Principles of Management (or) Management Concepts

LESSON - 1 NATURE AND PROCESS OF MANAGEMENT

Objectives  After studying studying this lesson, you should be able able to:    

understand the nature of management management familiarise with the basic managerial functions describe the levels in management and acquire an indepth knowledge of the skills required re quired of a manager.

Outline  A. Introduction Introduction B. What is Management? C. Nature of Management 1. Management as a Science 2. Management as an Art 3. Management as a Profession 4. Professionali Pr ofessionalisation sation of Management Management in India I ndia D. Functions of Management 1. Planning 2. Organising 3. Leading 4. Controlling E. Management Levels 1. Front-line Managers 2. Middle level Managers

3. Top level Managers F. Managerial Skills 1. Technical Skills 2. Human Skills 3. Conceptual Skills G. Summary  1. Review Questions 2. Case Study  3. Further Readings  A. INTRODUCTION INTRODUCTION Modern societies are often described as 'Societi ' Societies es of organisations'. When we think of any modern society, institutions like business enterprises, hospitals, religious and social organisations naturally come to our mind. All these organisations affect our lives in many ways. Despite the differences in their the ir functioning and approaches, they all strive to achieve certain objectives. It must also be noted that organisations cannot achieve achieve the objectives effortlessly. Several Several activities have to be performed performed in a cohesive way. As such, it is the function of the management to facilitate facilitate the performance performance of activities in a systematic systematic fashion such that the accomplishment of the objectives ob jectives becomes possible. possible. B. WHAT IS MANAGEMENT? Management means many things to many people. Economists Economists regard it as a factor of production. Sociologists see it as a class or group of persons while practitioners of management treat it as a process. In simple terms, management is what a manager does. It has been called by Mary Parker Follet as "the art of getting ge tting things done through people". This definition throws light on the fact that managers achieve organisational organisational goals by arranging others to perform rather than performing the tasks themselves. Management, in fact, is much more that no one single definition has been universally accepted. Nor can any one definition capture all the facets of management, given its dynamic nature. That is why, it is often said sa id that there are as many definitions of management as there are authors in the field. However, the definition given by James  A.F. Stoner encompasses encompasses all the important important facets of management. management. According According to him: "Management is the process of planning, pl anning, organising, leading and controlling the efforts of organisation members and of using all other organisational resources to achieve stated organisational goals".

This definition suggests that: - Management is a process because all managers irrespective of their level in the organisation, engage in certain interrelated activities in order to achieve the desired goals; - Managers use all the t he resources of the organisation, organisation, both physical as well as a s human; - Management aims at achieving the organisations goals. To achieve the objectives, o bjectives, every organisation uses certain inputs like materials, machinery, machinery, money and the services of men. These inputs are drawn from the environment in which the organisation exists. Whether in organisation is engaged in  business or non-business, non-business, the various various inputs are judiciously judiciously used to produce the outlays. This process which involves the conversion of inputs into outputs is common to all organisations and it shown in exhibit 1.

The output of the firm may be a physical product or service. Since a business organisation is an economic entity, the justification justification for its existence e xistence lies in producing p roducing goods and services that satisfy the needs of the people. pe ople. Here arises the question of effectiveness in transforming the inputs into outputs. How effectively the goods and services are produced is a matter of concern for any society, given the scarcity scarcity of resource. Effective management plays a crucial role in this context. C. NATURE OF MANAGEMENT Inspire of the growing importance importance of management as an academic discipline immensely immensely contributing contributing to the quality of human life, the concept is still clouded by certain misconceptions. misconceptions. No doubt, management as an academic body of knowledge has come a long way in the last few years, has grown in stature and gained acceptance all over the  world. Yet, it is paradox paradox that the term 'management' 'management' continues continues to be the most misunderstood and misused. 1. Management as a Science: It is therefore relevant to examine the exact nature of management management whether it is a science or an art. Before arriving at a conclusion, conclusion, let us understand understand the nature of science as well as art. Any branch of knowledge to be considered as science, (like the ones we have physics, chemistry, engineering, etc.) should fulfill the following conditions: a. the existence of a systematic s ystematic body of knowledge encompassing encompassing a wide array of principles;  b. the principles have to be evolved on the basis of constant enquiry and examination; examination;

c. the principles must explain a phenomenon by establishing cause-effect relationship; d. the principles have to be amenable for verification. verification. Looked at from this angle, management as a discipline fulfils the above criterion. Over the years, thanks to the contributions of many thinkers and practitioners, management has emerged with its own principle. The application of these principles helps any practising manager to achieve the desired goals. However, while using the principles, one should not lose sight of the variables in the situation, since situations differ from one another. Thus the importance importance of personal pers onal judgment cannot be undermined in the application of principles. Further, management is a dynamic subject in that it has drawn heavily from economi e conomics, cs, psychology, sociology, engineering and mathematics, to mention a few. It is multi-disciplinary in nature. Though management, considering its subject matter and the practical utility, may be considered as 'Science' for reasons discussed below, it cannot be viewed as an 'exact science'. In other words, it is a science, but an 'inexact science' because: i. Management by definition, involves getting the things done through people. Compared to the other inputs, 'people', who constitute the human resource of any organisation are unique in respect of their aspirations, attitudes, perceptions and the like. Dissimilarities in the behaviour patterns are so obvious that standard results may not be obtained in otherwise similar conditions. ii. Secondly, the behaviour of the human hu man beings cannot be accurately predicted. Hence readymade and standard solutions cannot be prescribed. iii. Thirdly, management is more concerned c oncerned with with future futu re which is complex and unpredictable. As the saying goes, 'many a slip between the cup and l ip', many variables in the environment may affect the plans and render them ineffective. iv. Lastly, since a business business organisation exists in an environment, it has a two-way interaction with the environment. The organisation influences the environment by its several decisions and in turn, is influenced by the various elements el ements of the environment Important among these are technological, economic, socio-cultural and political factors. The whole thing is so complex that however effective the plans are, one is prone to be taken unaware of unexpected changes in the environment. Unlike the pure or exact sciences where the results are accurate, in the Case of Management the various factors totalized totalized above may forc fo rcee even e ven the excellent plans and strategies go haywire. Too many complexities and uncertainties renders management management an 'inexact science'. 2. Management as an Art:  Art refers to the the 'know-how' to accomplish accomplish a desired result. result. The focus is on the ways ways of doing things. As the saying goes 'practi ' practice ce makes a man perfect', constant practice of the

theoretical concepts (knowledge base) contributes for the formation of skills. The skills can be acquired only through practice. In a way the attributes of science and art are the two sides of the same sa me coin. Medicine, engineering, engineering, accountancy and the like require expertise on the part of the practitioners and can only be acquired through practice. Management is no exception. A university gold go ld medalist in surgery may not necessarily turn out to be a good surgeon. Similarly a management graduate from the best of the institutes may not be very effective in practice. In both cases, the application of the knowledge acquired through formal education, requires ingenuity, correct understanding of the variables in the situation, pragmatism and creativity in finding solutions to problems. Effective practice of any art requires a thorough understanding of the science underlying u nderlying it. Thus science and art ar t are not mutually exclusive, but are complementary. Executives  who attempt to manage manage without the conceptual conceptual understanding understanding of the management principles and techniques have to depend on luck and intuition. With organised knowledge and the necessary skills to use such knowledge, they have a better chance to succeed. Therefore, it may be concluded that management is both a science and an art. 3. Management as a Profession:  Another important important dimension of the nature of management management is whether it is a profession. McFarland gives the following characteristics of a profession:    

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existence of an organised and systematic body of knowledge, formalised methods of acquiring knowledge and skills, existence of an apex level body with professionalisation professionalisation as its goal, existence of an ethical code to regulate regu late the behaviour of the members of the profession, charging of fees based on service, and a concern for the social responsibilities. responsibilities.

Management as a profession does not strictly strictly conform to the above criterion. Unlike medicine or law, management has to go a long way to have a universally acceptable norm of behaviour. There is no uniform u niform code of conduct that governs the behaviour of managers. The apex level body, All India Management Association (AIMA) provides only guidelines and does not have any controlling controlling power over the erring members. Vast differences are also found among managers in respect of their concern c oncern for the ethics and  values of the system in which which they function. function. Many a time, in their their obsession with profit, profit, the societal interests are neglected. However, as in the case of other professions, it is implied that managers are expected to set an example in doing doi ng good to the society. After all, given the enormous resources they have at their command, the expectation that managers should address themselves to the problems of society is not unnatural. u nnatural. Compared to other professions like engineering, medicine, accountancy, etc., the entry to management positions is not restricted to individuals with a special degree. To quote Peter Drucker, 'no greater damage could be done to an economy or to any society than

to attempt to professionalize professionalize management management by licensing managers, managers, for instance, i nstance, or by limiting access to management to people with a special academic degree'. The question whether management is a profession often breathes life into the widely debated issue "whether managers are born or made". It is true that many founding fathers of the industry in India and elsewhere too, did not study management in the formal way. The native wisdom coupled with their vision and ingenuity in organising the enterprises helped them earn name and fame. fa me. Huge industrial empires were built with sheer business acumen. Business history history of any nation is fully ful ly replete with many "rags to riches" stories. The Marwaris The  Marwaris and  and Parsees  Parsees in  in North India and Chettiars and Naidus and Naidus in South India, for instance, offer a classic example of such success stories. The success achieved by the pioneers in these cases amply demonstrates that success in business requires much more than the academic degrees. The achievements of the pioneers of the industrial development need not, however, shadow the importance of management as a profession, in arguing for and against, ag ainst, we must not ignore the context of the business. There has been a sea change in the environment of the business. Modern business business has become more complex due to the uncertainties arising mainly from: * rapid technological changes * increased sophistication in technology  * expansion in the t he size of organisations organisations and consequently the markets.  All these variables which which have a significant bearing bearing on the functioning functioning of a business point to the need for fo r formal training and acquisition acquisition of skills in management by pursuing management education. 4. Professionalisation of Management in India: I ndia: In the last few years, management management as a profession has gained a firm footing in India. I ndia. The awareness about the contributions of professional managers has been increasing. Consequently, there has been a manifold increase in the number of institutes offering MBA and related diploma courses. There has also been a phenomenal increase in the number of students seeking admissi a dmission on into the management management programmes. The following factors seem to be mainly responsible responsible for the growing demand for professional managers: - The liberalisation policies pursued by the government opened up new vistas for the Indian organisations. organisations. As  As a consequence, consequence, competition has increased in all the sectors sectors of Indian economy. - Private industrial houses which which were indifferent before, have fully realised the need for professional managers. While the promoters in many cases reserve the policy

formulation for themselves, the day-to-day managerial activities are entrusted to the professional managers. - Public sector undertakings are also, of late, forced to perform. As a result, qualified managers are sought after by PSU's than ever before. - Apart from the manufacturing concerns, concerns, public utilities like transport, telecommunications, and a host of service organisations are recruiting professional managers in a big way. D. FUNCTIONS OF MANAGEMENT Management is widely regarded as a process. A manager no matter what his level is in the organisation, performs a series of functions. functions. Surprisingly, there is no consensus among the management thinkers on the classification of management functions. The number of functions as well as the terminology terminology used to describe them are not alike. Henry Fayol identifies five functions, vis., planning, organising, commanding, coordinating and controlling. For instance, Newman and Summer recognize Summer recognize only four functions, namely organising, planning, leading and c ontrolling. Luther Guile's Guile's popular catch word POSDCORB suggests seven functions, fu nctions, namely, planning, organising, staffing, directing, coordinating, reporting and budgeting. Koontz and O'Donnel classify the functions into planning, organising, staffing, d irecting irecting and controlling. For the purpose of our study, we shall examine the following four functions of management - planning, organising, leading and controlling. 1. Planning Planning, simply, is outlining a future course of action. It is unique in that it precedes all al l the other managerial functions. It attempts to capture the future. It involves deciding the objectives and formulating the policies and procedures to achieve them. Effective planning provides answers to questions like - what to do, how h ow to do, who is to do it, and  when to do? Planning is a function performed by managers at all levels. However, p lan made by top managers have a wider scope with a focus on the organisation as a whole and normally cover a longer period. On the other hand, plans developed by middle and lower level managers relate to the divisions or departments and usually cover a short period. Systematic planning helps in facing the uncertainties uncertainties of future with less embarrassment. It helps in making making things happen in the expected way. 2. Organising Organisations Organisations achieve objectives by using physical physical and human resources. When people  work in groups, everyone everyone in the group should should know what he is expected to achieve achieve and  what reporting relationship relationship he has with with others. The manager's task in organising organising aims at creating a structure that facilitates the achievement a chievement of goals.

Organising involves:     

determination of activities required to achieve goals; grouping of these these activities into departments; assignment of such groups of activities to a manager; delegation of authority to carry them out; and provision for coordination horizontally and vertically in the organisation. organisation.

It must be remembered that the structure varies with the task. A large organisation with huge markets needs a different structure compared compared to a small organisation. organisation. Similarly, structure of an organisation operating in a stable environment may be different from the one operating in a dynamic environment. The way one goes about in organising the affairs of the organisation, is thus influenced by the size and nature of the activities involved, the type of o f environment, environment, and the overall business strategy. strategy. 3. Leading Once plans are finalised and the structure structure of the organisatio o rganisation n is determined, the next step is to help the people achieve the objectives. This involves directing or leading the activities of the people. The manager directs the the activities of his subordinates by explaining what they have to do and by helping them perform it to the best of their ability. In leading the people, pe ople, the manager performs the following three distinct tasks: Communication - the process of passing information from one person to another Leadership - the process of directing the activities of the people by explaining them what they have to do. Motivation - the act of stimulating the people p eople so that they give their best to the organisation Leading is a function predominantly interpersonal interpersonal in nature. In the organisational context many problems arise because of the failure of managers to understand the people, their aspirations, attitudes, behaviour as individuals and in groups. If the manager fails in leading lea ding the people towards better performance, performance, any amount of planning and organising, however effective they are, may not help the organisation. 4. Controlli C ontrolling ng  While plans of the organisation organisation spell out the objectives objectives to be achieved, control control as a managerial function facilitates to know whether the actual performance is in conformity  with the planned one. one. So that, in the event of deviations, deviations, appropriate appropriate corrective measures can be taken. In the absence of adequate ade quate control mechanism, unexpected unexpected changes in the environment may push the organisation off the track. Thus, controlling implies measuring and correcting the activities to assure that events conform to plans. It involves four main elements:

a. Establishing standards of performance; performance;  b. Measuring the actual actual performance and comparing comparing it against the standard standard performance; c. Detecting deviations, if any, in order to make corrections before it is too late; a nd d. Taking appropriate corrective corrective measures.

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E. MANAGEMENT LEVELS Though the term 'manager' is used to mean anyone who gets the things done through other people, we find the managers in any organisation with varying authority and responsibilities. responsibilities. In any company the total management job requires many skills and talents. Obviously, therefore, the job of manager is divided and subdivided. Such an arrangement implies different levels of management. As a matter of custom and convenience, we normally visualise a company's company's management as a pyramid as shown in EXHIBIT 2 Levels of Management

The three levels of management management that are commonly found in any organisation are lower or front-line, middle and top managers. 1. Front-Line Managers This is the entry level job in the management. Managers at this level direct the operating employees (workers). They are close to the action, for their job involves supervising the activities of operatives. Front-Line Front-Line managers are called foreman, supervisor, inspector and so on in any organisation. 2. Middle Level Managers

Middle management level includes, in many organisations, organisations, more than one level. Managers who work at all the levels l evels between the lower arid top levels constitute the middle management, departmental departmental heads and a nd regional managers. Zonal managers and so on fall in this th is category. They report to top managers. Their principal responsibilities responsibilities are to direct the activities of lower level managers who implement the organisation's organisation's policies. 3. Top level Managers This level consists of a small group of executives. Board of Directors, Chairman, Managing Director and the top functional heads and divisional managers comprise this level. Top managers are responsible for the overall management of the organisation. They decide the enterprise objectives, policies and strategies to be pursued to achieve those objectives. They provide direction to the organisation by guiding the organisation's interactions with its environment. F. MANAGERIAL SKILLS Management job is different from other jobs. It requires elements of stewardship stewardship and commitment commitment to the purpose. It involves the obligation to make prudent use of human and material resources. It requires resourcefulness and capacity for judgment to handle complex situations. Further, the nature of the job becomes increasingly complex at each higher level because of the increase in the scope of authority and responsibility. Therefore, each higher level requires re quires increased knowledge, broader perspective perspective and greater skills. For purpose of analysis, skills required requ ired of any manager are classi c lassified fied under three different heads - technical, human (Employee ( Employee relations skill) and conceptual skill as shown in Exhibit 3. The exhibit exh ibit helps in understanding the levels of management responsibility, responsibility, the principal principal skill re quirements, quirements, and the extent to which each kind of skill is required at each level.

1. Technical Skill Technical skill is the ability to use the procedures, techniques, techniques, and knowledge of a specialised field. It is primarily concerned with the ways of doing the things. It implies proficiency in a specific field of activity. Technical skill is most important for the lower level managers because by nature their job involves supervision supervision of the workers. Effective Effective supervision and coordination of the work of the subordinates, sub ordinates, therefore, depends on the technical skill possessed by the lower level manager. Any supervisor without a sound knowledge of the job cannot make an effective supervisor. Such supervisors are not respected by the subordinates at the shop floor. The relative importance of the technical skill as compared to the other skills diminishes as one moves up to higher levels of management.

2. Human Skill Human skill is the ability of the manager to work effectively as a group member and to  build cooperative effort in the team he leads. It is the ability to work work with, understand and motivate people. This skill s kill is primarily concerned concerned with persons, as contrasted c ontrasted with "things". When a man is highly skilled in employee relations, he is aware of his own attitudes, assumptions, and beliefs and recognizes their limitations as well as their usefulness. He accepts as an important fact of life the existence of viewpoints and feelings different from his own. He understands why people behave as they do and is able to make his own behaviour understandable to them. He can foresee their reactions to possible courses of action and, is able to take their attitudes into account. His skill in  working with others is is natural and continuous. continuous. He does not apply apply it in random or in inconsistent fashion. It is a natural ingredient of his every action. 3. Conceptual Skill This skill is also called design and problem-solving skill. It involves the ability to see the organisation as a whole, to understand how its various parts and functions mesh together, and to foresee how changes in any one of these may affect all the others. o thers. Conceptual skill extends to visualising the relation of the organisation organisation to industry, to the community community and to the political, economic and social forces of the nation as a whole, and even to forces which operate beyond the national boundaries. It is the creative force  within the organisation. organisation.  A high degree of conceptual conceptual skill helps in analyzing the environment environment and in identifying identifying the opportunities and threats. Managements of companies like ITC, Larsen & Turbo,  Asian Paints, Bajaj Bajaj Auto in the private sector sector and National Dairy Dairy Development Board in the public sector, to mention a few have amply demonstrated this skill in competitive co mpetitive edge over their competitors.  All the three types of skills skills discussed so far are are not mutually exclusive. In other other words, management job always requires all the three skills but in different proportions depending upon the level of management. There is a gradual g radual shift in the emphasis from the bottom to the top of o f the pyramid. Technical skill and human skill are always in greater demand at the base of the pyramid, for it is i s there the productive processes and operations are carried out. It is there where you find most of the people. It is there  where the action action takes place. The need need for conceptual skill skill is greatest at the peak of the the pyramid. Obviously, the top managers are not often involved in the d irect application of specific methods, procedures and techniques than those at the lower echelons of management.  Although, each of these skills is needed in some some degree at every level of management, management, there are successful executives who have no great amount of technical skills. But they are able to compensate compensate the lack of that skill through superior creative ability ability and skill in selecting, planning and effectively motivating subordinates who are strong in technical skill.

 As you have understood understood by now, at every level, level, management job is different from all other jobs in respect of the skills required. At the entry level into the management management job, that is, at the supervisory level, besides technical skills, you ha ve to realise the need to acquire human skill and the problem-solving skills (conceptual). To climb up the organisational ladder, you must not only be good at the skills required for the present  job. But also learn and acquaint acquaint yourself with with the skills required at the next level. level. As a result, in the event of promotion promotion to the next higher level, you would feel at home and discharge the responsibilities with ease.

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G. SUMMARY  Organisations engaged in business or non-business non-business use the inputs to produce the output (may be products or services). The conversion of inputs into outputs depends on the effectiveness of management. Management Management as a discipline has both the elements of science and art. The theory with principles and techniques constitute the science component, component, while skills s kills and talent required for the use of o f the principles constitute the art. Management has, of late, emerged as highly respected profession. The process of management is understood under the four basic functions, viz., planning, organising, leading and controlling. To execute the managerial job successfully, every manager

requires three types of skills - technical, human and concept c onceptual ual skills. The proportion in  which these skill skill are required varies from one level to the other. Technical Technical skills are important it the lower while human skills and conceptual skills are required in that order at higher levels of management. management. Review questions 1. Describe whether management is a science or art. 2. What do you mean by a profession? Examine the recent trends towards towards professionalisation professionalisation of management management in India. 3. Discuss the important functions of management. 4. Present a detailed account of the levels of management that are commonly found in any large scale organisation. What are the important skills at each level? CASE Traditional Manager or Professional Professional Manager Ravi, a brilliant young man, obtained his MBA degree from fro m an Indian university in 1991  with specialisation specialisation in the area of Finance. Finance. His basic degree degree is B.E. in Chemical Chemical Engineering. The engineering background coupled with the management education aroused in him new spirits to strike on his own. Careful and systematic systematic analysis of the  various opportunities opportunities enabled him finally to zero zero in on the production and and marketing of polythene bags that are increasingly increasingly used by fertilize and cement industries. The location of a fairly good number of units of these two industries in South India influenced his decision of the product choice. The fact that technology involved is not complicated or volatile further reinforced his belief belie f about the market potential. p otential. To reap certain locational advantages, he preferred to set up the un it in a fast growing district headquarters headquarters town in Tamilnadu connected connected with a good network of transport and communication facilities. facilities. But the cost of land as well as a s its availability became a problem. With the limited funds at his disposal, he could not afford to buy land and construct the unit which involved the commitment of substantial portion of his meager funds. On enquiry he came to know of certain sick units in the industrial estate in the outskirts of the town, which had ceased to function for sometime in the past. The machinery machinery in a few such units having been already auctioned, the sheds were available for sale and/or lease. This opportunity came in handy for Ravi. He took on lease one such shed and spent about one lakh to effect a few changes to suit his requirements. He started contacting the suppliers of the plant and machinery. He is confident of obtaining financial assistance assistance to meet the fixed as well as working capital requirements of the business. But at the same time, he is also confused of the multiplicity of organisations/agencies organisations/agencies that have come up to cater to the needs of small-scale

entrepreneurs. entrepreneurs. He doesn't have adequate knowledge of the assistance available and the incentives offered by all these agencies. Further, even though he doesn't d oesn't foresee any problems in the technical aspects relating to production, he is rather apprehensive of marketing the product. The demand for his product, being a derived one, is influenced by two factors - one, the demand for fertilisers, cement and other bulk commodities and two, the extent of the success made in replacing the gunny bags which are still in wider w ider use. To add to his bother, Government of India, of late, has made use of gu nny bags mandatory to protect the jute industry which has been languishing and is likely to vanish. v anish. However, all these problems could not deter the spirit of Ravi who is fully determined and bent on go ing ahead. Please Answer: 1. Is Ravi a professional manager? Substantiate your answer with the characteristics of a professional manager. 2. Does Ravi face any problem? If so, so , analyse the problem. 3. Has Ravi acted in a professional way in analysing the environment before taking a decision? How could he have averted the problem? FURTHER READINGS Drucker, Peter P., 1981, Manageme 1981, Management nt Tasks, Responsibilities Responsibilities and  Practices,  Practices, Allied Publishers, New Delhi Hodgets, Richard M., 1986, Managem 1986,  Management ent Theory: Process and Practice Practice,, Academic Press, London. Katz R.L., 1974, Skills 1974, Skills of an Effective Administrator Administrator,, Harvard Business Review, 52(5) 90-102. Koontz, Harold and Cyril O'Donnell, 1976, Management: 1976, Management: A System System and Contingency Contingency  Analysis of Managerial Functions Functions,, McGraw-Hill, Tokyo Newman, William H. Summer, Charles E. and Warren, E, 1974, The Process The Process of  Management Concepts, Concepts, Behaviour and Practice Practice,, Prentice Hall of India, New Delhi. Stoner, James A P, and Freeman Edward, R, 1989, Management  1989, Management , Prentice Hall of India, New Delhi.

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LESSON-2 EVOLUTION OF MANAGEMENT THEORY 

Objectives  After studying studying this lesson, you should be able able to:   

gain insights into the h istorical istorical perspective of management, appraise the major contributions to the management thought, and analyse the trends that have taken place in the evolution e volution of management thought over the years.

Outline Introduction Pre-Scientific Era * Charles Babbage * Robert Owen Scientific Management Era * F. W. Taylor * Henry Fayol Human Relations Era * Elton Mayo May o and the Hawthorne Hawthorne Experiments Social Sciences Era * Chester I. Barnard * Rensis Likert * Douglas McGregor * Herbert A. Simon * Peter F. Drucker

Summary  Review Questions Self-assessment Self-assessment Test Further Readings INTRODUCTION The practice of management is as old as human civilisation. In fact, much of the progress of mankind over the centuries may be attributed to the effective management of resources. The irrigation systems, existence of public pu blic utilities, the construction of  various monuments monuments like Taj Mahal, and the Egyptian Egyptian pyramids of the bygone bygone era amply amply demonstrate demonstrate the practice of management in in the olden ol den days also. The ancient civilisations of Mesopotamia, Greece, Rome and Indus valley displayed the marvellous results of good go od management practices. practices. However, the study of management in a systematic systematic way as a distinct body of knowledge is only of recent origin. That is why, management is often described as "oldest of the arts and youngest of the sciences s ciences". ". Thus, the practice of management is not new. It has been practiced for thousands of  years. But the science science part of it the systematic systematic body of knowledge knowledge is, no doubt, a phenomenon of the present century. The traditional management practices remained quite stable through the ce nturies until the birth of Industrial Revolution in the mid 18th century. The industrial industrial revolution  brought about the substitution substitution of machine machine power for manpower manpower through through several scientific inventions. As a result, within a few decades, the picture of industrial activity had undergone a metamorphic change. Man's quest for new ways of doing things, coupled with his ingenuity in adopting the scientific scientific and technological inventions inventions in the production of various goods and a nd services resulted in:  

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Mass production in anticipation of demand;  Advent of corporate corporate form of organisation organisation which facilitated facilitated such large scale production; Spectacular improvements in the transport and communication communication facilities; Increase in competition fox markets; The establishment of the new employer-employee relationship and so on.

