared with planned results (the objective); if deviations exist, changes must be
made. Here again we see the importance of measurable objectives. If such objectives do
not exist, then there is no way to judge performance. If actual results do not much
planned results, then the changes must be made in the solution chosen, in its
implementation, or in the original objective if it deemed unattainable. The various
actions taken to implement a decision must be monitored. The more important the
problem, the greater the effort that needs to be expended on appropriate follow up
mechanisms. Are things working according to plan? What is happening in the internal
and external environments as a result of the decision? Are subordinates performing
according to expectations? ……. must be closely monitored.
Decision-Making Conditions
When managers make decisions, the amount of information available to them or the
degree of knowledge they have about the likelihood of the occurrence of each
alternative vary from managers to managers or/and from situation to situation. To put
it in other way, decisions are made under three basic conditions. These are condition of
certainty, condition of risk, and condition of uncertainty.
1. Decision-making under Certainty
When managers know with certainty what their alternatives are and what conditions
are associated with each alternative, a state of certainty exists. Decisions under
certainty are those in which the external conditions are identified and very predictable;
i.e. we are reasonably sure what will happen when we make a decision. The information
is available and is considered to be reliable, and we know the cause and effect
relationships. In decision-making under certainty there is a little ambiguity and
relatively low chance of making poor/bad decisions. Decision-making under certainty
seldom occurs, however, because external conditions seldom are perfectly predictable
and because it is impossible to try to account for all possible influences on any given
outcome it is very rare.
2. Decision-making under Risk
A more common decision-making situation is under risk. Under the state of risk, the
availability of each alternative, the likelihood of its occurrence and its potential payoffs
and costs are associated with probability estimates; i.e. decisions under risk are those in
which probabilities can be assigned to the expected outcomes of each alternative. In a
risk situation, managers may have factual information, but it may be incomplete. There
is moderate ambiguity and moderate chance of making bad decision. E.g. tossing a coin,
metrology
3. Decision-making under Uncertainty
Under this condition the decision maker does not know what all the alternatives are,
what the probability of each will occur is or what consequences each is likely to have.
This uncertainty comes from the dynamism of contemporary organizations and their
environment. Big multi-national corporations assume these kinds of decisions. Decision-
making under uncertainty is the most ambiguous and there is high chance of making
poor decisions. In decision-making under uncertainty, probabilities cannot be assigned
to surrounding conditions such as competition, government regulations, technological
advances, the over all economy, etc. Uncertainty is associated with the consequences of
alternatives, not the alternatives themselves. The decision-making is like being a
pioneer. Reliance on experience, judgment, and other people's experiences can assist
the manager is assessing the value of alternatives. E.g. Innovation of new machine,
journey of discoverers.
Types of Decisions
Decisions can be classified in to: programmed and non programmed.
1. Programmed Decisions
Programmed decisions are those made in routine, repetitive, well-structured situations

through the use of predetermined decision rules. The decision rules may be based on
habit, computational techniques, or established policies and procedures. Such rules
usually stem from prior experience or technical knowledge about what works in the
particular type of situation. Most of the decisions made by first line managers and many
of those made by middle managers are the programmed type, but very few of the
decisions made by top-level managers are the programmed type. Managers can usually
handle programmed decisions through rules, procedures, and policies.
E.g. Establishing a re-order point, Decide if students meet graduation requirements,

Determination of employee pay rates
2. Non-programmed Decisions
Non-programmed decisions are used to solve non-recurring, novel, and unstructured

problems. No well-established procedure exists for handling them, because it has not
occurred before managers do not have experience to draw up on, or problems are
complex or completely new. Because of their nature non-programmed decisions usually
involve significant amounts of uncertainty. They are treated through farsightedness.
Most of the highly significant decisions that managers make fall into the non-
programmed
category. Non-programmed decisions are commonly found at the middle and top levels
of management and are often related to an organization’s policy-making activities.
E.g. To add a product to the existing product line, to reorganize a company, to acquire another
firm
Types of Managerial Decisions

Type of Type of Procedures Examples
decisions problem
Programmed Repetit Rules, Business: processing
ive, payroll vouchers College:
routin standard processing admission
e operating applicants Hospital:
procedures, preparing patient for
policies surgery.
Government: using state owned motor
vehicle.
Non- Complex, Creative Business: introducing a new product.
programmed novel College: constructing new
problem classroom facilities Hospital:
solving reacting to regional disease
epidemic Government: solving
spiraling inflation problem
In reality most decisions fall between the two; i.e. a continuum of decision situations
exists ranging from those that are highly structured to those that are unstructured.
Situations between the two extremes are partially structured. As the name suggests, in a
partially structured situation, only a part is well structured. Typically, although the
manager has a great deal of data available, the final choice is not obvious. Many
intangibles are involved in the final choice. Therefore, the manager must base the
ultimate decision on the data and supplementary factors, using judgment and
experience.
E.g. A hospital wishing to improve patient care may adjust its patient-staff ratio
(programmable situation), reorganize its staff (a non programmable situation).
Continuum of Decision situations
WELL PARTIALLY ILL-

STRUCTURED STRUCTURED STRUCTURED
(PROGRAMME (NON
D) PROGRAMMED)
1. Specification of 1. Only a part of 1. Decision
procedure
decision decision process can not be
procedure completely
agreed in advance can be structured in
completely advance
of resolution. specified of resolution.
and
structur
ed.
2. Little managerial 2. Manager makes 2. Individuals
resolve
involvement at final resolution each situation
time on the
of each resolution from structured basis of
experience
portion of his/her and judgment.
experience and
from
intuition.
3. Repeated 3. Different 3. Different
resolutions managers may managers may
with same data agree on certain reach different
yield data conclusions.
same results.
Why Do Managers Make Poor Decisions?
All managers recognize the importance of making sound decisions. Yet most managers
readily admit having made poor decisions that hurt their company or their own
effectiveness. Why do managers make mistakes? Why don’t decision always result in
achieving some desired goal? Making the wrong decision can result from any one of
these decision-making errors:
 Lack of adequate time
Waiting until the last minute to make a decision often prevents considering all
alternatives. It also hampers thorough analyses of the alternatives.
 Failure to define goals
Objectives cannot be attained unless they are clearly defined. They should be
explicitly stated so that the manager can see the relationship between a decision
and a desired result.
 Using unreliable sources of information
A decision is only as good as the information on which it is based. Poor sources of
information always result in poor decisions.
 Fear of consequences
Managers often are reluctant to make bold, comprehensive decisions because
they fear disastrous results. A “play it safe” attitude sometimes limits a manager’s
effectiveness.
 Focusing on symptoms rather than causes
Addressing the symptoms of a problem will not solve it. Taking aspirin for a
toothache may provide temporary relief, but if an abscess causes the pain, the
problem will persist. Business managers too often foul on the results of problems
instead of the causes.
 Reliance on Hunch and Intuition
Intuition, judgment and ‘feel’ are important assets to the decision maker. But a
manager who permits intuition to outweigh scientific evidence is likely to make a
poor decision.
Some times a manager’s decision is not exactly “poor”, but it still doesn’t produce
optimal results. Less than optimal decisions can have three causes:
1. Bounded rationality imposes limits on a decision, such as that it should be

economical or logistically practical. This limit serves as a screening device,
eliminating some of the alternatives. The manager must choose from the
options that have filtered through the restrictions. The overall optimal decision
may no longer be a valid option when using this method. The decision maker
simply selects the best alternative, given various specifications that must be
met.
2. Sub optimization is a manager’s tendency to operate solely in the interests of

his/her department rather than in the interests of the company as a whole. In
making a decision, the department manager cannot be so self-centered as to
ignore the effects of the action on other areas. The key is to improve the
company’s performance, not just the performance of one department.
3. Unforeseen changes in the business environment also cause less than optimal
decisions.
CHAPTER 5
THE ORGANIZING FUNCTION
In planning, managers set their objectives and determine exactly what to do to attain
these objectives. Of course, no one person can implement all the plans of a modern
organization or one person can not do everything necessary to meet the goals set forth in
those plans. Planning, consequently, requires organizing the efforts of many people. It
forces us to address several basic questions:
 What specific tasks are required to implement our plans?
 How many organizational positions are needed to perform all the required tasks?
 How should these positions be grouped?
 How many layers of management (Organizational levels) are needed to coordinate
them?
 How many people should a manager supervise directly?
The answers to these and other questions enable us to create an organizational
arrangement, a structure, for putting plans into action.
Organizing - is a management function that involves arranging human and non-human
(physical) resources to help attain organizational objectives. It is the management
function that establishes relationship between activity and authority. The end result of an
organizing process is an organization.
Organization - is the total system of social and cultural relationship among peoples who
are joined together to achieve some specific common objectives. It is a whole consisting of
unified parts (a system) acting in harmony to execute tasks to achieve goals effectively
and efficiently.
The Organizing Process

The organizing process has the following steps.
1. Identification of objectives
This is to understand clearly the objectives of the organization, i.e. to reconsider the
objectives established during planning and identify the specific objectives to be pursued.
2. Identification of the specific activities needed to accomplish objectives
Knowing the objectives clearly makes the identification of activities needed clear and
simple. Here we ask what work activities are necessary to accomplish the identified
organizational objectives. Creating a list of tasks to be accomplished begins if we identify
clearly what objective is to be accomplished or met. This identification of specific
activities needed is called division of labor.
3. Grouping of activities necessary to attain objectives
The series number of activities listed and/or identified must be grouped together. That is,
this involves grouping together of activities in accordance with similarities (homogeneity)
of the activities, interdependence, job characteristics or any other grouping criteria, and
this result in departments and the process is called Departmentation. Groping of similar
activities is based on the concept of division of labor and specialization.
4. Assigning group of activities (work) and delegate the appropriate authority
Management has identified activities necessary to achieve objectives, has classified and
grouped these activities into major operational areas and has selected a departmental
CHAPTER 5: 1
structure. The activities now must be assigned to individuals who are simultaneously
given the appropriate authority to accomplish task.
5. Provision for coordination/Design a hierarchy of relationships
This step requires the determination of both vertical and horizontal operating
relationships of the organization as a whole. The vertical structuring of the organization
results in a decision-making hierarchy showing who is in charge of each task, of each
specialty area, and the organization as a whole. Levels of management are established
from bottom to top in the organization. These levels create the chain of command, or
hierarchy of decision-making levels, in the company.
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The horizontal structuring has two important effects.
i. It defines the working relationships between operating departments
ii. It makes the final decision on the span of control (the number of subordinates under
the direction of each manager).
The result of this step is a complete organization structure. This structure is shown
visually by an organization chart.
Importance of Organizing
a. Organizing promotes collaboration and negotiation among individuals in a group. Thus, it
improves communication within the organization.
b.Organizing sets clear-cut lines of authority and responsibility for each individuals or
department’s. It helps employees to know their responsibilities and concentrate on the
key tasks at hand. It specifies who is responsible for what.
c.Organizing improves the directing and controlling functions of managers. It enables
management to effectively control the work and workers.
d. Organizing develops maximum use of time, human, and material resources. It also
enables for proper work assignment for individuals in pursuit of common goal.
e. Organizing enables the organization to maintain its activities coordinated so that the
efforts of managers and employees can be well integrated and directed towards an end;
i.e. to accomplish organizational goal.
Types of Organizations
These are two types of organizations: Formal and informal
Formal organization - is the intentional, deliberate or rational structures of roles in a
formally organized enterprise. It is characterized by well-defined authority - reporting
relationships, job titles, policies, procedures, specific job duties and a host of other factors
necessary to accomplish its respective goals.
It is represented by a printed chart that appears in organizational manuals and other
formal company documents called organization chart. Organization chart is a diagram of
formal relationship which shows how departments are tied together along the principal
lines of authority. Formal organization has consciously designed durable and inflexible
structure. Formal organization may have legal personality.
Informal organization - is a network of personal and social relationships that arises
spontaneously as people associate with one another in a work environment. It is an
unofficial network of personal and social relations developed as a result of association or
working together. E.g. the Chess group, the Morning Coffee group, the Bowling team, etc. It
operates outside formal authority relationships. It doesn’t have legal personality. Informal
organization develops within the formal organization. It is composed of all the informal
groupings of people with in a formal organization (it is not only the domain of workers;
managers form informal groups that cut across departmental lines). Informal
organization has a structure which is loosely designed, highly flexible and spontaneous. In
such an organization, the pattern of information flow, the exact nature of relationships
among the members, and the goals of the organization are unspecified. However, to
identify the existence of informal organizations and their composition we can use two
tools: a Sociogram and an Interaction Chart.
CHAPTER 5: 3
A Sociogram is a diagram of group attraction. The Sociogram is developed through a
process asking members whom they like or dislike and with whom they wish to work or
not to work. It is based on the belief that group interactions are the result of people's
feelings of like and dislike for another.
An Interaction Chart is a diagram that shows the informal interactions people have with
one another. For any specific person, the chart can show with whom the person spends
the most time and with whom the person communicates informally.
Members in most informal organizations change with time, i.e. when people highly vary in
income level, educational background, status, etc they tend to leave the original group and
join the new one. Members are bonded together through the need for one another’s
company and the fact that they find their memberships beneficial to them in one way or
another, i.e. mutual benefit is the bondage between or among members.
CHAPTER 5: 4
The informal organization presents a challenge for a manager because it consists of actual
operating relationships not prescribed by the formal organization and, therefore, not
shown on the company’s organizational chart.
Types of Groups in the Informal Organization
The informal organization is often looked at as groups of people. Informal groups may be
described as horizontal, vertical, or mixed. These titles indicate whether the group
members come from the same or different levels of formal organization.
Horizontal Groups:
 Include persons whose positions are on the same level of the organization i.e. they are
groups that are formed by peers.
 The groups can consist of all the members in the same work areas or membership
developed across departmental lines.
 Members may be all management or non-management personnel.
 Horizontal groups are the common kind of informal groups by virtue of the ease of
accessibility.
 Membership in a horizontal group is usually mutually beneficial to individuals - “You
help me and I will help you”. People in the same or related work areas often share the
same problems, interests, and concerns.
Vertical Groups:
 Include people on different levels of the formal organization’s hierarchy.
 These people always come together within the same department (work areas).
 A vertical group can consist of a supervisor and one or more of his/her employees. It
may also be formed through skip - level relationships - a top-level manager may
associate with a first level manager.
 Their relationships can be the result of outside interests or various employment
relationships.
Mixed Group:
 It is a combination of two or more persons whose positions are on different levels of the
formal organization and in different work areas.
E.g. A Vice-President may develop a close relationship with the director of computer
services in order to get preferential treatment.
A production manager may cultivate an informal, social relationship with the director of
maintenance for the same reason.
 Mixed groups often form because of common bonds outside work.
Why people form informal groups?

Informal groups are formed for different reasons
1. Need for satisfaction
People have needs that in some cases are not met through the formal organization. The
opportunity to fulfill security, affiliation, esteem, and sometimes self-actualization needs
can encourage people to look out and join others in an informal group. They provide the
opportunity to satisfy needs.
2. Proximity and interaction
A common reason people join groups is that they work near one another. This can be
either through working in close proximity physically or because of frequent interaction.
Horizontal informal groups are prime examples of this.
3. Similarity
CHAPTER 5: 5
People may join informal groups because they are attracted to other people who are
similar to themselves. Several persons with the same attitudes or beliefs may join one
group. Other factors or similarity can be personality, race, sex, economic position, age,
educational background etc.
* In informal group/organization one is not limited to one informal organization because
there may exist still unsatisfied needs by involving in one/two informal organization.
CHAPTER 5: 6
Why informal groups exist?
Informal groups remain in existence because they serve four major functions:
1. They maintain the social and cultural values of the group members.
Individuals in the group are likely to share the same beliefs and values as a result of
background, education, or cultural heritage. The many areas about which the group may
have beliefs are reinforced and maintained by the group environment. Such belief areas
are, for example, the work ethic.
2. They provide group members the opportunity for status fulfillment and social interaction.
Individuals can receive what the formal organization cannot or has not chosen to provide.
“I am just another figure” feeling (identity crisis) may be avoided by informal group. E.g.
an individual whose post is a technician may assume a position of head for a volleyball
team.
3. They provide information for their members
The informal group develops its own system and channels of communication parallel to
management’s formal channels. The ability to acquire access to information for members
is a major function of informal groups. Crucial information can be obtained through
informal communications.
4. They influence the work environment
Informal groups regulate or influence the behavior, dress, or work standards of their
members through positive means-acceptance, support, and affiliation or through negative
methods – threats of ostracizing non-complying members. The informal group can also
regulate or influence the actions of management and other informal groups.
The Impact of Informal Organization on the Formal Organization

The groups that compose the informal organization can affect the formal organization
negatively and positively.
The Negative Impacts
i. Resistance to change: The informal organization can resist change. In an effort to
protect its values and beliefs, the informal group can place roadblocks in the path to any
modifications in the work environment. The informal group shows its resistance through
hampering its implementation.
ii. Conflict: The informal group can create two “masters” for an employee. In an attempt to
satisfy the informal group, the employee may come in conflict with the formal
organization.
E.g. The Company may allow 10 minutes for coffee break; however, the informal group
may extend it to 30 minutes for the employee’s social satisfaction. There, the employee’s
social satisfaction is in conflict with the employer’s need for productivity.
iii. Rumor: The informal communication system - the grapevine - can create and process
false information or rumors. The creation of rumors can upset the balance of the work
environment.
iv. Pressure to conform: The norms that the informal groups develop act as a strong
inducement toward conformity. The more cohesive the group, the more accepted are the
behavioral standards. Non-conforming in the person’s reference group can result in
gentle verbal reminders from the group but can escheat to harassment
CHAPTER 5: 7
- ostracism
The Positive Impacts

Despite the possibility of these problems, informal groups do have the potential to be
helpful to managers.
i. Makes the total system effective: If the informal organization blends well with the
formal system, the organization can function more effectively. The ability of the informal
group to provide flexibility and instantaneous reactions will polish the plans and
procedures developed through the formal organization.
ii. Provides support to management: The informal organization can provide support to
the individual manager. It can fill in gaps in the manger’s knowledge through advice or
through performing the work, for example, budgeting and scheduling. By performing
effectively and positively, it can build a cooperative environment. This, in turn, can mean
more delegation to the employees and less time spent by the manager controlling
employee behavior.
CHAPTER 5: 8
iii. Provides a useful communication channel: The informal organization provides
employees with the opportunity for social information, for discussing their work, and for
understanding what is happening in the work environment.
iv.Encourages better management: Managers should be aware of the power of the
informal organization in what is actually a check and balance system. Planned changes
should be made with an awareness of the ability of the informal group to make the plan
successful or unsuccessful.
v.Provides stability in the environment: The informal organization can provide
acceptance and belonging. This feeling of being wanted by the group can encourage
employees to remain into environment, thus reducing turnover. Additionally, the informal
organization provides a place for a person to vent frustrations. Being able to discuss them
in a supportive environment may receive emotional pressures.
Major Elements of the Organizing Function

Division of Labor
When joint accomplishment of a grand task is the goal of many people, this overall task
must be split into its component jobs and apportioned among the people involved. It is
only after these jobs are correctly done that the grand task can be achieved. The degree to
which the grand task of the organization is broken down and divided into smaller
component parts is referred to as division of labor. Division of labor is performed in light
of organizational objectives. It begins by determining (sub tasks) called jobs that are
necessary to accomplish the identified objectives. These sub tasks could include ongoing
tasks which are part of the regular routine for running any business such as hiring and
record keeping or tasks unique to the nature of the business; such as assembling,
machining, storing, inspecting, selling, advertising, computer programming.
After determining the sub-tasks, sub-tasks will be defined by enumerating the activities
that each individual sub-tasks would entail in terms of what the incipient sub task
performer is expected to do. This is called job description. Job description is an account of
activities what the sub-task performer is expected to perform and the associated
authority and responsibility relationships among jobs. The sub-task assigned to the sub
task performer is called job. Thus by doing so individuals specialize in doing part of the
task rather than the entire task, i.e. division of labor in effect is the assignment of various
portion of a particular task among organizational members.
In short, division of labor involves:
 Breaking down a task into its most basic elements
 Training workers in performing specific duties
 Sequencing activities so that one person's efforts build on another's
Advantages of Division of Labor

1. It enables a person performing a task to become highly proficient in a relatively
short time; as a result efficiency and productivity increases.
2. Decreased transfer time. It saves the time that is always lost in changing from one job to
another.
3. Less wastage of materials in the learning process including time.
4. Ease of supervision. When employees are performing similar simplified tasks it will
CHAPTER 5: 9
require the superior to have a narrow range of skills to effectively oversee subordinates.
5. Training is more easier with specialization and takes shorter period. Plus, it decreases
training cost.
Disadvantages of Division of Labor

6. Boredom and fatigue caused by monotonous, repetitive tasks because the work becomes
less challenging.
7. Specialization would result in workers' having limited knowledge.
8. Creates communication barriers. Specialists develop their own language and customs,
which can hamper communication across departments.
9. Specialization sometimes causes workers to think more in terms of their department or
function instead of the company. Becoming engrossed in their own tasks, they lose sight
of the company's mission.
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10. Specialization leads to time-oriented confusion. Production department, for instance, are
commonly short-run oriented; research and development departments are concerned
with the long term. Consequently, production departments typically evaluate their
performance in the short run, where as R&D efforts may so unrecognized for several
years.
11. Different specialties often formulate rules, policies, and procedures that conflict with
those of other operational units.
Departmentation: Meaning and Bases
Departmentation - All organizations, regardless of their size or mission, divide their
overall operations into sub-activities and then combine these sub-
activities into working groups. This process of grouping specialized
activities in a logical manner is called Departmentation.
Department - is a distinct area, division, or branch of an organization over which a
manager has authority for the performance of specified activities. It is a
unit formulated as a result of the Departmentation process.
The physical and mental limitations of individual managers to effectively oversee and
coordinate activities beyond a given limit partly justify the need for departmentation.
Departmentation is not an end in it self but is simply a method of arranging activities to
facilitate the accomplishment of objectives.
Bases for Departmentation

Since organizations are different in their activities, objectives and areas in which they
operate, there are different bases for departmentation. The most common bases are
function, territory, product, customer, and process
I. Departmentation by Function
It is the grouping together of activities in accordance with the functions of an enterprise -
on the basis of similarity of expertise, skills or work activities. In other words, jobs that
call for certain skills or the use of similar working methods will be put together. It is
probably the most common base for departmentation and is present in almost every
enterprise at some level in the organization structure. It asks the question “what does the
enterprise/organization do” what kind of activities. E.g. Human resources, production,
marketing, finance, etc.
It is the responsibility of top management to identify the activities needed for the
attainment of organizational goals and then groups these activities into distinctive
units, each one dealing with functionally similar activities and then assign them to
people who can perform them efficiently and effectively.
Advantages:
1. It is a logical reflection of functions.
2. It maintains power and prestige of major functions of the organizations. Assigns
responsibility of each function to the head of that function by providing individual
status and prestige to major functional areas.
3. It follows principle of occupational specialization, thereby promoting efficiency in the
utilization of people. Simplifies to fill vacant positions.
4. It simplifies training. Train functional specialists by indicating special abilities required.
5. Provides unity of command for closely related activities.
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6. Managers have an easier time coordinating and planning because all the jobs that
report to them are similar in content.
7. Promotes specialization and operational efficiency. Because closely related activities
and employees are grouped together, functional departmentation permits effective
economies of scale.
Disadvantages
1. De-emphasis of overall company objectives - narrow minuends may develop.
Identification with the department and its objective is often stronger than
identification with the organization and its objectives.
2. Over specializes and narrow viewpoints of key personnel.
3. Reduce coordination and communication between (among) functions.
CHAPTER 5: 1
4. Decisions are concentrated at the top management, creating delay.
5. Limits development of general managers.
II. Departmentation by Territory/ Geography
 Groups activities on the basis of geographic region or territory.
 Is common in enterprises that operate over wide geographic areas i.e. it is attractive to
large-scale firms or other enterprises whose activities are physically or geographically
dispersed. The logic is that all activities in a particular area or region should be
assigned to a manager. This individual would be in charge of all operations in that
geographic area.
 Can be used by business, government, NGOs, or other enterprises.
Geographic departmentalization works best when different laws, currencies,
languages and traditions exist and have a direct impact on the ways in which business
activities must be conducted.
Advantages
1. Places emphasis on local markets and problems; better face to face communication
with local interests or allows the company to address needs or characteristics of
consumers that are particular to that area.
2. Encourages local participation in decision-making
3. Improves coordination of activities in a region
4. Takes advantage of economies of local operations
5. Furnishes measurable training ground for general managers. Managers are
responsible for the activities in that geographic area. Decision concerning that region
will be made of that level and not forwarded up the chain of command.
6. Encourages decentralized decision-making.
Disadvantages
1. Requires more persons with general manager abilities
2. Duplicates staffs, services, or effort.
3. Tends to make maintenance of economical central services difficult and may
require services such as personnel or purchasing at the regional level
4. Increases problem of top management control
III. Departmentation by Product (Line)
It is the grouping and arrangement of activities around products or product groups.
Departmentation by product should be considered when attention, energy and efforts
need to be focused on an organization’s particular products. This can be true if each
product requires a unique strategy or product process or distribution system or
capital sources.
 This approach works well for an enterprise which engaged in very different types of
products.
E.g. Textile products - Nylon products, woolen products, silk products,
cotton products Petroleum refining - kerosene, diesel,
Electronics - Radios, TVs, Computers
Advantages
1. Places attention and effort on product line
2. Facilitates use of specialized skill, capital facilities and knowledge
3. Permits growth and diversity of products and services
4. Places responsibility for profits at the division level
5. Furnishes measurable training ground for general managers
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Disadvantages
1. Requires more persons with general manager abilities
2. Tends to make maintenance of economical central services difficult - duplication of
business functions within each product line. Each needs marketing, personnel, finance,
and production operations, which may be so specialized they are unable to serve
more than one product line or division.
3. Presents increased problem of top management control
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IV. Departmentation by Customer
It is a grouping of activities around customers. This grouping reflects a primary
interest in customers. Customers are the key to the way activities are grouped when
each of the different things an enterprise does for them is managed by one
department head. This makes economic sense when the customers are distinct enough
in their demands, preferences, and needs. It helps organizations meet the special and
widely varying needs of customers. It can be used in medical institutions such as
hospitals and clinics - emergency services, out patient services, inpatient services, x-
rays; retail stores- men's clothing, women's clothing, children's clothing.
Advantages
1. Encourages concentration on customer needs
2. Gives customers the felling that they have an understanding supplier
3. Develops expertness in customer area
Disadvantages
1. May be difficult to coordinate operation between competing customer demands
2. Requires managers and experts in customers’ problems
3. Customer groups may not always be clearly defined
4. The possibility of underemployment of facilities and labor specialized workers in
customer groups
V. Departmentation by Process
Manufacturing firms often group activities around a process or type of equipment. This
is when special skill is needed to operate different machines. Making plywood, for
example, involves several sequential process: poling (removing bark from logs); sawing
logs in to 8’ lengths, heating; veneer stripping and stamping veneer sheets in to 4'
segments; drying and grading according to quality; gluing plies together; finishing and
bundling.
Advantages
1. Achieves economic advantage
2. Uses specialized technology
3. Simplifies training
Disadvantages
1. Coordination of departments is difficult
2. Responsibility for profit is at the top
3. Is unsuitable for developing general mangers
VI. Departmentation on Combined Base

It is a base in which multiple bases are used at different organizational levels of a
particular organization.
Delegation of Authority
Authority - is the right to commit resources (that is, to make decisions that commit an
organization’s resources), or the legal (legitimate) right to give orders (to tell
someone to do or not to do something)
- is the right to make decisions, carry out actions, and direct others in matters related to
the duties and goals of a position
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-is the formal right of a superior to command and compel his subordinates to perform a
certain act. All managers in an organization have authority. It provides the means of
command.
Generally, level of authority varies with levels of management. Higher-level managers
have greater authority, with ultimate power resting at the top. Authority decreases all the
way to the bottom of the chart, where positions have little or none. Authority is vested in
a manager because of the position he/she occupies in the organization, that is why we say,
“authority comes with the territory.”
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When an organization gives one of its members authority, or the legitimate right to use
power over others, it carries with it the burden of responsibility. Responsibility means
being held accountable for attainment of the organization’s goal. Authority is derived
from the person’s official position in the organization. The person who occupies the
position has its formal authority as long as he/she remains in the position. As the job
changes in scope and complexity, so should the amount and kind of formal authority
possessed. Even though a manager has formal or legitimate authority, it is wise to
remember that the willingness of employees to accept the legitimate authority is a key to
effective management. Chester Bernard called this Acceptance Theory of Authority.
Delegation of Authority - is the downward pushing of authority from superiors to
subordinates to make decision within their area of responsibilities. It is the process of
allocating tasks to subordinates, giving them adequate authority to carry out those
assignments, and making them obligated to complete the tasks satisfactory. Delegation is
a concept describing the passing of formal authority to another person. It is the
assignment of part of a manager’s work to others, along with both the responsibility and
authority necessary to achieve expected results.
Delegation is necessary for an organization to exist. Just no one person in an enterprise
can do all the tasks necessary for accomplishing a group purpose, so is it impossible, as
an enterprise grows, for one person exercise all the authority for making decisions.
In delegating authority a manager doesn’t surrender his power because he does not
permanently dispose of it; delegated authority can always be regained. This is called
recovery of delegated authority. Reorganization inevitably involves some recovery and
redelegation of authority. In a shuffle in an organization, rights are recovered by the
responsive head of the firm or a department and then redelegated to managers of new or
modified departments.
The Process of Delegation