Industrial Revolution had thus sown the seeds of modern management. The early scientific inquiries into the practice of management ma nagement began. In what follows in this lesson, the evolution of management thought over the years is d iscussed in a chronological way. PRE-SCIENTIFIC ERA  The captains of the industry industry in the early 18th 1 8th and 19th centuries were confronted with many problems in managing the organisations. organisations. They had no previous experience to

guide them. The concept of automation and the consequent mass mass production were totally new. For the first time, the need for standard systems and procedures procedures was felt. The new situation around the a cademic interest and the search for new principles and theories to ensure better management began. Notable among the early thinkers is Charles Babbage, Babbage, the British professor of Mathematics. Mathematics. He is often regarded as father of Operations Research. In the early 1800's he was convinced convinced that the application of scientific principles to work processes processes would  both increase productivity productivity and reduce reduce expenses. He introduced work measurement methods, profit sharing and bonus plans. He had invented a predecessor to the modern day computer, an invention he called the "difference machine" that performed mathematical calculations. calculations. He had also published a book titled "On Economy of Machinery and Manufacturing". Manufacturing". Babbage was an early advocate of division of labour. He  believed that each factory factory operation should should be analysed so that the the various skills necessary to execute the operation could be identified. It is interesting to note that our modem assembly line in the manufacturing manufacturing concerns is based b ased on Babbage's ideas.  At about the same same time Robert Owen, Owen, an entrepreneur entrepreneur and manager of o f several cotton textile mills in Scotland introduced many reforms to improve the working conditions of the employees. He built better houses for workers workers and started company store to supply goods to the employees cheaply. He also reduced the working day to 10 hours and refused to hire children under the age of 10. Owen argued that better working conditions  would contribute to to larger output and profits. profits. At a time when his counterparts counterparts concentrated on investing only on machines, he believed in investing in the workers workers in terms of improving their working and living conditions. He considered workers as "vital machines". He also introduced "rating system" to evaluate the employees' work on a daily basis and emphasised the human element in the factories. Similarly, the thinking of James Montgomery , a textile mill owner in Scotland who addressed himself to the problems of planning, organising and controlling in early factories and Henry Varnm Poor, Poor, editor of the American Rail road Journal created good impact on the then management practices. Though the contributions of the owner managers and a few academicians in the 19th century were in haphazard haphazard manner and had failed to stimulate interest in management it must be accepted that some thought provoking issues on the day to day management of organizations were raised. Their ideas created awareness about managerial problems. Thus by the end of the 19th century, adequate ground was prepared for a more systematic effort for the study of management. SCIENTIFIC MANAGEMENT ERA  Frederick Winslow Taylor (1856-1915) should be ever remembered for his contribution to the management management movement. In an e ffort to address several organisational problems, Taylor developed the body of knowledge what is now called "scientific management". Taylor investigated investigated the effective use of human beings at the shop floor level in the industrial organisation. He defined managing as the art of

"knowing exactly what you want men to do and then seeing that they do it in the best and cheapest way". For the emphasis he had placed on the scientific scientific way of doing things, he is often called the "Father of Scientific Management". Management". Salient Features of Scientific Scientific Management Taylor conducted various experiments at the work place to find out how human beings could be made more efficient by standardising the work. These experiments have provided the following features fea tures of scientific management. i. Separation of planning and doing Taylor emphasized the separation of planning from actual doing. Before Taylor's Scientific Scientific Management, a worker used to plan about how he had to work and a nd what instruments instruments were necessary for that. This Th is was creating lot of problems. Taylor insisted that planning should be left to the supervisor and the worker should concentrate concentrate on doing the work. ii. Functional Foremanship Foremanship Separation of planning from doing resulted in the development of supervision system. For this purpose, Taylor evolved the concept concept of functional foremanship based on speclalisiation of functions. iii. Job analysis  According to Taylor Taylor the best way of doing doing a job is one which requires requires the least movements, consequently consequently less time and cost. He analysed a nalysed the various jobs to find out the best way of doing the things with the help of Time and a nd Motion and Fatigue studies. a) Time Study involves Study involves the determin d etermination ation of time, a movement takes to complete. The movement which takes minimum minimum time is the best one. This helps in fixing the fair work for a period.  b) Motion  b) Motion Study involves Study involves the study of movements which are involved in doing a  job and thereby eliminating eliminating the wasteful movements movements and performing performing only necessary movements. c) Fatigue c) Fatigue Study shows Study shows the amount and frequency of rest required in completing the work. Thus job analysis, as given g iven by Taylor, suggests the fair amount of a day's  work requiring certain certain movements and rest periods to complete complete it. iv. Standardisation Standardisation Instruments and tools, period of work, amount of work, working conditions and cost of production have to be standardized on the basis of job analysis and various elements of costs that go into the job.

 v. Scientific Scientific Selection and Training of of Workers Taylor suggested that workers should be selected on a scientific basis taking into account their education, work experience, aptitude, physical strength, etc. A worker should be given work for which he is physically and technically technically most suitable. Apart from selection, proper emphasis should be laid on the training of workers workers to make them efficient and effective.  vi. Financial Financial Incentives Incentives Taylor introduced financial incentives to motivate workers to put in their maximum efforts. He applied the concept of differential piece rate system. s ystem. According to this scheme, a worker who completes the normal work gets wages at higher rate per piece and one who does not complete c omplete gets at lower rate. To make the differential differential piece rate system work, he has suggested that wages should be based on individual performance. performance.  vii. Economy  Economy   While applying scientific scientific management, not only only scientific and technical technical aspects aspects should  be considered considered but adequate consideration consideration should be given given to economy and and profit. For this purpose, techniques of cost estimat e stimates es and control should be adopted. The economy and profit can be achieved by making the resources resources more productive as well as by eliminating the wastages.  viii. Mental Mental Revolution Revolution Taylor strongly suggested a change in the attitude of employers and employees. Mutual conflict should be replaced by mutual cooperation cooperation which is beneficial to both. Taylor Ta ylor argued that mental revolution is i s the most important feature feature of o f scientific management  because in its absence, absence, no principle principle of scientific scientific management could be applied.

In his crusade against the unscientific unscientific methods of management which were prevalent at that time, Taylor had to face bitter criticism from different quarters. It is an irony that in the beginning both workers and the managements did not understand Taylor's preachings correctly. Workers Workers had struck work in protest against the proposed changes in the work routine and systems. The American congress had even called Taylor for an explanation. Taylor's philosophy, in simple, simple, as reiterated by him before the congress and also in his book "The Principles of Scientific Management", rested on the following four  basic principles: principles: 

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Development of a true science of management, so that the best method for f or performing each task could be determined; Scientific selection of the workers, so that each worker would be given responsibility responsibility for the task for which he or she was best suited; Scientific education and development of the worker; and

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Intimate, friendly co-operation between management and labour.

Henry Fayol (1841-1925), is widely acclaimed as the founder of the c lassical management school. He was the first to systematise what management management is all about. Fayol believed that sound managerial practice falls into certain patterns that can be identified and analysed. From this basic insight, he developed a comprehensive comprehensive philosophy of management which is found relevant to this day. Fayol was a contemporary of Taylor. It is important to note that, while Taylor was basically concerned with technical technical aspects at the shop floor, Fayol was interested in the total organization. He looked at the problems of managing managing an organisation from top management point of view. His emphasis that management was not a personal talent but a skill like any other was a major contribution to managerial managerial thought. It had generally been believed that "managers were born, not made". Fayol, opposed that view and argued that management could be taught once its underlying principles were understood and a general theory of management was formulated. formulated. Many of the managerial concepts concepts we take for granted today were first articulated by Fayol. In an attempt to develop a science of management, management, Fayol began by dividing business operations into six activities. These activities were 1) Technical - producing and manufacturing products 2) Commercial - buying raw materials materials and selling products 3) Financial - acquiring a cquiring and using capital 4) Security - protecting employees and property 5) Accounting - recording and taking stock of costs, profits, and liabilities, keeping  balance sheets and compiling compiling statistics, statistics, and 6) Managerial. Fayol's primary focus, of course, was on the last activity because he felt managerial skills had been the most neglected aspect of business operations. He defined management in terms of five functions - planning, organizing, organizing, commanding, coordinating, and controlling. Fayol's Principles of Management 1. Division of Labour The more people specialize, the more efficiently they can perform their work. The principle is epitomized by the modern assembly line.

2. Authority  Managers must give orders so that they can get things done. While their formal authority gives them the right to command, managers will not a lways compel obedience unless they have personal authority (such as relevant expertise as well). 3. Discipline Members in an organization need to respect the rules and agreements agree ments that govern the organization. To Fayol, discipline will result from good leadership at all levels of the organisation, fair agreements (such as provisions for rewarding superior performance), and judiciously enforced penalties for infractions. 4. Unity of Command Each employee must receive instr i nstruction uction about a particular operation operation from only one person. Fayol believed that when an a n employee reported to more than one superior, conflicts in instruction and confusion of authority au thority would result. 5. Unity of Direction Those operations within the organization that have the same objective should be directed by only one manager using one plan. For example, the personnel department in a company should not have two directors, each with a different hiring policy. 6. Subordination of Individual Interest to the Common Good In any undertaking, the interests of employees should not take precedence over the interests of the organization as a whole. 7. Remuneration Compensation for work done should be fair to both employers and employees. 8. Centralizati Ce ntralization on Decreasing the role of subordinates subordinates in decision making is centralization, increasing their role is decentrali de centralization. zation. Fayol believed that managers should retain final responsibility  but also need to give their subordinates subordinates enough authority authority to do their jobs properly. properly. 9. The Hierarchy  The line of authority in an organization often represented represented today by the neat boxes and lines of the organization chart runs in order of rank from top management management to the lowest l owest level of the enterprise.

10. Orders Materials and people should be in the right place at the right time People in particular should be in the jobs or positions most suited for them. 11. Equity  Managers should be both friendly and fair to their subordinat su bordinates. es. 12. Stability of Staff   A high employee turnover turnover rate is not good for the efficient efficient functioning functioning of an organisation. 13. Initiative Subordinates should be given the freedom to conceive and carry out their pl ans, even though some mistakes may result. 14. Espirit de Corps Promoting Team Spirit will give the organization a sense of unity. To Fayol, even small factors could help to develop this th is spirit. He suggested, for example the use of verbal communication communication instead of formal, written communication, whenever possible.

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HUMAN RELATIONS ERA  The Human Relations Era, also Called Behavioural School emerged e merged because the Scientific Scientific Management Manage ment principles principles propounded by classical thinkers like F. W. Taylor, Henry Fayol, Frank and Lillian Gilbreth did not achieve sufficient production efficiency and industrial harmony at the work place. Understanding human behaviour at work still remained a big puzzle for the managers. Therefore, Therefore, systematic attempts were made by a few psychologists and sociologists to help managers understand the dynamics of human  behaviour. The term 'human relation' is used to describe the employer-employee relation in the organisational context. When the relations are effective employees e mployees contribute contribute their maximum for the achievement of the organisational organisational goals. On the other hand, human relations are ineffective when morale and e fficiency of the workers deteriorate. They are present at the work place but do not perform. Therefore, Therefore, to create effective e ffective human human relations, it is essential that managers must know why employees behave as they do and  what psychological psychological and sociological factors factors motivate them. Elton Mayo and the Hawthorne Experiments

The Hawthorne Experiments conducted conducted by Elton E lton Mayo and his associates at the  Western Electric Company Company from 1924 to to 1933 provided new insights insights into the human human  behaviour. Many of the the experiments were were performed at the the Western Electric's Hawthorne plant near Chicago. Mayo's findings in these experiments marked marked the  beginning of the human human relations era. The studies attempted to investigate investigate the relationship rel ationship between the physical conditions at the workplace and the productivity productivity of workers. The researchers divided the employees into two groups. One group called the test group was subjected to changes in lighting. The lighting condition for the other group called the control group remained constant throughout the study. When the test group's lighting conditions were improved, productivity increased as expected. What surprised the researchers most was the fact that productivity continued to increase even when the lighting was reduced. Further, to add to the mystery, the control group's output also increased as the test group's lighting conditions were changed, though there was no change in the lighting conditions for the control group. As a result, for the first time, it was realised that something in addition to lighting was influencing the worker's performance. In another set of experiments, the changes in the performance of a group of workers  were observed by changing changing the various work work related factors such such as: * increasing the wages; * introducing rest periods; and * reducing the workdays and workweek.  Workers were were also allowed to choose their own own rest periods and to have have a say in all these changes. These experiments revealed that financial incentives alone were not causing the productivity improvements. It was found that a complex set of attitudes were responsible for the productivity increase. Employers develop group norms at the work place. The test and the control groups developed some group understanding that motivated them to perform well. The fact that employees would work hard if they are convinced that supervisors pay special attention to their we lfare was also made abundantly clear. This is often referred as the Hawthorne Effect.  Another conclusion conclusion of the studies was was that informal informal work groups exist in in the work place. The informal groups help the individuals share common values, understanding and  beliefs. These informal informal groups exert significant significant influence influence on the employees' performance. It is our common knowledge that many a time we find in the organisations organisations how employees associations and friendships with co-workers influence their attitude towards the work and the superiors. The contribution of the Human Relations Movement Movement is quite significant in that the individual and the impact of his association with a group g roup had received due attention. Employee productivity productivity was viewed as a function of the human relations at work rather

than an engineering problem. Elton Mayo's s tudies in fact, contributed for a thorough thorough change in the attitude and approach towards training. SOCIAL SCIENCES ERA  Chester I. Barnard's Barnard's contribution is often described as the Social Science Era in the development of management thought. His book "The Functions of the Executive" is regarded as a classic on management even to date. He argued in favour of looking at a t the organisations as social systems and analysing the managerial managerial tasks in the system in  which they operate. This is a significant significant departure from the the earlier approaches. approaches. Barnard used his work experience as the chief executive of New Jersey Bell. Based on his experience and extensive readings in sociology s ociology and philosophy, he had formulated f ormulated his theories on organisational life. According to him, people come together in formal organisations to achieve things they could not achieve working alone. As they pursue organisation's goals they also try to satisfy their individual needs. Thus Bernard arrived at the theme: 'an enterprise can operate efficiently and survive only when both the organisation's goals and the needs of the individuals i ndividuals working for it are kept in balance.'  According to Barnard, Barnard, an organisation organisation exists when the following following three conditions conditions are fulfilled: 1. There are persons able to communicate with each other 2. They are willing to contribute to the a ction 3. They attempt a ttempt to accomplish a common purpose He has identified three types of functions which an executive performed in an organisation. These are: * Maintenance of organisational organisational communication. * Securing of essential services from individuals in the organisation so as to achieve the overall purpose. * Formulation and definition of orga nisational nisational purpose. Barnard's views on the concept of authority are noteworthy. He does not agree with the traditional view that authority transcends transcends from the top to down. In his view, a person does not simply obey an order or directive d irective because it has been given by a superior. As such, the exercise of authority depends on its acceptance, which is possible only when an individual: * understands the communication; communication; * believes that it is not inconsistent with the organisational organisational purpose;

* believes it to be compatible with the personal interest as a whole; and * is mentally and physically able to comply with it. The contribution of Barnard shows his perception of the organisation as a social system. His contribution is regarded quite high h igh in management. Commenting on Barnard's book "The Functions of Chief Executive", William Wolf once said, "The book is a sociology of management. Its style of writing was purposely pitched at a high level of discourse. He  believed that the field of management management was lacking lacking In concepts and was clouded by ambiguous and even erroneous thinking, hi a sense, he hoped that the functions would set things right and g uide the social scientists to more realistic studies of organisation and management. Mary Parker Follet Follet (1868-1933)  (1868-1933) - USA, strongly believed that management management and labour share a common purpose as members of the same organisation, however the distinction distinction is order givers and order takers. She believed leadership should not come from the power of formal authority, as was traditional, but from the manager's greater knowledge and expertise. The manager should simply be the person best equipped to head the group. She believed that the participative mode of management could increase increase cohesiveness, the sense of belonging and creativity creativity the root cause of conflict is 'desire to dominate'. The tendency to acquire man power to oneself and reluctance reluctance to delegate authority are two consequences such behaviour pattern. She advocated 'behavioural approach' in management Rensis Likert is Likert is an Americ A merican an social psychologist born in i n 1903. Likert and his associates carried out extensive research on management practices in a wid e variety of situations like industrial units, railways, hospitals, schools and voluntary organisations and covered unskilled workers in factories to top scientists in research laboratories. He  believed that the body of knowledge knowledge of social sciences sciences can pave the way to frame frame a generalised theory of organisation and management. His findings provided deep insights into supervision, general management systems and Likert classified supervisors into two categories: "job centered' and "employee centered". The primary concern of the first category of supervisors is to ensure performance performance of assigned tasks and maintenance of prescribed standards. On the other hand supervisors in the second category are primarily concerned with the human aspects of their subordinates and effective team building for high task performance. performance. It is argued that high performing managers are humane to their subordinates, and low performing managers are compelled to get tough with their subordinates to achieve  better results. To resolve resolve this dilemma, dilemma, Likert and his colleagues colleagues conducted a series series of experiments in which high and low performing managers were changed into each other's jobs. While high performing managers succeeded succeeded in improving improving the performance performance of low production produ ction units, low performing managers placed in high production units  brought down their output output over a span of time. Management Systems 1-4

The most important contribution of Likert is his conceptualisation of different systems of management along a continuum. He identifies four distinct points along the continuum for purpose of illustration of the characteristics characteristics of each of the management systems. He labels these points 1. Exploitative - Authoritative 2. Benevolent - Authoritative Authoritative 3. Consultative 4. Participative The four management systems systems are then arrayed along the two important dimensions, the type of authority or control an organisation exercises over its members is represented as one dimension. The second dimension relates to the motivational forced used to control the activity of the people. The operatin o perating g characteristics characteristics include leadership, motivation, communication, interaction influence, decision-making, goal-operating characteristics are juxtaposed over the four types of management management systems. Likert rigidly points out that authoritarian-exploitative authoritarian-exploitative management system displays a steep hierarchical structure, structure, centralised decision-making, top-down communi co mmunication, cation, tight supervision, performance under pressure, pressure, and low degree of employee motivation. On the other hand, the participative management system displays flat structure, group decision processes, open and authentic three-way communication communication (up, down and lateral), adaptive supervision. individual and work groups with a high degree of achievement motivation. The other management systems 2 and 3 reveal intermediate combination on forms and processes. The intermediate forms of management systems 2 and 3 will reveal transitory transitory characteristics characteristics of progression from management system from 1 to 4 over a period. In system 2 management orientation is still authoritative, but becomes becomes less exploitative expl oitative and more benevolent towards the members of the organisation. In system 3, exercise of authority is more broad-based with delegation of powers to middle levels and consultation of effected interests at tower levels. To the extent motivation, communication communication and involvement of subordinates replace reliance on exercise of formal authority, consultative consultative management systems will be well set to move forward to the management system 4. Douglas McGregor proved that reliance on authority as the primary means of control leads to resistance, restriction of output and a nd indifference to organisational objectives. His monumental classic "The Human side of the Enterprise" (1960) marked the  watershed in the history history of management movement. movement. He questioned questioned the various models describing man as rational, economic, and self-actualizing.

McGregor's assumptions, assumptions, on the other hand, about human beings in the form of Theory X and Theory Y present contrasting nature of man. Theory X revolves around the Traditional Theory of Human Behaviour. In his own  words these assumptions assumptions are as follows: * The average human being has an a n inherent dislike of work and will avoid if he can; * Hence most people must be controlled, directed and coerced with punishment to get them to put forth fo rth adequate effort towards the achievement of organisational objectives; * The average human being prefers to be directed, wishes to avoid responsibility, has relatively little ambition, wants security above all. Theory Y assumptions on the other hand, hold an optimistic view of human nature.  According to this this set of assumptions assumptions modern industrial industrial life does not fully tap the the potential of the average human being. They suggest managers should should take advantage a dvantage of the subordinates willingness willingness and ability to work wor k by providing a climate for their performance. The assumptions under Theory Y as pronounced by McGregor are as follows: * The expenditure of physical and mental effort in work is as natural as play or rest; * External control and the threat of punishment are not the only means for producing effort towards organis organisational ational objectives. People will will exercise self direction and selfcontrol in the service of objectives to which they are committed; * The degree of commitment to objectives is in proportion to the size of the rewards associated associated with their achievement: * Average human beings learn, under proper conditions, not only accept but also to check responsibility  * The capacity to exercise a relatively rela tively high degree of imagination, ingenuity and creativity in the solution of organisational problem is widely, not narrowly distributed in the population; * Under the conditions of modern industrial life, the intellectual potentialities of human  being are only partially partially utilised.  As can be easily easily seen, these two sets sets of assumptions assumptions are fundamentally fundamentally different. Theory X is pessimistic, static and rigid. Control is external in that it is imposed on the subordinate by the superior. In contrast. Theory Y is optimistic, dynamic and flexible  with an emphasis emphasis on self-direction. self-direction. It also advocates the the integration of individual individual needs  with organisational organisational demands.

Herbert A. Simon is Simon  is an eminent American social scientist. Born in 1916, he was awarded the Nobel Prize in Economics in 1978, in recognition of his outstanding contribution contribution in analysing the decision-making process. He goes to the extent of equating e quating decision-making decision-making with management. management. He laid l aid emphasis on how decisions are made and how they can be made more effectively. In his writings on decision-making, he maintained that to be scientific, one must exclude value judgments and concentrate concentrate on facts, apply rigorous analysis and test factual statements. Simon viewed an organisation as a structure of decision-makers. decision-makers. The missing factor, according to him is correct c orrect decision-making. decision-making. He argued that optimum rational choice between alternative courses of action ac tion is rarely made. Simon divides the decision-making de cision-making process process into three phases, namely: 1. Intelligence activity: This involves finding occasions occasions calling for decision. The manager analyses the environment and identifies conditions that need a ction; 2. Design activity: Identifying, Identifying, developing deve loping and analysing all possible p ossible alternative alternative courses of action are the important tasks in this stage. 3. Choice activity: a ctivity: Finally, the manager selects one of the alternative sources of action available to him.  According to Simon, Simon, every decision consists consists of a logical combination combination of facts and value propositions. propositions. He argues that complete rationality in decision-making is not always possible. He, in fact, disputes the concept of total rationality in administrative  behaviour. Human Human behaviour is neither totally totally rational nor totally totally non-rational. It involves, to use his own word, "bounded " bounded rationality" and "satisfying" "satisfying" are the two important terms used by him to drive home the point further. "Satisfaction" involves the choice of a course of a action ction which is satisfactory satisfactory or at least l east good enough. Simon argues that managers do not aim at maximum satisfaction or result from a decision but are satisfied with reasonably good enough outcome or result. It is because of the limitations limitations involved in identifying the alternatives, collecting all the facts and da ta, knowing the  values of all the alternatives, etc. Though some of Simon's Simon's views on decision-making decision-making are widely acclaimed, acclaimed, his critics critics point out that social, political, economic and cultural factors did not get due attention. His theory is criticised as being extremely general and does not provide the details to guide the managers in decision-making. decision-making. Inspite of some imperfections, Simon's contribution is undoubtedly undou btedly a major major breakthr breakthrough ough in the decision-making decision-mak ing behaviour behaviour of managers. Peter F. Drucker is a highly respected management thinker. He is a prolific writer and has published several books and articles on the management practices. He is so  versatile that there is is hardly any area in management management which is is not touched by him. He has drawn heavily from his consultancy experience spread over the last four to five decades. Drucker perhaps is the only western management management thinker who is admired by

even the socialist block countries also. His views on management management may be summarised summarised as follows: i. Management as a practice:  According to Drucker Drucker management management has two important important functions: Innovation Innovation and Marketing. He has treated management as a discipline as well as a profession. For him, management is more a practice. It is always goal oriented. His comment on the purpose of business as the creation of customer, if understood and in the right way helps any organisation to achieve success. su ccess. Drucker's view on innovation are equally important for the emphasis they place on new product development. He argues that "new products should drive out the existing products" rather than the other way round. As such, he is against bureaucratic management for it stifles the innovative spirit and the initiative among the people in the organisation. He contends that modern organisations are knowledge based organisation and describes the modern workers as 'knowledge ' knowledge workers' considering considering their skills, and innovative abilities. ii. Functions of management: management: Drucker points out three basic functions functions of management. The actions of management should contribute to * the achievement of purpose and mission of the institution; i nstitution; * make the work productive and the worker achieving; achieving; and * effective management of social responsibilities. responsibilities. iii. Objective setting: Drucker has attached great importance to objective setting. He has specified that objectives should be be set for all the result areas areas of business. business. To make the objective setting and their achievement more meaningful, meaningful, he has given g iven a new tool, what is popularly known as 'Management by Objectives' (MBO). MBO MBO is regarded as one of his most important contributions contributions to the discipline of management. He has discussed the concept in great detail in his book, 'The Practice of Management' (1954). MBO is a process whereby superiors and subordinates jointly identify the common objective, set the results that should be achieved by subordinates and assess the contribution of each individual. It is viewed more as a philosophy than as a tool or technique to achieve the objectives. iv. Orientation towards future: Drucker is a great visionary and futurologist. He was ahead of others in visualising the future trends that affect the society. He visualised the concept c oncept of modern organisation

and its impact on the society several years ago. His views on the many facets of the modern corporations corporations have almost all become reality now. To put it in his own words, he described the present age as the "age of discontinuity". discontinuity".  v. Federalism: Drucker has advocated the concept of federalism. Federalism according according to him, involves centralised control in a decentralised structure. Federalism has certain positive values over other methods of organising. These are as follows: * It sets the top management management free to devote dev ote itself to major policy formulation and strategy development; * It defines the functions and responsibilities responsibilities of the operating people; * It creates yardsticks to measure twin success and effectiveness in operating jobs; and * It helps to resolve the problem of continuity through giving education to the managers of various units while in an operating position. position. Drucker's realistic way of looking at the organisations and society has earned him the status of a management guru. His contributions have made tremendous impact on the management practices practices all over the world. He is one of the few contemporary contemporary management thinkers, thinkers, who is highly admired in Japan. Similarly, the contributions of Peter's and Waterman who extensively studied a few American companies known for their excellence in modern management practices is no less les s significant. McKingsly consultancy firm's contribution contribution of the 7S model for the management of the firm and Edward Deming's preachings on Quality Control created tremendous impact on modern management all over the world in the recent past. Michael Porter's work on competitive strategy turned a new leaf in the strategic, management management area. His books on competitive strategy suggest the ways: and means that help organisations and nations to gain competitive competitive edge. edg e.

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SUMMARY  Though management has been in practice in some form or other since time immemorial, the development of a systematic body of knowledge dates back to the last few decades. Industrial revolution has immensely contributed for the development of management thought. Over the years, it has drawn heavily from various disciplines like economics, psychology, psychology, sociology, operations research and so on. The contributions of prominent thinkers who have created an everlasting impact on management have been discussed in this lesson in detail. An attempt is made to expose the learner to the historical development of management over the years. REVIEW QUESTIONS 1. "Management is oldest of the Arts and youngest of the Sciences". Discuss. Discuss. 2. Analyse the contributions of F. W. Taylor and Henry Fayol to the Modern Management Thought and discuss how the two differ in their approaches. approaches. 3. Examine the significance of 'Hawthorne studies' to the development of managerial thinking.

4. Assess the contributions contributions of Chester Barnard Barnard and Herbert Simon to the management thought. 5. "Among the contemporary management thinkers, Peter F.Drucker, perhaps, outshines all". Elucidate, SELF-ASSESSMENT SELF-ASSESSMENT TEST Indicate whether the following statements are True or False. 1. Scientific management is concerned with the application on mathematics to the practice of management. management. ( ) 2. Henry Fayol is known as the the father father of modern management theory. (

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3. Scientific management lays emphasis on the top management functions. (

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4. Hawthorne experiments proved that productivity of the workers depends on the physical conditions at the work place only. ( ) 5. Elton Mayo completely ruled out the possibility possibility of the existence of informal groups at the work place. ( ) 6. Herbert Simon is widely known for his thesis that absolute absolute rationality is not always possible in the decision making. ( ) 7. Theory X is optimistic optimistic of the human human behaviour behaviour while while Theory Y is is pessimistic. pessimistic. (

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8. Hawthorne is the management thinker who conducted 'Hawthorne experiments'. experiments'. ( ) 9. Unity of command suggests the exercise of multiple commands. ( 10. Rensis Likert's system-4 management is highly authoritative. (

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FURTHER READINGS Barnard, Chester, I. 1938. 1938. The functions of the Executive, Executive, Harvard University Press, Cambridge. Drucker, Peter F. 1954, The Practice of Management , Harper & Row, New York. Koontz Harold, O'Donnell Cyril, 1984, Management  1984, Management , McGraw Hill, New York. Likert Rensis, 1961, New 1961, New Patterns of Management  Management , McGraw Hill, New York. McGregor, Douglas 1960, The Human Side of Enterprise, Enterprise, McGraw Hill, New York.

Terry, George R and Franklin, Stephen G. 1988, Principles 1988, Principles of Management  Management , All India Traveller Bookseller, Delhi.

- End of Chapter LESSON-3 PLANNING

Objectives  After studying studying this lesson, you should be able able to:   

Understand the nature and purpose of planning;  Acquaint with the the important principles principles of planning; and Describe the basic steps in planning. pl anning.

Outline Introduction Purpose of planning    

To achieve objectives To make the things happen To cope with change To control the events

Principles of planning     

Take time to plan Planning can be top down and bottom up Involve and communicate to all those t hose concerned Plans must be flexible and dynamic d ynamic Evaluate and revise

Steps in planning     

Establish goals Establish planning premises Decide the planning period Develop a course of action a ction Develop derivative plans

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Review periodically 

Summary  Review Questions Case Illustration: Bajaj Auto - Corporate Mission and Objectives Further Readings INTRODUCTION Most of us plan many things in our day to day lives. We plan to go on a holiday trip, plan our careers, plan our investments and so on. Organisations are no exception and lot of planning is done by managers at all levels. Thus individuals and organisations both need to plan. Planning is the basic process by which we use to select our goals and determine the means to achieve them. Lot of information has to be gathered and processed before a plan is i s formulated. In other words, a plan is like a jigsaw puzzle. All the pieces have to  be put together property, property, so that they they make sense. Planning is necessarily forward looking. It is looking into the future. It bridges the gap  between where we are and and where we want to go. go. Let us look at what the following following observations suggest about planning:    

"Planning is outlining a future course of actio a ction n in order to achieve an objective" "Planning is looking ahead" "Planning is getting ready to do something tomorrow" "Plan is a trap laid down to capture the future"

PURPOSE OF PLANNING Needless to say, in the absence of planning, events are left to chance. As a manager, in such a case, you are depending on luck. You may, as a result, in all probability, end up in chaos. Organisations often fail not because of lack of resources, but because of poor planning. The following factors further highlight the importance of planning: i. To achieve ac hieve objectives  While developing a plan, you have to ask yourself yourself a few-questions: - Why am I making this plan? - What am I trying to accomplish? - What resources do I need to execute the plan?

These questions, obviously, force you to be clear about the objectives, the time frame required to achieve them and the resources required. It forces you to visualise the future in an organised manner. manner. The saying that "when a man doesn't know what harbour harbour he is making for, no wind is the right wind" is quite appropriate in the case of planning. pl anning. Systematic planning, thus, starts with a clear statement of objectives. All the important important inputs necessary necessary to achieve the objectives are carefully thought of including the uncertainties of the future. ii. To make the things happen Effective manager is rather proactive. He takes the initiative to make things happen in the desired way. In any modern business, the interests of many people are at stake. The shareholders, employees, creditors, consumers consumers and the government are the major interest groups in city organisation. Further, the interests and expectations of all these groups are varied and at times are in conflict. c onflict. If the management fails to achieve, the interests of these groups are affected and the whole exercise results in heartburns. As a result, you will be forced to indulge in fire-fighting activity. Therefore, your job, as a manager, is to foresee the future and predict the consequences consequences of actions. In other words, you have to look down the road into future and prepare  yourself to meet the the uncertainties and and the eventualities ahead. A well well thought out plan solves many of the problems associated associated with the uncertain future. iii. To cope with change Both human beings and organisations are products of environment. The ability ability to deal dea l  with the environment environment has enabled many an organisation to survive, survive, despite other  weaknesses.  weaknesses. Alert managements managements continually tune tune in to the environmental environmental forces. On the other hand, managements which fail to adapt would eventually fall on the way side. Therefore, in the managerial job, you have to constantly analyse the impending changes in the environmen e nvironmentt and assess their impact on your business. For instance, business environment environment in 1990s 1 990s is totally different from that of 1970s and 1980s. The liberalisation policies pursued by the government have, of late, brought in too many changes. Markets are shifting due to increased competition, pressure pressure on o n the resources is increasing, expectations of the employees as well as the consumers consumers are changing, and product life-cycles are becoming shorter due to rapid technological changes. All these changes exert a tremendous pressure pressure on the management. Certain changes will throw open new opportunities while certain others affect the very survival. If you are not prepared, you will definitely be in trouble. Since environmental scanning is an important element in planning, plans are normally formulated on the  basis of a thorough thorough analysis of the environment. environment. Necessary Necessary flexibility flexibility is built in the plans to meet the unexpected changes. Effective planning thus shows the preparedness of the organisation to manage the change. It helps the organisation to keep itself afloat even in the worst circumstances. circumstances.

iv. To control the events Planning and control are often of ten described as the Siamese twins of management. When  you plan the events, you expect expect them to happen happen in a particular way. Therefore, it goes  without saying that you need some mechanisms mechanisms to know whether whether the events are happening in the way expected. Planning is important in that it provides the necessary  yardsticks to measure measure the performance. performance. It ensures ensures the events to conform conform to plans. Thus, if you do not plan (no clear objectives), you do not know you are reaching the goal or not  you do not know what to to control. Control assumes assumes significance significance in a dynamic environment as of today, where several forces push you away from the desired path.  Appropriate control control devices help you to check the course from time time to time so that you  will be able to keep yourself onto the track. PRINCIPLES OF PLANNING Effectiveness in planning depends on the understanding understanding of the following principles. They are relevant to planning the activities of any organisation organisation whether business or non business. A thorough thorough understanding understanding of the principles underlying underlying the planning, planning, therefore, would enable you to guard yourself against the possible mistakes that are often committed by many managers. 1. Take time to plan  Any plan is a decision regarding a future future course of action. It specifies specifies the sequence sequence of events to be performed. performed. It involves the commitment of organisational resources in a particular way. Therefore, if the plan is not conceived well, the resources would be put to  wrong use. It becomes becomes a wasteful exercise exercise resulting in in frustration. Hence utmost utmost care has to be exercised in formulating the plans. Several probing questions have to be asked. Planning in haste with incorrect information, unsound assumptions and inadequate analysis of the environment has to be avoided by all means. Otherwise, you may save some time in quickly developing a plan, bu t in the event of things going g oing wrong, you are hard pressed for time and resources to correct yourself. 2. Planning can be top-down t op-down and bottom-up bottom-up Normally in any organisation overall enterprise plans are developed by the top management. These plans are wider in scope and provide the direction to the whole organisation. They spell out what the organisation wants to achieve. The overall plan thus formulated by the top management is split into department de partmental al plans. Accordingly, plans for production marketing, finance, personnel and so on, stem from the basic plan of the organisation. organisation. The other operational plans at various levels le vels down the organisation flow from the departmental plans. This approach is called top-down approach to planning. On the other hand, proponents of bottom up approach argue that top management needs information from lower level, that is, about the realities at the ground level in terms of strengths and weaknesses. In this approach, the initiative initiative for planning comes

from the lower levels in the organisation. organisation. This approach makes use of the rich experience of the subordinates who are close to the action. It also h elps to motivate the people and elicit commitment from them. The choice of the method depends on the size of the organisation, organisation, the organisational organisational culture, the preferred pre ferred leadership style of the executive and the urgency of the plan. 3. Involve and communicate with all those concerned Operations in modern business organisations organisations are highly interrelated. Organisational plans affect many departments in the enterprise. For instance, a plan to improve the quality of the products (quality control plan) may re quire the cooperation cooperation of the people in the production, p roduction, finance, finance, marketing departments and so on. It is, therefore, desirable to involve the concerned people in these departments. Such participation participation helps in instilling a sense of commitment among the people. They also in turn gain a sense of pride for having been a party in deciding the plan. Such an involvement inv olvement makes makes possible the process of sharing information. information. If plans are not communicated communicated to all those affected  by them, there may may be unnecessary unnecessary gaps in the execution. execution. 4. Plans must be flexible fle xible and dynamic  You would be very happy happy as a manager if there there are no unexpected unexpected changes in the environment. Day in and day out, you are c onfronted onfronted with too many problems. Most of such problems are caused by unexpected events in the environment. A plan is rigid if there is less scope for a change in its course. In a static environment, of course, there may not be a problem with a rigid plan. But in a dynamic environment, environment, to meet the unexpected changes, changes, adequate flexibility has to be built into a plan. Otherwise, the plan itself becomes a limiting factor.

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5. Evaluate and revise Evaluation of the plan at regular intervals is necessary to make sure that it is contributing contributing to the objectives. objectives. Like a navigator, who in the high seas checks the course to make sure that he is sailing in the right direction, the manager has to, from time to time, look back and evaluate the plan. Such an exercise enables to initiate the corrective measure at the right time before it is too late. This depends on the accuracy of the

information systems in the organisation organisation through which information reaches the management. STEPS IN PLANNING The process of planning may be understood as having the following s teps: a. Establish goals Planning begins with decisions about what the organisation wants to achieve over a period of time. The goals of an organisation and its various subunits have to be decided and spelt out in clear terms. it is always desirable to express the goals in quantitative terms for all the key areas of the business like production, profit, productivity, productivity, market share, employee relations, social responsibilities, etc. For instance, instead of saying saying that the objective of business is to achieve a fair rate of return or the investment, it may be given quantitative expression, say, 10 or 15 percent return on the investment. Specific goals enable the organisations organisations to use the resources effectively. Since goal setting is the essential first step in planning, managers who fail to se t meaningful goals will be unable to make effective effective plans. If Bajaj Auto is able to retain its prominence in the two wheeler industry (scooter segment), it is because all the employees of the organisation know cleanly that the primary objective is retaining the leadership in the industry.  An awareness awareness of the opportunities opportunities and their evaluation in the light light of the organisational strengths and weaknesses weaknesses is essential to set the goals goal s in a realistic way. The mission of the organisation, the corporate values, experience, policies of other enterprises, observation and data secured from research and experiences provide adequate gu idance to the managers in goal setting. se tting.  b. Establish planning premises Since plans operate in the future, it is imperative to make certain assumptions assumptions about the future. This act is called c alled premising. Planning assumptions or premises provide the basic framework in which plans operate. Appropriate assumptions have to be made on  various aspects of the the environment environment - both internal internal and external to the organisation. organisation. i. Internal premises: Important internal premises include sales forecasts, policies of the organisation, skills, attitudes and beliefs of the people, the resources of the organisation. ii. External premises: Important premises:  Important external premises relate to all those factors in the environment outside the organisation. They include technological changes, changes, general economic conditions, government policies and attitude towards business, demographic trends, socio-cultural socio-cultural changes in the th e society, political stability, production costs and their behaviour, degree of competition in the market, availability of various resources and so on.

It is evident that some of these premises are tangible while others are intangible. For example, resources, availability, availability, etc. are tangible tang ible factors which can be stated in quantitative quantitative terms. On the other hand factors like political stability, attitudes of the people, certain of the sociological factors are intangible in that they cannot be measured quantitatively. Effective premising - the making mak ing of appropriate assumptions helps the organisation to identify the favourable and unfavourable elements in the environment. Though accurate premising is difficult, anticipating future situations, problems and opportunities to the extent possible is an essential part of planning. c. Decide the planning period How far in the future should a plan be made is another pertinent question in the process of planning. Businesses vary in their planning periods. In some cases plans are made for a short period, varying from a few months to a year, while in some other cases, they are made to cover a longer period, p eriod, to cover a period of more than a year. The period may extend upto 5-10 years and even beyond. Companies normally plan for a period that can  be reasonably anticipated. anticipated. The lead time involved in the development development and commercialisation commercialisation of a product and time required to recover the capital investment (payback period) influence the choice of the length of the plan. d. Develop alternatives and select the course of action The next logical step in planning pl anning involves the development of various alternative courses of action, evaluating these alternati a lternatives ves and choosing the most suitable alternatives. Objectives may be achieved by different courses of action (alternatives). For example, technical knowhow may be developed by in-house research, collaboration with a foreign, company or by tying up with a research laboratory. Technical Technical feasibility, feasibility, economic viability and the impact on the society are the general thumb rules to select the course of action. The alternative courses are evaluated in the l ight of the premises and the overall goals of the organisation. e. Make derivative plans The plan thus decided after a thorough analysis of various alternatives suggests the proposed course of action. To make it operational, it has to be split into departmental plans. Plans for the various operational units within the departments also have to be formulated. The plans thus developed for the various levels le vels down the organisation are called derivative plans. For instance, production production and marketing marketing of 10,000 units of a product and thus achieving a return of 10 percent on the investment may be the enterprise's plan relevant for the whole organisation. Its effective execution is possible only when specific plans are finalised for the various departments like production, marketing, finance, personnel personnel and so on with clear-cut objectives to be pursued by these departments. f. Review periodically  periodically 

Success of the plan is measured by the results and the ease with which it is implemented. Therefore, provision for adequate follow-up to determine compliance should be included in the planning work. To make sure that the plan is contributing for the results, its review at regular intervals is essential. e ssential. Such a review helps in taking corrective action, if necessary, when the plan p lan is in force. It is an irony that at times even the best of the plans may flounder in spite of careful analysis and mental commitment. commitment. So as to avoid the 'pitfalls' in planning make sure of the following:  

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Set realisation and achievable goals; Communicate Communicate the assumptions on which plans are formulated to all al l the people and departments concerned; Encourage and make people participate in the planning programme so as to ensure the right commitment; Ensure proper coordination between the short-term and long-term plans. They should not be viewed as mutually exclusive; exclusive; Encourage creativity creativity in planning. Creativity helps help s in identifying the best alternatives; and Pay attention to the resources position of the organisation so as to ensure the availability as and when required.

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SUMMARY  Planning is the most fundamental responsibility responsibility of a manager. Planning Planning is deciding de ciding a future of action. It helps in setting the objectives, to make the events happen, coping  with the changes and to control control the events. Effective Effective planning is a process process and involves a few logical steps. The process includes goal setting, promising, identification of the alternative courses of action, and selection of a course of action after a vigorous analysis of the pros p ros and cons. However, successful implementation and achievement of results depend on the degree of participation participation and commitment of the people of various levels in the planning exercise, in the absence of which plans would remain as wishful statements. REVIEW QUESTIONS 1. 'In the absence of planning, things are left to change'. What significance does this statement hold in the present p resent day business context? Discuss. 2. What precautions do you take to make planning a successful successful event in the organisation? 3. Describe the important steps in the formal planning process. 4. 'Planning and Control are the twins of management'. Explain the relationship  between planning and control with with suitable examples. 5. Explain the significance of participation in formulating the plans. How do you ensure participation participation of people in the planning exercise. CASE ILLUSTRATION - BAJAJ AUTO; CORPORATE MISSION AND OBJECTIVES Mission: Be a relevant and responsible corporate citizen by – 

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serving as a catalyst in the creation and sharing sharing of wealth and prosperity prosperity with every constituent of our business environment; environment; orienting company policies to be in consonance with national priorities and social needs; adopting work ethics inspired by integrity and excellence; providing the best value for money in our products and services; and fulfill an ambition to be the biggest and the best in every e very endeavour undertaken. undertaken.

Objectives:

1. Productivity and Growth: 

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Continuously generating new ideas in designing, planning, research and development and value engineering engi neering leading to quantum jumps in productivity. Optimum utilisation of production capacity by minimising wastage, rejection and re-work and maximising efficiency of man and equipment. Sustaining minimum annual growth of 20% in real terms by mechanisation, automation methods and productivity improvement and better utilisation of existing manpower. Developing a long term and fruitful relationship relationship with vendors for: a) Obtaining raw materials materials and components of finest finest quality at competitive cost.  b) Achieving faster development development of new features and models. models. c) Increasing Increas ing off-loading off-loa ding of parts and operations.

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 Adhering to high standards standards of safety and and cleanliness thus thus ensuring an environment of beauty and joy.

Research and Development: Development: 

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Establishing our leadership in the design of two and three wheelers. Where foreign know how is required, the aim would be early self-reliance. Continuing product upgradation and aspiring for development of a t least one new model every year.

Human Resource: 

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Strengthening the sense of belonging in all employees and sustaining their pride In being associated with the company. Recognising and rewarding individual merit and contributi c ontribution on while emphasising team spirit and a nd healthy competition. Stressing discipline and diligence, innovation and creativity, superior performance and professional integrity leading to increased increased job satisfaction. Creating a corporate culture of dignity, character and competence. Developing an efficient team of personnel by providing training at various levels and grooming deserving personnel for higher responsibili r esponsibilities. ties.

Marketing: 

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Promoting sales aggressively while providing excellent after-sales-service through a network of trained personnel. Increasing exports by remaining internationally competitive. competitive.

Social Welfare:

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Caring for the well being of our employees by providing canteen, medical, sports, cultural, educational and other facilities. Encouraging employee education programmes so as to develop de velop respected and responsible citizens. Contributing to the national cause by promoting family welfare and c ommunity ommunity and rural development schemes.

 Adopted from: Chopra, Chopra, BSKS., 1989. Cases in Corporate Planning, Planning, Times Research Research Foundation, (Pune). FURTHER READINGS 1. Dale, Ernest, E rnest, 1973. Management 1973. Management Theory Theory and Practice, Practice, McGraw-Hill, New York. 2. Drucker, Peter F.I974. Management F.I974.  Management Tasks, Tasks, Responsibilities, Practices Practices,, Harper & Row, New York. 3. Koontz, Harold and Cyril O'Donnel. 1976. Management: 1976. Management: A System System and Contingency Contingency  Analysis of Managerial Functions Functions,, McGraw-Hill New York. 4. Massie, Joseph L.1971. Essentials L.1971. Essentials of Management  Management , Prentice Hall, Englewood cliffs, N.J. 5. Terry, George R and Franklin, Stephen. G. 1988. Principles 1988. Principles of Management  Management . All India Traveller Bookseller, New Delhi. 6. Steiner, George A. 1969. Top Management Planning, Planning , Macmillan, New York.

- End of Chapter LESSON -4 TYPES OF PLANS

Objectives  After studying this lesson, lesson, you should be able to :  

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Distinguish between strategic planning and operational planning. Comprehend how strategic planning is useful for the organisation's long-term survival; and The different types of plans that are formulated in organisati organi sations. ons.

Outline Introduction Strategic Planning  

 Anticipates future future opportunities opportunities and threats Provides clarity of purpose and direction

Operational Planning Types of Plans     

Mission or purpose Policies Rules Programmes Budgets

Summary  Review questions Self-assessment test Case - Fairdeal Company vs. Government Further Readings INTRODUCTION Planning is so pervasive in every organisation organisation that it touches every part or segment of the organisation. One common ingredient of all planning is time - the period in future that a plan covers. Based on the length of time involved, plans are usually classified as strategic and operational plans. Strategic plans are designed to meet the broad objectives of the organisation organisation - to implement the mission that provides justific ju stification ation for the organisation's existence. Operational plans provide details as to how strategic plans  will be accomplished. We will will first discuss strategic strategic planning and then proceed proceed to operational planning. STRATEGIC PLANNING The terms Corporate planning, long-range planning and strategic planning are used synonymously by many authors. Strategic planning has its origin in military organisations where such planning envisaged a variety of contingencies that may arise  when large forces move into into operation. operation. When viewed in this backdrop, backdrop, strategic planning in a business organisation organisation envisages a comprehensive study of the various external and internal parameters that affect a company in charting a course of action to achieve the goals.

George Steiner has defined strategic strategic planning as "the process of determining the major objectives of an organisation and the policies and strategies that will govern the acquisition, use and disposition of resources to achieve a chieve those objectives". Strategic plans reflect the socio-economic purpose of the organisation and the values and philosophy of the top management. In simple, they relate the organisation to the environment in  which it operates operates by providing answers answers to the basic questions questions like:   

 Where are we now?  Where do we want to go?  Why do we want to go?

They help the management in:    

coping effectively with future contingencies; contingencies; providing an early opportunity to correct mistakes; making decisions about the right things at the right time; and a nd understanding what actions to take in order to shape the future as desired.

Strategic planning has been in vogue in the West since long. In India, multinational corporations made a beginning in this direction. Other Indian companies (private and public sector) have also realised the importance importance of strategic planning, thanks to the changed realities in the last few years. As a result every company has now begun to speak in terms of corporate corporate mission, strategic planning and organisational organisational vision. These have almost all become buzz words of the Indian corporate sectors in the 1990s. Strategic planning serves the following two functions: 1. Anticipates future opportunities and threats Business environment is changing so fast these days that a deliberate de liberate corporate effort is called for to keep a tab on the broad spectrum over which changes changes occur. The changes that occur may be precursors of future threats and opportunities. The investment in a large business enterprise enterprise today runs into hundreds of crores of rupees. During this period many things may change. Take for instance, the case of the Tata Power Company. They proposed a 500 MW power station in 1972. The proposal kept shuttling between officialdom for 5 years before it was approved in 1977, but not before the change of government. government. The project went through so many hurdles and was eventually commissioned in 1983, a full 11 years since it was mooted. In the meantime cost had escalated to nearly 3 times the original estimate. This case demonstrates demonstrates the need for close cl ose monitoring monitoring of the potential threats in the environment. Just as threats can be reasonably anticipated, so too can be opport opp ortunities. unities. For instance, when the crude oil prices were hiked in 1973, by the OPEC countries it created havoc on petro-based industries. Automobile companies as a result were forced to change to small fuel efficient cars. In this case, the threat was converted into an excellent opportunity. Small car thus has become the fashion of the day. Similarly ITC in India, continuously hounded by excise levies and taxes on their

main product cigarettes, had to think of diversification into hotels, paper agro products and aqua-culture, which ultimately turned out to be a god sent opportunity. 2. Provide Clarity of Purpose and Direction  With the overall increase increase in the size of companies, companies, the internal internal departments (production, marketing, marketing, finance, personnel etc.) have also become quite large. l arge.  With growing specialization specialization in each of these areas, areas, these departments departments are prone to  become watertight watertight compartments compartments giving rise to inter-departm inter-departmental ental rifts. It is not unusual, for instance, for marketing department to ask the production department to shorten their production runs to cater to demands of various models which is normally resisted by the latter. Similarly, the design department may often specify certain change in the product which may raise the cost of production. The finance department, may try to block any measure that increases the cost of production. In such a situation, corporate objectives spelt out clearly help in smoothening smoothening out some of the interdepartmental interdepartmental conflicts. Thus, strategic planning provides unity of purpose and direction, the much emphasised management principle. principle. The process of strategic planning in any organisation is similar to the general planning process which has been discussed in Lesson L esson 3. However, the empha e mphasis sis on strategic strategic planning is more on long-term objectives, goals, purpose or mission, rather than the day-to-day issues of management. The objective is to keep firm afloat in the long-run in the light of the several unforeseen contingencies contingencies that lie ahead in future. The following are the important steps in the process of strategic planning:   

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deciding the corporate mission and broad objectives; gathering and analysing information; information; conducting a resource audit (analysis of strength, weaknesses weaknesses in the light of the opportunities opportunities and threats); identifying strategic alternatives; and making the choice (selection of the right strategy)

The manager's success lies in i n understanding the trends in the environment. The trends contain signals and give clues about the potential potential opportunities and impending threats. Many organisations have paid a heavy price for their failure to d raw the right meanings from the signals. Therefore what is required is "the ability to read the writing on the  wall". Take the case of the public sector giant, HMT which prided itself, for a long time, on its dominance in the Indian wrist watch market. The company was in an upbeat mood and failed to understand the shift in the consumer preference preference towards the trendier, sleek quartz watches. In the meantime TITAN had entered the market with a wide array of products and began to give HMT a run for its money. TITAN with its innovative

marketing strategies has, no doubt, changed the face of the Indian watch market so much that HMT was in fact struggling hard to face TITAN. This is only one of the several examples of failures in strategic planning in the contemporary contemporary business world. Technological, economic, sociological and political changes in the environment are so extensive and affect so many activities of an enterprise that is essential to keep their effects in mind. Failure to read the changes and complacent attitude attitude on the part of management costs the firm dearly. There are numerous examples, where yesterday's leaders have become today's non-entities solely because of their failure to adapt to the changing realities. OPERATIONAL PLANNING Strategic Planning vs. Operational Planning  While strategic planning planning is the prerogative prerogative of the top management management which is the highest policy making body in any organisation, operational planning is done at the l ower levels. Strategic planning is mostly concerned with the "why" of o f the things whereas operational planning is concerned with the "how" of the things, that is, the nitty-gritty nitty-gritty of achieving the things. The focus in strategic planning is on long-term while it is s hort-term in operational planning. Further, planning is less detailed in the former because because it is not involved with the dayto-day operations whereas it is more detailed in the latter. Tactical planning is the other name used to describe 'operational planning'. Strategic planning provides guidance and boundaries for operational management. Effective management, therefore, therefore, must have a strategy and must operate on the day-today level to achieve it. At times both may overlap. However, they should not be viewed as mutually exclusive because operational planning identifies the major activities to achieve the objectives of strategic planning. For example, if the strategic plan is to face competition competition with new and innovative products, major tasks to achieve this goal would  be clarified by operational operational planning. The possible possible tasks at the operational operational level include:   

strengthening strengthening the research and development department; motivating the people to work on new products; products; and creating a climate in the organisation organisation where people are willing to take ta ke risks.

In the implementation implementation of strategic strategic plans, it is common that certain departments have far more to do than others. In the above example, in order to bring out new products the operational aspects of the R & D department's work culture, and the incentives systems to motivate the people need attention.

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TYPES OF PLANS Planning by definition involves deciding a future course of action. Different types of plans are developed by an organisation, namely mission, strategies and policies, procedures, rules, programmes and budgets. All these refer to a future course of action. However, some variances variances in respect of the scope and operation are found in the implementation. Some are single-use plans while some so me others are standing plans. They are discussed below: 1. Mission or purpose: The terms mission or purpose are often used interchangeably. An organisation's mission statement includes its philosophy and basic purpose for f or which it exists. It establishes establishes the  values, beliefs, and guidelines that that the organisation organisation holds in high esteem. Mission Mission statement suggests how an organisation is going to conduct its business. It defines the  basic intentions intentions of the firm. A clear definition definition of mission mission or purpose is necessary necessary to formulate meaningful objectives. o bjectives.  Answers to two important important questions questions are provided by the mission mission statement: a. What is our business? and b. What should it be? These questions force the management to define their customers and their needs. The essence of corporate corporate mission or purpose can be understood from the IBM's philosophy, as enunciated by Thomas Watson, its founder fou nder way back in 1960's.   

Respect for the individual;  We want to give the best customer customer service of any company in in the world; and  We believe that an organisation organisation should pursue all tasks with the idea that they they can be accomplished in a superior fashion.

It is interesting to note that almost 30 3 0 years after Watson stated these three basis  beliefs, IBM's present Chairman Chairman stated: stated: "We have changed changed our technology, changed changed our organisation, changed our marketing and manufacturing techniques many times, and  we expect to go on changing. changing. But through all this change, change, those three basic beliefs remain. We steer our course by those stars."