Delegation of authority has the following steps:
1. Assignment of tasks
Specific tasks or duties that are to be undertaken are identified by the manager for
assignment to the subordinate. The subordinate is then approached with the assignment
(task).
2. Delegation of authority
In order for the subordinate to complete the duties or tasks, the authority necessary to do
them should be delegated by the manager to the subordinate. A guideline for authority is
that it be adequate to complete the task - no more and no less.
3. Acceptance of responsibility
Dispensability is the obligation to carryout one’s assigned duties to the best of one’s
ability. It is the obligation created when someone accepts task assignments together with
the appropriate authority. Responsibility is not delegated by a manager to an employee,
but the employee becomes obligated when the assignment is accepted. The employee is
the receiver of the assigned duties and the delegated authority; these confer
responsibility as well.
4. Creation of accountability
Accountability is having to answer to someone for your results or actions. It means taking
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the consequences - either credit or blame. It is the requirement to provide satisfactory
reasons for significant deviations from duties or expected results. When the subordinate
accepts the assignment and the authority, s/he will be held accountable or answerable for
actions taken. A manager is accountable for the use of his/her authority and performance.
The manager is also accountable for the performance and actions of subordinates.
The manager should take the time to think through what is being assigned and to confer
the authority necessary to achieve results. The subordinate, in accepting the assignment
becomes obligated (responsible) to perform, knowing that s/he is accountable
(answerable) for the results.
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Importance of Delegation
1. It relieves the manager from his/her heavy workload: Delegation frees a manager from
some time consuming duties that can be adequately handled by subordinates and lets the
manager devote more time to problems requiring his/her full attention (lets the manager
concentrate on strategic issues). Enables managers to perform higher level work.
2. It leads to better decisions: Since subordinates are closer to real “firing line” activities and
problems than superiors, they have more realistic information and better understanding.
The realistic information that subordinates have may lead them to make better decisions.
3. It speedup decision-making: Decisions made by lower level managers usually are timelier
than those that go through several layers of management.
4. It helps subordinates to train and builds moral: Subordinate managers can reach their full
potential only if given the chance to make decisions and to assume responsibility for
them.
5. It encourages the development of professional managers: Had there not been any
delegation, professional managers wouldn’t have been produced.
6. It helps to create the organization structure: If there were no delegation of authority is an
organization, there would exist only the president/CEO/ top-level manager. And an
individual cannot create an organization.
Centralization and Decentralization

The terms centralization and decentralization refer to a philosophy of organization and
management that focuses on either the selective concentration (centralization) or the
dispersal (decentralization) of authority within an organization structure. Centralization
or decentralization is a relative concept when applied to organizations. They are
tendencies of delegation of authority.
Centralization - is the extent to which power and authority are systematically retained by
top managers.
If an organization is centralized:
- Decision-making power remains at the top
- The participation of lower-level managers in decision-making is very low
Decentralization - is the extent to which power and authority are systematically
dispersed / delegated throughout the organization to middle and lower level managers. It
is the tendency to disperse decision-making authority in an organized structure.
 In a decentralized organization decision-making power is pushed downwards and lower-
level managers actively participate in decision-making process. That is, they are not only
called for implementation but also for decision-making.
Centralization and decentralization are not opposites rather they are
tendencies/proportions in delegation of authority. If they were opposites, there could be
absolute centralization or absolute decentralization, but there is no absolute
centralization or absolute decentralization. There could be absolute centralization of
authority in one person. But that implies no subordinate managers and therefore no
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structured organization. Some decentralization exists in all organization, on the other
hand, there cannot be absolute decentralization, for if managers should delegate all their
authority, their status as mangers would cease, their position would be eliminated, and
there would, again, be no organization. Centralization and decentralization are
tendencies; they are qualities like “hot” and “cold”.
 Centralization and decentralization form a continuum with many possible degrees of
delegation of power and authority in between.
When decentralization is greater:
 The greater is the number of decisions made at lower level of the organization
 The more functions are affected by decisions made at lower levels
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 The less a subordinate has to refer to his/her manager prior to a decision and the less
checking required as decisions are made at the lower level.
Factors Determining Delegation

Managers cannot ordinarily be for or against decentralization of authority. They may
prefer to delegate authority, or they may like to make all the decisions. Some factors that
affect the degree of centralization or decentralization- delegation of authority- are:
1. The history and culture of the organization: Whether authority will be decentralized
frequently depends upon the way the business (organization) has been built. Those
enterprises that, in the main, expand from within show a marked tendency to keep
authority centralized. On the other hand, enterprises that result from mergers and
consolidations are likely to show, at least first, a definite tendency to retain decentralized
authority. In other words, organizations which were centralized or decentralized at their
establishment tend to centralize and decentralize authority to repeat what they have done
before. When centralized organization is changed into decentralization and the vice versa
people feel discomfort.
2. The nature of the decision: The costlier and the riskier the decision is, the more
centralized the authority will be. Cost may be reckoned directly in birr and cents or in
such intangibles as the company’s reputation, its competitive position or employee
morale. The fact that the cost of mistake affects the decentralization isn’t necessarily
based on the assumption that top managers make fewer mistakes than subordinates.
They may make fewer mistakes, since they are probably better trained and in possession
of more facts, but the controlling reason is the weight of responsibility. Delegating
authority is not delegating responsibility; therefore, managers typically prefer not to
delegate authority for crucial decisions.
3. Availability and ability of managers (Lower level managers): A real shortage of managers
would limit decentralization of authority, since in order to delegate, superiors must have
quantified managers to whom to give authority. In addition to the availability of lower
level managers, the quality of the existing lower level managers (subordinates) has
impact on centralization or decentralization. Hence, the competency to carry out and
exercise the delegated authority has some effects. Some managers lack confidence in
their subordinate or fear the consequences or criticism of having subordinates make bad
decisions.
4. Management philosophy: The willingness of managers to delegate authority and limit the
degree of decentralization or the desire to do the job by herself/himself. The character
and philosophy of top executives have an important influence on the extent to which
authority is decentralized. Sometimes top managers are despotic, tolerating no
interference with the authority they jealously hoard. At other times, top managers keep
authority not merry to gratify a desire for status or power but because they simply
cannot give up the activities and authorities they enjoyed.
5. Size and character of the organization: The larger the organization, the more decisions to
be made, and the more places in which they must be made, the more difficult it is to
coordinate them. These complexities of organization may require policy questions to be
passed up the line and discussed not only with many managers in the chain of command
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but also with many managers at each level, since horizontal agreement may be as
necessary as vertical clearance.
Slow decisions - show because of the number of specialists and managers who must be
consulted - are costly. To minimize the cost, authority should be decentralized wherever
feasible. Also important in determining size is the character of a unit. For decentralization
to be thoroughly effective, a unit must possess a certain economic and managerial self-
sufficiency.
6. Geographic dispersion of operations: Geographic dispersion of operations makes
decentralization more necessary because top executives frequently find it impossible to
keep abreast of the details of what is going on at various locations. Moreover, managers
on site may be in a better position to assess local situations and make appropriate
decisions.
7. Environmental uncertainty: Environmental uncertainty tends to produce a need for more
decentralization. In this case, the fast pace of change interferes with top management’s
ability to assess situations with the speed necessary to make timely decisions.
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Problems in Effective Delegation
Despite of the advantages, many managers are reluctant to delegate authority and many
subordinates are reluctant to accept it. Both these barriers hinder effective delegation.
Reluctance to delegate/Problems from Managers
There are a number of reasons that managers commonly offer to explain why they do not
delegate. Some are:
1. Fear of loss of power - Some managers fear when they delegate authority because they
expect that they will be substituted/replaced by their subordinates if subordinates have
got the experience and skill of decision-making.
2. “I can do it better myself” fallacy: Some managers have an inflated worth of themselves
and think that they do everything better than their subordinates.
3. Lack of confidence in subordinates: The perception of managers that my subordinates just
are not capable enough. When managers delegate authority to their subordinates they do
also delegate responsibility. That is, managers are accountable for the actions of their
subordinates and may fear the blame if subordinates fail, if subordinates lack knowledge
and skill.
4. Fear of being exposed: Some managers fear that their subordinates do too good job as
compared with themselves i.e. feel threatened that competent subordinates may perform
too well and possibly make the manager look poor by comparison.
5. Difficulty in briefing: Many times managers are reluctant to delegate authority if they
conclude that the time for briefing is more than the time for decision-making or if they
believe they lack the time to train subordinates. “It takes too much time to explain what I
want done”.
Reluctance to Accept Delegation/problems from subordinates
1. Fear of failure and criticism: Subordinates who fear criticism or dissemble for mistake are
frequently reactant to accept delegation. The solution for this problem can be teaching
subordinates when they make mistakes than criticizing or dismissing.
2. Subordinate may believe that the delegation increases the risk of making mistakes but
doesn’t provide adequate rewards for assuming greater responsibility: Lack of incentive or
reward for assuming a greater workload. Accepting delegation frequently means that they
will have to work harder under greater pressure. Without appropriate compensation
subordinates may be unwilling to do so.
3. Lack of adequate information and resources: If subordinate managers think that they don’t
have enough factual information on which to base a decision or other resources necessary
to carryout the assigned duties, they tend to decline/reject accepting authority delegated.
4. If subordinates are already overworked
5. Lack of self-confidence
6. Believing / Thinking that decision-making is the boss’s job.
Overcoming the barriers in effective delegation

The most basic prerequisite to effective delegation is the willingness of managers to give
their subordinates real freedom to accomplish delegated tasks. Managers have to accept
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the fact that there are usually several ways to solve a problem and that subordinates may
legitimately choose a path differently from their own. And, subordinates will make errors
in carrying out their tasks. But they must be allowed to develop their own solutions to
problems and learn from their mistakes. The solution to subordinates mistake is not for
the manager to delegate less, but to train or otherwise support subordinate more.
Improved communication between managers and subordinates will increase mutual
understanding and thus help to make delegation more effective. Managers who know the
abilities of their subordinates can more realistically decide which tasks can be delegated
to whom. Subordinates who are encouraged to use their abilities and who feel their
managers will “back them up” will in turn be more accepting of responsibility
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Authority Relations in Organization
(Line, Staff, Functional)
In an organization different types of authority are created by the relationships between
individuals and between departments. There are three types of authority.
i. Line Authority
Line authority defines the relationship between superior and subordinate. It is a direct
supervisory relationship. It exists in all organizations as an uninterrupted score or series
of steps.
In line authority a superior exercises direct command over a subordinate. Line authority
is represented by the standard chain of command that starts with the most superiors and
extends down through the various levels in the hierarchy to the point where basic
activities of the organization are carried out.
ii. Staff Authority - is advisory in nature.

The function of people in a pure staff capacity is to give advice, expertise, technical
assistance, and support to help line managers to work more effectively in accomplishing
objectives. Advisory authority doesn’t provide any basis for direct control over the
subordinates or activities of other departments with whom they consult (Within the staff
manager’s own department, s/he exercises line authority over the department’s
subordinates).
E.g. Personnel, research and development, legal, plant maintenance, compost quality
control, etc.
 Staff authority is advisory and normally flows upward.
Line and Staff Departments: line and staff authority are concepts that describe the
authority granted to managers. Line and staff departments have different roles or
positions within the organization structure. Line departments, headed by line managers,
are the departments established to meet the major objectives of the organization.
Departments normally designated as line departments include production, marketing, and
finance. In functioning with employees and departments under their control, line
managers exercise line authority.
Staff departments provide assistance to the line departments and to each other. They can
be viewed as making money indirectly for the company through advice, service and
assistance. Staff departments are created on the basis of the special needs of the
organization. As an organization develops, its need for expert, timely, ongoing advice
becomes critical. Examples could be legal, personnel, computer service, etc.
iii. Functional Authority

It is the right which is delegated to an individual or a department to control specified
process, practices, or provinces or other matters relating to activities undertaken by
persons in other departments. If the principle of unity of command were followed without
exception, authority over these activities would be exercised only by their line superiors,
but numerous reasons - including a lack of specialized knowledge, lack of abilities to
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supervise processes, and danger of diverse interpretations of policies - explain why they
occasionally are not allowed to exercise this authority. It is delegated by their common
superior to a staff specialist or to a manager in another department.
Functional authority is not restricted to managers of a particular type of department. It
may be exercised by line, derive or staff department heads, more often the latter two,
because they are usually composed of specialists whose knowledge becomes the basis for
functional controls.
Example:
1. The Finance Manager can give direct command to the marketing manager of the same
level about financial affairs.
2. The Legal Advisor can give direct command to others concerning the legal affairs of the
organization.
3. The Personnel Manager can give direct command to others regarding recruitment,
selection, performance appraisal systems
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Benefits of Staff
1. Staff managers provide advice for line managers, i.e. the advice of well-qualified
specialists in various areas of an organization’s operations can scarcely be overestimated,
especially as operations become more complex.
2. These specialists may be allowed to the time to think, to gather data, and analyze, when
their superiors, busy managing operations, cannot do so.
 As problems become more complex, staff analysis and advice becomes an urgent necessity.
Conflict between Staff and Line Managers
For several reasons there is a conflict between line and staff managers. Some are:
1. Demographic factor: There is a general premise that staff mangers are younger, well
educated, firmly attached to their profession than their organization and want more
money, power and prestige. The older line officers dislike or receiving what they regarded
as instructions from someone so much younger than themselves.
2. Threats to Authority: Line managers consider staff managers as potential threats to their
authority, particularly if staff managers exercise functional authority.
3. Dependence on knowledge: Line managers feel discomfort and get frustrated when they
progressively depend on the advice of staff managers; i.e. they fell that they are less
important to the organization.
4. Staff managers may exceed their authority and attempt to give direct command to the line
managers.
5. Staff managers may attempt to take credit for ideas implemented by line managers;
conversely, line managers may not acknowledge the role of staff managers.
6. Staff departments are organizationally placed in a relatively high position to top
management.
Resolving Conflict
The line - staff problem is not only one of the most difficult that organizations face but
also the source of an extra ordinarily large amount of inefficiency, solving this problem
requires great managerial skill, careful attention to principles and patient teaching of
personal. Some ways of resolving the conflict include:
1. Understanding authority relationships: Managers must understand the nature of authority
relationships if they want to solve the problems of line and staff. Line means making
decisions and acting on them. Staff relationship, on the other hand, implies the right to
assist and counsel. In short the line may “tell”, but the staff must “sell” (its
recommendations).
2. Making line listen to staff: Although line-staff friction may stem from ineptness or
overzealousness on the part of staff people, trouble also arises when line executives too
carefully guard their authority and resent the very assistance they need. Line manager
should be encouraged or required to consult with staff. Enterprises would do well to
adopt the practice of compulsory staff assistance where in the line must listen to staff.
3. Keeping staff informed: Common criticisms of staff are that specialists operate in a
vacuum, fail to appreciate the complexity of the line manager’s job, or overlook important
facts in making recommendations. Specialists should take care that their
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recommendations deal only with part of a problem. Many critics arise because staff
assistants are not kept informed on matters in their field. Even the best assistant cannot
advise properly in such cases. If line managers fail to inform their staff of decisions
affecting its work or if they don’t pave the way through announcements and requests for
cooperation - for staff to obtain the requisite information on specific problems the staff
cannot function as intended.
4. Requiring completed staff work: Completed staff work implies presentation of a
recommendation based up on full consideration of a problem, clearance with persons
importantly affected, suggestions about avoiding any difficulties involved, and often,
preparation of the paper work - letters, directives, job descriptions, job specifications so
that a manager can accept or reject a proposal without further study, long conferences, or
unnecessary work.
5. Clear areas of responsibility and accountability for results.
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Span of Management
Meaning: The term span of management is also referred to as a span of control, span of
supervision, span of authority or span of responsibility.
Span of management - refers to the number of subordinates who report directly to a
manger, or the number of subordinates who will be directly
supervised by a manager.
This varies from one situation to another. There is no magical number for the span of
control. There are various factors affecting the span of management. Based on the number
of subordinates who should report to a manager or the number of subordinates that a
superior should supervise, we can have Wide span of management and Narrow span of
management.
i. Narrow Span of Management