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2. Policies: Koontz and O'Donnel define policy as "a general statement or understanding which guides the thinking and action in decision-making. Policy is a one time de cision. When decisions are to be made, managers consult the policy relevant to the decisions. Policy stipulates how an activity has to be performed. It provides the basic framework within  which managers operate. operate. Policies exist at all levels l evels in the organisation. Some may be major company policies affecting the whole organisation while others may be minor or derivative policies affecting the functioning of departments departments or sections within the departments. departments. Policies may be very clear and explicit. Good policies are flexible, easy to interpret and consistent with overall objectives of the organisation. Policies are laid down by the management for all the important important functional areas. As such, we hear about production production policies, financial policies, marketing policies and personnel policies, to mention a few. For instance, in the personnel area, specific policies may be formulated for f or recruitment, training, compensation, etc. Accordingly, whenever the need n eed for recruitment recruitment arises, the personnel manager consults the existing recruitment policy of the c ompany and initiates the steps necessary to fill the vacancies. Thus it is evident evide nt that the personnel manager operates within the broad policy of the company in recruiting the people. Thus pol icy is

a one-time standing decision that helps hel ps the manager in making day-to-day decisions, in their operational areas. 3. Procedures:  Another term that that is frequently heard in in any organisation is 'procedures'. 'procedures'. The term sounds of some bureaucratic bureaucratic element where issues are finalised only after they undergo a long drawn scrutiny. But procedures, if simple and clear would ensure order in the performance of operations. Though procedures exist at all levels in an organisation, they are more detailed at the lower levels. In common parlance, they are called 'Standard Operating Procedures' (SOPs). Procedures for placing orders for material and equipment, for sanctioning different types of employee leave, for handling grievances at the shop floor level, etc., to mention a few, suggest how each of these has to be handled. Policies P olicies and procedures procedures are closely interrelated. For instance, a company may follow time-bound promotion policy to promote people from within. But the operational part of the policy is specified by the procedure - the formalities to be fulfilled to e ffect the promotion are dictated by the procedure. 4. Rules:  A rule is also a plan, but the simplest type of plan. Rules Rules are plans in that they suggest suggest the required actions. A rule requires that a definite action has to be taken in a particular  way with respect respect to a situation. Some definiteness definiteness is associated associated with rules. rules. For example, 'no smoking' is a rule. No deviation is normally allowed from the rule. The essenc e ssencee of a rule is that it reflects a managerial decision that certain actions actions be taken or not be taken. Rules vs Policies and Procedures - Rules should not be confused with policies and procedures. Policies contain some operational way or discreti d iscretion on while rules allow no discretion in their application. Similarly, procedures though different from rules may contain rules. For example, there may be a procedure to enable customer grievances in respect of post-sale service. The procedure may contain a rule that free service is available only for a period of two years after the sale. 5. Programmes: Terry and Franklin define programme as "a comprehensive comprehensive plan that includes future use different resources in an integrated pattern and establishes e stablishes a sequence of required actions and time schedules for each in order to achieve stated objectives". Thus, a programme includes objectives, policies, procedures, methods, standards and budgets. For instance, launching  Prithvi   'Prithvi ' satellite is a programme; programme;  Jawahar  'Jawahar Rojgar Rojgar Yojana' Yojana' is a programme. The essential ingredients of any programme are time phasing and  budgeting. It implies that specific specific dates are are prescribed for the completion completion of various phases of a programme. Adequate budgetary provisions are made for financing the programme.

Programmes may be major or minor. For instance, a company may embark upon modernisation modernisation programme of the plant and machinery and other manufacturing systems in a big way. By all means, such an effort is a major programme. Similarly Similarly a large organisation may start computerising computerising all its activities. On the other hand, modernisation modernisation of small equipment in some section of the factory and computerisation computerisation of a particular operation in a certain department may be considered as minor programmes. programmes. 6. Budgets: Budgets are plans in that they contain c ontain statements statements of expected results in numerical terms. A budget is a quantitative quantitative expression of a plan. It specifies the future course of action as laid down by a plan. In fact budgeting is a planning pl anning device. It is the fundamental planning instrument in many companies. companies. Organisational budgets vary in scope. Master budget which contains the consolidated plan of action of the whole enterprise enterprise is in a way the translated version of the overall  business plan of the the enterprise. Similarly, Similarly, production budget represents the the plan of the production department. Again, capital expenditure budget, raw material budget, labors  budget, etc. are a few minor minor budgets in the the production department. One of the advantages of budgets bu dgets is they facilitate the comparison of actual results with the planned ones by providing yardsticks for measuring performance. performance. 'Zero-based  budgeting' - a recent innovation innovation in budgeting practices practices makes planning more more complete. It emphasises the need to examine every commitment commitment afresh in terms of decision packages. SUMMARY   Any plan is a future course course of action. It facilitates facilitates the achievement achievement of goals. Different Different types of plans are formulated in any organisation. organisation. Though all the plans, by whatever name they are called, involve a future course of action, they differ in respect of the length of time, relative importance and the level at which they are more relevant. Strategic plans provide the direction to the organisation and concerned with the achievement of organisational mission where as operational plans are concerned with the day-to-day managerial activities. The various types of plans namely, policies, procedures, rules, programmes and budgets plans are also d iscussed. iscussed. REVIEW QUESTIONS 1. Distinguish between strategic planning and operational planning. How are they relevant for the management of an organisation? 2. Present the business strategy of any organisation that you are familiar with. Could  you offer a better strategy? strategy? 3. Briefly describe the following types of management management plans: a) Policies, b) Procedures, Pr ocedures, c) Programmes, d) Budgets.

4. "The importance of strategic planning is now fully realised by the Indian corporate sector than before". Discuss. 5. 'Environmental scanning scanning is the core of all planning planning activity'. Elucidate. SELF-ASSESSMENT SELF-ASSESSMENT TEST From what you have understood in this lesson, respond to the following by i ndicating T/F (True or False) as the case may be: 1. Strategic planning is wasteful exercise because future cannot be predicted accurately. ( ) 2.

Strategic planning planning is another name for long-range planning. ( )

3.

Strategic plans and operational operational plans are independent independent of each other. ( )

4.

The emphasis emphasis in in operational operational planning is achievement of corporate corporate mission. ( )

5.

Strategic planning is usually done by top management. ( )

6.

Operational plans plans are more concerned with day-to-day managerial operations. ( )

7.

A policy is a standing standin g plan. ( )

8.

Budget Bu dget is a plan prepared only by the government. government . ( )

9.

Rules offer great flexibility in the implementation. implementation. ( )

10. Success in business depends on luck, no matter how you plan. ( ) CASE: FAIRDEAL COMPANY VS. GOVERNMENT In line with the Government Government of India's liberalisation policies, the State Government of  Andhra Pradesh, Pradesh, to woo the the NRI investment, a few years back permitted permitted the Fairdeal Company, promoted promoted by an NRI, NRI , to manufacture chemicals. The factory was set up in 1988 at a place p lace 5 kms west of the city of Vijayawada, Vijayawada, a fast f ast growing city in Andhra Pradesh on the banks of river Krishna. The State Government, in return for a guarantee of year round employment for at least 5000 persons, persons, offered an attractive package of incentives to the company which include: * Sale of 50 acres acres of land to the company at a nominal nominal price of Rs. 1000 an acre; * Constitution of a building to Fairdeal's Fairdeal's specifications specifications with the company company repaying repaying the  building cost in equal annual annual payments over a 20 20 year period with with annual interest of 10 percent on the unpaid balance; and

* No State Government Govern ment levies lev ies for 10 years. The company with a gestation period of 3 years went on stream in 1991. For two years 1991-92 and 1992-93, the company did not make any profit and it was only in the last financial year (1993-94), the company posted some profit. pro fit. Subsequent to the establishment of the factory in 1988, contrary to the expectations of the city planners, the city has grown westward during the last 4-5 years. To cope with the growth needs, the urban development authority (called Vijayawada Urban Development Authority, VUDA) has undertaken several civic plans in the vast areas on the western side of the city. One of the plans includes the development of a park featuring boating and picnic facilities centering around the r iver Krishna. VUDA has embarked on a detailed study of the prospects of developing the whole area into a premier tourist centre. In the study it was found that the chemical chemical plant was discharging effluents into the river in a big way contaminating contaminating the river r iver water. In the wake of the plan to develop the area into a tourist spot considering the scenic  beauty of the place, VUDA VUDA required the company company to install special equipment equipment to neutralise the waste materials now emptied into the river. Company engineers estimated the cost of waste treatment at Rs. 2 crores for equipment and Rs. 5 lakhs for annual operating costs. The management of the company contends that the expenditure is well above the affordable limits. Fairdeal's Chairman states states that insistence insistence on such an outlay  by the Government would force the company company to abandon the plant and locate it elsewhere. He further points out that the company has fulfilled every requirement of the initial agreement reached when the decision was made to set up the plant. For example, the company has met all the required payments, and since opening the plant, has never employed fewer than 6000 persons - which accounts for nearly 5 percent of the employment in the organised sector of the city. The chairman also points out that the  building is specially designed designed built for the company's company's particular type type of chemical manufacturing. manufacturing. It is not an all-purpose building and can be utilised only on ly by a firm such as theirs. The available trends both at the national and international level show that the company has a bright future. However, the Government takes the view that the initial deal was offered to help the company in getting established. With nominal land, cost, favourably financed building cost, and availability of labour in the a rea, the company should have volunteered itself. The company is part of the community and therefore should assume its social obligations as such. Pouring waste into a public stream is harmful and simply cannot continue. Also, in the opinion of the government government officials, the threat from the company to abandon its plant is a pure bluff. A suitable land and building b uilding elsewhere at today's prices would cost several times more than the present one, leave alone losing a well trained work force. QUESTIONS 1. How does this problem relate to modern management management planning?

2. Develop a set of o f tactical plans for the Fairdeal Company. 3. What solutions do you offer of fer to overcome the present impasse? impasse? FURTHER READINGS Chopra, BSKS. 1988 Business 1988 Business Policy for Indian Indian Industries, Industries, Times Research Foundations, Pune. Gleuck, William F. 1980 Business 1980 Business Policy and Strategic Strategic Management  Management , McGraw-Hill, McGraw-Hill, New York. Koontz, Harold and others, 1984 Managemen 1984 Managementt McGraw-Hill, Tokyo. McCathay, Danil J, and others 1987, Business 1987, Business Policy and Strategy: Strategy: Concepts Concepts and  Readings, Richard  Readings, Richard D. Irwin Inc. Illinois. Steiner George, 1969, Top Management Planning, Planning , Macmillan, New York. Terry, George.R. and Franklin, Stephen.G. Stephen.G. 1988 All India Traveller Bookseller, New Delhi.

- End of Chapter LESSON-5 POLICY FORMULATION - BASIC ISSUES I SSUES

Objectives  After studying this lesson, lesson, you should be able able to:    

Understand the importance of policies; po licies; Describe the basic sources of policies in the organisations; Familiarise with the steps in the policy formulation; and Identify the key areas where policies are needed.

Outline Introduction

Importance of policies  

Furnish the framework for decisions  Assure consistency consistency in operations operations

Types of policies    

Originated policies  Appealed policies Implied policies Externally imposed policies

Principles of policy making Process of policy formulation Basic areas of policy making    

Production Marketing Finance Personnel

Summary  Review Questions Case Further Readings INTRODUCTION Decision-making is the primary task of a manager. While making decisions, it is common that managers consult the existing organisational policies relevant to the decisions Thus, policies are intended to provide guidance to managers in decisionmaking. It has to be remembered remembered that a policy is also a decision. But it is a one-time standing decision in the light of which so many routine decisions are made. IMPORTANCE OF POLICIES -> Furnish the framework fra mework for decisions Policies provide the broad framework within which decisions are to be made. In the absence of appropriate policies, managerial decision-making may be analogous to "reinventing the wheel" every time. For example, a policy greatly helps the manager in filling the vacancies (vacancies caused by the retirement have to be filled only by

internal promotions). Whenever vacancies arise, he simply goes by the existing promotion policy of the organisation. Sound policies thus save lot of time in decisionmaking and avoid confusion. -> Assure Consistency in Operations Since policies specify the boundary conditions of de cisions, it goes without saying that  when decisions decisions are actually made, they they conform to the the policy relevant to the decision. decision. Thus, decisions relating to a particular operational area of the business tend to be consistent if the policy of an organisations is to face competition with quality products, the emphasis naturally will be on issues relating to improving the quality of the product.  All the decisions that affect the product quality quality are normally taken taken in the light of the explicit policy. Policies developed carefully and understood perfectly, result in consistency in planning. As a result, resul t, organisational resources resources would be deployed in those areas where they find a better use. TYPES OF POLICIES Policies come about in any organisation in different ways. Based on their source, Koontz and O'Donnell have classified policies under the following types. 1. Originated Policies : Originated policies are the result of top management decisions. To guide the actions of the subordinates su bordinates,, top management formulates policies for the important functional areas of business such as Production, Marketing, Finance, Personnel and so on. These policies basically stem from the organisational organisational objectives. They may be 'broad' or 'specific' depending on the centralisation or decentralisation of authority. If they are broad, they allow the subordinates some operational freedom. On the other hand if they are specific, specific, they are implemented implemented as they are. 2. Appealed Policies : At :  At times a manager may may be in dilemma whether he he has the authority to take a decision on a particular problem. There may not be precedents to guide him. In such a case, he appeals the matter to his superiors for their thinking. Thus, appeals are taken upwards till they reach the appropriate level in the h ierarchy ierarchy for a decision. The decision taken by the higher-ups, thus becomes a ruling. For example, during festival seasons, the manager at the branch level may be in a dilemma to offer discount to the customers. There may not be any explicit policy to guide him. But to meet competition in a particular market situation where competitors offer discounts, top management, on the basis of an appeal made by the Branch Manager may allow him to offer discount d iscount.. Unless otherwise stated, it becomes an unwritten unwritten policy pol icy and guides the manager's decision-making decision-making in all al l such future situations. 3. Implied Policies : As :  As in the above case, there may may not be specific specific policies for all the contingencies. contingencies. Managers draw meanings from the actions and behaviour of their superiors. In a particular situation, a manager may go all out to help a customer who is in a difficult situation. If customer service is on top of the agenda of the organisation, organisation, there may not be any objection from the top management management to the stand s tand taken by the

lower level manager in support of the customer. Though there is no explicit policy, managers may assume assume it in a particular way and go about in their day-to-day operations. 4. Externally Imposed Policies : These are the policies imposed by the agencies in the external environment like governme g overnment, nt, trade unions, industry associati as sociations, ons, consumer councils, etc. These agencies, to protect the interests of the respective groups may lay down certain policies to be followed by the business. As the interaction of the  business with external external environment environment is increasing, one one can find many policies policies thus coming into being in any modern business. For instance, the recruitment policy of the organisation is influenced by the government's government's policy towards reservations for weaker sections. Anti-pollution measures, concern for the quality of the product and customer service also fall in this category. PRINCIPLES OF POLICY MAKING Policies help to ensure that all units u nits of an organisation operate under the same ground rules. They facilitate coordination and communication between various organisational units. This is possible because policies make consistency in action possible. In view of the importance of policies in guiding executive behaviour, they have to be formulated carefully. In fact, policy formulation is one of the important executive responsibilities. responsibilities. Effectiveness of policies, therefore, lies in understanding the following principles underlying policy formulation: (1) Define the Business: Correct definition of the business provides clarity to the policies. Two questions have to be asked in this regard - what is our business, and what kind of business are we in. Many businesses businesses have failed fa iled because they did not attempt to seek answers to these simple and basic questions. Gramophone record companies companies for long l ong did not realise that they are in the entertainment entertainment  business. Hence they they are now here in the corporate corporate history. To define define the business, a company must take a close look at its basic operations and analyse it's major strengths and weaknesses in all the functional areas like marketing, product development, finance, and public relations. Such an exercise enables the enterprise to correct it weaknesses, if any, and to capitalise on its strengths. (2) Assess Future Environment: Future environment of the business has to  be forecasted. A realistic realistic estimate of the the future trends in matters matters relating to technology, economic and market conditions, political stability, etc. is essential for policy formulation. As many people would agree, forecasting is a difficult task. Instances Instances are not rare, where the best of the forecasts turned out to be just intentions. It is interesting to note that sometimes products which were predicted to be instant failures by the so called market surveys proved to be run-away successes. The Syntax water tank is a classic example where the product defied the gloom predicted by the market research. However, examples of this sort are few and far between. (3) Ensure Availability of Resources: Formulating Resources:  Formulating policies in an ambitious  way without regard to the the ground realities realities may land you in trouble. You would

encounter too many problems while implementing the policies. As a result, policies do not serve the intended purpose. For example, if the policy of the organisation is to cash in on the new opportunities, opportunities, it does not mean that you can enter any field thrown open by the government g overnment.. You have hav e to assess yourself as to how strong you are in terms of resources required. required. Otherwise it amounts to overstretching. (4) Communicate the Policies: The chief objective of many policies is to help managers in decision-making and to ensure consistency consistency in action. As such, policies have to be communicated to all those who are to take decisions. The policy of the organisation towards competition, competition, for instance has to be communicated to the people in the marketing marketing department. Otherwise there will not be proper synchronisation synchronisation between the policy and action. PROCESS OF POLICY FORMULATION  As mentioned mentioned earlier, the basic intention intention of policies policies is to help executive thinking thinking in decision-making. decision-making. Policies are formulated for all the key functioned areas of business like production, marketing, finance, finance, personnel and so s o on. Effectiveness Effectiveness and consistency consistency of decisions in all these areas depend on how well the policies are formulated and understood. A policy is a plan. Therefore, the steps involved in policy formulation are similar to the steps in planning. Though policies vary, in respect of scope, the process of policy formulation usually involves the following steps: Step 1 - Corporate Mission : Corporate mission specifies the purpose for which the organisation exists. It is natural, therefore, that all the activities of the organisation are geared towards the achievement of the mission. mission. The mission statement statement provides the direction to the organisation. organisation. As such, thorough understanding understanding of the corporate mission is the starting point for policy formulation. Step 2 - Appraisal of the Environment : Integration of the organisation with the environment is the key function of the management. The nature of environment and the  various forces in in it that affect the the business have to be analysed. analysed. It includes includes collection of relevant Information from the environment and interpreting its impact on the future of organisation. Step 3 - Corporate Analysis :  While the focus of the environmental environmental appraisal is on the external factors of the business, corporate analysis takes into account the internal factors. Corporate analysis discloses strengths strengths and weaknesses of the organisation and points out the areas that have potential. p otential. Step 4 - Identification Identification of Alternatives : The above two steps - environmental environmental appraisal and corporate analysis popularly known as SWOT (strengths, (strengths, weaknesses, opportunities opportunities and threats) analysis will help identifying identifying the alternative alternative policies. po licies. For example, the objective of the organisation is expansion. This may be achieved by several  ways - diversification diversification of the activities, activities, acquisition of existing organisations, organisations, establishment of subsidiaries abroad, and so on. Again, if diversification d iversification is chosen, it has

to be decided whether it is into related or unrelated business. The alternative policies thus identified have to be evaluated in the light of the organisational mission and objectives. Step 5 - Choice of the Right Policy : This stage involves choosing the right policy from several policy options that suits the organisational objectives. The corporate history, personal values and attitude a ttitude of the management and the compulsions in the environment, if any, influence the choice of the policy. Step 6 - Policy Implementation : Once the policy is de cided, necessary necessary steps have to  be taken for its implementation. implementation. Effective Effective implementation of the policy policy requires design of suitable organisational structure, developing and motivating people to contribute their best, design of effective control and information systems, allocation of resources, etc. At times, policies may have to be revised in line with the changes in the environment. To make good, any inadequacy at the time of making the policy, or to adopt to the changes in the business environment, environment, policies like plans have to be monitored constantly during the implementation implementation stage.

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BASIC AREAS OF POLICY MAKING  As mentioned mentioned earlier, policies are normally normally formulated for all the key key areas of the  business. Some of the the important areas areas for which policies are are required are discussed here: Production In the area of production, make or buy decision is decision is an important policy. policy. For instance, automobile companies buy many accessories and parts from outside rather than making those parts themselves. This type of policy enables the organisation organisation to concentrate concentrate on on the basic product. However, it depends largely on the resources of the organisation and capabilities.  Another important important policy pertains pertains to the production the production run. run. The volume of output depends on the production run. The demand for the product in terms te rms of the orders, costs of tooling, economics of scale are some of the factors that influence influence the production run. Some companies choose to produce to order, while some companies may produce in

anticipation of demand. During slack season, there are companies which produce some fill-in-products to make good use of the facilities. Issues relating to innovation to innovation,, new product development and diversification diversification are other important aspects which require policy direction.

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Marketing  As the business world world has become increasingly increasingly competitive, competitive, marketing has acquired tremendous tremendous importance importance in the recent times. Peter Drucker regards innovation and marketing as the two important functions for every business. The success of any organisation depends on how strong it is in these two basic functions. In the functional area of marketing, answers to certain basic questions help in formulating the policies. po licies. The questions include:     

 Who are our customers customers and what do they buy?  Why do they buy our product? product?  What do we offer in relation relation to our competitors? competitors?  What supporting supporting services do we offer? offer?  What is the price to be charged? charged?

 Appropriate answers answers to these questions questions help in deciding the product, product, pricing, distribution and promotional policies of the firm. Among these, pricing these, pricing policy is policy is of utmost significance. Issues Issues relating to how to face the competition are resolved with a sound pricing policy. For instance, whether to indulge in price competition competition or non-price competition competition are the two basic issues in this regard. In the former case, the firm meets competition competition by cutting the prices while in the later, competition is met by promotion, advertising and after sales service, etc. The emphasis is on non-price non-price variables. Finance Financial aspects normally set the limits limits to the expansion of the business. Necessary steps have to be taken to raise the funds. The required funds for the business may be furnished by the owners or borrowed from outside sources. The actions of management  with regard to procurement, to procurement, utilisation utilisation and distribution distribution of funds are funds are guided by the  broad policies laid down down for the management management of funds.

Important policy decision pertains to the proportio the  proportion n of the equity to debt capital . The relative merits and demerits in raising the funds through equity and debt have to be examined. Further, in the case of a going g oing concern, funds may also be raised through retaining a portion of the profits in the business. This in turn influences the dividend policy of policy of the organisation. Working capital management  is  is another area which requires policy direction. Adequate  working capital capital is essential for any business business for maintaining maintaining credit and meeting meeting obligations. Policies regarding working capital vary from c ompany ompany to company depending on the size and nature of the business. For instance, instance, public utility concerns  with regular cash collection collection may need less working working capital than those engaged In the manufacture manufacture of specialised machines. Similarly, a company operating on strictly cash  basis requires requires less working capital capital than one operating on predominantly predominantly credit credit sales. Policies relating to the distribution the distribution of profits of profits of the business are are equally important. important. This is usually influenced by factors including - the desire of the shareholders, the company's future plans of expansion, availability of other sources of obtaining capital, the urgency of the need for additional ad ditional capital and availability of re-investible profits. If multinational companies like Hindustan Lever, Brooke Bond, Colgate etc., enjoy tremendous investor clout and emerged as blue chip companies, it is because of investor friendly policies relating to dividends and frequent capitalisation of resources. Personnel  Any organisation organisation can be as effective effective as the people in it. Many problems problems in the organisations are people related in nature. It is, therefore needless to say that sound personnel polices ensure good employer- employee relations. Important policies policies in this area relate to recruitment and training training,, compensation  and other employee benefits, and the attitude of the management towards labour unions. All these policies are normally influenced by factors such as skills required at various levels, the attitude of the people towards work and the philosophy of the management. On the  whole, good employee-oriented employee-oriented personnel policies policies encompassing encompassing the above mentioned mentioned issues would contribute to employee motivation and morale. SUMMARY  Policy formulation is one of the important responsibilities responsibilities of the executive. Policies provide the broad framework within which decisions are made by the managers in handling various day-to-day problems. They also assure consistency in managerial decision-making. decision-making. Based on the source through which policies policies come into being in the organisations, they are classified into originated, appealed, implied a nd externally imposed policies. Thorough analysis of the strength and weaknesses of the organisation in the light of the opportunities and threats is a critical step in the formulation of

policies. A few important important functional areas such as a s production, marketing, finance and personnel, where sound policies are essential e ssential have also been discussed. REVIEW QUESTIONS 1. Discuss the importance importance of policies and how they assure consistency consistency in decisionmaking. 2. What are the important sources of policies policies in the organisations? Explain with the the help of examples. 3. Discuss the important important steps in the policy formulation. formulation. 4. Identify a few important areas of the the business where policies are necessary necessary and elaborate with appropriate examples, the important policy policy decision in any one of the functional areas. CASE: HONESTY ENTERPRISES - POLICY DILEMMA  Honesty Enterprises Enterprises is a medium-size medium-size organisation operating in the highly competitive consumer goods industry. The company which started its operation in 1970s in a humble way has come a long way and emerged as a force to reckon with in the industry. The success of the company is mostly attributed to certain core values that the management cherishes cherishes even to date. Important Important among them are, product quality and customer service. The company all through made it a policy not to resort to price-cutting and instead chose to compete on quality and customer service. Even in the most most difficult times the company stuck to the same policy and never yielded to the provocation of the competitors. competitors. In the early 1990s, the consumer goods industry, because of the recession, had a very tough time. Unable to withstand the evil effects of the s lump, many small and inefficient firms were almost all relegated to the oblivion. During 1991, one of the regional marketing managers of the Honesty Enterprises operating in the state of Tamil Nadu, to meet the targets in the most trying circumstances, authorised the local sales managers to allow price discounts on the products. The practice p ractice of offering discounts continued for some time till the middle of 1993. In the meantime, though though price-cutting has never  been the policy of the the company, for all practical practical purposes an implied policy had emerged. Regional managers and lower level leve l people in the marketing department operating in the various other markets also began to compete on price terms by offering different types of discounts to the customers. It took some time for this unanticipated development to reach the top management. Some perceptible changes in the attitude of the customers towards the company products began to surface. The company was perceived to be compromisi c ompromising ng on the quality of the product. All this resulted in an erosion of the image of o f the company assiduously built over a period of twenty years.

 Added to this, the management management is also confronted confronted with another problem problem relating to the technological upgradation. All along the company relied on the in-house research and development capabilities capabilities for product innovations. Now that advanced and more sophisticated sophisticated technology is easily accessible, thanks to the liberalisation of the economy, many competitors are firming up collaboration agreements with internationally reputed companies. The management management is at the cross roads. It I t is exploring the various possibilities possibilities to surmount the present crisis. Questions 1. Summarise the problems that that you have identified in the case and analyse their genesis. 2. Evaluate the external environment of the business in the case case and discuss its impact on the company. 3. Assuming that you were were the consultant, how how would you help the management management to overcome the crisis effectively? FURTHER READINGS 1. Koontz, Harold and others, 1984. Management  1984. Management , McGraw-Hill, Tokyo. 2. Massie. Joseph L. 1971. Essentials 1971. Essentials of Management  Management , Prentice-Hall, Englewood cliffs. N.J. 3. Terry. George R and Franklin, Stephen G. 1988, Principles 1988, Principles of Management  Management . All India Traveller Bookseller (Indian Reprint), New Delhi. 4. Drucker, Peter F. 1954. The Practice of Management , Harper & Row, New York. 5. Barnard. Chester I. 1938. The Functions of the Executive, Executive, Harvard University Press, Cambridge. 6. Chandler, Alfred D. 1962. Strategy 1962. Strategy and Structure Structure,, MIT Press, Cambridge. 7. Ghreck, William F. 1972. Business B usiness Policy: Strategy Formulation and Management  Action,  Action, McGraw-Hill, New York.5. I.Chestner Barnard.

- End of Chapter LESSON-6 ORGANISATION ORGANISAT ION THEORY 

Objectives  After studying studying this lesson, you should be able able to:   

 Appraise the the different approaches approaches to the study of organisations; organisations; Distinguish between formal and informal organisations; organisations; and  Acquire a correct correct perspective of 'organising' 'organising' as a managerial managerial function. function.

Outline Introduction Organisational Theories   

Classical Organisational Theory  Neoclassical Organisational Theory  Modern Approaches to Organisational Theory 

Formal and Informal Organisations   

The need for Informal Organisation Problems and Benefits with Informal Organisation Managing the Informal Informal Organisation

Summary  Review Questions Further Readings INTRODUCTION Organisations are made up of people. When people work together in groups to achieve the goals, everyone in the group g roup must know what he is expected to do, with what resources, and what reporting relationship he has with others. Otherwise, activities of the people will tend to be directed in different ways resulting in the wastage of scarce resources. The managerial function of 'organising' aims a ims at designing a structure where everyone knows who is to do d o what and who is responsible for what results. It helps in removing confusion and uncertainty by providing for adequate coordination between groups of people pe ople working in various departments or divisions. Koontz and O'Donnell O'Donnell  define organising as "the grouping of activities activities necessary to attain objectives, the assignment of each grouping to a manager with authority necessary to supervise it, and the provision for coordination horizontally and vertically in the enterp e nterprise rise structure". Thus organising is the process of creating a structure for the

organisation that will enable its people to work together toge ther effectively effectively towards its objectives. However, the structure of the organisation organisation has undergon u ndergonee considerable considerable changes over the years in response to changes in the environment. Let us examine, in  brief, the various approaches approaches or theories theories of organisations. organisations. ORGANISATIONAL THEORIES There are three approaches approaches to understand un derstand the organisational organisational theory: Classical, Neoclassical and Modern. The assumptions about human beings and other variables that affect the organisational organisational functioning vary from one o ne approach to the other. 1. The Classical Organisation Theory   As discussed in lesson lesson 2, the early management management thinkers viewed viewed the organisation as a machine and human beings as different parts of that machine. Organisation Organisation was viewed as a closed system. The influence of the external environment environment was ignored. The emphasis was more on increasing the output, and human element in the process received scant attention. Further, early writers' concern was mostly to find the 'one best  way' to design the organisation organisation which would would suit all the situations. Division of Labour, Scalar Principle, and Span of Control are the important principles principles on which enterprise activities were organised. Members of the organisation organisation were guided  by a sense of duty to the the organisation and by a set of rules and and regulations. Mason Haire has Haire has identified the chief characteristics characteristics of classical organisation theory as follows:  

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Human beings were assumed to be relatively homogeneous and unmodifiable; Organisation was perceived as a closed system with little interaction with the external environment; environment; The emphasis was on detection de tection of errors and their correction after they have happened;  Authority was centralised centralised and the integration integration of the system system was achieved through through exercise of authority and implementati i mplementation on of rules and regulations; Stability was the central theme in designing the structure.

Classical Organisation Theory, is thus, based on the contributions of scientific management by Taylor and others, administrative administrative management by Fayol and  bureaucratic system system by Max Weber. Weber.  Appraisal of of Classical Theory  March and Simon, Simon, Katz and Khan, Khan, Victor Thompson and a host of other othe r writers have found the classical organisation theory inadequate in dealing with the complexities of modern organisations. organisations. The salient features of the classical theory may be summarised as follows: i. Mechanistic structure : Organisations have been treated as closed systems with no environment and hence no interaction with the outside world. Classical thinkers

assumed two things - there is no impact impact of the environment on the organisation, and human beings are inert elements who can be manipulated. Once the structure is created, it was assumed that it would run smoothly with the rules and regulations. ii. Organisation as a static concept : Classicists held the view that an organisation is a static concept. Once the structure is created, it will work forever. The need for change or structural adjustment was not given g iven due consideration. The emphasis was more on stability in operations. iii. Excessive reliance on principles : Principles like division of work, scalar chain, structural arrangement, order and span of control were taken as articles of faith. Too much reliance was placed on these classical management principles. Coordination Coordination by hierarchy, unity of command, line and staff relationships, discipline - all resulted in the creation of command and control structures. structures. Classical organisation theory has been criticised by criticised by many authors authors on the following grounds: - It neglects neg lects the human aspects of organisation organisation members, assuming that they are motivated only by economic considerations. As educational levels, expectations expectations and aspirations of people have been changing fast, this criticism has become more severe. - It does not suit the rapidly changing environments of today. Structures Structures designed to function effectively in static s tatic environments environments with  with an emphasis emphasis on stability, stability, hardly suit the changing requirements of modern businesses. - It assumes that higher-level managers are respected by subordinates because of their knowledge and skills. These days, young people at a t lower levels seem to be fully equipped with latest skills. At times they are found to be even outsmarting their superiors. As a result, some emotional conflicts between superiors and subordinates have become quite common. - As organisation or ganisational al procedures become more formalised and tasks more specialised, people tend to lose sight of the bigger picture. They develop a narrow perspective where they are obsessed with their own functional areas. It should not, however, be construed from the foregoing analysis, that the classical theory of organisation is completely irrelevant. The contributions of the early thinkers  which ensured proper proper systems and order order in the organisational organisational functioning functioning cannot be undermined. Classical organisation theory has strengths as well as weaknesses. For example, classical structure provides much task support. At the same time it is weak in psychological support. What is needed is an organisational system that provides both task and psychological support. 2. Neoclassical Organisation Organisation Theory 

The classical thinkers with their obsession with economic effectiveness effectiveness neglected employee satisfaction. They failed to recognise the significance of the impact of human element. Neoclassical theory, on the other hand, which revolves around the contributions contributions of behavioural be havioural and social scientists, aims at complementing complementing for some of the deficiencies in classical theory. The initial impetus was provided by Elton Mayo's Mayo's Hawthorne studies. Neoclassical theorists did not totally reject the classical model, but only tried to modify it. Important among them are Douglas McGregor, McGregor, Chris  Argyris and  Argyris and Rensis Likert, Likert, whose contributions to the development d evelopment of management thought have already been discussed in detail in lesson l esson 2. The main propositions of neoclassical theory are as follows: i. In every organisation, in addition to the technical system, there there exists a social system; ii. Along with the formal organisation structure, there also exists an informal organisation; iii. Human beings have diverse motivational patterns and try to fulfill different types of needs; iv. Quite often there exists ex ists a conflict between individual and organisational objectives. objectives. Hence the need for integration between the two; and  v. Cooperation among people people is not automatic but but has to be achieved through through appropriate behavioural interventions.  Appraisal of Neoclassical Theory  Neoclassical theory of organisations marked a significant departure from the classical theory, in that, it raised several new concepts concepts like informal organisation, organisation, group norms, non-economic motivators, irrational irrational behaviour, etc. Consequent to the findings of Hawthorne studies and the writings of behavioural scientists, concepts like flat like  flat structure, structure, decentralisation and decentralisation and informal organisation have found increased usage in the design of the organisation structure. structure. In the place of the traditional tall structures which are bureaucratic bureaucratic in their the ir functioning, flat structures are emphasised. As against delays in decision-making, decision-making, hierarchical controls and communication bottlenecks bottlenecks in the tall structures, flat structures with wide span of control are found suitable to motivate human beings.  Another postulate postulate of the neoclassical theory theory is decentralisation decentralisation closely related to flat flat structure. Decentralised structure structure offers of fers autonomy autonomy and freedom to people in decisionmaking. It assures operational freedom. The existence of informal organisation organisation in the formal organisation is by far a significant breakthrough of the neoclassical theory. While normal organisation is a deliberate del iberate creation of the management, informal organisation is the spontaneous outcome of the people to satisfy their social and psychological needs.  Various aspects relating relating to informal organisation organisation are discussed discussed in the subsequent subsequent section of this lesson.

The neoclassical theory to organisational design compensates for some limitations in the traditional classical model. But it too has been criticized on the following grounds: - The neoclassicists neoclassicists share the classical c lassical assumptions assumptions that there is "one best way" to design an organization. They overlook environmental, environmental, technological, and other  variables that might affect affect an organization's organization's design; - The neoclassicists neoclassicists oversimplify human motivation. Not everyone is motivated by the non-monetary aspects of work, nor can a ll work be made intrinsically challenging and rewarding; and - The coordination coordination of decentralized, decentralized, fragmented groups to achieve organizational goals may be more difficult than the neoclassicists suggest, particularly when the objectives of lower-level employees are not consistent with the goals of upper-level managers. 3. Modern Approaches to Organisational Organisational Design  As discussed in the the preceding sections, hierarchical organisational organisational structures structures are centralised. Information Information flows slowly, so also the decisions. de cisions. Modern approaches approaches to organisational design take into account business account business environment, technology technology and people.  As such, while designing designing the structure, structure, an understanding of the the environment is is essential. i. Environme E nvironment nt Business environment may be classified into stable, dynamic d ynamic and turbulent. Stable environment is one with no unexpected or sudden change. Changes in technology, market demand, and socio-economic and political conditions occur infrequently and modifications can be planned in advance. But these days, stable business environments are hard to find.  As against stable environment environment where changes are infrequent, infrequent, dynamic environment is characterised by frequent changes. These changes, to a certain extent, can be predicted. Trends are likely to be apparent and organisations organisations can easily try to adjust. However, the rate of change in the environment environment may be high in some industries while it is low in some s ome other industries. It is also quite possible p ossible that the once stable environment may become become a dynamic one. For example, the environment of many businesses in India till a few years ago was quite stable. But as the economy is opened up, unprecedented changes are taking place in the Indian economy. Turbulent environment, on the other hand, is characterised by unexpected changes and surprises. As Peter Drucker has described the present age as "the age of discontinuity", managements managements are taken by surprises. Spectacular Spectacular breakthroughs breakthroughs in technology, sudden changes in the market preferences, preferences, political uncert u ncertainties, ainties, etc., make the environment e nvironment very turbulent.

In the light of the changes in the environment, whether they are predictable or unpredictable, the organisational organisational structure has to be designed in such su ch a way that it matches with the environment. Burns and Stalker on the basis of their extensive research classified organisational systems into 'mechanistic' and 'organic' structures. structures. In a stable environm e nvironment ent mechanistic structures structures would do well because the emphasis in such systems is on achieving excellence excel lence in the routine tasks, whereas organic systems are preferable in a dynamic or turbulent environment. Some combinations of the two systems may also be used. ii. Technology and Structure  Apart from the environment, environment, technology technology also influences influences the structure. structure. By technology we mean the task related. Management researcher Woodward researcher Woodward had studied about 100 British manufacturing firms and established relationship between technology and structure. He classified technology into Unit production, Batch Batch or Mass production and Process production. Unit production refers production refers to the production of individual items tailored to customer's customer's specifications. The technology used is not very complex and output is produced largely  by individual crafts people. people. Mass production refers to the manufacture of large quantities of products, mostly on an assembly line. Process production refers production refers to the production of materials that are sold by weight or  volume such as chemicals, chemicals, sugar, cement cement etc. The following are the findings of the Woodward's study on the relationship between technology and organisation organisation structure: 

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The more complex the technology, the greater is the number of managers and management levels. In other words, complex technologies require require greater degree of supervision and coordination; The span of management increases increases from unit production to mass production and then decreases from mass production to process production. Lower level employees in both unit and process pr ocess production production firms tend to do highly skilled work. As a result, narrow span becomes inevitable. In mass production, on the other hand, assembly line workers perform mostly routine tasks. Large Large number of such workers can be supervised by one manager; The greater the technology complexity of the firm, the larger is the clerical and administrative staff.

The foregoing analysis shows that all these variations in technology will influence the organisation structure, which in turn will affect the t he performance. Successful firms are those that design the structure in accordance with the technological requirements of the firm.

iii. Aspirations of the People  Along with the environment environment and technology, technology, the attitudes and aspirations aspirations of the the people need due consider c onsideration ation in designing the structure. Unlike in the past, where classical theorists’ assumptions assumptions about human beings were held good, there has been a sea change in the attitudes and aspirations of the people in the recent years. Peter Drucker has rightly described the present day workers as "knowledge workers". They want more challenging jobs and participation participation in the decision-making decision-making proc pr ocess. ess. They are selfmotivated and direct their the ir activities themselves. In view of such raising aspirations and expectations, organisational structures have to  be designed in such a way that that their aspirations aspirations are taken care care of. The structure structure has to provide an environment where individuals have freedom and autonomy. That is why, these days there is lot of talk about flexible systems and loose controls in the organisations. The objective behind all these structural changes changes is to identify and encourage creative people. In a competitive environment environment as of today, in the final analysis, it is the quality of human hu man resource resource which makes a difference when all the other things are equal. In the place of rigid and bureaucratic systems which which stifle the innovative abilities of people, the emphasis at present is towards flexible systems. As such the structure should facilitate to satisfy the ego needs of the people. FORMAL AND INFORMAL ORGANISATIONS ORGANISATIONS Much of what is discussed and understood about organizations in general, relate to the formal organisation. In many organisation structures, authority-responsibility authority-responsibility relationships among people are clearly visible. v isible. Information Information flows from one level to another or from one individual to another in a formal way. All the relationships find a place in the organisation chart. The roles of the people pe ople are clearly defined and they are expected to perform the roles as stipulated to achieve the goals. g oals. Thus formal organisation is a deliberately created entity to achieve certain specific objectives. Informal organisation, organisation, on the other hand, refers to the network of personal and social relations not established by formal authority au thority but arising spontaneously as people associate with one another. The emphasis within informal organisation is on people and their relationships, whereas formal organisation organisation emphasi e mphasizes zes offici o fficial al positions in terms of authority and responsibility. responsibility. Thus, informal organisation refers to unofficial relationships that inevitably occur between individuals or groups within the formal organisation.  As such in any organisation, organisation, both formal formal and informal organisations organisations exist. Both are are not mutually exclusive, but are complementary. complementary. The actual organisation structure structure is the result of both formal and informal relationships. The existence of informal organisation organisation  within the formal organisation organisation can easily be seen in any formal formal system, be it a business business enterprise, educational institution, or a voluntary organisation. organisation. The need for Informal Organisation

The inadequacy of the formal organisation to meet certain social and psychological needs is the basic reason behind the emergence of informal organisation. organisation. Because the formal organisation does not provide for all the social interactions, members try to find out alternative ways of association. a ssociation. As the Hawthorne experiments revealed, membership in informal groups give people psychological psychological benefits in every e very respect as important as the salary paid to them by the employer. The following are some of the major reasons for the emergence of informal organisation. i. The desire to socialise with others - Keith Davis observes observes that "along with men's technical imperative, there is also a social imperative to work together. Man is a so cial  being. He wants to belong, belong, to associate with with others rather rather to work in isolated loneliness. loneliness. Out of this basic drive of man, the informal organisation arises". arises". It is, therefore, quite natural when people work together in groups, they tend to socialise with fellow employees to satisfy their own social and ego needs. These needs are n ot normally satisfied by the formal organisation. organisation. Informal organisation, on the other hand, provides them opportunity to interact with people of their liking based on so many personality many personality factors. We can easily observe in any formal organisation, like minded people coming together and forming groups. ii. Disillusionment with the routine - Excessive specialisation these days in a way contributes for the employee aloofness. People become bored with the routineness in tasks and feel psychological fatigue. They don't get the pride or satisfaction, as what they perform constitutes only a small portion in the total task. People try to overcome overcome this  boredom through through interactions with with others. Such informal informal interactions, which encompass a whole gamut of issues both related to job and personal life, help in releasing the tension created on the job. Informal organisation thus helps in filling up the psychological vacuum created by dull, du ll, boring and monotonous jobs. iii. Hierarchical command and control - Commands and a nd controls characterise formal organisation. Wherever there is hierarchy, it goes without saying that things happen in a formal way. Reporting relationships are clear. Information flows along the formal lines of authority and responsibility of the people. There exists a superiorsubordinate relationship where superiors tend to exercise control which may not be liked by subordinates. su bordinates. While the subordinate cannot defy the superior, to compensate compensate for the inner conflict, he tries to find out ou t an association where he does not face any such control. Thus informal organisation provides him the necessary forum where he gets full psychological relief and solace by sharing his agony with others. iv. Protection of interest interest  - In addition to the above factors, informal organisation organisation strives to protect the interests of its members by working as a regulatory device. At times individual grievances are also redressed in organisations by informal groups. The opinions and viewpoints of the people are channelised through the informal bodies. Many limitations which otherwise otherwise would be faced by a member as an individual overcome because the informal organisation takes care of the t he interests of the members.  v. Need for for assistance assistance - Formal organisation provides for subordinates' consultation consultation  with the superior for for advice when confronted confronted with work related related problems. But many

people hesitate for fear of criticism. Furthermore, Furthermore, every organisation has a large number of rules governing procedures. Therefore, people often prefer to resolve their needs for assistance through through peers. We often find in organisations employees consulting their colleagues rather than their superiors for many work-related problems.  vi. Communication Communication  - People like to know what is going on around them, especially especially if it affects them. It may take some time for people pe ople to get information through formal channels. Sometimes, superiors may deliberately withhold certain information from subordinates. Therefore, an important reason for joining informal organisation is to get information through informal channels. It satisfies individual's need for psychological security and affiliation as well as provide him with much faster access to job-related information. information. The informal communication, communication, often called 'grapevine' also carries social gossip. Problems and Benefits with Informal Organisations Though the existence of informal organisation organisation is a natural outcome in any organisation, organisation, many managers perceive them as bad. Some S ome managers even carry an erroneous notion that informal organisation is a reflection of ineffective management. They therefore try to either suppress them or ignore their impact. In the process, they fail to take advantage of the informal organisation by overreacting to the negative aspects and disregarding the positive aspects.  Problems

with informal organisations

It is true that in some cases, informal organisations organisations may function in ways that are counter-productive. counter-productive. They may stand in the way of organisation's achieving the objectives. For instance, one of the consequences of informal organisation is the spread of rumours. All of us u s are familiar with how the grapevine in organisations spread rumours that are false and lead to negative attitudes towards management. management. The informal groups may set norms n orms for productivity. The work-to-rule and slow-down techniques often accepted by workers in many instances instances are the result of the dictates of the informal organisation. Individuals often tend to conform themselves to the group standards or pressures which may cause performance to be below the standards set by management.  Another evil effect of the the informal organisation organisation is the tendency to to resist change. change. Such an attitude often impedes the much needed innovation and adoption of changes as demanded by the exigencies of the environment. However, such counter-productive  behaviour is often a reaction reaction to the groups perception perception of how management management is treating them. Group members perceive that they are being be ing treated unfairly and respond as any individual would in such a situation. s ituation.  Benefits

of informal organisations

Since group membership is contingent on working for the organisation, loyalty to the group may translate into loyalty loya lty to the organisation. organisation. For instance, many people refuse r efuse

higher paying jobs with other companies because they are reluctant to give up the solid ties developed at the present company. It is possible for groups' objectives to be compatible with those of the organisation. At times, the performance norms of informal organisation may be higher than those of the the formal organisation. For example, the intense team spirit characteristic characteristic of some organisations, which results in a strong s trong drive to succeed is often o ften an outgrowth of informal relationships. relationships. Similarly, the grapevine may help the formal organisation by supplementing the formal communication network. By failing to work effectively with them, or engaging in actions to deliberately suppress informal organisations, managers managers often become unable u nable to harness these potential  benefits. In any event, event, whether a particular particular informal organisation organisation is harmful or  beneficial, one thing is is certain that it exists exists and must be dealt with. with. Therefore, as a manager, you must learn to cope effectively with informal organisation. organisation.

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Managing the Informal Organisation Management writers writers have fully realised the importance of handling informal organisations to help the formal organisation organisation attain its objectives. Scott and Davis offer the following suggestions: 

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Recognize that the informal organisation exists, and nothing can destroy it completely without also destroying the formal organisation. Therefore, management should accept it, work with it, and not threaten its existence; Listen to the opinions of informal leaders and group members; Consider possible negative effects on the informal organisation before taking any action; Decrease resistance resistance to change by allowing the group to participate in decisiond ecisionmaking; and Control the grapevine by promptly releasing accurate information. information.

SUMMARY  Different approaches have been developed over the years to explain the process of organisations. The classical theory which wh ich emphasised technical and other operational aspects of the job; the neo-classical theory which emphasized human element in the organisations with due recognition recognition to the existence of a social system along with the

technical system; and the modem approach where organisation structure has to be designed in tune with the environmental demands have been discussed in this lesson. Besides, the distinction between the formal and informal organisations organisations and how informal organisations come come into being in the formal systems - the reasons thereof, the problems, and benefits have also been presented in detail. REVIEW QUESTIONS 1. What are the basic tenets of the classical organisation organisation theory? Is this theory relevant relevant to the design of the present pre sent day organisation structures? structures? 2. Why should the environmental environmental force be taken into into account while while creating an organisation structure? Examine a few important variables that affect the structure. 3. Neo-classical theory is just a modification modification of the classical organisation organisation theory - Do  you accept? Substantiate Substantiate your answer answer with appropriate appropriate reasons. 4. Discuss some of the problems and benefits of informal organisations. organisations. 5. Have you ever been in a situation situation where informal group norms put you in role role conflict with formal organisation standards? If so, present such situations in detail. FURTHER READING Burns, Tom and Stalker.G. Stal ker.G.M. M. 1961. The Management Management of Innovation,Tavistock, London.  Woodward, Joan, 1965. 1965. Industrial Organisation, Organisation, Oxford University University Press, Press, London. Thompson, Victor .A. 1961. Modern Organisation, Alfred A.Knoof. New York. Lawrence, Paul Paul R and Lorsh, Jay.W. 1967. Organisation Organisation and Environment, Environment, Richard D.Irwin, Homewood. Davis, Reith, 1993. Human Behaviour at a t Work, Tata McGraw-Hill, New Delhi. New Delhi. Drucker, Peter.F. 1969. The Age of Discontinuity, Discontinuity, Harper & Row, New York. Stoner, James A.F. and Freeman.E.R.1989. Freeman.E.R.1989. Management, Management, Prentice-Hall Prentice-Hall of India, New Delhi.

- End of Chapter LESSON - 7 ORGANIZATIONAL DESIGN

Objectives  After studying studying this lesson, you should be able able to:   

Understand the process of departmentation; departmentation; Familiarise yourself with various va rious methods of departmentation; departmentation; and  Acquire the necessary necessary skills to design the the appropriate structure structure which serves serves the need of the company.

Outline Introduction Steps in Designing Organisation Structure Departmentation Product / Market Departmentation   

Product Departmentation Departmentation Customer Departmentation Departmentation Territorial Departmentation

Project Organisati O rganisation on The Matrix Structure Contingency Organisation Design Summary  Review Questions Case: Confusion in Auto Parts Limited Further Readings INTRODUCTION The managerial function 'organising' involves the creation of a structur s tructuree most appropriate for the organisation's objectives and other internal and external factors. The  best structure is the the one that enables the the organisation to interact interact effectively with with its environment, to efficiently channel the efforts of its people, to make efficient use of its resources and thereby to meet the needs of its customers and attain its objectives. objectives.

STEPS IN DESIGNING ORGANISATION STRUCTURE Ernest Dale describes organising organising as a multi-step process. According to him, it involves:  

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Detailing all the work that must be done to attain the objectives; Dividing the total work load into activities that can logically and comfortably be performed by one person or by a group of persons; Grouping the related tasks in a logical l ogical manner (this (this activity is known as departmentation); Setting up a mechanism mechanism to coordinate the work of members into a unified way by establishing authority-responsibility, authority-responsibility, relationships and Monitoring the effectiveness of the organisation organisation and making adjustments to maintain or increase increase effectiveness.

It is important to remember that the resulting structure is not a static form like the structure of a building. Since structure is based on plans, plan s, a major revision of plans may necessitate a corresponding modification modification of structure. As such, organising and reorganising are ongoing processes. Successful organisations organisations continuously assess the appropriateness of their structure and change it in accordance with the dictates of the environment. It is anybody's knowledge that these days every issue of leading business magazines widely reports news relating to reorganisation reorganisation underway in some large company or the other. DEPARTMENTATION  Although organisations have much in common common with one another, another, they also differ differ in many ways. Some organisations are large, some are small and some operate in only one product area like Tata Iron and Steel Company (TISCO). Others like Larsen and Toubro (L&T) and ITC operate in many diversified areas. “Some operate operate in a small geographic area, whereas others like Coca-Cola, Procter and Gamble, and IBM, for instance, do  business in many countries countries of the world. To cope with with these differences differences in objectives, strategies and situations, managers use various systems of departmentation. departmentation. Departmentation Departmentation is the process of dividing the organisation into manageable sub-units. The sub-units are often referred to as departments, divisions, or sections. By whatever name the units are called, the process is known kn own as departmentation. departmentation. Functional Departmentation Departmentation This is perhaps the most logical and basic form of departmentation. departmentation. Functional departmentation is the process of dividing the organisation into units on the basis of the firm's major activities. It involves grouping employees according to broad tasks they perform. Normally separate separate departments are created for all the key activities activities of the  business. For example, example, in a manufacturing manufacturing company, the activities essential to the existence of the company are production, marketing, and finance. However, in nonmanufacturing concerns concerns these functions differ. In a transport company, the key areas

may be operations, sales and finance. fina nce. Thus, public utility concerns like electricit e lectricity, y, transport, banking, insurance insurance and hospitals have their own distinct key functional areas. In all these cases, under functional departmentation, departmentation, major or primary departments departments are created along the key functional areas of the respective businesses. If the organisation or given department is large, or in other words, as the organisation grows, major departments can be subdivided. These sub-divisions are called derivative departments. The essential essential idea is to make increased use of specialisation. A typical functional organisation with major functions and derivative functions are shown in the following Exhibit 1. EXHIBIT - 1 FUNCTIONAL DEPARTMENTATION DEPARTMENTATION

The following are the advantages and disadvantages of functional departmentation.  Advantages:   

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It is the most logical and simplest form of departmentation. departmentation. It makes efficient use of specialised resources and skills. It makes supervision easier, since each manager has to be an expert in o nly his functional area of operation; It fosters development of expertise in specialised areas.

Disadvantages: 

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Functional departmentation departmentation is often found to be inadequate to meet the growing needs of the business, particularly particularly as the organisation expands or diversifies its activities; Further, decision-making decision-making becomes slow as the functional managers have to get the approval of the headquarters; It is also difficult to determine accountability in a functional structure. If a product fails, the question as to who is responsible responsible cannot be easily answered; and Functional managers managers tend to develop devel op narrow perspective perspective and lose sight sigh t of the  bigger picture. Members Members of each department department feel isolated from those those in other departments. For example, manufacturing manufacturing department may be obsessed obsessed with cost cos t reduction and meeting the delivery dates, neglecting the quality control. As a result, marketing department may be flooded with complaints. c omplaints.

PRODUCT / MARKET DEPARTMENTATION: DEPARTMENTATION:  As the organisation grows, grows, either by broadening broadening its product line, or by by expanding geographically, some of the disadvantages of functional structure begin to be more

apparent. In such a case, management will create semi-autonomous divisions for each product or market. Three patterns are adopted generally generall y by organisations depending on the specific requirements to overcome the limitations of functional structure. They are product, territorial and customer departmentation. i. Product Departmentation One of the most common ways in which businesses grow is by increasing increasing the number of products they make and sell. If the organisation is successful, several product lines may attain such high sales that they require a separate division. Large organisations like Shaw Wallace, Kirloskar, Voltas, ITC, Hindustan Lever, have coped with the expansion of their product lines by creating separate departments or divisions for the various products they make. Under product departmentation, a single manager often referred to as the brand or product manager is a delegated authorit au thority y over all a ll activities required to produce and market that product. As against ag ainst functions in the functional departmentation, basic products or services become the primary or major departments in the product p roduct departmentation, departmentation, as shown in exhibit-2. EXHIBIT - 2

 Advantages: 

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Product departmentation places attention and effort on the basic products, the success of which is critical to the survival of the organisation; organisation; Since all revenues and costs are assigned to a particular product, product, cost centres can  be established, high profit profit areas can be encouraged, encouraged, and unprofitable unprofitable product lines can be dropped. Thus responsibility for cost reduction and profits can be established at the division level; Proper coordination of all functional areas can be achieved as all the functional functional managers work as a team under close supervision of the product manager. Since the department or division is multifunctional, it often operates like a complete company. Enables quick response to changes in environment as compared with functionally organised firm; Provides managers a training ground in general management which is useful in overcoming narrowness of interest; Expansion and diversification diversification of activities is made easy e asy by creating new departments for the new products that are added to the existing ones.