This means superior controls few numbers of subordinates or few subordinates report to
a superior. When there is narrow span of management in an organization, we get:
 Tall organization structure with many levels of supervision between top management
and the lowest organizational level.
 More communication between superiors and subordinates.
 Managers are underutilized and their subordinates are over controlled.
 More trained managerial personnel and centralized authority.
Advantages
1. Close supervision and control
2. Fast communication between subordinates and superiors.
3. Easy to coordinate and control activities.
Disadvantages
1. Superiors tend to get too involved in the subordinates work
2. The problem of setting more trained managerial personnel
3. Excessive distance between lowest level and top level management. This kills intuitive for
top-level positions.
4. High costs due to many levels
ii. Wide Span of Management

This means many subordinates report to a superior or a superior supervises
many subordinates. If the span of management is wide, we get:
 A flat organization structure with fewer management levels between top and lower level
 Many number of subordinates and decentralized authority
 Managers are overstrained and their subordinates receive too little guidance and control
 Fewer hierarchal level
Advantages
1. Superiors are forced to delegate
2. It initiates the development of clear polices
Disadvantages
1. Tendency of overloaded superiors to become decision bottle necks
2. Danger of superior’s loss of control
3. Require exceptional quality of mangers
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Span of Control Vs Levels of Management: If one wants to reduce the number of
hierarchical levels in an organization, the only way to do so without reducing the number
of employees at the bottom is to increase spans of control.
Relationship of centralization to span of control

The company’s philosophy of centralization or decentralization in decision-making can
influence the span of control of subordinate managers. A philosophy of decentralized
decision-making generally means that the span of management should be wider for each
manager. This is so because decision-making is forced down to subordinates, thus feeling
up a manager’s time commitments. This situation also generally means fewer level of
management in an organization.
Conversely, a philosophy of centralized decision-making should result in a narrower span
of control and more levels of management. If it is the philosophy of the company to have
managers make the majority of decisions, the mangers will closely supervise their
subordinates and delegate little. Contacts with subordinates should increase in number
and in length, thus narrowing the span of control.
Factors Determining an Effective Span of Management

The principle of span of a management states that there is no any specific number of
subordinates to be supervised by a manager. Rather, it states, there are factors that affect
the span of management. Some are:
1. Ability of the manger: The ability of the manager (supervisor) who is responsible for
supervising subordinates affects the span of a management. If the manager is well trained
and highly capable, receives assistance in performing her/his supervisory activities,
doesn’t have many additional non-supervisory activities to perform, and if that manager
defines tasks and responsibilities to subordinates clearly, the appropriate span can be
relatively broad (wide).
2. Manager’s personality: if managers strongly need to share power, they may prefer a
wider span of control. Some managers develop reputation as empire builders and attempt
to increase their spans.
3. The abilities of subordinates: The amount of training, experience, and ability that
subordinates have is directly related to a manager’s span of control. Knowledgeable
subordinates who work well on their own require less supervision than inexperienced,
poorly trained workers do. Well - trained subordinates require not only less of their
manager’s time but also fewer contracts with them.
4. Motivation and commitment: motivated employees take initiative and responsibility,
utilize and develop their skills committed to their job, devote more time and effort and
needs less of their supervisor’s time.
5. Need for autonomy: subordinates with high need for autonomy prefer to make decisions
by themselves (wider span) and vise versa is true for those who take every problem to
their superior for decision-making.
6. Type of work - Routines and simplicity of work. Managers supervising people with simple
and repetitive jobs are able to manage more immediate subordinates than are those who
supervise people with complex, non- repetitive tasks.
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7. Geographic dispersion of subordinates: Normally, there is an inverse relationship
between a manager’s span of control and the geographic dispersion of his/her
subordinates. For example, a sales manager whose sales people are scattered over a wide
geographic region cannot supervise as many subordinates as a manager can whose
subordinates are in one building. This is especially true when the manger and
subordinates must meet on a regular basis.
8. The availability of information and control systems: If there are sophisticated
information and control systems, well-defined policies and plans, the manager can
supervise many subordinates and hence the span will be wide.
9. Levels of management: The size of the most effective span differs by organizational level.
 At the top level of management the span is wide, because
 The communication and conceptual skill that top level managers have.
 The nature of their work they deal with: general/broad policy control rather than direct
supervision.
 Their subordinates are relatively skillful.
 At the middle level of management the span is narrow, because they involve in policy
supervision and much more direct, personal contract with subordinates than top-level
managers.
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 At the lower level of management the span is wide, because as managers of operating
employees, supervisors frequently supervise work that is not complex and that rarely
requires policy decisions. Instead, they will usually rely on rules and procedures to help
them solve the daily problems that arise.
7. Economic Factor: Narrow spans of management require not only more supervisors
(and their services) but also the added expense of executive offices, secretaries and fringe
benefits. However, the wide spans of a management require few supervisors with their
accessories. So, organizations should take cost into consideration.
There are two major reasons why the choice of appropriate span is important.
(1) Span of management affects the efficient utilization of managers and the effective
performance of their subordinates. Too wide a span may mean that managers are
overextending themselves and that their subordinates are receiving too little guidance or
control. Too narrow a span of management may mean that managers are under utilized.
(2) There is a relationship between span of management throughout the organization
and the organization structure. A narrow span of management results in a "tall"
organizational structure with many supervisory levels between top management and the
lowest level. A wide span for the same number of employees means fewer management
levels between the top and bottom.
The concept of an "optimal" span of management is the one that is neither too broad nor
too narrow. The concept of an optimal span of management suggested that spans could be
too broad or too narrow in specific instances.
The wider the span of management, the less direct supervision there is; the narrower the
span, the greater the number of managers and, therefore, the higher the cost in salaries.
Organizational Structure
Meaning
 Organization structure is the structural framework for carrying out the functions of
planning, decision-making, controlling, communication, motivation, etc.
 Organization structure is the formal pattern of interactions and coordination designed by
a manager to link the tasks of individuals and groups in achieving organizational goals.
The word “formal” in this content refers to the fact that organization structures typically
are created by management for specific purposes related to achieving organizational
goals, and, hence, are official, or formal outcomes of the organizing function.
 Organization structure is the arrangement and interrelationship of the component parts,
and positions of an organization.
The process of developing an organization structure is sometimes referred to as
organization design.
The formal structure of an organization is of two-dimensional: The horizontal dimension
and vertical dimension. The horizontal dimension identifies departments, units, and
divisions on the same level of a management. Whereas the vertical dimension refers to the
authority relationships between superiors and subordinates and it also identifies who is
responsible and accountable for whom.
One aid to visualizing organization structure is the organization charts.
CHAPTER 5: 3
Organizational Chart
 It is the means through which we depict the organization structure. Organization chart is
a line diagram that depicts the broad outlines of an organization’s structure. It shows the
flow of authority, responsibility, and communication among the various departments
which are located at different levels of the hierarchy. An organization chart is a visual
representation of the way in which an entire organization and each of its components fit
together
Organization charts vary in detail, but they typically show in visual form the various
major positions or departments in the organization, the way the various positions are
grouped into specific units, reporting relationships from lower to higher levels, and
official channels for communicating information.
Because organization charts facilitate understanding the overall structure of
organizations, many organizations have found them useful. Such charts are particularly
helpful in providing a visual map of the chain of command.
The organization chart can tell us:
- Who reports to whom (chain of command)
- The number of managerial levels
- How many subordinates work for each manager (the span of control)
- Channel of official communication through the solid lines that connect each job (box)
- How the organization is structured-by function, territory, customer, etc.
- The work being done in each job- the labels on the boxes
- The hierarchy of decision making- where a decision maker for a problem is located
- How current the present organization is (if a date is on the chart)
- Type of authority relationships- line authority, staff authority, and functional authority
President
V-P V-P
Marketing GM Production GM
Manufact Quality
GM GM GM uring Control
Sales Advertising Research
Division Sales Manager

Division Sales Manager
Manager Product Research
Manager Consumer Research
Example of an organization structure It can help
 In addition, the chart is a trouble-shooting tool.

CHAPTER 5: 3
Manager OperationsManager Manufacturin
Manager Shipping
managers locate duplications and

conflicts as a
result of awkward arrangements. What the chart does not show are the degree of
authority, the informal communication channels (grapevine), and the informal
relationships.
CHAPTER 5: 3
CHAPTER FIVE
THE STAFFING FUNCTION
MEANING AND NATURE OF STAFFING
Staffing is the executive .function of recruiting, selecting, training, developing, promoting,

and retiring subordinates. It is the responsibility of every manager. The benefits of
staffing are:
 Staffing helps in discovering and obtaining competent personnel for various jobs
 Staffing makes for higher performance by putting the right man on the right job.
 Staffing ensures the continuous survival and growth of the enterprise through the
development of successive managers.
 Staffing helps to ensure optimum utilization of human resources
o Avoids over manning
o Avoids shortage of manpower in advance
 Staffing improves job satisfaction and morale of employees through objective
assessment and fair rewarding of their contributions.
Generally, the purpose of staffing function is to ensure that the right number and the
right type of people are working on the right jobs at the right time and right place.
ACTIVITIES IN STAFFING FUNCTION
The major activities in the staffing function include:

1. Manpower planning.
2. Recruitment
3. Selection
4. Placement
5. Induction/ orientation
6. Training and development
7. Performance appraisal
Manpower planning /human resource planning/
Manpower refers to the quantity and quality of workforce. Manpower planning is the
process of forecasting the number and type of personnel whom the organization will
have to hire, train, and promote in a particular period in order to achieve its
objectives. It involves determining objectives, policies, programs, and procedures in
relation to human resources. It refers to planning for the future personnel needs of
the organization.
Manpower planning process
CHAPTER 6:
The process of manpower planning consists of the following steps:
1. Forecasting manpower requirements: This refers to anticipation of the
requirements of manpower for a particular future period of time in terms of the
number, type and quality of people. Three stages are involved in projecting future
manpower needs.
A. Determine replacement of lost manpower. Based on past experience, the
human resource manager should calculate the rate of loss of manpower due
to leave, retirements, quits, transfers, deaths, discharges etc.
B. Determine the need for new manpower. Based on workload analysis,' the
manager needs to determine the new manpower required.
C. Determine the abilities/ skills required for the efficient performance.
Job specifications and job descriptions are prepared to determine job
requirements and the quality of needed personnel. Job description is an
organized, written and factual statement of job contents in the form of duties
and responsibilities of a particular job. Job specification is a formal
statement of minimum acceptable human qualities required for the
successful performance of a job.
2. Preparing manpower inventory/manpower audit. It refers to the analysis and
assessment of the current human resources in terms of the size and quality of
personnel available.
3. Identifying man power gaps: In order to identify the manpower gap, the existing
number of personnel and their skills are compared with the forecasted manpower
requirement
4. Formulate manpower Plans: This involves developing appropriate and detailed
policies, programs and strategies for recruitment, selection, training, promotion,
retirement, and replacement.
Example
CHAPTER 6:
Production budget....................................................................100,000 tons
Standard man hours /
ton……………………………………………….. 50 hours
Productive hours per worker in the year.......................2,000
hrs
Allowance for absenteeism and turnover......................500 workers
Existing manpower...................................................................2,200 workers
Determine the new manpower
Solution
Total planned hours = 100,000 x 50 = 5,000,000
Number of workers required = 5,000,000/2000 = 2500 workers
Number of workers required..............................2500
Add: allowance for absenteeism and turnover 500
Total requirement...................................................3000
Less: existing manpower......................................2200
New workers ............................................................................. …800 workers
Recruitment
It is the process of searching for prospective employees and stimulates them to

apply for jobs in the organization. The purpose of recruitment is to attract
potential employees with the necessary characteristics and in the proper quantity
for the jobs available. It is generally viewed as a positive process. The sources of
recruitment include:
1. Internal sources
These consist of transfers and promotions of present employees. A transfer refers to

the shifting of an employee from one job to another without a drastic change in the
responsibilities and status of the employee. On the other hand, promotion involves
shifting an employee to a higher position carrying higher responsibilities, higher
status and more pay. Transfer is a horizontal shifting while promotion is a vertical
shifting.
Advantages
o Improve employees' motivation, loyalty and security and morale
o Less expensive (no induction training)
o Simplifies the process of selection and placement
o Lower level employees are encouraged to look forward to higher ranks.
o Develops better employee-employer relationships
Disadvantages
o Involves danger of in breeding by stopping infusion of new blood into the
organization
o Reduces the area of choice
CHAPTER 6:
o Limits the pool of talents
o Does not provide an equal opportunity to all people to compete for jobs
o Encourages favoritism and nepotism
o Encourages complacency
2. External sources
Where all vacancies cannot be filled from within, external sources are used to fill the
positions. The advantage of extern sources is that it provides wide choice and brings
new blood to the organization. However, it is not without limitation. The major
limitation is that it is expensive and time consuming.
The various external sources of recruitment are:
a. Advertisements
b. Employment agencies
c. Educational institutions
d. Recommendations by other people
e. Causal callers
f. Direct recruitment
Selection
CHAPTER 6:
Selection involves screening or evaluation of applicants to identify those who are best
suited to perform the jobs. It divides the candidates in to two categories.
1. Those who will be employed
2. Those who will not be employed
Selection is described as a negative process. The proper selection of employees
will go a long way towards building a stable work force and eventually reducing
labor costs. When selected personnel are suitable to the job requirements, their
efficiency and productivity will be high. Such personnel will have job satisfaction
and high morale. Rates of absenteeism and labor turnover will be low.
Steps in selection procedure
In order to achieve the purpose of selection, a well-planned and suitable selection