Disadvantages: 

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Requires more persons with general management abilities as more and a nd more departments are created for the various products; p roducts; The product departments may try to become become too autonomous, thereby presenting top management with a control problem;

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It is also common common to find product departments engaged in the duplication dupl ication of efforts. Each product unit has its own functional departments. These may not be sufficiently large to make maximum use of facilities. Thus product departmentation becomes an expensive organisational form.

ii. Customer Departmentation Some organisations sell a wide variety of goods or services that appeal to different groups of customers, each of which has distinguished needs. In such a case, departments are created around customer groups. Customers are the key to the way activities are grouped. For instance, commercial banks organise their activities around customer groups to cater to their specific needs. As such, we find separate departments or divisions for agricultural, industrial and merchant banking operations. Similarly, we find Blue S tar Company organising its air-conditioning air-conditioning business  business around domestic domestic and industrial air-conditioning units illustrates a typical typical customer departmentation in a large bank.

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Customer departmentation facilitates concentration on customer needs. This is almost all in line with the customer orientation orientation professed by many organisations organisations these days. Customers feel that they have an understanding supplier. For example, the manufacturer manufacturer may sell to wholesalers who lesalers and industrial buyers; wholesaler requires a product of dependable quality with assured supplies; the industrial buyer wants a product of high quality plus p lus a service that includes installation and repair of the product and the specific training of employees. Helps the organisation to get the correct feel of the market dynamics in terms of preferences of the customers, customers, competitor's strategies, etc.

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Difficult to coordinate operations between competing customer's demands; Requires considerable expertise on the part of managers in understanding customer's problems and specific needs; There is a possibility of under-utilis un der-utilisation ation of facilities and employees e mployees specialised specialised in terms of customer groups. Small Small organisations particularly cannot afford the expenditure involved because some amount of duplication of the facilities facilities is inevitable.

iii. Territorial Departmentation  When an organisation organisation operates in different different geographical areas, areas, each with distinct distinct needs, it is desirable to create the departments departments along geograp ge ographical hical lines, as illustrated in Exhibit-4. The process of creating departments along the geographical lines is termed

territorial territorial departmentation. departmentation. This type of organisation makes it easier for the organisation to cope with variations in laws, l aws, local customs and customer needs. Public utilities like transport companies, insurance insurance companies, etc. adopt a dopt territorial departmentation. departmentation. Similarly, a large scale organisation operating both in domestic and international international markets may have separate departments departments for both the markets. Again, different departments departments or divisions may be created for different d ifferent regions regions of the world. Many multinational companies organise organise their global gl obal activities with regional headquarters in different regions of the world.

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Territorial departmentation departmentation makes possible concentration concentration on markets and marketing channels in different geographical areas; Develops opportunities for more efficient marketing activities because of better face-to-face communication communication with local interests; and Effective utilisation of locally available resources besides being able to cater to the region-specific variations in terms of preferences preferences and sentiments of the people is made possible.

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In this type of department de partmentation, ation, there are problems in training people to think in terms of markets rather than products; Requires more persons with general management abilities; and Increases problem of top management control because of the distance between the corporate headquarters and the regional offices.

The three patterns of departmentation departmentation discussed above - product, customer and territorial departmentation departmentation - broadly characterise the divisional structure. All the three patterns have advantages and disadvantages. The variations in the patterns are in response to the specific factors in the environment. The choice of any of these structures, therefore, therefore, would be based on which of the factors management management judges to be more important and critical critical in the th e light of the strategies and objectives.

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PROJECT ORGANISATION ORGANISATION The use of the project organisation organisation has increased in the last few years. It is currently  being employed in numerous numerous undertakings undertakings engaged in the execution execution of construction activities, turn-key projects and research and development projects. The project organisation can take various forms, but the important characteristic characteristic that distinguishes distinguishes it from other forms is that once the project is completed, the organisation organisation is disbanded or phased out. By definition, project management involves "the gathering of the best available talent to accomplish a specific and complex undertaking within time, cost and quality parameters, followed by the disbanding of the team upon completion of the undertaking". The group members then go on to another project, return to their permanent home department in the organisation, are given jobs elsewhere in the organisation, or, in some cases, are phased entirely out of the firm. THE MATRIX STRUCTURE The matrix structure is a hybrid organisational form, containing characteristics of both project and functional structures. In consumer goods industries, it could contain the characteristics characteristics of both product and functional departments. This structure allows operational responsibilities responsibilities to be divided into two parts. One part contains all the responsibilities responsibilities associated with the management of an independent business and is

given to an individual who is called 'business manager' or 'product manager'. The other part contains all the responsibilities responsibilities related to the management management of resources needed to get the job done. The person pe rson responsible for these is the usual 'functional manager' or 'resource manager' in charge of the functions like production, marketing, finance, personnel and so on. The matrix is built around a cooperative relationship between the project / product manager and the functional / resource manager. Thus, project staff members in a matrix structure structure have a dual responsibility. First, First, they are responsi re sponsible ble to the head h ead of their functional department, the person who has assigned them to the project. The functional functional department head is their line superior and will continue to be so. But the project manager exercises what is called project authority over the project staff. Exhibit 5 presents these dual responsibilities in a matrix form of organisation.

 _______ Functional Authority  Authority  ---------- Project Authority   When the concepts concepts of functional and project project authority are brought brought together, the result result is an organisation structure that is both vertical and horizontal. The vertical pattern is  brought about by the the typical line authority flowing flowing down from superior to subordinate. subordinate. The horizontal authority flow is caused by the fact that both the scalar principle principle and unity of command principle are violated. viol ated. Companies like Larsen & Toubro (L&T), Western India group, U P Construction Construction Corporation, Afcons-Pauling, Afcons-Pauling, etc., adopt this structure for the execution exe cution of various projects. For instance, L&T's construction of Jawaharlal Football Stadium in Madras and Afcons-Pauling's laying the East Coast Road are big projects by themselves. The execution of such projects is entrusted to a team drawn from the functional departments of the headquarters. The overall responsibility for the project lies with the project manager. The people that work in the project are responsible to the project manager as  well as their functional functional head from whom they are drawn. Similarly, Similarly, in the multi-product multi-product consumer goods industries, as in the case of projects, responsibility for different products may be placed on product managers as could be seen i n the exhibit. The matrix may be temporary or permanent. In construction construction and turnkey activities, project is disbanded after the execution, where as it may take a permanent permanent form in the case of a consumer goods company.  Advantages: David I. Cleland and William R. King identify the advantages as follows: 

Utilisation of manpower can be flexible because a reservoir of specialists is maintained in functional departments. These specialists can be deployed to the  various projects for for optimum use of their their services;

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Responsibility Responsibility for the th e overall execution, management, and profit is with the project manager who acts like a chief executive; Specialised knowledge is available to all projects or products on an equal basis. Knowledge and experience can be transferred transferred from one project to another; Project people have a functional home when they are no longer needed on a given project;  A better balance between between time, cost and and performance performance can be obtained through through the built-in checks and balances and the contin c ontinuous uous negotiations carried on  between the project project and the functional functional organisations.

Disadvantages: Many of the drawbacks mentioned below of the matrix structure cannot be avoided. Managers have to learn to deal effectively with them. 

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The major disadvantage relates to power struggles. Since use of the matrix means use of dual command, command, managers often end up in conflicts; Matrix entails wide use of group decision making because group cooperation is required for success. The inevitability of group g roup cooperation at times delays de lays decision making; If the organisation has too many projects, the result may be severe layering of matrixes. Uncontrolled growth of matrix structures often results in power struggles between managers; Matrix structure may be expensive. The dual chain of command may cause management costs to double.

 When there is an economic economic crunch and the the organisation has to cut cut back, matrix structures are the first to go. Despite the drawbacks, the use of matrix structure structure has spread to many industries. In addition to construction and engineering, e ngineering, consumer goods, banking, insurance computer companies are now using it. Va riations of matrix are also used by hospitals and other professional professional organisations. CONTINGENCY ORGANISATION DESIGN The contingency approach to organisational design suggests using whatever approach is most effective. Accordingly, so many flexible structures are adopted these days to meet the specific needs of the organisations. organisations. The idea is that the internal functioning of organisations must be consistent with the demands of the organisation's task, technology, external environment, environment, and the needs of its members if the organisation is to  be effective. This approach approach basically implies the the development of a contingency contingency theory of organisation. The approach is based on the exigencies of the situation.  William F. Glueck, offers offers the following guidelines for contingency contingency design: 

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 When low cost and efficiency efficiency are the keys keys to successful goal achievement, achievement, organisations should use functional departmentation; departmentation;  When the environment environment is complex, matrix matrix structure structure is effective;

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If the organisation is large and operates in a stable environment, environment, it can afford a fford to formalise the structure; The greater the intensity of competition, the greater will be the degree of decentralisation; The greater the volatility of the environment, environment, the more decentralised and flexible the organisation has to be; and Companies that implement the organisational style appropriate to their strategy strategy  will be more effective than those those that use an in appropriate style.

SUMMARY  The managerial function 'organising' is the process of identifying the important activities to be performed to achieve the objectives, grouping of related activities, assigning such groups of activities to people and providing for c oordination oordination by establishing authority-responsibility authority-responsibility relationships among people. Creation of departments within the organisation - the process pr ocess known as departmentation, departmentation, resulting in the design of a structure is an important task in organising. Different patterns patterns of departmentation are used by organisations depending on their specific requirements. Important among them are functional, product, customer, and territorial departmentation. Matrix organisation which is a hybrid form of both functional and project/product project/product departmentation is also being increasingly used by organisations operating in highly competitive markets. The question of what kind of structure is best, has no single right answer; it depends on the situation. Some firms need stable systems systems  while some others need need flexible systems. The nature of the task, technology, technology, environment and the needs of the organisational members are some of the factors that influence the design of the structure. REVIEW QUESTIONS 1. What are the basic characteristics characteristics of functional departmentation? Analyse Analyse its merits and demerits. 2. Suggest a method of departmentation departmentation for a large multi-product organisation with a huge market spread over the whole country. Explain the reasons for your suggestion 3. Explain the statement: "A matrix structure is a hybrid form of organisation, containing characteristics of both product and functional structure". 4. Do you agree with the view that there is no one best way of departmentation departmentation applicable to all organisations? Substantiate Substantiate your answer and explain exp lain what factors influence departmentation. departmentation. CASE: CONFUSION IN AUTO PARTS LIMITED  Auto Parts Limited, Limited, a medium-size company company engaged in the manufacture manufacture of automobile components was started by Mr. Reddy, a technocrat, in 1988. Things went on well for a couple of years. Problems began to surface in the early e arly nineties because of the recession

in general in the automobi au tomobile le industry. Since the demand for the company's products is a derived one, the company could not insulate itself from the fluctuating fortunes of the automobile industry. As the parent industry began to cross the recession, happy days  were once again there there for Auto Parts Limited. Limited. Because of the quality products that the company was known for, several internationally internationally reputed automobile companies also  became eager to source source their requirements requirements for components components from Auto Parts Parts Limited.  All these developments should should naturally make Mr. Mr. Reddy, a happy man these these days. But he is concerned with certain organisational problems problems and is wondering as to how to organise the company in the light of tremendous potential potential for growth. He is particularly tired of being the only one in the company responsible for profits. The company, since inception has been organised on functional fu nctional lines. He has good managers heading the functions departments like manufacturing, finance, sales, advertising and product research, but none of them could be held responsible for profits. He often finds it difficult even to hold them responsible responsible for the contribution of their respective areas to company profits. Besides, each manager began to complain against the other. For instance, sales manager, the other day, complained that he could not be fully responsible for sales when advertising was ineffective, ineffective, when the products wanted in the market were not readily available from manufacturing department. department. He further complained that the manufacturing department did not heed to their suggestions regarding certain modifications in the products. In turn, the manager in charge of manufacturing argued that financial controls did not allow his department to carry a large inventory of everything and he was obsessed with cutting down the costs. Mr. Reddy is really fed-up of o f these internal squabbles among the functional heads and is seriously considering the idea of breaking the company down into six or seven product divisions with a manager for f or each, with complete responsibility over the product including the profit. But he feels that this would not be economical since many of the products are produced with the same equipment and raw materials. Further, a sales person calling on a customer (the automobile company or the spare parts dealers in the market) could far more economically handle a number of related products than one or a few. Confronted with the above dilemma, Mr. Reddy came to the conclusion that the best thing to do is to set up six product managers reporting reporting to a product marketing manager. Each product manager would be given responsibility for one or a few products and  would oversee all aspects of manufact manufacturing, uring, product research, research, sales and advertising. advertising. Thus, in essence each product manager manager would be responsible for the performance performance and profits of the products pr oducts assigned to him. Mr. Reddy is bent on reorganising the company on the lines presented above and hopes for the best. But he is still not clear about his thoughts and has some confusion about the new reporting relationships that would emerge after the proposed reorganisation exercise is over. Questions

1. What is the exact problem in the case? Do you view the problem very serious, or is Mr. Reddy over-reacting? 2. What are your comments on the scheme of things that Mr. Reddy proposes in order to reorganise? 3. What would you do to remove confusion and help the company achieve its ambitious goal of emerging as a leader l eader in the auto components components industry? FURTHER READINGS Miner, John B. 1978. The Management Process, Macmillan, Macmillan, New York. Naisbitt, John. 1982. Megatrends Warner Books. New York, Glueck, William F. 1984. Management, Dryden Press, Hinsdale. Lorsch, Jay W and Lawrence, Lawrence, P.R. 1970. Studies in Organisation. Design, Richard D. Irwin, Homewood. Hodgets, Richard. M. 1986, 1 986, Management,  Academic Press, Press, New York.

- End of Chapter LESSON - 8 SPAN OF MANAGAMENT AND ORGANIZATION STRUCTURE

Objectives  After studying studying this lesson, you should be able able to:   

Understand what an organisation chart is and what it explains; Describe the concept of span of control; and  Appreciate the traditional traditional as well as the the current thinking on span span of control.

Outline Introduction Organisation Chart  

Chain of Command Unity of Command

Span of Control   

Classical thinking on span of control Current thinking on span of control Factors influencing span of control

Summary  Review Questions Further Readings INTRODUCTION Organisations must continually continually adopt to meet competition. competition. Consequently, their structures must be modified periodically. Management expert Tom Peters estimates that about 50 percent of organisation problems arise from inappropriate organisation organisation structure. As discussed in the previous p revious lesson, organising is the process of dividing work among individuals and groups grou ps and coordinating their activities to accomplish goals. The process, obviously, results in the creation of a structure. The different patterns adopted  by organisations to create create such structure structure have also been examined in the the previous lesson.  Whatever an organisation's organisation's goal is, its its structure should facilitate facilitate the most effective and efficient use of available resources. Because adaptation is a key to competitive competitive survival, the 'right' structure for an organisation is determined by numerous factors. For this reason, selecting an organisation structure might best be described as an evolutionary, trial-and-error process. That is why, we find numerous organisations constantly constantly modifying their structures to adapt to the needs of the environment.  A look at the organisation organisation chart of any company company provides an understanding as to to the pattern used to divide the organisation into manageable units and the corresponding corresponding authority-responsibility authority-responsibility relationships among people working in the various v arious departments. ORGANISATION ORGANISATION CHART  An organisation chart chart is simply a diagram diagram of all the positions positions in an organisation and their formal relationships to one another. The important purpose referred by an organisation chart is that it illustrates an organisation's overall shape and the levels of management in a comprehensible manner. The organisation chart of a typical company organised on functional basis is present in exhibit-1.

 As seen in exhibit exhibit 1, an organisation chart shows: shows:

- The hierarchical hierarchical structure that is typical of most organisations; - The number of management layers or levels; - Degrees of authority and status of the individuals as indicated by the location of their positions in relation to other positions; - How an organisation's organisation's activities are divided in terms of o f departments (whether by function, by product, by territory and so on); - The work being done in each position (indicated by the labels in the boxes); - Interaction of people as indicated by the horizontal and vertical lines connecting connecting  various positions/departm positions/departments; ents; - Relations between superiors and subordinates subordinates - who reports to whom, i.e., the chain of command; - How many subordinates report directly to each manager, that is, the span of control; - Career progression - routes to the higher levels; and - Formal channels of communication communication (indicated by the connecting connecting lines). However, an organisation chart does not show : - The ongoing dynamics of workplace behaviour; in a way, organisation charts are static; - Interactions between people who have n o official reporting relationships, i.e., the informal organisation; - Personal preferences preferences and coalitions; coalitions; - Informal communication channels, i.e., the grapevine; and - Interference by outsiders. The organisation chart of any company c ompany enables one to understand easily three classical principles of organising, viz., chain of command, unity of command, and span of control. 1. Chain of Command  As an organisation's activities are divided divided into departments, co-ordination co-ordination becomes becomes necessary for integrating integrating individual and group efforts so as to achieve the goals. Such coordination is achieved through a systematic placement placement of positions positions and duties. This type of arrangement of various positions in an orderly way is termed 'scalar chain' or 'chain of command'. The chain of command exists whenever one individual is made

subordinate to another. Since ancient times, it has been recognised that the only way to structure structure unified systems involving large number of people is through a chain of command. The resulting hierarchy hierarchy is found in every company or in any human system including a family. Exhibit - 2 depicts the chain of command in a typical manufacturing company.

In addition to defining different degrees of authority on people, the Chain o f Command also suggests the routes through which information information flows within an organisation. organisation. 2. Unity of Command The Chain of Command principle implies another feature of organising "one subordinate - one boss". If the efforts of subordinates are to be effectively coordinated, it is necessary that they must have a reporting relationship with only one superior. Unity of Command principle avoids the confusion as to who should report to whom and who should issue orders to whom. However, the truth of the matter is that unity of command is violated in varying degrees in almost every organisation. As understood earlier (in chapter 7), it has ha s been especially undermined by the emergence of matrix organisation structure. 3. Span of Control  We shall understand understand Span of Control in detail below. SPAN OF CONTROL  Whereas chain of command command and unity unity of command relate to to the vertical structure structure of an organisation, span of control relates to the horizontal structure. Just as a growing organisation ultimately ultimately reaches a point at which it is impossible for one person to handle all the work, there is a limit to the number of subordinates that a manager can effectively supervise. But for this limit, organisations would have not taken the pyramid shape. Span of control refers to the number of subordinates that report directly to a supervisor. In the olden days, a great g reat deal of attention was directed to the issue of span of control. The thinking then was that an effective span of control involved some definite number of subordinates. Often, one of the first things done by an a n organisational analyst or consultant was to count the number of subordinates reporting to each manager. In each instance, when the number exceeded a definite figure, say - six or eight, there would be a recommendation recommendation to narrow the span. Thus, the thinking of the classical theorists about the span revolved around a definite number. For example, Lyndall Urwick  found  found the ideal number of subordinates for all superior positions to be four, and at the lower level of organisation, the number may be eight to twelve. But empirical research research subsequently found the actual practices among companies regarding span to be widely varying.

The span of control, also called 'span of management', has gained importance importance as a principle of organising because of the limitation on the part of a manager to manage an infinite number of subordinates. This obviously results in the levels in the organisation. Thus, an inverse relationship generally exists between the span of control and number of management levels. That is, if an organisatio org anisation n has wide horizontal spans, the resulting structure will be flat, with few vertical vertical levels of o f management. Conversely, Conversely, if an organisation has narrow horizontal horizontal spans, the structure will be tall, with many vertical management levels. Both the situations of flat as well as narrow spans, and the resulting flat and tall structures, are shown in exhibits 3 and a nd 4. DH = Department Head S = Subordinate Exhibit 3

 As the above exhibit clearly show, in company company A, each supervisor's supervisor's span of control covers four subordinates, and four department heads report to the chairman. There are a total of 21 managers, arranged in four management management levels. Exhibit 4

In contrast, in company B, each of the eight supervisors exercise control over eight subordinates. As a result, there exists only three layers. In this case, by increasing the span of control from four to eight, one layer l ayer of management is eliminated. Problems with levels Creation of too many levels has certain problems relating to communication and managerial control, in addition to the costs involved i. Communication: Communication: Experience  Experience shows that the greater the number of management levels a message must pass through, the longer it will take to reach its destination. More often, the information also loses l oses clarity. In effect, successive layers of management management act as communication filters distorting the transmission transmission of information. Thus, communication communication of organisational organisational objectives, plans, and a nd policies becomes difficult. Omissions Omissions and misinterpretations misinterpretations usually occur as information passes through too many levels in the scalar chain. ii. Managerial control: The distance between the top and bottom b ottom levels of an organisation also affects control. For example, example, even the best of the plans which are definite and complete at the top level, l evel, lose clarity as the plans are sub-divided and

elaborated at lower levels. Consequently, at the implementation stage of the plans, control becomes difficult. iii. Costs: Too many levels leve ls involve lot of expenditure. Additional facilities in terms of secretarial staff have to be provided besides the pay differentials differentials in the compensation package. In many organisations substantial expenditure has been saved by increasing the span.

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1. Classical Thinking on Span of Control The traditional theory of management management was much concerned concerned with the specific number of subordinates that could be supervised by a manager. For instance, Lyndall Urwick  suggests that no executive should attempt to supervise directly more than five. Different thinkers suggested different spans spans both at the top and lower levels of organisation. The contribution of U.A. Graicunas was Graicunas was however, significant to the span of management theory. According According to him, in deciding the span, managers should consider not only the direct one-to-one relationships with with their subordinates, subordinates, but also two other kinds of relationships, namely, 'direct group relationships' relationships' and 'cross-relationships'. 'cross-relationships'. As such, if A has two subordinates B and C, the following relationships would emerge. i. Direct one-to one- to-one -one relationships: These relationships relate the superior directly with his subordina su bordinates. tes. A, in this case will have two direct relationships  with B and C, viz. A to B and A to C. ii. Direct group relationships: This type refers to the superior relationship  with the various possible possible combinations of subordinates. subordinates. In the above above example, A may interact with B in the presence of C or with C in the presence of B. Graicunas argues that though the individuals are same, the two situations have different implications. iii. Cross-relationships: These types of relationships are created when subordinates consult one another. In our example, the two cross-relationships are B with C and C with B. Graicunas gave a formula to ascertain the number of all three kinds of relationships: relationships:

Number of relationships = n [2 n/2 + n - 1]  where, n stands stands for the number number of subordinates. One can can easily ascertain ascertain how the number of relationships relationships increases as the number of subordinates subordinates rises by applying this formula. With four subordinates (n=4), the total relationships go up to 44 {4 x [24/2 + 4 - 1] = 4 x [16/2 + 4 -1] = 4 x 11 = 44}, with five subordinates to 100, with six subordinates to 222, and with 10 1 0 subordinates to 5,210. Though Graicunas' formula explains the complexities involved as the number of subordinates increase, it suffers from the following inadequacies. a) The formula ignores the frequency and importance importance of relationships, and b) Several other factors which have a  bearing on the superior-subordin superior-subordinate ate relationships have not been taken taken into consideration consideration while framing f raming the formula. 2. Current Thinking in Span of Control In contrast to the traditional traditional thinking on the span of control, modern management theories emphasise emphasise that there are too many variables that influence the span. Thus, the emphasis has shifted to the variables in the situation. While the fact that there is a limit to the number of subordinates subordinates that can be effectively managed cannot be disputed, the exact number will depend upon various factors... 3. Factors Influencing Span of Control i. Manager's personalit pe rsonality  y : If managers share a strong need for power, they may prefer a wider span of control. On the other hand, some managers feel threatened because they cannot oversee the activities of too many ma ny people. Such managers would naturally prefer a narrow span. ii. Manager's capability: capability: An experienced, experienced, well trained and knowledgeable manager manager is normally able to handle a relatively wider span than a lesser capable manager. iii. Subordinates capabilities: capabilities: Experienced  Experienced and well-trained we ll-trained subordinates will be able to resolve the difficulties themselves. They They do not take much of the time of the superior. The need for frequent contacts is also obviously lesser. iv. Fatigue tolerance: Physical and mental fatigue may limit a manager's capacity for control. There are only so many hours in a day, and only so many things can be done at once. Consequently, the greater the physical or mental demands of a job, the narrower the span of control.  v. Activity Activity level: The pace and pattern of work in an engineering firm, an investment firm, and a university differ in many respects. Moreover, there also al so exist differences  between the various various units of an organisation. organisation. For example, production production compared compared to public relations. Thus, the more active the pace and pattern of a manager's work, the narrower the appropriate span of control.

 vi. Non-supervisory Non-supervisory activities: activities: If the manager spends more time on nonsupervisory activities like long-range planning and outside assignments, he tends to have lesser time to supervise the subordinates. This obviously limits the span.  vii. Similarity Similarity of activities activities supervised: If supervised:  If the nature of activities performed performed by the subordinates is routine, the superior can manage many subordinates. On the other hand, if it is unique u nique and non-routine problems, problems, and more frequent, the span should be limited.  viii. Complexity of work: Simpler job assignm a ssignments ents are usually easier ea sier to supervise than more complex ones. The problems that arise are generally less demanding and take less of the superior's time. Thus, less supervision will be necessary, contributing for a  wider span. ix. Availability of sophisticated facilities:  Availability of more advanced and sophisticated sophisticated faciliti fa cilities es like high speed telecommunication telecommunication devices, modern office equipment, etc. will help the manager in managing a relatively wider span. x. Location: If Location:  If subordinates are physically dispersed, a manager will need to spend more time in traveling and communicating. The span of control in such a case will be narrower. To conclude, it has to be remembered that despite the desirability of flat structures, the span of control may be limited by certain factors. factors. As an enterprise grows, the increase in organisation levels cannot be completely avoided. What is required is a precise  balancing of all the factors factors in a given situation. situation. Widening spans and reducing reducing levels may  be the answer in some some cases, while the the opposite may be true in others. others. One must balance balance all the advantages and disadvantages. SUMMARY  The organisational chart of a typical company and the important aspects that it explains such as chain of command, unity of command, and span of control, have been discussed in this lesson. Span of control, one of the important principles of organising has been analysed in detail. It refers to the number of subordinates that a superior can effectively manage. The principle suggests that there is a limit on the number of subordinates that can be managed by a superior. This limit l imitation ation gives rise to t o the levels in the organisation. If the span is wide, it would result in a flat f lat structure. Conversely, if it is narrow, the result would be a tall structure. Both the types of structures have merits and demerits. The classical thinkers' view point regarding the span vis-a-vis the modern view as to how span is influenced by various factors of the situation, like the capabilities of superiors and subordinates, nature of the task, environment, etc. have been examined in detail. REVIEW QUESTIONS

1. Calling upon your personal experience as a student of management, give a few examples of chain of command. 2. "Organisation chart provides a broad picture of positions of authority and their relationships in the organisation structure". structure". Examine this statement. 3. What do you understand by levels in the organisation? Examine the implications of too few and too many levels. 4. How does a tall ta ll organisational structure structure differ from a flat one? Give an example of each, 5. What do you y ou mean by span of control? Examine the traditional as well as modern  viewpoints on the the span of control. FURTHER READINGS Dale, Ernest, 1960. The Great Organisers, McGraw-Hill, McGraw-Hill, New York. Drucker, Peter. F, 1974. Management: Tasks, Responsibilities, Practices. Harper & Row, New York. Cleland, David. I, and William. William. R. King, 1975. Systems Analysis and Project Management, McGraw-Hill, McGraw-Hill, New Ne w York. KastF.E., and J.E.Rserizweig, 1973. Organisation and Management: A systems  Approach, Mc-Graw-Hill Mc-Graw-Hill,, New York. Hodgets, Richard. M, 1988. Management, Academic Press, New York. Koontz, Harold and Others, 1984. Management, McGraw-Hill, Tokyo.

- End of Chapter LESSON - 9 DELEGATION OF AUTHORITY AND DECENTRALIZATION DECENTRALIZATION

Objective  After studying studying this lesson, you should be able able to:

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Understand the concepts of 'authority' and 'power'; Explain the sources of 'authority' and 'power' in the organisational organisational context; Describe the process of delegation and the barriers to effective delegation; and Know the factors influencing decentralisation of authority.

Outline             

Introduction Classical Theory of Authority   Acceptance  Acceptance Theory of Authority  Authority  Power Delegation of Authority  Barriers to Effective E ffective Delegation Overcoming the Barriers Decentralisation of Authori Au thority  ty  Factors Influencing Decentralisation Decentralisation Summary  Review questions Case Further Readings

INTRODUCTION  Authority is the right to command. It is the the discretion power power vested with a manager manager to use the organisational resources. Managers acquire authority authority by virtue of the rank or title associated with their positions. There are two principal views regarding the source of authority. The classical view holds that authority passes from the "top down". In contrast, the acceptance view contends that authority flows from the "bottom up" u p" (see exhibit-1)

CLASSICAL THEORY OF AUTHORITY   According to this this theory of authority, authority, managers derive their their authority from the the right of private property, which is guaranteed by the constitution and the concerned laws of the country. Thus, the right to own the property and to manage it without violating the rights of others is conferred on the individuals by the constitution. constitution. In most of the large scale organisations, shareholders shareholders who are the real owners o wners of the company transfer their ownership rights to Board of Directors, which which in turn, may, appoint a Chairman (Chief Executive Officer) to manage the organisation's day-to-day operations. Likewise, Likewise, the CEO may appoint a Managing Director who in turn may appoint several managers down the line. Formal authority thus is transferred from top to the down in the organisation. The authority thus possessed by the managers by virtue of their position in the organisation is known as formal authority.

 ACCEPTANCE THEORY OF AUTHORITY  The acceptance theory of authorit au thority y was popularised by management thinker Chester I. Barnard. Barnard. According to this theory, authority stems from below because subordinates can always reject a directive. It is only by accepting an order that a subordinate affirms the right of a manager to issue the orders or commands. Barnard contends that subordinates will accept orders given by their superiors provided that the orders meet four conditions. These conditions define what is acceptable to a subordinate and, thus, create a zone of acceptance within which authority may be exercised. A subordinate will accept an order and comply with authority au thority under the following four conditions: 1. The subordinate su bordinate understands understands the order. 2. The subordinate su bordinate believes the order is consistent consistent with organisation goals. 3. The subordinate subordina te believes the order is compatible with his or her personal interests. 4. The subordinate subordinate is mentally and physically physically able to comply with the the order. Effective managers make certain that their orders fall within their subordinates 'zones of acceptance'. POWER  The terms authority and power are often confused. Authority as described above is the right to command or issue orders. Power, on the other hand, is the capacity to influence others. All managers have power by virtue of the positions positions they occupy. Power, however, does not necessarily stem from authority. In other words, people with authority may have power. But, interestingly in some systems, people may exercise tremendous power though they have no formal authority. Thus, we find people at lower levels also a lso without any authority sanctioned to them by the formal system, enjoying captivating power over the colleagues and at times may influence even the superiors. superiors. John R.P. French and French and Bertram Ravan have Ravan have identified five basic types of power. The first three types - reward, coercive, and legitimate - generally are associated with a manager's position. position. The last two - referent and expert - are part of the person, not the position. 1. Reward power is power is based on a manager's ability to provide various, kinds of rewards for complying with orders. The rewards generally include salary increases, promotions, favourable job assignm a ssignments, ents, praise and recognition. recognition. 2. Coercive power is power  is based on a manager's manager's ability to punish for not complying with orders. Coercion may take the form of verbal reprimands, disciplinary actions like fines, demotions and threats of suspension or termination.

3. Legitimate power is power is based strictly on an individual's position in the organisational hierarchy. The higher a manager is in the hierarchy, the greater his or her legitimate legitimate power. As such, the manager's legitimate power and formal authority are one and the same. 4. Referent power refers power  refers to the power enjoyed by some people because of their integrity and charisma. Any individual who wins over o ver the subordinates by his personality personality and ability to take them with him, enjoys this power. Subordinates in any organisation usually like to identify with such an individual. This power is purely personal. For example, managers who win the admiration of people with whom they  work, may be able able to exercise influence over over them to behave in a particular particular way. 5. Expert power is power is based on possessing possessing valued knowledge or special skills. A manager  who possesses such knowledge or skills skills has power over others others who do not. Managers Managers  who offer the right right solutions to subordinate's subordinate's questions and and provide support, yield expert power. The saying that 'knowledge is power' is thus true. RESPONSIBILITY  Responsibility, Responsibility, in the organisational organisational context, is obligation to perform the tasks and account for their satisfactory completion. completion. It is implied that an a n individual is expected to fulfill certain job requirements when he or she accepts a position in the organisation. organisation. In other words, the individual i ndividual enters a contract with the organisation to perform the tasks of the position in exchange for certain rewards. In other words, the individual is answerable for the results of the task to be performed. In contrast contrast to authority, responsibility responsibility of an individual in the organisation is always upwards, that is, the subordinate is responsible to his or her superior. DELEGATION OF AUTHORITY  Delegation is the process by which authority passes from one organisation level to another. If not for delegation of authority, organisations would remain small forever. Delegation is the only solution to cope with the increasing work load of managers as the organisation grows. Because of the constraints of time and ability, a manager cannot perform all the tasks himself. Therefore, he delegates certain tasks to the subordinates and gets them done. The process of delegation has the following steps: Step 1. Entrustment of duties or Assignment of responsibilities This is a crucial step in that a few important questions like "what to delegate?", "when to delegate?", "whom to delegate to?", and "how to delegate?" del egate?" are answered. The effectiveness of delegation depends on how clearly these questions are answered. First of all, the manager has to decide the tasks to be delegated del egated to the subordinates. For this, he must be able to distinguish between the routine routine and non-routine tasks. Routine and single tasks can as well be performed by the subordinates while the non-routine and  very important tasks tasks must be performed performed by himself.

Step 2. Granting of authority  When the subordinates subordinates are assigned assigned certain tasks or responsibilities, responsibilities, it goes without saying that they need authority also to perform the tasks. Authority is required by them to make use of the resources of the organisation for executing the tasks. The superior, therefore, parts with his authority to enable the subordinate to perform the delegated tasks. Responsibility Responsibility and authority both go together. One of the important important principles of organising - parity of authority and responsibility responsibility - emphasises emph asises the need for a proper  balance between between the two. Step 3. Creation of accountability  Delegation does not end with just entrusting of duties du ties and the granting of authority. The superior has to create an obligation on the part of the subordinate subordinate to perform. In other  words, the subordinate subordinate is accountable accountable to his superior superior for the tasks delegated. delegated. Thus,  while authority flows downwards, responsibility responsibility flows upwards. Normally, accountability is created by asking the subordinate to submit performance reports/status reports/status reports from time to time. BARRIERS TO EFFECTIVE DELEGATION Though delegation is a powerf p owerful ul device whereby managers reduce reduce their workload, unless adequate care is exercised, the result may be give anxiety for both superiors and subordinates. Delegation requires effective communication. communication. The subordinates while accepting delegation must understand exactly what the superior wants. Delegation also involves motivation, motivation, influence and leadership. To make delegation del egation effective, the spirit and  willingness of both the the parties are crucial. crucial. Following are some some of the reasons why delegation often fails in organisations, for which both superiors and subordinates are responsible: a. Superior's Resistance to Delegation i. The "I can do it better myself fallacy"  - Some managers always suffer from a feeling that they only can do the job the best. Consequently two things happen. First, spending time on a task a subordinate subordinate could perform would mean that the manager may not be able to perform other important duties like policy formulation and supervision. Second, unless the manager allows subordinates to attempt new tasks, they will be unable to develop their skills. Thus by insisting on doing things themselves, managers often fail to meet their responsibility responsibility for training and growing subordinates for promotion to higher levels. ii. Lack of ability ab ility to direct - Some managers become so involved in day-to-day operations that they neglect the broader picture. Unable to understand the long term perspective of the work flow, they do not fully realise the importance of distributing

 work among subordinates. subordinates. Some Some managers deliberately deliberately do this because of lack of confidence in their supervisory abilities. iii. Lack of confidence in subordinates subordinates  - Lack of trust and confidence on subordinate's abilities abilities and skills makes the superiors reluctant to delegate work to them.  As a result, subordinates subordinates lose initiative and frequently frequently seek the guidance guidance of the bosses to know whether they are doing the things correctly . iv. Aversion to risk - Since the superior cannot absolve himself of the final performance of the task, he may fear that delegating the job will cause problems. Further, those superiors who see a threat in the subordinates always try to avoid delegation. This is mostly due to the mindset where the superior fears that he may be outsmarted by the subordinate, and eventually the latter may become a potential threat to his position.  v. Absence of selective controls controls - When certain duties are delegated to subordinates, the superior has to ensure proper controls in the form of feedback about performance. It gives the superior the security of knowing the problem before much damage takes place. If controls are not adequate and effective, manager has good reason to avoid authorit au thority y delegation.  b. Subordinate's Subordinate's Resistance Resistance to Delegation It should not n ot be construed from the above discussion that superiors are only responsible for poor or ineffective delegation. The subordinates role in the whole exercise cannot be lost sight of. Their attitude and skills play a significant role. Sometimes, subordinates subordinates may avoid responsibility and block the delegation delegation process for the following reasons: i. The subordinate finds it easier to ask a sk the boss what to do, rather than taking the initiative himself. ii. The subordinate fears criticism for his mistakes. Since greater responsibilities increase the chances of making errors, the subordinate for the sake of security tries to avoid additional responsibilities. responsibilities. iii. The subordinate lacks the information and resources needed to do the job successfully. successfully. Some managers with a view to letting down their subordinates may deliberately make the delegation unclear. As a result the subordinate lands himself in confusion as to the exact nature of the duties du ties and the authority that he can exercise. The motive of the superior in such cases may be to make the subordinate fail in the execution. iv. The subordinate believes he has more work than he can do. For fear of overburdening himself he may not show any interest to accept new responsibilities. responsibilities.  v. The subordinate lacks lacks self-confidence. self-confidence. Added to that, the fear that that he will get into trouble in the event of failure puts him in a still worse state s tate of mind.

 vi. The subordinate is not offered any incentives incentives or benefits benefits in terms of pay rise, rise, importance, importance, and status for assuming addition a dditional al responsibilities. responsibilities.

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OVERCOMING THE BARRIERS Several barriers to delegation discussed above are deeply rooted in human behaviour. Insecurity, aversion to risk, lack of self-confidence, inability inability to trust another to perform a task are all different types of manifestations manifestations of human behaviour. Among the various  barriers, psychological psychological barriers are are the most difficult difficult ones to overcome. To overcome overcome many of these barriers, both superiors and subordinates subordinates must take a hard look at themselves, recognise recognise their own fears and try to come out of the inhibitions. inhibitions. To start with, superiors have to create effective control systems to feel secure about delegating a high degree of o f authority. They have to also realise their inadequacies and take initiative to improve their leadership skills. They can also help the subordinates overcome their insecurity feeling by creating creating an environment of mutual mutua l trust and confidence. Perhaps the most important means to effective delegation are clear communication, communication, following the parity pa rity principle and positive incentives.

i. Communication: Communication:  When a subordinate subordinate does not perform perform the tasks as expected expected by management, management, the problem can be faulty communication. In the hurry to get the things done, managers may skip through what they exactly e xactly expect from the subordinate. The subordinate su bordinate may also hesitate to ask questions for looking stupid. At times, subordinate too, may be in a hurry to get on with the job. Consequently, both parties may think they understand what  was assigned and expected. Later, often often too late, the the work is not done right and and both are disappointed. Thus, effective communication to subordinates of their responsibilities, tasks, and authority reduces the chances of misunderstandings misunderstandings between the two and thus paves the way for fruitful accomplis ac complishment hment of the tasks. ii. Parity Principle: For delegation to be effective, it is necessary for authority and responsibility responsibility to coincide; that is, management must assign sufficient authority to the subordinate subordinate to be able a ble to accomplish the tasks delegated to him, an d for which he has assumed responsibility. responsibility. For example, a marketing manager who got the task of increasing sales delegated to him can accomplish the task only when he is given authority au thority to conduct an advertising campaign campaign and provide motivational incentives to sales people. Absence of such an authority to use the organisational resources lands him in frustration. Unfortunately, Unfortunately, the parity principle is often violated in practice. Imagine yourself being, for a while, in the s ituation of having responsibility responsibility for the tasks without without sufficient authority. In such a case you should let the superior know as soon as possible, the actual situation and get the situation corrected. iii. Incentives for additional responsibility:  Additional responsibility responsibility usually means additional additional work and more risk for the person assuming it. The average person in any system expects to be rewarded for the additional responsibilities responsibilities in some s ome way. But unfortunat u nfortunately, ely, many organisations fail to offer o ffer positive rewards. Current research strongly indicates that employees will not be fully motivated if they feel they are giving the organisation more than what they are getting from it. The rewards may be in many forms. Additional pay, promotion opportunity, a better job title, praise, added status, more pleasant working conditions, conditions, etc. proved to be very effective. Having understood the concept of delegation of authority, the Dos and Don'ts, it is appropriate to take a look at the different degrees of delegation. Though delegation  broadly involves assignment assignment of duties and the granting of necessary necessary authority to subordinates, the actual practices vary. Harvey Sherman categorised Sherman categorised the following six typical degrees or levels of delegation: delegation : Degree/Level 1... 1... Look into this problem; give me all facts and I will decide what to do.

Degree/Level 2... 2... Look into this problem; let me know alternative a lternative actions available  with pros and cons cons and recommend recommend one for my approval. approval. Degree/Level 3... 3... Look into this problem; let me know what you intend to do; delay action until I give approval. Degree/Level 4... 4... Look into this problem; let me know what you intend to do; do it unless I tell you not to. Degree/Level 5... 5... Take action; let me know what you did. Degree/Level 6... 6... Take action; no further contact with me is needed. DECENTRALISATION DECENTRALISATION OF AUTHORITY  The term 'decentralisation' should not be confused with that of delegation. Although the two are closely related, rela ted, decentralisation decentralisation is much wider in scope reflecting management's philosophy regarding which decisions to be taken at the top as well as down the line in the organisation. While in delegation, d elegation, authority is transferred on one-to-one basis from the superior to the subordinate, subordinate, decentrali de centralisation sation of authority is broader in scope and involves the transfer of authority in the organisational context from top to the lower rungs of management in the hierarchy. Thus, the greater the amount of authority delegated throughout the organisation, the more decentralised the organisation organisation is. It must also be understood that both absolute centralisation and absolute decentralisation decentralisation are undesirable, for, the former refers to an autocrati au tocraticc structure while the latter results in a chaotic situation. For this reason, decentralisation decentralisation must be viewed as a relative concept, not as an absolute one. Ernest Dale, Dale , a well-known management  writer, has described described the following conditions conditions where decentralisation decentralisation is greater: greater: - the greater the number of decisions made lower down the management hierarchy. - the more important the decisions made lower down the management hierarchy. hierarchy. For example, the greater the amount of capital expenditure that can be approved by the plant manager without consulting anyone else, the greater the degree of decentralisation decentralisation in this field. - the more functions affected by decisions made at lower levels. le vels. Thus, companies which which permit only operational decisions to be made at branch/plant levels are less decentralised than those which permit financial and personnel decisions at  branch/plant  branch/plant level. - the less checking required on the decision. d ecision. Decentralisation Decentralisation is greatest when no check at all must be made; lesser when superiors have to be informed decision after it has been made, still lesser if superiors have to be consulted before the decision is made. The fewer people to be consulted, and the lower they are on the management management hierarchy, the greater the degree of decentralisation. decentralisation.

 Advantages of Decentralisation Decentralisation The advantages of decentralisation are similar to the advantages of delegation. Unburdening of top managers, improved decision making because decisions are made closer to the scene of action, better training, better morale and better initiative at lower levels, and more flexibility and faster decision decision making are some of the advantages of decentralisation. decentralisation. These advanta ad vantages ges are widely acclaimed, so much so that decentralisation decentralisation is often regarded as 'good' 'goo d' and centralisation as 'bad'. But total decentralisation, decentralisation, as mentioned earlier, with no coordination from the top  would be undesirable. undesirable. That is why, the question before before manager is not whether whether an organisation should be decentralised, decentralised, but to what extent it should be decentralised. On the whole, the appropri a ppropriate ate amount of decentralisation for an organisation will vary  with time and circumstances. circumstances. It will will also vary for the different units of the organisation. organisation. For example, production and sales departments, departments, in general, have gained a high degree of decentralisation decentralisation in many organisations, whereas financial departments have tended to remain relatively centralised. centralised. FACTORS INFLUENCING DECENTRALISATION i. The Cost and Impact of the Decisions: Managers may be skeptical about decentralisation decentralisation of decision making authority where the commitment involved in the decisions is very high in terms of impact on the performance performance of their own o wn units units or the organisation as a whole. As a rule of thumb, the greater the cost involved, the more likely it is that the decision will be made at the upper levels. We often find situations in organisations where managers at a particular level seek the approval of superiors where the expenditure involved exceeds a certain limit. ii. Company Size and Rate of Growth: It is very difficult to manage a large organisation efficiently with decision-making authority concentrated in one or few at the top. Further, as an organisation grows in size and complexity, the need for decentralisation decentralisation is obviously felt. Top management cannot continue continue to hold a tight grip over the several aspects of the growing organisation. This is the principal reason why organisations often engage in reorganising their units and operations as they grew in size. The necessary autonomy is given to the units or departments so that top management can concentrate concentrate itself with more important tasks such as strategic planning, policy formulation and controlling the overall operations of the firm. iii. Organisation's Environment: Environment in general influences the strategy strategy to  be pursued to gain or retain competitiveness. competitiveness. The type of competition competition in the market, market, technological developments, socio-cultural socio-cultural and political po litical factors play a dominant role in the company's strategy. Strategy, in turn, influences the type of structure that can cope  with the environmental environmental pressures. pressures. In a fast changing environment environment as of today, one one can

easily find companies choosing decentralised structures that facilitate quick response to the environment. environment. iv. Philosophy Philosophy of Top Management: Management: Some firms are highly centralised, cent ralised, whereas others are highly decentralised because of the character and philosophy of their top management. The leadership style, the attitudes, values and beliefs of the top management team have a bearing on the degree of decentralisation. For instance, if Tata group companies have registered a phenomenal growth over the years, it is partly  because of the operational operational freedom and autonomy autonomy the various units units in the group enjoy.  v. Philosophy Philosophy of Subordinate Subordinate Manager: The philosophy of subordinate subordinate managers is another important factor that influences the decentralisati d ecentralisation on because they can both encourage or discoura d iscourage ge decentrali de centralization. zation. If subordinates want decentralisation, decentralisation, top management cannot hold everything everything in their hands for too long a period. The desire by subordinates for independence and the willingness to assume a ssume increased responsibilities responsibilities may make them think of decentralisation. As against this, shortage of lower level managers who are willing to assume responsibility may encourage top management management to maintain a centralised structure. structure. Now-a-days, in most large-scale organisations, the trend is towards decentralisation. decentralisation. This is in line with greater employee empowerment. empowerment. Pushing authority down the line to lower levels in an organisation organisation results in an environment e nvironment of freedom and experimentation. experimentation. Employee empowerment helps in foisting an entrepreneurial entrepreneurial spirit in the organisation, by encouraging employees at lower levels to accept responsibility, to unleash their full potential and most important, to think and innovate. The benefits of decentralisation decentralisation are clear. However, Ho wever, the extent of decentralisation depends on the unique requirements of an organisation. It normally varies from organisation to organisation. SUMMARY   Authority is the right right to command. Classical Classical theory lays emphasis on formal formal authority, that is, the authority that an individual in the organisation enjoys by virtue of his or her position. The other viewpoint known as 'acceptance 'acceptance theory' suggests that an individual exercises the authority to the extent it is accepted by his subordinates. subordinates.  A manager must have have both authority and power. While authority authority is positional positional in nature, power, the ability to influence others is earned. There are five sources of power:- reward, coercive, legitimate, expert and referent. Delegation of authority facilitates the organisation organisation to grow. g row. It helps an organisation use its resources efficiently, frees managers for important tasks, improves decision-making, and encourages initiative. Delegation is closely related to decentralisation in the sense that the greater the amount of delegation, the more decentralised the organisation. The appropriate amount of decentralisation for a particular organisation will depend on factors like costliness and the associated a ssociated impact of the decisions, company size and growth, philosophy of top management, management, changes in the environment and the attitude

and philosophy of subordinat su bordinates. es. The current trend, of course, is towards decentralisation. REVIEW QUESTIONS 1. What is meant by the terms 'authority' 'authority' and 'power'? Distinguish between the two.  Where does the authority authority come from? 2. Explain the process of delegation of au thority in an organisation. organisation. Discuss the factors that encourage it and those that discourage it. 3. What are the five types of power? Identify and describe each with suitable examples. 4. How are delegation and decentrali d ecentralisation sation related? Are they both bo th one and the same? 5. Discuss the important factors that influence the degree of decentr d ecentralisation alisation in an organisation. 6. Considering the changes that are taking place in the Indian economic environment in the post-liberalisation era, do you believe there will be a trend towards centralisation centralisation or decentralisation decentralisation over the next few years? Give reasons. CASE: THE FAIR DEAL LIMITED Fair Deal Limited is a medium-sized company with a turnover of Rs.50 Crores and with 500 workers. You have been in the office of its Factory Manager, Mr. Kumar, for nearly 45 minutes. During this short period you have found that your conversation with him has been interrupted several times. First, it was the Office Manager who rang him to get his approval for samples of office stationery. Mr. Kumar sends for the samples. Then comes the ring from a supplier who informs Mr. Kumar that a particular part of the machinery, machinery, which is otherwise not available in i n the market, can be had from him. Mr. Kumar calls up the storekeeper and instructs him to purchase this part immediately from the supplier and to cancel the order, if any, the purchase officer might have placed  with any other supplier. supplier. Then there is a call from from a customer requesting requesting Mr. Kumar Kumar to allow a higher percentage of discount than that promised by the company's sales manager. Mr. Kumar not only turns down the request but also al so expresses his surprise at the high percentage already allowed by the sales manager. Finally, Finally, a foreman foreman enters and complains that a certain part of one machine is broken and it not being available in the stock, the production may suffer. Mr. Kumar asks the foreman to tell the purchase manager to order the part p art immediately. Questions: a) From what you have understood in this lesson, how do you describe the situation in the case? What is the exact problem?

 b) Is Mr. Kumar performing performing the job of a manager manager effectively? Give reasons reasons to your answer. c) What are your suggestions to improve Mr. Kumar's style of managing? FURTHER READINGS Chester A. Barnard, 1938. The Functions of the Executive, Harvard University Press, Cambridge. Claude S. George, Jr. 1968. The History of Management Thought, Prentice-hall, Prentice-hall, England Cliffs, N.J. Harold Koontz and Cyril O'Donnel, 1976, 1 976, Management: A Systems and Contingency  Analysis of Managerial Managerial Functions, McGraw-Hill, McGraw-Hill, New York. John R.P. French and Bertram Raven, 1959. The Bases of Social Power, in Dorwin Cartwright (ed). Studies in Social Power, Institute for Social Research, University of Michigan. Harey Sherman. 1966. It All Depends: A Pragmatic Approach to Organisations, quoted in A.F.Stoner and Freeman, Management, 1989, prentice-hall India, New Delhi.  Arthur G. Bedian, 1993. Management, The Dryden Press Press New York. Richard M. Hodgets, 1986. 1986. Management: Theory, Process Process and Practice, Academic Academic press, New York.

- End of Chapter LESSON- 1O LINE AND STAFF RELATIONSHIPS

Objectives  After studying studying this lesson, you should be able able to:    

Understand the concepts of line and staff s taff authority; Describe the major reasons for the conflict between line and staff managers; Suggest ways and means to achieve proper harmony between the two; and Familiarise with various aspects related to the committee form of organisation.

Outline Introduction Line and Staff Concepts Line Authority  Staff Authority  Line and Staff Conflict  Achieving harmony harmony between Line Line and Staff  Committee Committee Form Fo rm of organisation    

Types of committees Reasons for the use of committees Disadvantages of committees committees Successful operation of committees

Summary  Review questions Further Readings INTRODUCTION Effective functioning of the formal organisation depends on the authority responsibility responsibility relationships among people working in groups to achieve the objectives. Different types of relationships are possible throughout the organisation structure. structure. We, in this lesson, will understand un derstand the line and staff authority relationships. Perhaps no other area of management has created as much confusion as the line and staff authority. Though the concepts have been present in management literature for many years, they still remain to be clouded c louded with conflict and confusion. The viewpoints of different authors widely differ in regard to the line and staff relationships. Let us, therefore, first understand what the line and staff authority mean. LINE AND STAFF CONCEPTS There are two approaches, to understand line and staff concepts. One approach lays emphasis on the basic functions of the business. Accordingly, functions of an enterprise enterprise are classified into line and staff function. To quote Louis Alien: "Line functions are those  which have direct responsibili responsibility ty for accomplishing the objectives objectives of the enterprise enterprise and

staff refers to those elements of the organisation that help the line to work most effectively in accomplishing the primary objectives of the enterprise." Thus, organisational objectives are the basic determinant determinant of line and staff functions and  with the change in the the objectives, line and staff staff functions may may change. A line function in in one organisation may be staff s taff function in another. For example, personnel function in an employment agency is line but it is a staff function in a manufacturing manufacturing organisation. In a manufacturing organisation organisation whose basic objective is to produce pr oduce and sell goods, production and marketing are line functions and others such as finance, personnel, legal, etc. are staff functions. Further, Further, within a department, there may be line and staff functions, for example, in marketing department, selling may be line function whereas market research is a staff function. The other approach lays emphasis on the authority and views that line and staff are two kinds of authority. According to this approach, line authority is defined as a d irect authority which a superior exercises over his subordinates subordinates to carry out orders and instructions. instructions. The exercise exe rcise of this authority is always downwards, that is, from a superior to a subordinate. Staff authority involves giving advice to line managers to carry on the operation. The flow of this authority may be in any a ny direction depending on the need of such an advice. Koontz and others have defined line and staff authority as follows. "Line authority becomes apparent from the scalar principle as being that relationship in  which superior superior exercises direct supervision supervision over a subordinate - an authority authority relationship in direct line or steps. The nature of staff relationship is advisory. The function of people in a pure staff capacity staff capacity is to investigate, research, and give advice to line managers to whom they report." It is common that in actual practice, some variations may exist. The variations are more pronounced in the case of staff authority. As presented in exhibit - 1, variations in the staff authority may be seen in a continuum. EXHIBIT – 1

The distinction between line and staff is important because staff must be provided if the growing organisation is to accomplish its goals. Line and staff relationships are established to guide people in the way they work together. But, for practical purposes it should never be looked upon as an inflexible barrier. The differentiation between line and staff is necessary for the following reasons: LINE AUTHORITY  Line authority exists between superior and his subordinate. subordinate. In the organising process, authority is delegated to the individuals to perform the activities. activities. These individuals, in turn, assign some of the activities to persons working below them in the hierarchy hierarchy and delegate them authority. This process goes on, creating superior subordinate

relationships in the organisation. The direct relationship between a superior and his subordinate is created through the enforcement of line relationship. Such a relationship  works as follows:  As a Chain Chain of Command: Command:  A command relationship relationship exists between between each superior and subordinate. Line authority is the heart of this relationship because it entities entities a superior to direct the work of his subordinate.  As a Channel Channel of Communication: Communication: Line authority can be treated as a channel of communication communication between members of the organisation. Communication Communication up and down in the organisation, flows through the line relationship. Barnard has emphasised emphasised the role of line relationship as a channel of communication by suggesting that line communication should be e stablished and every member of the organisation should be tied into the system of communication by having someone to report to and others to report him. him. Such a line line can be maintained maintained easily through the chain of command.  As a Carrier Carrier of Responsibility: Responsibility: The line relationship re lationship carries ultimate ultimate responsibility for the work assigned. Though the process of assigning activities goes on till the level where actual work is performed by operatives, each individual in the line is accountable for the proper performance of the activities assigned to him. STAFF AUTHORITY  The relationship between a staff manager and the line manager with whom he works depends in part on the staff duties. A man who only gathers facts or only checks on performance will have relationship with line manager that are different from those of a man who has concurring concurring authority. Such variations between line and staff relationships as discussed earlier, run along a continuum with only advice at one extreme point and functional authority at other extreme point. In I n between, two more situations represent compulsory staff consultation and concurring authority. (See exhibit -1) The different shades of staff authority are discussed below:  Advisory Staff Staff Authority  Authority  This is the type of staff relationship popularly associated associated with the term staff authority.  An advisory staff staff manager provides provides advice, assistance, assistance, and information information and it depends on the line manager whether these are put into action or not. Thus, a staff man relies largely on persuasion to get his ideas put into effect. In the absenc a bsencee of power of command, he must build confidence in his opinions. Therefore a staff manager has to depend on his persuasive skills.