procedure is required. This procedure involves the following steps:
1. Application Blank: It is a brief written resume of the name, age, address,
education, occupation, interests, experiences etc of the candidates. It provides basic
information about the prospective employee, which is helpful at the time of interview.
It reflects the candidate's personality and his/her desire for the job. First inference
about the candidate can be made.
2.Employment test: It is designed to measure selected aspects of the candidate's
personality and to predict how well the applicant is likely to perform the job (the
fitness of a person to a job)
Some of the employment tests include:
a. Intelligence test: It is used to measure the mental capacity of an applicant in
terms of his memory, reasoning ability, power of understanding, verbal
comprehension, word fluency etc.
b. Aptitude test: Aptitude refers to the latent ability or the capacity of individuals
for learning the skills required performing the job. Aptitude test is used to
measure an individual potential for development.
c. Personality test: It measures the temperament, maturity, initiative, judgment,
emotional balance and other personality traits of an individual. It helps in
weeding out candidates who may not be able to go along with other people.
d. Proficiency test: It is designed to measure the level of knowledge, proficiency
or skill already acquired by an individual in a particular job. It is also called
performance, ability, achievement, or trade test.
e. Interest test: It is designed to identify the likes and dislikes of the applicant for
different jobs.
3. Employment interview
4. Physical / medical examination
5. Checking references
6. Final approval
CHAPTER 6:
Placement
Placement is the process which involves putting or posting the selected candidates on
appropriate jobs. It involves assigning specific jobs and work places to the selected
candidates. In placement, employees are assigned to jobs that are most suitable to
them. New employee is given a particular job to perform on the basis of his/her
abilities, aptitude, skills etc. The purpose of placement is to match the worker and
the job, or to place right man on the right job. The advantages of correct placement
are:
o Placement improves job satisfaction and productivity
o Placement reduces labor turnover
o Placement reduces absenteeism
Induction/ orientation
When an employee is hired, two processes are started. These are induction and
orientation. Although the terms "induction" and "orientation" are used interchangeably, in
some cases, there is a difference between the two.
Induction: - is a socializing process by which the organization seeks to make an

individual its agent for the achievement of its objectives and the individuals seeks to
make the organization an agency for the achievement of his personal goals. The
purpose of induction is to provide the new employee with the necessary information
about the company i.e
o The duties and benefits of employment
o Company history
o Company products/services
o Organization structure
o General company policies
o Location of departments and employee facilities
o Personnel policies and practices
Orientation
CHAPTER 6:
Orientation is a socializing process by which new employee is provided with
information about work environment and operating realities. Specifically, orientation
involves:
o Rules, regulations and daily routines
o Grievance procedures
o Safety, measures
o Standing orders
o Employee activities, benefits and services
Generally, if induction and orientation programs are not undertaken formally, the
new employee may form wrong impression. Thus, first impression is the last
impression.
Who orients new employees?

Different persons may be involved in orientation of new employees. The most common
are:
1. Human resource manager
2. Operating manager
3. Union officials
4. Public relation officer
5. Experienced co-worker
In medium sized and large organizations, both operating manager and human
resource manger run the orientation. However, in small organization, operating
manger performs all orientations.
Means of orientation and

induction Handbo
o Lectures
o o Pamphlets
o Discussions
oks
Advantages of orientation o Manual
and induction s
1. To reduce the start-up costs for new employees: Recruiting new employee
involves additional costs because new employee is not as efficient as the
experienced employee. This inefficiency is considered to be start-up cost. An
effective orientation program can reduce this inefficiency, and in turn, reduces
start up costs.
2. To reduce the amount of anxiety and hosing a new employee experiences:
Anxiety refers to fear of failure on the job. The new employee may develop the
fear that he/she will not perform the job properly. This fear could be aggravated
when old employees hose the new employee. Effective orientation can alert the
new employee to hosing and reduces anxiety.
3. To reduce employee turnover: An employee who developed fear about his/her
inefficiency may decide to quit his/her job. In the absence of orientation this
problem may recur. In order to avoid such problem, the organization needs to
have a good orientation program.
CHAPTER 6:
4. To develop realistic job expectations: The job expectation of new employee may
be too high or too low. The two extremes are very dangerous. Orientation enables
the new employee to incorporate the job and its work values in to his/ her self-
image.
5. To develop positive attitudes toward the employer: The new employee may
have negative attitude toward his/her employer before joining the organization.
This negative attitude can be changed to positive attitude through effective
orientation.
6. To develop job satisfaction: A new employee is satisfied if he/she knows very
well what is expected of him/her, how to perform it, and what reward is available
for good performance. With out orientation a new employee may not have the
chance to know these things. Thus, orientation can playa great role of this regard.
Training and development

Very often the terms "training" and "development" are considered as synonymous.
Really speaking, there is a difference between the two.
Training: It is the process of increasing the knowledge and skills of an employee for
doing a particular job. It implies imparting technical knowledge, manipulative skills,
problem solving ability and positive attitude. The purpose of training is to enable the
employees to get acquainted with their present/prospective jobs and also to increase
their knowledge and skills and to modify their attitude. Training is not a one-stop
process, but continues throughout the career of an individual. TraL.1'1ing is job-
oriented (job-centered).
Development: It refers to the growth of an individual in all respects - physically,
intellectually, and socially. Development is career bound. Development of individuals
is the consequence of training. In other words, training is the cause whereas
development is the consequence.
CHAPTER 6:
Types of training
Training may of several types. Some of them are:
1. Orientation training. It seeks to adjust newly appointed employees to the work
environment
2. Job training. It refers to the training provided with a view to increase the
knowledge and skills of an employee for improving performance on the job.
3. Safety training. It is intended to provide training to minimize accidents and
damages to machinery. It involves instruction in the use of safety devices and
in safety consciousness
4. Promotional training. It involves training of existing employees to enable
them to perform higher level jobs (Positions)
5. Refresher training - It involves training given to employees in the use of new
methods and techniques. This type of training is given when existing
techniques become obsolete due to development of better techniques
6. Remedial training. It is designed to correct the mistakes and shortcomings
in the behavior and performance of employees.
Methods of training
1. On-the-job Training (OJT)
Under this method, the worker is trained by his immediate supervisor or by an

experienced employee in a real work situation. The trainee is told (explained) the
method of handling tools, operating the machines etc.
Some of the advantages of OJT are:
o The trainee learns in the actual job environment
o Supervisor takes an active part in the training program
o The training is relatively
cheaper and convenient The
disadvantages of OJT are:
o Training involves some interference in the normal work routine
o No uniformity in training because every supervisory is a different training unit
o Very time-consuming
o Tendency to ignore principles and theory in favor of immediate results
o Inappropriate for a large number of people at the same time
On the job training is considered to be the most effective and the oldest method of
training the operative personnel. One best example of OJT is job rotation.
2. Apprenticeship Training
It refers to giving instruction, both on and off the job, in the practical and theoretical
aspects of the work required in a highly skilled occupation. Its weakness is that the
trade union fails to take into consideration individual differences in learning time
because of the trade union that determines the time that the person serves as
apprentice. Apprenticeship program contains both on-the-job and classroom
CHAPTER 6:
training. The theoretical aspect of the job is learnt in the classroom, but its skills will
be learnt on the job. Wages of apprentices are less than experienced q. employees.
3. Vestibule Training
Vestibule Training is a training in which the trainee learns the job in an environment
that simulates the real working environment as closely as possible. The limitations of
vestibule training are:
 It is expensive
 Trainee may face adjustment problem.
4.Off- the -Job Training

Off- the -job training includes all over training other than apprenticeship, vestibule
training, and on-the job training. It can be done in organizational classrooms,
vocational schools or else where. Off- the job training may be conducted using
confidence/Discussion, programmed instruction, case method & simulation.
Programmed instruction is used if the objective of training is knowledge acquisition.
On the other hand, case method of training is used if the intention is to improve the
problem-solving skills. Conference approach requires the trainer to give a lecture
and involve the trainee in a discussion of materials to be learned. Programmed
instruction is a technique for instructing without the intervention (presence) of
human instructors.
CHAPTER 6:
CHAPTER 7
THE DIRECTING / LEADING
FUNCTION
1. MEANING AND THE NEED FOR

LEADERSHIP MEANING:
Leadership can be defined in different ways according to different writers. Some are:
1. Leadership is the process of influencing others toward the achievement of
organizational objectives. This definition recognizes that leadership is typically an on going
activity, is oriented toward having an impact on the behaviors of others, and is ultimately
focused on realizing the specific aims of the organization.
2. Leadership is the process of influencing a group or individual to set a goal or achieve a

goal. It is a process involving the leader, the led (group or individual), and a practical goal or
a situation. It is behavioral in nature and involves personal interaction.
3. Leadership is the art or process of influencing people so that they will strive willingly
and enthusiastically toward the achievement of organizational or group goals.
4. Leadership is the ability to secure desirable actions from a group of followers voluntarily
without the use of coercion or force.
As we can see from the above definitions, leadership has three ingredients: leader, led
(follower) and goal (situation) – organizational Environment.
Leader- the one with the ability/capacity to understand others’ motivation and to inspire
them with the ability to create a climate for motivation.
Follower (led) - the individuals being led or influenced
Environment- the working environment in which the leader interacts with the followers.
Leading is the management function aimed at setting the members of an organization move
in the direction that will achieve its objectives. Directing builds a climate, provides
leadership and arranges the opportunity for motivation. Leading is not deriving or pushing
from behind; it is placing oneself before the group and facilitating progress and inspires
followers to accomplish organizational (group) objectives.
Leadership versus Management

Management is a broad subject that encompasses activities such as planning, organizing,
staffing, directing, and controlling. Leadership, on the other hand, focuses almost
exclusively on the ‘people’ aspects of getting a job done-inspiring, motivating, directing, and
gaining commitment to organizational activities and goals. Leadership accompanies and
CHAPTER 7: 1
complements the management functions. In short, management influences brain, while
leadership encourages the heart and the spirit.
THE NEED FOR LEADERSHIP

The need for leadership can be explained by the fact that organizations will never be
successful unless they have effective and efficient leaders. The effectiveness and efficiency
of leaders is nothing but to create conducive environment in the organization. Whatever
amount of capital invested and technology an organization has, without effective leadership
the organization will not be successful.
The importance of the directing function in the organization can be presented as follows:
 Directing initiates actions by giving directives and guidance to employees.
 Directing integrates employees’ effort by coordinating actions of the members and
leading toward the objectives.
 Directing attempts to get the maximum output of individuals by providing ways to
fully utilize the potentials and capabilities of employees.
 Directing facilitates changes by incorporating (adopting) environmental and internal
changes into the organization
 Directing provides stability by balancing the different parts of the organization so that it
exists for a long period and its parts work in a harmonious ways.
The directing function enables subordinates to contribute their best to attain the goal of the
organization. Thus, managers should try to integrate both organizational and individual
objectives in order to get the work done by subordinates. Managers must be good leaders
(by providing effective leadership) to guide, counsel, and influence subordinates so as to
win their confidence and acceptance.
How leaders influence others?

Why do people accept the influence of a leader? One major reason is that leaders have
power. Power is the capacity to affect the behavior of others, in other words, power is the
ability of individuals or groups to induce or influence the beliefs or actions of other
CHAPTER 7: 2
persons or groups. It is a resource or patronage an individual has at his/her disposal to
stage-manage others towards a wanted behavior. Having power can increase the
effectiveness of a manager by enabling the manager to influence people to what is wanted.
Leaders in organizations typically rely on some or all of five major types of power:
legitimate, reward, coercive, expert and referent.
1. Legitimate power/position power refers to the power a leader possesses as a

result of occupying a particular position or role in the organization, i.e. it is a power that
stems from a position’s placement in the managerial hierarchy. It corresponds to authority.
Legitimate power exists when a subordinate or the influenced acknowledges that the
influencer has a “right” or is lawfully entitled to influence within certain bounds. It is
related to the position, rather than to the person personality, so it is clearly a function of the
leader's position in the organization and is completely independent of any of the leader's
personal characteristics. Thus, the higher a manager is in the organizational hierarchy, the
greater is the “perceived power” thought by subordinates.
2. Reward Power refers to the leader's capacity to give or withhold rewards for
followers. It is based on the capacity to control and provide valued rewards to others.
Rewards that may be under the control of individual manager include salary increases /pay
raises, bonus, interesting projects, promotion recommendations, a better office, support for
training programs, assignments with high responsibility in the organization, recognition,
positive feedback etc. Purchasing agents, with little position power; might be able to
exercise considerable influence by their ability to expedite or delay a much-needed spare
part. Or University professors have considerable reward power; they can grant or withhold
high grades. The greater a manager’s control over valued rewards, the greater the
manager's reward power and the more power to influence.
3. Coercive Power is a power based on fear. It is the negative side of reward power.
Coercive power is the ability to coerce or punish the influencees/followers when they do
not engage in desired behaviors. Forms of coercion or punishment include criticisms,
terminations, reprimands, suspensions, warning letters that go into an individual’s
personnel file, negative performance appraisals, demotions and withheld pay raises;
(punishment may range from loss of a minor privilege to loss of one's job). Coercive power
is usually used to maintain a minimum standard performance or conformity among
subordinates. The greater the freedom to punish others, the greater a manager’s coercive
power. And the more coercive power a manager uses, the more resentment and opposition
s/he faces from subordinates.
4. Expert Power refers to power that a leader possesses as a result of his or her
knowledge and expertise regarding the tasks to be performed by subordinates. It is power
based on the possession of expertise, knowledge, skill or information. To the extent that a
leader possesses expertise and information that is needed or desired by others, the leader
CHAPTER 7: 3
has expert power. Physicians, lawyers, and university professors may have considerable
influence on others because they are respected for their special knowledge. A manger who
is capable of achieving an important methodological break through that no other
companies dreamed of and a secretary who knows how to unreveal or reveal bureaucratic
red tape all have expert power over any one who needs that information.
5. Referent Power / Charismatic Power is power that results from being admired,
personally identified with or liked by others. When we admire people, want to be like them,
or feel friendship toward them, we more willingly follow their directions and exhibit loyalty
toward them. For example, a Movie Star, a Great Athlete, a Great Football Player, a Musician
or a Military Hero might possess considerable referent power.
 The strength of referent power is directly related to such factors as the amount of
prestige and admiration the influence confers up on the influencer.
 The more that a leader is able to cultivate the liking, identification, and admiration of
others, the greater the referent power.
 The more power a leader has at his/her disposal, the more likely that s/he will be
successful in influencing followers to do the work assigned to them except coercive
power.
Although all five types of power are potential means of influencing others, in actual usage
they may engender somewhat different levels of subordinate motivation. Subordinates can
react to a leader’s direction with commitment, compliance, or resistance. With commitment,
employees respond enthusiastically and exert a high level of effort toward organizational
goals. With compliance, employees exert at least minimal efforts to complete directives but
are likely to deliver average, rather than stellar, performance. With resistance, employees
may appear to comply but actually do the absolute minimum, possibly even attempting to
sabotage the attainment of organizational goals.
CHAPTER 7: 4
Types of
outcome
Source of Basis for Commitment Compliance Resistance
Leader power
influences
Referent power Admiration and Likely* Possible Possible
liking If request is If request is If request is
by others. believed to be perceived to be something that
important to unimportant to will harm
leader leader leader
Expert power Possession of Likely* Possible Possible
valued If request is If request is If leader is
expertise persuasive and persuasive but arrogant and
subordinates subordinates are insulting or
share leader’s apathetic about subordinates
task goals task goal oppose task
goals
Legitimate Hierarchical Possible Likely* Possible
power If request is If request or If arrogant
position demands are
and authority polite and very order is seen as made or
appropriate legitimate request does
not appear
proper
Reward power Capacity to Possible Likely* Possible
provide If used in a If used in a If used in a
valued rewards subtle, very mechanical, manipul
personal way impersonal way ative,
arrogant
way
Coercive power Ability to punish Very unlikely Possible Likely*
If used in a If used in a
helpful, non hostile or
punitive way manipulative
way
* Indicates most common outcome
Major sources of leader power and likely subordinate reactions
Authority versus Power

Authority Power
1. It is positional – it will be there 1. It is personal-it
exists because when the incumbent leaves. of the
person.
2. Narrower – it is one type of power 2. Broader
3. It changes with changes in position. 3. Some types of power do not change
(Expert, referent) but some change legitimate,
reward, coercive.
CHAPTER 7: 5
4. Authority is delegated to an individual 4. Not all
power types can be delegated by superiors.
(Expert and referent).
2. LEADERSHIP THEORIES
A. Trait Theory
Traits are distinctive internal/personal qualities or characteristics of an individual, such as
physical (height, weight, appearance, health, etc), personal (self-confidence, dominance,
adaptable, extroversion/sociability, originality etc) and mental (intelligence, creativity,
knowledge, technical competence etc). A leader trait is a physical or personality
characteristic that can be used to differentiate leaders from followers.
Trait theory attempts to find traits that make a leader. That is, it is a theory, the old
approach, which focused on identifying the personal traits that differentiated leaders from
followers. Trait theory originated from an ancient theory called “Great Man” theory that
assumes that “leaders are born not made”-a belief dating back to the ancient Greeks and
Romans.
The idea in trait theory was to see whether certain traits would predict the individuals who
would emerge (be identified by members of the group) as leaders.
In searching for measurable leadership traits, researchers took two approaches:
1) They attempted to compare the traits of those who emerged as leaders with the traits of
those who did not.
2) They attempted to compare the traits of effective leaders with those of ineffective leaders.
Studies that were conducted on the first category have failed to distinguish/uncover any
traits that clearly and consistently distinguish leaders from followers. Leaders as a group
have been found to be somewhat taller, brighter, more extroverted, persistent and more
self- confident than non-leaders. However, millions of people have these traits, but most
of them obviously will never attain a leadership
CHAPTER 7: 6
position. In addition, many established leaders did not and do not have these traits.
(Napoleon, for example, was quite short, and Lincoln was moody and introverted.)
Interestingly enough, studies have also found that people who are too intelligent compared
with other group members do not emerge as leaders-perhaps because they are too different
or too far removed from the group.
Studies that were conducted on the second category have generally failed to isolate traits
that are strongly associated with successful leadership.
Generally, the efforts to identify universal leadership traits ran into difficulties for the
following reasons:
1) Not all leaders possess all the traits and many non-leaders may possess most of the traits.
2) It gives no guidance as to the magnitude of each trait for a person to be a leader.
3) No agreement has been reached as to what their relationships are to the actual instances
of leadership.
4) Traits tend to be a chicken-and-egg proposition i.e. successful leaders may display
traits such as good vocabulary, education and self-confidence after they have assumed
leadership positions.
B. Behavioral Theories
When it became evident that effective leaders did not seem to have any distinguishing traits
or characteristics, researchers tried to isolate the behaviors that made leaders effective. In
other words, rather than try to figure out what effective leaders were, researchers tried to
determine what effective leaders did, how they delegated tasks, how they communicated
with and tried to motivate their subordinates, how they carried out their tasks, and so no.
This tries to answer the questions “What do effective leaders do? What ineffective leaders
don't do? How do subordinate react emotionally and behaviorally (performance) to what
the leader does?"
Two major dimensions of leader behavior emerged from this body of research; one deals
with how leaders get the job done and the other deals with how leaders treat and interact
with their subordinates.
i. TheUniversity of Michigan Studies

Through interviewing leaders and followers, researchers at the University of Michigan
identified two distinct styles of leadership, referred to as .job-centered and employee -
centered.
The job-centered leader practices close supervision on the subordinates’ performance. This
leader relies on coercion, reward, and legitimate power to influence the behavior and
performance of followers.
The employee-centered leader believes in delegating authority and supporting followers in
satisfying their needs by creating a supportive work environment. The employee centered
leader is concerned with followers', their personal advancement, growth and achievement.
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The Ohio State Studies
ii.
These studies isolated two leadership factors, referred to as initiating structure and
consideration.
Initiating structure involves behavior in which the leader organizes and defines the
relationship in the group, tends to establish well-defined patterns and channels of
communication, and spells out ways of getting the job done.
Consideration involves behavior indicating sensitiveness to subordinates, respect their
ideas and feelings, establishes mutual trust and friendship between the leader and the
followers.
In short, the behavioral theory attempted to identify effective leader behaviors that
would work in every situation. But researchers found that leader behaviors that worked
best in one situation were not often as effective in other situations.
C. The Contingency /Situational Leadership Theory

Situational leadership theory grows out of an attempt to explain the inconsistent findings
about traits and styles /behaviors. Situational theory proposes that the effectiveness of a
particular style of leader behavior depends on the situation. As situations change, different
styles become appropriate. This directly changes the idea of one best style of leadership. In
other words, the contingency/situational theory holds that appropriate leader traits or
behaviors are contingent or dependent on relevant situational characteristics. More
specifically, the contingency leadership theory states that, leadership is the result of the
interaction of:
a. Leaders: behavior and competence
b. Followers: behavior and competence
c. Situations: situational variables such as job characteristics, organizational policies,
leaders member relations (the extent to which a leader has the support of group
members), position power (the amount of power that the organization gives the leader
to accomplish necessary tasks).
Theory X and Theory Y Assumptions about People

A manager’s philosophy about work and the people who perform the work will influence
his/her approach to leadership. Douglas McGregor has hypothesized two sets of
assumptions about people that serve as a philosophical base for leadership action. These
are Theory X and Theory Y Assumptions.
Theory X – pessimistic and negative
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A manager basing an operating philosophy on Theory X would impose a directive
leadership style on the individual or work group s/he is supervising. Coercion, negative
motivation, and refusal to allow employee participate in decision-making would probably
be the actions of the manager.
Why? Because the manager assumes:
 The average human being has an inherent dislike of work and will avoid it if s/he can-
workers are lazy.
 Because of this dislike, most people must be coerced, controlled, directed, and
threatened with punishment to get them to put forth adequate effort toward the
achievement of organizational objectives.
 The average human being prefers to be directed, wishes to avoid responsibility, has
relatively little ambition and wants security above all.
McGregor’s Theory X view of human nature holds that the dislike of work is so great that
even the promise of rewards will not overcome it. “People will accept the rewards and
demand continually higher ones, but these alone will not produce the necessary effort. Only
the threat of punishment will do the trick.
Theory Y- adopts a developmental approach/ modern + positive set of assumptions

A manager with Theory Y assumption will prepare him/herself to work with people as
individuals, to involve people in the process of decision-making, to openly encourage
people to seek responsibility and to work with people achieve their goals.
Why? Because the manager assumes:
o The average human being does not inherently dislike work; the physical and mental
effort involved is as natural as play or rest.
o External control and threat of punishment are not the only means for bringing about
effort toward organizational objectives. A person will exercise self-direction and self
control in the service of objectives to which s/he is committed.
o People generally become committed to organizational objectives if they are rewarded
for doing so.
o The average human being learns, under proper conditions, not only to accept, but also
they seek responsibility.
o Many people have a relatively high degree of imagination, ingenuity, and creativity in
the solution of organizational problems.
o The average person’s intellectual potential is only partially utilized under the
conditions of modern industrial life.
The assumptions in Theory Y have remarkably different implications for managers than do
those of Theory X. Instead of blaming poor performance on basic human nature, Theory Y
places squarely on management the responsibility for tapping the reservoir of creativity,
hard work, and imagination. The worker’s performance is limited only by management’s
ability to use human resources effectively. Theory Y also has implications for decision-
making. Because it recognizes worker’s intellectual potential, this philosophy suggests that
organizational goals are best achieved if workers have voice in decisions. Participatory
decisions making is especially important as it relates to a person’s job. In addition, Theory Y
vie of human nature implies that a manager’s role is not to manipulate workers; rather, it is
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to create an atmosphere in which workers can use their commitment and involvement to
satisfy their personal needs as well as those of the organization.
3. LEADERSHIP STYLES
The focus on finding leadership style (behavior patterns of leaders) is on the relationship
between leaders’ action and the reaction of subordinates emotionally and behaviorally. A
manager’s leadership style is composed of three parts:
i. How the manager chooses to motivate subordinates
Motivation approach
Positive Negative
Responsibility Threats
Recognition Coercion
Praise Fines
Security Suspensions
Monetary Rewards Termination
ii. His/her decision-making style: the degree of decision-making authority the manager
grants to subordinates.
iii. His/her areas of emphasis (orientation) in the work environment: Task
orientation, employee orientation Based on the above points there are
three types of leadership styles: Autocratic, Democratic, and Laissez-faire.
1. Authoritarian/Autocratic Leadership Style

It is closely associated with the classical approach to management. The manager who
follows this style is dogmatic and leads by the ability to withhold or give rewards and
punishment, i.e. motivation is through incentives and fear. In this style, decision-making is
solely by the manager, in other words, the leader retains all authority and responsibility. In
the extreme case, the manager makes the decision and announces it to the work group.
There is no opportunity for input into the decision-making process by the subordinates and
communication is primarily downward. Variations of this approach find the manager
making the decision and then “Selling” it to employees or making the decision and allowing
the group the opportunity to ask questions. The autocratic leader is task-oriented and
places little value on showing consideration to subordinations as a leadership technique.
The Autocratic manager uses Theory X assumption as his philosophical base for leadership.
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There are situations where managers are compelled/forced to use this leadership style.
Some are:
a. When there is a need to influence subordinates in favor of organizational objectives
which has an effect on individuals.
b. When subordinates are new, they need to be directed.
c. When the situation calls for unilateral decision-making – perhaps there is no enough
time for quality input from subordinates or the subordinates may lack information.
Limitations
- Employees’/subordinates’ ideas will not be used to solve organizational problems,
which in some cases subordinates may have better ideas than the superior about a
particular problem.
- Subordinates would be demotivated, i.e. It may suppress individual initiative
- Poor implementation of decisions
2. Democratic/Participative Leadership Style

In this leadership style, the manager involves subordinates in making organizational
decisions, shares problems with them and shares authority to reach a decision.
Subordinates take part in the decision-making process through consultation. The leader
delegates a great deal of authority while retaining ultimate responsibility. Active two-way
communication (upward and downward) exists. The democrat leader uses Theory Y
assumption as his/her philosophical base for leadership.
Limitations
1. Subordinates may be too involved to influence the manager even when there is no need.
2. The manager may not be able to influence the subordinates to the extent needed.
However, the major advantage of this leadership style is that, it enhances personal
commitment through participation.
The advantages of democratic leadership style are the disadvantages of the autocratic
leadership style after we make them opposite.
3. Laissez-Faire/Free-Rein Leadership Style

In this leadership style, leaders generally give the group complete freedom, provide the
necessary materials, participate only to answer questions, and avoid decision-making
whenever possible. The leader either sets limits and the followers work out their own
problems, or the individuals set their own goals. In this style, leaders depend largely on
subordinates to set their own goals and the means of achieving them, and they see their role
as one of aiding the operations of followers by furnishing them information and acting
primarily as a contact with the groups external environment, i.e. the leader’s role is to
serve as a logistics specialist or representative of the group to outside groups. The leader
denies responsibility and abdicates authority to the group.
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The application of Laissez-Faire style can be found with individuals or groups that the
manager views as being knowledgeable, independent, or motivated. Additionally, if the
work group is composed of high achievers, or is highly research oriented, this style has
potential benefits. Primarily horizontal communication among peers exists.
Limitations
- Group may drift aimlessly in the absence of direction from leader.
- It may make things out of control.
Advantages
- It gives quite freedom for subordinates
- It gives much responsibility and self guidance for subordinates
- It permits self-starters to do things as they see fit without leader
4. Situational Leadership style

The situational leadership style states that for a manager to be democrat, autocratic or
laissez-faire, situations force him/her.
4. MOTIVATION
The Concept of Motivation
The term motivation derived from the Latin word movere meaning “to move.” In the
present context, motivation represents “those psychological processes that cause arousal,
direction, and persistence of voluntary actions that are goal oriented. Managers need to
understand these psychological processes if they are to successfully guide employees
toward accomplishing organizational objectives.
 Motivation is an internal force that energizes behavior, gives direction to behavior,
and underlies the tendency to persist. This definition of motivation recognizes that in order
to achieve goals, individuals must be sufficiently stimulated and energetic, must have a
clear focus or end in mind, and must be willing and able to commit their energy for a long
enough period of time to realize their aim. Since the leading function of management
involves influencing others to work toward organizational goals, motivation is an important
aspect of that function.
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Because motivation is an internal force, we cannot measure the motivation of others
directly. Instead, we typically infer whether or not other individuals are motivated by
watching their behavior. As managers analyze their workforces, they can always see some
people who outperform others of equal skill. A closer look might reveal instances in which a
person with outstanding talents is consistently outperformed by someone having lesser
talents. Why? These latter employees appear willing to exert more effort, to try harder, to
accomplish their goals, often these hard workers are described by their bosses as
“motivated employees.” Motivated individuals work hard, persist and are goal oriented.
Motivators
Motivators are things, which induce an individual to perform. While motivation reflects
wants, motivators are the identified rewards, or incentives that sharpen the derive to
satisfy these wants. They are also the means by which conflicting needs may be reconciled
or one need heightened so that it will be given priority over another. A motivator is
something that influences an individual’s behavior. It makes a difference in what a person
will do.
The Motivation Cycle

The starting point in this cycle is a need or a deficiency or a state of felt deprivation an
individual experiences at a particular time. This deficiency causes tension (physiological or
psychological in balance), which will be modified by one’s culture and personality to cause
certain wants leading /motivating the individual to some kind of goal directed behavior.
This leads to satisfaction and one cycle of motivation will be completed.
The Motivation Process
1 Need deficiency
Need satisfaction 2 Goal Directed behavior
From this we can understand that deficiency triggers a drive for need satisfaction, which
causes an individual to take a certain course of action that will alleviate a need and reduce a
drive. The need for food for example will result in hunger and hunger will drive or motivate
the individual to take action (eating food), which will achieve the goal. This goal attainment
will restore the physiological or psychological balance and reduce or cutoff the drive for
food.
Motivation Vs Satisfaction
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Motivation refers to the drive and effort to satisfy a want or a goal. Satisfaction refers to the
contentment experienced when a want is satisfied. In other words, motivation implies a
drive toward an outcome, and satisfaction is the outcome already experienced.
Motivation Results Satisfaction
Motivation and Performance

All too often, motivation and performance are assumed to be one and the same. This faulty
assumption can lead to poor managerial decisions. The following formula for performance
helps put motivation into proper perspective:
Performance = Ability x Motivation x Environmental conditions
Thus, we see motivation is a necessary but insufficient contributor to job performance. The
multiplication sign is used to emphasize how a weakness in one factor can negate the other.
The above relationship between performance and motivation clearly shows us that
managers should hire individuals who have the ability to do what is required. After that, the
management challenge is providing environmental conditions that nurture and support
individual motivation to work toward organizational goals. Keeping other variables
constant, motivation and performance have neither positive nor negative relationship. As
motivation increases, job performance increases, reaches its maximum and the decreases.
Optimal/maximum
* After the optimal point

further
Performan
motivation
brings about
anxiety,
tenseness,
fretfulness, and
the anxiety
eventually
decreases performance.
Motivation
CHAPTER 7: 1
Theories of Motivation
A. Carrot and Stick Approach
This metaphor relates the use of rewards and penalties in order to induce desired human
behavior. It comes from the old story that to make a donkey move one must put a carrot in
front of it and if it does not move beat it with stick from behind.
Despite all the researches and theories of motivation that have come to the fore in recent
years, reward and punishment are still recognized/considered by strong motivators. For
centuries, however, they were too often thought of as the only forces that could motivate
people.
Carrot - money in the form of pay or bonuses.

Stick – fear such as fear of loss of job, loss of income, reduction of bonuses demotion or some
other penalty.
Failures of carrot and stick approach

1. Carrot can be obtained by any member of the organization without differentiation in
performance – through such practices as salary increases and promotion by seniority,
automatic “merit” increases, and executive bonuses not based on individual manager
performance. It is as simple as this: If a person put a donkey in a pen full of carrots and
then stood outside with a carrot, would the donkey be encouraged to come out of the
pen?
2. Stick in the form of fear is not the best kind of motivating factor. It often gives rise to
defensive or refectory behavior, such as union organization, poor quality work,
executive indifference, failure of a manager to take any risk in decision-making, or even
dishonesty.
B. Money as a Motivator
Even if under the carrot and stick approach money as a sole motivator has been criticized,
it is used as a motivator (motivating factor) but not the only one. Money can be used as a
motivator under the following conditions.
- For people who have low-level standards of living and who badly need it for their life.
- When the amount is so significant that the organization uses it for competitive
purposes.
- When the payment is so differentiated that even at equal position discriminatory
payment is made for people with different levels of performance.
C. Maslow’s Need Hierarchy

One of the most widely mentioned theories of motivation is the hierarchy of needs theory
put forth by psychologist Abraham Maslow. Maslow proposed that motivation is a function
of needs, and he also proposed that human needs are arranged hierarchically (in a form of
hierarchy). The hierarchy of needs is based on four premises:
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1. Only an unsatisfied need can influence behavior; a satisfied need is not a
motivator. What motivates a person is what s/he does not have but not what s/he
has.
2. A person’s needs are arranged in a priority order of importance. Thus, the priorities
(hierarchy) go from the most basic needs to the most complex.
3. As the person’s needs are met on one level, the person advances to the next level of
needs. S/he will focus on the first level need until it is minimally satisfied before
moving to the next level.
4. If satisfaction is not maintained for a once-satisfied need, it will become a priority
need again.
Based on the above premises, Maslow proposed that human needs form a five-level
hierarchy.
1. Physiological Needs
These are the basic needs for sustaining human life itself, such as food, water, air, shelter,
sleep, etc. Maslow took the position that until these needs are satisfied to the degree
necessary to maintain life, other needs will not motivate people. In other words, As Maslow
points out, a person lacking food, love and esteem wants food more than he/she wants
acceptance or prestige. These other needs would be unimportant. In the working
environment, management tries to satisfy these needs primarily through salary and by
eliminating threats to physical safety.
2. Safety /Security Needs

When physiological needs are satisfied, safety needs become a priority as a motivator.
Safety needs include freedom from fear and anxiety, job security, desires for retirement and
insurance programs and so on. As with physiological needs, management attempts to
satisfy safety needs primarily through salary.
3. Social/ Love/ Affiliation Needs

Once we feel reasonably safe and secure, we turn our attention to relationships with
others in order to fulfill our belongingness needs, which involve the desire to affiliate with
and be accepted by others i.e. the need for friendship, companionship, and a place in a
group. Love needs include both giving and receiving. These needs are met by frequent
interaction with fellow workers and acceptance by others.
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4. Esteem Needs
Esteem needs include the desire for both self-esteem (self respect) and public esteem, and
recognition by others. These needs take two different forms. First, we have a need for
competency, confidence and independence. We also want the prestige, status, recognition
and appreciation that others bestow on us. Satisfying esteem needs produces self-worth-
pride, self-confidence, and true sense of importance; not satisfying them produces feelings
of inability and inadequacy- feeling of inferiority, weakness and helplessness. Esteem
needs can be met in an organization through recognition by peers and superiors of the
person’s work, by acquiring organizational titles and by the accomplishment of work
projects.
5. Self-Actualization/Realization Needs
Refers to the need for fulfillment, the desire to become what one is capable of becoming-to
maximize one’s potential and to accomplish something. For the athlete, it may be breaking
a world’s record; for the research scientist, it may be finding a cure for HIV/AIDS; and for
the physical therapist, it may be the satisfaction of helping a child walk or laugh for the first
time. In other words, these needs differ greatly from person to person.
Maslow’s theory suggested that people must satisfy lower-level (physiological needs)
before working toward higher-level needs. Only when physiological, security, and social
needs have been more or less satisfied do people seek esteem. This theory also suggests
that if a lower-level need is suddenly reactivated, the individual will try to satisfy that need
rather than higher-level needs.
Maslow’s hierarchy, although intuitively appealing and frequently used in management

training, has not found widespread support from management researchers. Beyond the first
two basic needs, people vary in their need emphasis. Some may seek social-need
satisfaction, while others may emphasize esteem needs or self-actualization needs. Thus,
each individual may respond differently to organizational characteristics. Moreover, the
steps in Maslow’s hierarchy may not be necessarily experienced in a sequential manner.
People may have more than one need at the same time. Situations detect which needs are
most important at a given point in time.
D. Herzberg’s Two Factor Theory

Herzberg developed a theory known as the two-factor theory of motivation. The initial
framework for the two-factor was derived from interviews with accountants and
engineers using what is known as the critical-incident method. The accountants and
engineers were asked to provide interviewers with examples of time they felt
exceptionally good or exceptionally bad about their jobs or job related issues that made
them feel good or bad.
According to the analysis, although an unpleasant work environment might be a reason

given for job dissatisfaction, a pleasant work environment is rarely cited as a reason for
CHAPTER 7: 1
job satisfaction. This suggested that job satisfaction and job dissatisfaction are not
simple opposites. Traditionally, managers viewed job satisfaction and job dissatisfaction
as opposite ends. In contrast, Herzberg's findings suggested the opposite of satisfaction
is not dissatisfaction, but rather ‘no satisfaction’. Herzberg believed that two entirely
separate sets of factors contribute to an employee’s behavior at work.
Herzberg labeled the factors that produced job satisfaction as motivators. His analysis
indicated these factors are directly related to job content. The absence of motivational
factors may not result in dissatisfaction, but their presence is likely to motivate
employees to excel. When motivators are absent, workers are neutral toward work, but
when motivators are present, workers are highly motivated and satisfied. Herzberg
labeled the factors that led to job dissatisfaction as hygienes and found they are related
more to the work setting, or job context, than to job content. These factors do not
necessarily motivate employees to excel, but their absence may be a potential source of
dissatisfaction, low morale, and high turnover. When hygiene factors are poor, work is
dissatisfying. However, good hygiene factors simply remove the dissatisfaction; they do
not by themselves cause people to become highly satisfied and motivated in their
work.
Herzberg's Motivators and Hygiene's

Motivators Leading to Job Hygienes Leading to
satisfaction Dissatisfaction
• Achievement • Policies and
administration
• Recognition • Supervision
• Work it self • Relations with peers
• Responsibility • Working Condition

• Advancement • Pay
• Personal growth • Job Security
Thus, to the degree that motivators are present in a job, satisfaction will occur, when
absent, motivators do not lead to dissatisfaction. And, to the degree that hygienes are
absent from a job, dissatisfaction will occur, when present hygienes prevent
dissatisfaction but do not lead to satisfaction.
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5. Communication in Organizations
Communication is the process of transmitting information among two or more people. It is
the glue that holds organizations together. Communication assists organizational member
to accomplish both individual and organizational goals, implement and respond to
organizational change, coordinate organizational activities, and engage in virtually all
organizational relevant behaviors. It would be extremely difficult to find an aspect of a
manager's job that does not involve communication. In other words communication is
unavoidable in an organization's functioning. By its very nature a manager's job requires
communication. The success of every manager and every organization depends on
communication because in any undertaking involving two or more persons, it is essential
for the coordination of individual activities.
Formal and Informal

Communications Formal
communication
This is a communication, which is intentionally designed by the organization. Information
flows through the formally established channel and is concerned with work related matters.
Formal communication includes; Downward communications, Upward communication,
Horizontal communication, and Diagonal communication.
Vertical communication is communication that involves a message exchange between two

or more levels of the organization hierarchy. Vertical communication can involve a manager
and a subordinate or can involve several layers of the hierarchy. It includes downward and
upward communications.
Downward communication occurs when information is transmitted from higher to lower

levels in an organization. Downward communication starts with top management and flows
down through the management levels to line workers and non-supervisory personnel. The
major purposes of downward communication are to provide organization members with
information about organizational goals and policies. The kinds of media used for downward
communication include instructions, speeches, meetings, the telephone, grapevine,
memoranda, letters, handbooks, pamphlets, policy statements, procedures, etc.
Upward communication – in such situations, the communicator is at a lower level in the

organization than the receiver. In other words, information flows from the subordinates to
the superior. The main function of upward communication is to supply information to the
upper levels about what is happening at lower levels. It includes the flow of opinions, ideas,
complaints, progress reports, suggestions, explanations, and requests for aid or decisions
and other kinds of information from subordinates up to managers. Typical means for
upward communication besides the chain of command are suggestion systems, appeal and
grievance procedures, complaint systems, counseling sessions, group meetings, etc.
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Horizontal communication is lateral message exchange either within work unit
boundaries, involving peers who report to the same supervisor, or across work unit
boundaries, involving individuals who report to different supervisors. It takes place among
departments or people on the same level of hierarchy. It is useful to coordinate activities.
Horizontal communication can take many forms, including meetings, reports, memos,
telephone conversations, and face-to-face discussions between individuals.
Diagonal communication involves the flow of information among departments or

individuals on different levels of the hierarchy. This occurs often in the case of line and staff
departments, in which the staff has functional authority. It is also common to find diagonal
communication among line departments, again in which one of them has functional
authority. The use of diagonal channel would minimize the time and effort expended by the
organization (upward and then horizontal).
Informal Communication
It is a communication, which is not deliberately designed by the organization. It is rather
created by informal groups in order to satisfy their need to interact and share information
among themselves. In the informal communication, information flows in unstructured and
unpredictable ways. In other words, it is a structure less network. Informal communication
channel is commonly termed as grapevine because of its structure less direction of flow.
Normally the information which flow in grave vine is con sidered to be secret or
confidential.
CHAPTER 7: 2
CHAPTER 8
THE CONTROLLING
FUNCTION
MEANING
 Controlling is the process through which managers assure that actual activities
conform to planned activities.
 Controlling is the process of regulating organizational activities so that actual
performance conforms to expected organizational standards and goals.
 It is checking current performance against predetermined standards contained in the
plans.
IMPORTANCE OF CONTROLLING
All the good planning efforts and brilliant ideas in the world do little good if a firm has
no system of managing control. Control, therefore, is an essential part of effective
organizational management. Specifically, control helps an organization adapt to
changing conditions, limit magnification of errors and provide the means to monitor
performance.
Adapting to changing conditions: in today’s dynamic and unpredictable business

environment, control plays a crucial role than ever. A properly designed control
system allows managers to effectively anticipate, monitor, and respond to often
constantly changing conditions.
Limiting the magnification of errors: generally, a small error or mistake does not
adversely affect organizational operation. However, a small error/mistake left
uncorrected (perhaps one undetected as a result of a lack of control) may be magnified
with the progress of time, eventually harming the whole organization.
Another purpose of controlling is to determine whether people and the various parts
of an organization are on target, achieving the progress toward their objectives that
they planned to achieve. Planning chooses goals and maps out the necessary strategy
and tactics. Controlling attempts to prevent failure (and to promote success) by
providing the means to monitor the performances of individuals, departments,
divisions, and the entire organization.
The controlling process is closely associated with the other three functions of
management: planning, organizing and leading. It builds most directly on the planning
function by providing the means for monitoring and making adjustment in
performance so that plan can be realized. Still, controlling also supports the organizing
and leading functions by helping ensure those resources are channeled toward
organizational objectives. A combination of well-planned objectives, strong
organization, capable direction and motivation has little probability of success unless
CHAPTER 8: 1
there exists an adequate system of control. Planning, organizing, staffing and directing
must be monitored to maintain their effectiveness and efficiency.
THE CONTROLLING PROCESS

Although control systems must be tailored to specific situations, such systems
generally follow the same basic process. The controlling process has five major steps.
1. Determine Areas to Control

The first major step in the control process is determining the major areas to control,
i.e. identify critical control points. Critical control points include all the areas of an
organization's operations that directly affect the success of its key operations, areas
where failures can not be tolerated, and costs in time and money are greatest.
Managers must make choices because it is expensive and virtually impossible to
control every
CHAPTER 8: 2
aspect of an organization’s activities. In addition, employees often resent having their
every move controlled. Managers usually base their major controls on the
organizational goals and objectives developed during the planning process.
2. Establishing Standards
Standards are units of measurements established by management to serve as
benchmarks for comparing performance levels. They spell out specific criteria for
evaluating performance and related employee behaviors. The exact nature of the
standards to be used depends on what is being monitored.
Standards, if possible, must be

- Specific and quantitative as much as possible.
- Flexible to adopt the changes that may occur over the future.
- Challenging and should aim for improvement over past performance.
Generally, standards serve three major purposes related to employee behavior. For
one thing, standards enable employees to understand what is expected and how their
work will be evaluated. This helps employees do an effective job. For another,
standards provide a basis for detecting job difficulties related to personal limitations
of organization members. Such limitation can be based on a lack of ability, training, or
experience or on any other job-related deficiency that prevents an individual from
performing properly on the job. Timely identification of deficiencies makes it possible
to take corrective action before the difficulties become serious and possibly
irresolvable. Finally, standards help reduce the potential negative effects of goal
incongruence. Goal incongruence is a condition in which there are major
incompatibilities between goals of an organization member and those of the
organization. Such incompatibilities can occur for a variety of reasons, such as lack of
support for organizational objectives (e.g. an employee views the job as temporary
and attempts to do the minimum), and often result in behaviors that are incompatible
with reaching organizational goals. One common manifestation of goal incongruence is
employee theft, which includes wasting an organization's resources, as well as taking
equipment, materials and money.
There are three types of standards: performance standards, corollary standards and
standards of conduct.
Performance standards deal with quality, quantity, cost and time.
Corollary standards support a given level of performance. These include minimum
personnel requirements and adequate physical resources, such as when a company
knows it will need at least five hundred workers and well-equipped factory to produce
a certain number of terminals.
Standards of conduct are moral and ethical criteria that shape the behavioral climate of
the work place. They originate from law, custom and religious beliefs.
Examples of standards: Producing 800,000 units per year, increasing market share by
CHAPTER 8: 3
20%, cutting costs by 15%, answering all customer complaints within 24 hours.
3. Measuring Actual Performance

Once standards are determined, the next step is measuring performance. For a given
standard, a manager must decide both how to1 measure actual performance and how
often2 to do so.
1 The means of measuring performance will depend on the standards that have
been set.
2 The period of measurement generally depends upon the importance of the
goal to the organization, how quickly the situation is likely to change, and
the difficulty and expense of rectifying a problem if one were to occur.
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4. Comparing Performance against Standards
This is a step where comparison is made between the “what is” and the “what should
be.” Managers often base their comparisons on information provided in reports (oral
and written) that summarize planned versus actual results, and by working around
work areas and observing conditions, a practice sometimes referred to as
Management by Wondering Around (MBWA). The purpose of comparing actual
performance against intended performance is, of course, to determine if corrective
action is needed.
Consequently, the comparison result may show that the actual performance exceeds
(positive deviation), meets (zero deviation), or falls below (negative deviation)
expectations (standards). Accordingly, if performance fulfills expectations (meets
standards), no control problem exists. However, if performance exceeds or fails to
meet expectations, further investigation is required to determine the cause.
Performance that exceeds expectations may mean either superior talent or
inappropriately set standards. Performance that fails to meet expectation may likely
mean inappropriately set standards, poor talent or improper use of resources. The key
question in both cases will be, “How much variation from standards is acceptable
before action is taken?” The answer to this question will lead to the development of
ranges defining upper and lower limits. And performance outside of acceptable range
servers as a red flag calling for taking the necessary corrective action.
The managerial principle of exception states that control is enhanced by concentrating

on exceptions, or significant deviations from the expected result or standard.
Therefore, in comparing performance with standards managers need to direct
attention to the exception, and by doing so, managers can save time and effort.
5. Taking Corrective Action (on time)

The corrective action to be taken depends up on the type of deviation that exists.
When performance exactly meets (deviation of zero) or exceeds (positive deviation)
the standards set, usually no corrective action is necessary. However, managers do
need to consider recognizing the positive performance. The type of recognition given
can vary from a verbal “well done” for a routine achievement to more substantial
rewards, such as bonuses, training opportunities, or pay raises, for major
achievements or consistently good work. Yet, favorable deviations should be examined
to understand such success. When standards are not meet, managers must carefully
assess the reason why and take corrective action. During this evaluation, managers
often personally check the standards and the related performance measures to
determine whether these are still realistic. Sometimes, managers may conclude that
the standards are, in fact, inappropriate- usually because of changing conditions-and
that corrective action to meet standards is therefore not desirable. More often, though,
corrective actions are needed to reach standards. The standards may have been based
on historical data which may be inappropriate to current conditions. In such
instances, the past is a poor basis on which to predict the future. Similarly, the use of
CHAPTER 8: 5
comparative standards may prove to be problematic since no two organizations are
alike.
In taking corrective actions, managers must carefully avoid two types of errors: taking
corrective action when no action is warranted and failing to take corrective action
when it is clearly needed.
TYPES OF CONTROLLING
In addition to determining the areas they want to control, managers need to consider
the types of controls that they wish to use. Based on the time period in which control
is applied in relation to the operation being performed, or the stage of productive
cycle in which controlling is carried out, there are three basic types of controls:
preventive, concurrent, and feedback. Thus, an organization’s performance can be
monitored and controlled at three points: before, during, or after an activity is
completed.
CHAPTER 8: 6
1. Preventive/Steering/ Preliminary / Input Control
Preventive control focuses on the regulation of inputs to ensure that they meet the
standards necessary for the transformation process. It attempts to monitor the quality
and/or quantity of resources (financial, physical, human and information) before they
become part of the system. Preventive control is future oriented and takes place
before the operation begins. It focuses on prevention in order to preclude later serious
difficulties in the production process - its aim is to prevent problems before they
arise. Nevertheless, since preventive control can’t cover every possible contingency,
other type of controls may also be needed.
E.g. Entrance exams for colleges and universities, policies, rules, procedures, proper
selection and training of employees, inspecting raw materials, the
implementation of induction and orientation programs-save trial and error cost,
frustration of employee. Preventive control comes from an old saying “A gram of
prevention is worth a kg of cure.”
2. Concurrent/Screening/ Yes-No/Checking Control

Concurrent control involves the regulation of ongoing activities that are part of the
transformational process to ensure that they conform to organizational standards. It is
designed to detect and anticipate deviations from standards at various points
throughout the processes, i.e. the controlling is carried out during the actual
transformation process. The emphasis here is on identifying difficulties in the
productive process that could result in faulty outputs.
Because concurrent controls involve the monitoring of ongoing activities, they are the
only controls that can cope with contingencies (unexpected events) that cannot be
anticipated. When contingencies arise involving activities in a transformation process,
a yes/no decision is required. That is, decision must be made whether to continue as
before or follow an alternative course, or take corrective action, or stop work
altogether. In this way, concurrent controls allow adjustments to be made while work
is being done.
E.g. On the job training, on the spot observation, exams, tests, quizzes
3. Feedback/Post-Action/ Output Control

As the name indicates post action control focuses on the end results of the process. It
is regulation exercised after the product (goods or services) has been completed in
order to ensure that the final output meets organizational goals and standards. The
information derived is not used for corrective action on a project because it has been
completed.
The feedback control provides information for a manager to examine and apply to
future activities that are similar to the present one. That is why it is called “historical
results guide future actions.” The purpose of feedback control is to help prevent
CHAPTER 8: 7
mistakes in the future and also it can be used as a base for reward; and in cases
where other (preliminary & concurrent) controls are too costly.
E.g. Performance evaluation, financial statement analysis, final exams
Fig 6.2 Major Control Types by Timing

Controls INPUTS Controls TRANSFORMATION Control OUTPUTS
Preventive Concurrent Feedback Control
CHAPTER 8: 8
Cybernetic and Non-cybernetic Controls
A basic control process can be either cybernetic or non-cybernetic, depending on the
degree to which human discretion is part of the system. A cybernetic control system is
a self-regulating control system that, once it is put into operation, can automatically
monitor the situation and take corrective action when necessary. E.g. computerized
inventory system, a heating system controlled by a thermostat
A non-cybernetic control system is a control system that relies on human discretion as

a basic part of its process.
CHARACTERISTICS OF AN EFFECTIVE CONTROL SYSTEM

Controls may have many different characteristics, but some of the most important are:
Future–Oriented
To be effective, control systems need to help regulate future events, rather than fix
blame for past events. A well designed control system focuses on letting managers
know how work is progressing toward unit objectives, pinpointing unforeseen
opportunities that might be developed – all aids to future action
Multidimensional
In most cases, control systems need to be multidimensional in order to capture the
major relevant performance factors, such as, quality, quantity, overhead, etc.
Economically Realistic/ Cost Effective

The cost of implementing a control system should be less, or at most, equal to the
benefits derived from the control system. The benefits received from controls should
off-set their expenses.
Accurate
Since control systems provide the basis for future actions, accuracy is vital. Control
data that are inaccurate may be worse than no control at all, since managers may make
poor decisions on the basis of faulty data they believe to be accurate. An inaccurate
data from a control system can cause the organization to take action that will either
fail to correct a problem or create a problem when none existent. Evaluating the
accuracy of the information they receive is one of the most important control tasks
that managers face.
Acceptable to Organization Members

Control systems operate best when they are accepted by the organization members
who are affected by them. Otherwise, members may take actions to override and
undermine controls; i.e. controls will not work unless people want them to. Too many,
arbitrary, too few and too rigid controls often cause the satisfaction and motivation of
employees to decline.
Timely
CHAPTER 8: 9
Control systems are designed to provide data on the state of a given production cycle
or process as of a specific time. In order for managers and employees to respond
promptly to irregularities, control systems must provide relevant information soon
enough to allow corrective action before there are serious repercussions or
consequences.
Reliability and Validity

Controls not only must be dependable (reliable), but also must measure what they
intend to measure (must be valid). When controls can’t be relied on and are invalid,
they are unlikely to be trusted and can lead to very bad consequences.
CHAPTER 8: 1
Monitor able
Another desirable characteristic of control system is that they can be monitored to
ensure that they are performing as expected. One way of checking a control system is
to deliberately insert an imperfection, such as a defective part, and then observe how
long it takes the system to detect and report it to the correct individual.
Organizationally Realistic
The control system has to be compatible with organizational realities. All standards
for performance must be realistic. Status differences between individuals have to be
recognized. Individuals have to be able to see a relationship between performance
levels they are asked to achieve and rewards that will follow.
Flexible
Just as organizations must be flexible to respond rapidly to changing environments,
control systems need to be flexible enough to meet new or revised requirements.
Accordingly, they should be designed so that they can be changed quickly to measure
and report new information and track new endeavors.
Focus on Critical Control Points

Critical control points include all the areas of an organization’s operations that directly
affect the success of its key operations. The focus should be on those areas where
failures cannot be tolerated and where that costs in time and money are the greatest.
Easy to Understand
Complexity often means lack of understanding. The simpler the control, the easier it
will be to understand and apply. Controls often become complex because more than
one person is responsible for creating, implementing or interpreting them.
Emphasis on Exception
A good system of control should work on the exception principle, so that only
important deviations are brought to the attention of management. In other words
management does not have to bother with activities that are running smoothly. This
will ensure that managerial attention is directed towards error and not towards
conformity. This would eliminate unnecessary and uneconomic supervision,
marginally beneficial reporting and waste of managerial time.
Overcontrol versus Undercontrol

Since excessive amount of control can make the occurrence of dysfunctional aspects of
control systems more likely, managers need to avoid overcontrol. Overcontrol is the
limiting of individual job autonomy to such a point that it seriously inhibits effective
job performance. At the same time, managers need to avoid going too far in the other
direction, which results in a situation of undercontrol. Undercontrol is the granting of
autonomy to an employee to such a point that the organization loses its ability to
direct the individual's efforts toward achieving organizational goals.
CHAPTER 8: 1
Determining the appropriate amount of control that should exist in organizations is a
significant management decision. With the appropriate amount of control, a manager
can be reasonably certain that no major unpleasant surprises will occur and that
employees will achieve organizational goals.
CHAPTER 8: 1

Introduction to Management

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1

INTRODUCTION TO MANAGEMENT (Mgt 221)

1) Meaning And Definition Of Management

In the above definition there are three key concepts

c) Management is the utilization of scientifically derived principles to examine

d) Management is the process of achieving organizational goals through

Organization – is a group of two or more people brought together to achieve

Managerial Functions Regardless of the type of firm and the organizational

- ii. ORGANIZING: is concerned with assembling the resources necessary to

It is through organizing function that managers determine which tasks are to be

iv.Directing/LEADING: has been termed as motivating, influencing, guiding,

v.CONTROLLING: is the measuring and correcting of activities of subordinates to

There are different reasons to study management. These are:

Managers can be divided based on two criteria. These are:

I. Types of Managers based on levels of management

Based on levels of management or hierarchy we do have three types of managers.

i.Top Level Managers

- Develop overall structure of the organization.

ii. Middle Level Managers

- Regardless of their title, their subordinates are managers.

iii. First Level Managers/Supervisory Level managers

Organizational Hierarchy Time spent on carrying out managerial functions

Fig. 1.1 The relative importance of the managerial functions at

Supervise employees (managers + workers) with specialized skills in specific areas

Oversee a complex unit, such as a company, a subsidiary, or an independent

I.Interpersonal Roles involve developing and maintaining positive

i. Figurehead Role: managers perform symbolic duties of a legal or social

E.g. Signing documents, presiding at a ceremonial event, greeting visitors,

iii. Liaison Role/Coordinator role: The liaison maintains a network of

Refers to dealing with the member of the organization superiors, subordinates,

II. Informational Roles focuses on the transmission of important information

Information is gathered from news reports, trade publications, magazines,

iii. Spokesperson/representative Role: the spokesperson transmits

i. Entrepreneur Role: (initiator of change) the manager acting as an

ii. Disturbance Handler Role: solution seeking role. In the role of

iii.Resource Allocator Role: deciding on the allocation of the organization’s

The Ten Managerial Roles

and outside organization; use mail,

6) Managerial Skills And Their Relative Importance

 Effective managers are essential to the performance of all organizations,

1. Technical Skills – involve process or technique, knowledge and proficiency.

- Is specialized knowledge and ability that can be applied to specific tasks.

2. Human Relations /Interpersonal Skill – the ability to interact effectively

3. Conceptual skills – involve the formulation of ideas. It refers to the ability

Managerial Levels Managerial Skills

Fig. 1.2 Variation of skills necessary at different management levels

4. Management: Science or Art?

Therefore, management in actual sense is neither an art nor science, but it

THE EMERGENCE AND DEVELOPMENT OF MANAGEMENT

A. Management in Antiquity and Pioneer Contributors

Management in Antiquity: - Management thought has been shaped over a period of

Attempts to develop theories and principles of management, however, are relatively

 Egypt - The construction of the Egyptian pyramid (5000-525 BC) is a testimony of

“Comparing the technology and information we have today, managers

 Romans - the ancient Romans also provided numerous illustrations of effective

Roman Catholic Church also made important contributions to early management

 In Ethiopia, the construction of obelisks of Axum, Castle of Gondar, Rock Hewn

Early Management Pioneers

PRE CLASSICAL CONTRIBUTORS

1. Robert Owen (1771 - 1858) - was a British industrialist and an owner-manager of