Compulsory Compulsory Staff Consultation Some organisations prescribe the practice of compulsory staff consultation. Under this arrangement, arrangement, a staff man must be consulted before action is taken. However, line manager is free to take action of his choice after consulting consulting staff. Compulsory consultation supplements a more general requirement for successful staff work, the requirement that a staff should have access to any information that relates to his field of interest. Concurring Authority   At times, a staff staff man may be granted authority authority so that no action action can be taken taken until he agrees to it. For example, quality control inspector must pass on raw materials or semi finished products before they move to the next stage of production, or agreement with with employees over the matter of wages, should be entered only after the personnel personnel manager has agreed to it. The idea of concurring authority is that the staff viewpoint is incorporated into operating decisions. It is a better arrangement arrangement because of which line manager cannot take needless action. These considerations suggest that concurring authority is granted only when the viewpoint represented by a staff man is particularly important when possible possible delay in action will not be serious. For example, it may be prescribed that a finance manager cannot withhold capital expenditure simply because of his disapproval of capital expenditure plan, but he can withhold it because funds are not available or funds cannot be arranged. In government g overnment organisations, organisations, normally wideranging concurring authority is granted to staff men. LINE AND STAFF CONFLICT Line and staff relationship implies that both support each other harmoniously to achieve organisational objectives. objectives. However, there are frequent instances of conflict between line and staff in the organisations, resulting in friction and loss of time. The various factors leading to line-staff conflict can be grouped into i nto three categories: apprehensions apprehensions of line managers, apprehensions apprehensions of staff, staff , and nature of line-staff relationship. re lationship. Let us examine how these apprehensions apprehensions generate conflict.  Apprehensions  Apprehensions of Line Line Managers Line managers, who are responsible for the final results leading to the achievement of organisational objectives, objectives, feel that staff people work against them in the following f ollowing ways. i. Lack of Responsibility: Responsibility: Line  Line managers often allege that staff people do not carry any responsibility in the organisation, but enjoy e njoy authority. Lack of responsibility makes them complacent and they do not care for the ultimate objectives of the organisation. On top of all this, line managers contend that they will be criticised if things go wrong, while the staff will get the rewards if things go well. This Th is disparity between authority authority and responsibility responsibility and also between contributions and rewards is a source of jealousy  between line and staff. staff.

ii. Encroachment of Line Authority: Line managers perceive that staff people encroach upon their authority by advising on matters which fall within their  jurisdiction. Whenever Whenever there is any such such encroachment, the result is resentment, resentment, hostility, and open or hidden reluctance to accept advice and recommendation. iii. Dilution of Authority:  There is also a feeling that staff people dilute line authority. Line managers fear that their responsibility responsibility will be reduced re duced because of the addition of staff thereby making their job less challenging. Such a feeling of insecurity makes line managers suspicious of staff s taff managers. iv. Theoretical Bias: Often Bias: Often the advice a dvice and recommendation of staff people suffer from theoretical bias because of two reasons. First, they tend to think within the context of their own specialty, and thus lack practical implication. Second, as staff people are away from the actual operational scene, they are not able to fu lly appreciate the actual actual dimensions of the problems and their recommendations recommendations may not be practicable.  APPREHENSIONS  APPREHENSIONS OF STAFF STAFF MANAGERS MANAGERS Similar to the contention of line managers, staff people have their own arguments and try to find fault with line managers. The focus of the staff arguments centres around the following : i. Lack of Proper Use of Staff: Staff Staff: Staff people feel that line managers do not make proper use of their services and decisions are made without inputs from staff. They are informed after the action has been taken. By virtue of h is position, position, a line manager can accept, amend, or reject the advice of staff irrespective of its quality arid practicability. Further, when something goes wrong in the area of his operation, operation, staff person from concerned concerned field is made the scapegoat. ii. Resistance to New ideas: Line managers often resist new ideas because new ideas mean that there is something wrong with their present way of working. Thus new ideas are treated as fault-finding device in their operation. As against this, staff people are more innovative in the areas of their specialty. Because line people are reluctant to new ideas, many of the efforts of staff s taff people go waste. iii. Lack of Proper Authority: Staff Authority: Staff people feel that they contribute to the realisation of organisational objectives without really enjoying any authority. Line managers clearly hold most of the cards and enjoy enormous authority. authority. It is not necessary to consult staff  before arriving at a decision. decision. Even when staff is consulted, consulted, it is not necessary necessary that staff staff advice is put into practice. As a result staff specialists specialists feel that if they have the best solution to a problem, they should have authority au thority over line managers to force the solution. Nature of Line-Staff Relationship Relationship In addition to the factors discussed so far, following inherent characteristics of line and staff relationship also contribute to conflicts and tensions.

i. Divergent Backgrounds: Line Backgrounds: Line and staff-people, often have different backgrounds backgrounds and individual characteristics. Staff people in contrast to line, are generally younger,  better educated, educated, more poised in social social interaction, more articulate and individualistic. individualistic.  As a result, they often often look down on the less educated educated line people who must have have worked their way up through the organisation. These differences create an atmosphere of mistrust and hatred between them. Thus, both of them work in an environment of hostility. ii. Lack of Demarcation Between Line and Staff: Though Staff:  Though in theory, line and staff authority is clear, often in practice, practice, demarcation between line and staff is rarely clear. Many jobs in line and staff defy def y description description and relationshi rela tionship p between them is not clarified. In such cases there is a possibility for overlap and gap in authority and responsibility responsibility which can affect personal relationships. iii. Lack of proper Understanding of Authority: Assuming Authority:  Assuming that line and staff authority is made clear in the organisation, in practice, people may fail to u nderstand the exact nature. This misunderstanding may lead to encroachment encroachment of authority either  by line or by staff people. people.  ACHIEVING HARMONY BETWEEN BETWEEN LINE AND STAFF The following guidelines, if understood thoroughly may solve many problems. 1. Line people have the ultimate responsibility for the successful operation of the organisation. Therefore, they should have authority for making o perating decisions. decisions. 2. Staff people contribute to achieve organisational objectives by making recommendations recommendations and providing advice in their respective fields. In some situation, they may be granted functional authority through which wh ich they can ensure that their recommendations recommendations are put in operation. 3. Since in most cases, solicitation of advice and acceptance of that is u sually at the option of the line people, it i t becomes imperative imperative for the staff to offer advice and service. 4. Barring few exceptional situations where time factor is of utmost u tmost importance importance for decision making, line should be impressed upon the need for compulsory consultation. 5. Staff people should sell their ideas to line people. They should shou ld rely more on the authority of knowledge and competence rather than authority of position.

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How to make better use of Staff  Staff people are needed in the organisation because line people may not able to solve the problems which require special knowledge and expertise. The effectiveness of line people depends to a large extent on how they make use of staff. For making proper use of staff, following points p oints are important. 1. There should be encouragement encouragement and education to line people as to how to make maximum use of staff effectively. Line people cannot make use of staff unless they know  what a specialist can can do for them. At the same same time, staff people also have have a responsibility responsibility to let line people know how they can contribute for the better performance of line activities. 2. In order to make proper use of staff, they should not be kept busy in unimportant  work because it does does not serve any meaningful meaningful purpose. purpose. Instead, they should should be assigned critical work in the area of their specialty. 3. Staff people should be involved at the basic stage of planning of an activity rather than  when the problem becomes becomes critical. critical. When they are involved involved at the level of planning, many of the problems may not arise. 4. If line people have taken some actions directly affecting staff activities without without consulting staff people, they should be informed immediately about such actions. The information will help in removing misunderstanding, misunderstanding, if any, created in the minds of staff people. COMMITTEE FORM OF ORGANISATION ORGANISATION One of the most misunderstood concepts in management is the committee form of organisation called variously as board, commission; commission; ask force, team, etc. The essential nature of all these bodies bod ies is the same. The basic distinction that sets apart the committee from other organisation devices is the group action. In spite of the severe criticism against the usefulness of committees committees in organisations, they are very extensively used in the modern organisations at various levels. Koontz and O'Donnel define a committee as "a group of persons to whom, as a group, some matter is committed". Though it implies group action, there are many variations in the use of committees, particularly, in respect of the authority assigned to them. TYPES OF COMMITTEES Committees can be broadly classified into advisory committees and executive committees. committees. When committees committees are entrusted with staff authority, au thority, they are known as

advisory committees. committees. That is, they play only an advisory role and cannot enforce implementation of their advice or recommendation. Works committees, finance committees, committees, new product development committees committees etc. e tc. fall in this category. On the other hand, whenever, committees committees are vested with line authority, au thority, they are called executive committees. Unlike the advisory committees, executive committees not only take decisions, but also have the authority to implement them. The board of directors is a classic example of executive committee. Committees Committees may also be permanent or they may be temporary (adhoc). They may also  be formal or informal. informal. A formal committee committee is one which finds a place place in the organization chart with specific authority and responsibility. Formal committees, in general, are permanent in nature whereas informal committees may be permanent or temporary. They may also be classified into adhoc committees committees and standing committees. committees. The former is constituted for a specific s pecific purpose and then disbanded after it has performed the assigned task. The latter is more permanent and exists as long as there is need for it in the organisation. organisation. REASONS FOR THE USE OF COMMITTEES The use of committees in modern organisations, both business as well as non-business is so widely prevalent that it is hard to miss them in any organisation. The board of directors which presides the destiny of the organisation by itself is a committee. committee. The following are some major factors responsible responsible for the popularity of the committee form of organisation. i. Group Participation: Committee Participation:  Committee facilitates the involvement invo lvement and participation of more than one. The concept, in a way, is so close to the adage that "two heads are better than one". The fact that a group of people with varied experiences and intelligence can throw a better light on the issues that are deliberated in the meetings cannot be disputed. Many of the inadequacies or limitations of an individual are compensated by collective wisdom and thinking. Wide ranging discussions can take place. Committee meetings undoubtedly become the forum for cross-examination and fertilisation of ideas. The exchange of information, information, viewpoints, beliefs and experience, ex perience, help in examining the issues involved more thoroughly which may not be possible in an individual judgment. ii. Diffusion of Authority: Fear Authority:  Fear of concentration concentration of authority in one individual is another contributing contributing factor for the constitution of committees. No single member of the committee committee can have absolute authority. Whatever the decision of the committee, it has to be approved by at a t least majority members. However, consensus consensus of all the members may also be required for certain issues. Thus, the possibility of au thority thority being misused and the exercise of discretion power in a wrong way to a larger extent, be avoided by entrusting the matters to be decided to a group. For instance, the existence of board of directors at the top itself amply indicates how shareholders entrust the overall responsibility responsibility of managing the organisation organisation to a larger body instead to a single individual.

iii.Consolidation of Authority:  Usually in any organisation manager at a particular level, say a department head, or branch/section branch/section manager has only a portion of the authority. In some instances, the authority that a manager has may not be sufficient to take a decision in a particular way. In the case of a committee, the authority of all the members will be pooled up. This Th is is what is meant by consolidation of authority. The authority of different individuals which is otherwise splintered is consolidated in the committee committee form. The collective c ollective authority thus pooled up enables the committee to decide on matters which are beyond the scope of individual authority. authority. iv. Representation of Interest I nterested ed Groups: The Groups:  The activiti a ctivities es of modern organisations are interrelated in such a way that many decisions effect a more than one department or section. In such a case, for better compliance of the decision, it is des irable to appoint a committee committee with representation representation to all those who are affected by a particular decision. Such a measure not only offers an opportunity for participation but also satisfies the ego of the individual members. members. The members naturally feel that they are also a party to the decision and therefore they tend to be loyal to the decision.  v. Co-ordination Co-ordination becomes becomes Easy : Coordination of the various plans, programmes and activities of various departments is an essential task  management. Committees are  very useful in that they they facilitate inter-departmental inter-departmental coordination. coordination. A committee committee provides the members first hand information about the overall plans. It facilitates facilitates contribution of suggestions for improvement, if any. The interaction among the members and the way how the information is shared by them, contribute for better co-ordination of the plans and thereby inter-departmental inter-departmental activities.  vi. A Tool of Management Development: Development: A  A committee can also be used used as a tool of management development. development. While experience of a manager on his job enables him to sharpen the skills in his particular area of specialisation, committees may widen his perspective and knowledge about the other related tasks. His participation in the committee committee meetings and the exposure thus gained enable e nable him to understand the larger picture. Valuable learning takes place where individuals can take an integrated view to solve the problems.  vii. Avoidance Avoidance of Action: It Action: It is interesting to note that more often committees committees are used to avoid action on a problem. This tendency, of course is more pronounced in  bureaucracies.  bureaucracies. At times, a manager manager may be unwilling unwilling to take action, but he cannot afford to avoid action also. The best option, open to him in such a situation, s ituation, is, to refer the matter to a committee. It is this particular phenomenon which often gives raise to so many jokes on committ c ommittees ees in organisations. organisations. Thus, a committee committee can be used to smoothen the tempers and passions of people. It is also used as a means to overcome resistance, pressure, or opposition opposition from parties involved in an issue. DISADVANTAGES DISADVANTAGES OP COMMITTEES  As mentioned mentioned earlier, many jokes about bad management management revolve around committees. committees. The committee's notoriety for ineffectiveness often is traceable to misuse. Committees Committees

are subject to mismanagement mismanagement and misuse. Here are a few definitions of a committee, committee, pointing the darker side of the use of committees. committees. "a committee is made up of the u nfit, selected selected by the unwilling, to do the unnecessary" "a place where the loneliness lo neliness of thought is replaced by the togetherness of nothingness". Though these definitions seem to be excessively hostile to the committee committee form of organisation, if proper care is not taken, there is little wonder that they may prove to be correct. The following are the problems, in general, with committees. i. High cost in Time and Money: The Money:  The constitution of a committee is an expensive affair. The time and money involved are quite qu ite considerable. considerable. More so, if the members are drawn from far off places. Lot of money has to be paid towards various allowances to the members. That apart executive time has got opportunity cost. After a series of o f meetings, if no decision is taken on the outcome is insignificant insignificant the expenditure of resources and the executive time in such as wasteful exercise is meaningless. It will be still ridiculous if a committee is assigned a problem that could be solved by a simple individual. Thus, one should not loose sight of the costs involved in appointing committee. committee. ii. Slow decisions: The decisions:  The very nature of functioning of the committee is not conducive for quick decisions. If consensus is insisted, the situation becomes still worse. All the members have to be informed of the agenda in advance. Modifications Modifications in the agenda, if there are any suggested by members have to be again ag ain circulated. Deliberations in the meeting may also take a long lo ng time. Valuable opportunities opportunities may be lost in the mean time as committee members are engrossed in the hectic deliberations. iii. Indecision: Quite Indecision: Quite often committee committee meetings end up in no decision Meetings get adjourned for want of quorum and time for thorough discussions. Besides, many decisions may be taken on the basis of compromise. The decision thus arrived at, may be in no way better than the one which would have been taken by an individual who could c ould see the things as they are and acted a cted upon. The leveling effect in committee deliberations in which high premium is placed on conformity has gone disastrous affects. The result of the levelling effect is that the individual's thinking is brought in line with the group thinking. Consequently the decision thus reached need not be the best decision. iv. Minority Tyranny: Committees Tyranny: Committees normally tend to seek unanimous or nearunanimous decisions. Minority members who hold a different view are therefore in a strong position. More particularly, when the practice is to arrive at a decision through unanimity. The minority members members tend to take advantage ad vantage of such a situation and try to exercise tyranny over the majority. The problem becomes more complicated if members have the vet power. Similarly, majority can also put pressure on minority members to force them to arrive at the decision.

 v. Splitting Splitting of Responsibilit Responsibility: y: In  In any a ny system, people tend to work more efficiently  when their authority authority and responsibility responsibility are clearly specified. specified. Since many members are involved in the decision-making decision-making process of the committee, no individual member can be held responsible if the outcome of the decision is adverse. The major drawback is that it splits the responsibility and no member feels the responsibility for group action. SUCCESSFUL OPERATION OF COMMITTEES The available evidence on the practices in the corporate sector shows that the use of committees committees in all types of organisations is on the increase. As the emphasis on the group decision-making decision-making and participation increases, so also the use of committees in the company's affairs. Inadequate care is exercised in respect of the following factors, the  benefit outweigh the disadvantages. disadvantages. i. Authority and scope must be specified:  The terms te rms of reference to the committee and the authority of it have to be clearly defined. That whether That whether the committee committee has the authority to make decisions, or its job is just to make recommendations. recommendations. If the scope and authority of the committee are not clearly defined, quite often, members may end up in deliberating issues that are not referred to the committee at all. ii. Size of the committee: Though there is no exact number regarding regarding the size of the committee, committee, the complexity of interrelationships interrelationships naturally increases with the size of the group. If the group is too large, it may be difficult di fficult for the members to communicate communicate effectively, on the other hand, if it is too small, the purpose behind the use of committee may be lost. As a general rule, a committ co mmittee ee should be large enough to promote deliberations and to provide an opportunity for the consolidation of wisdom and expertise of many members, Research indicates that the ideal committee committee size is five,  when all the five members possess adequate adequate skills and knowledge to deal deal with the subject assigned to the committ c ommittee. ee. However, if the committee is to have all a ll interested groups participate participate in its deliberations, the number may be large. If all the interested groups are not represented, represented, the committee's work may be criticised. In such a situation where the need for representation representation of the interested parties, makes the committee too large, one option to constitute sub-committees sub-committees by breaking down the problems to be studied. iii. Selection of Members: For Members: For the committee committee to be successful, successful, the members on the committee must be good at understanding the problems and analysing them. They must also be good at a t performing well in a group. Every member must have the right righ t temperament, verbal and analytical ability and capacity for working with others. Selection of members requires judgment about the personal characteristics characteristics of members, their functional background background and level in the organisation. The basic objective is meaningful deliberations in committee meetings that result in e ffective decisions. Committees are likely to function better if members are friendly, known to each other and respect each other. Committees which include members drawn from different levels are unlikely to function effectively because they are from the lower levels and may not  very actively participate participate in discussions discussions because of the the variances in this formal formal positions

in the organisations. organisations. For example, workers representatives, representatives, and the boards of management of many organisations and the teachers representatives on the various administrative administrative bodies of universities are found to be not very effective purely because of this factor. iv. Nature of the subject matter: Careful selection of the subject matter to be entrusted to the committee is equally e qually important. Certain subjects can be handled effectively by a committee while others can be handled better by individuals. For instance, research research and development which depend on the individual creativity cannot be entrusted to a committee. On the other hand, for the establis e stablishment hment of major objectives and formulation of policies and review and coordination of work, committee committee may be preferred.  v. Effectiveness of Chairperson: Chairperson: The  The chairperson, in fact, is the leader of the committee. committee. Therefore, the effectiveness of the committee depends on the chairperson's skills and motivation. His basic functions include planning for the meetings, preparing preparing the agenda, supplying some preliminary information to the members and conducting the meetings effectively. The chairman must not act in a prejudicial way and yield to the pressure of a few members. He has to monitor monitor and coordinate coordinate the proceedings such that effective decisions are taken by the committee. He has to see that the minutes of the meetings are recorded properly, circulated to all the members. Modifications suggested and action taken on recommendations recommendations should also be communicated. SUMMARY  Line positions may be defined as those directly responsible for achieving the organisation's goals. Staff positions positions provide expert advice and service to the line. Staff authority ranges from being limited to advising on request, to compulsory consultation, to concurrent authority, to functional authority. Because of the differences in the nature of authority between the two, it is not uncommon to hear about the conflicts between the line and staff managers. Each Each look at a t the other with suspicion. As a result, infighting and always trying for one upmanship are quite natural in organisations. The concepts of line and staff authority, reasons for the conflicts and the ways and means of a chieving harmony have been discussed in this lesson. In the second half of the lesson, committee form of organisation and the major issues related to committees such as types of committees, reasons for the use of committees, disadvantages of committees and the measures for making committees committees more effective, e ffective, have been dealt with. REVIEW QUESTIONS 1. Line-staff conflict occurs occurs for many reasons. Examine Examine the following adages; "Staff should be on tap, not top", and "staff should sell, not tell". 2. Describe the difference difference between the advisory authority, concurrent concurrent authority authority and functional authority.

3. What are the important sources sources of conflict between line and staff managers? How do  you resolve the conflicts? conflicts? 4. In spite of the serious drawbacks in in the functioning of committees, committees, they cannot be dispensed with? why? give reasons. 5. What measures do you suggest to make a committee committee function more effectively? effectively? FURTHER READINGS  Arthur G. Berdan. Berdan. 1993. Management, Management, the Dryden Dryden press. New York. Harold Koontz. Cyril O'donnel and and Heinz Heinz Weihrich, Weihrich, 1984 1984 Management, Management, McGraw-Hill, McGraw-Hill, Tokyo. George R. Terry and Stephen Stephen G. Franklin. Franklin. 1988. Principles of Management, Management,  AITBS, Delhi. Cawsey, T.F. 1980 "Why Line Line Managers Don't Listen to Their Personnel Personnel Departments", Departments", Personnel, Jan-Feb v . Clark, P.A. 1952. Organisational Organisational Design: Theory and Practice, Practice, American management  Association, New York. York. Drucker, Peter. F. 1974. Management Management Tasks, Responsibilities practices, practices, Harper Harper &Row, New York.

- End Of Chapter LESSON- 1O LINE AND STAFF RELATIONSHIPS

Objectives  After studying studying this lesson, you should be able able to:    

Understand the concepts of line and staff s taff authority; Describe the major reasons for the conflict between line and staff managers; Suggest ways and means to achieve proper harmony between the two; and Familiarise with various aspects related to the committee form of organisation.

Outline

Introduction Line and Staff Concepts Line Authority  Staff Authority  Line and Staff Conflict  Achieving harmony harmony between Line Line and Staff  Committee Committee Form Fo rm of organisation    

Types of committees committees Reasons for the use of committees Disadvantages of committees Successful operation of committees

Summary  Review questions Further Readings INTRODUCTION Effective functioning of the formal organisation depends on the authority responsibility responsibility relationships among people working in groups to achieve the objectives. Different types of relationships are possible throughout the organisation structure. structure. We, in this lesson, will understand un derstand the line and staff authority relationships. Perhaps no other area of management has created as much confusion as the line and staff authority. Though the concepts have been present in management literature for many years, they still remain to be clouded c louded with conflict and confusion. The viewpoints of different authors widely differ in regard to the line and staff relationships. Let us, therefore, first understand what the line and staff authority mean. LINE AND STAFF CONCEPTS There are two approaches, to understand line and staff concepts. One approach lays emphasis on the basic functions of the business. Accordingly, functions of an enterprise enterprise are classified into line and staff function. To quote Louis Alien: "Line functions are those  which have direct responsibili responsibility ty for accomplishing the objectives objectives of the enterprise enterprise and staff refers to those elements of the organisation that help the line to work most effectively in accompli a ccomplishing shing the primary objec ob jectives tives of the enterprise."

Thus, organisational objectives are the basic determinant determinant of line and staff functions and  with the change in the the objectives, line and staff staff functions may may change. A line function in in one organisation may be staff s taff function in another. For example, personnel function in an employment agency is line but it is a staff function in a manufacturing manufacturing organisation. In a manufacturing organisation organisation whose basic objective is to produce pr oduce and sell goods, production and marketing are line functions and others such as finance, personnel, legal, etc. are staff functions. Further, Further, within a department, there may be line and staff functions, for example, in marketing department, selling may be line function whereas market research is a staff function. The other approach lays emphasis on the authority and views that line and staff are two kinds of authority. According to this approach, line authority is defined as a d irect authority which a superior exercises over his subordinates subordinates to carry out orders and instructions. instructions. The exercise exe rcise of this authority is always downwards, that is, from a superior to a subordinate. Staff authority involves giving advice to line managers to carry on the operation. The flow of this authority may be in any a ny direction depending on the need of such an advice. Koontz and others have defined line and staff authority as follows. "Line authority becomes apparent from the scalar principle as being that relationship in  which superior superior exercises direct supervision supervision over a subordinate - an authority authority relationship in direct line or steps. The nature of staff relationship is advisory. The function of people in a pure staff capacity staff capacity is to investigate, research, and give advice to line managers to whom they report." It is common that in actual practice, some variations may exist. The variations are more pronounced in the case of staff authority. As presented in exhibit - 1, variations in the staff authority may be seen in a continuum. EXHIBIT – 1

The distinction between line and staff is important because staff must be provided if the growing organisation is to accomplish its goals. Line and staff relationships are established to guide people in the way they work together. But, for practical purposes it should never be looked upon as an inflexible barrier. The differentiation between line and staff is necessary for the following reasons: LINE AUTHORITY  Line authority exists between superior and his subordinate. subordinate. In the organising process, authority is delegated to the individuals to perform the activities. activities. These individuals, in turn, assign some of the activities to persons working below them in the hierarchy hierarchy and delegate them authority. This process goes on, creating superior subordinate relationships in the organisation. The direct relationship between a superior and his subordinate is created through the enforcement of line relationship. Such a relationship  works as follows:

 As a Chain Chain of Command: Command:  A command relationship relationship exists between between each superior and subordinate. subordinate. Line authority authority is the heart of this relationship because it entities entities a superior to direct the work of his subordinate.  As a Channel Channel of Communication: Communication: Line authority can be treated as a channel of communication communication between members of the organisation. Communication Communication up and down in the organisation, flows through the line relationship. Barnard has emphasised emphasised the role of line relationship as a channel of communication by suggesting that line communication should be e stablished and every member of the organisation should be tied into the system of communication by having someone to report to and others to report him. him. Such a line line can be maintained maintained easily through the chain of command.  As a Carrier Carrier of Responsibility: Responsibility: The line relationship re lationship carries ultimate ultimate responsibility for the work assigned. Though the process of assigning activities goes on till the level where actual work is performed by operatives, each individual in the line is accountable for the proper performance of the activities assigned to him. STAFF AUTHORITY  The relationship between a staff manager and the line manager with whom he works depends in part on the staff duties. A man who only gathers facts or only checks on performance will have relationship with line manager that are different from those of a man who has concurring concurring authority. Such variations between line and staff relationships as discussed earlier, run along a continuum with only advice at one extreme point and functional authority at other extreme point. In I n between, two more situations represent compulsory staff consultation and concurring authority. (See exhibit -1) The different shades of staff authority are discussed below:  Advisory Staff Staff Authority  Authority  This is the type of staff relationship popularly associated associated with the term staff authority.  An advisory staff staff manager provides provides advice, assistance, assistance, and information information and it depends on the line manager whether these are put into action or not. Thus, a staff man relies largely on persuasion to get his ideas put into effect. In the absenc a bsencee of power of command, he must build confidence in his opinions. Therefore a staff manager has to depend on his persuasive skills. Compulsory Staff Consultation Some organisations prescribe prescribe the practice of compulsory staff consultation. Under this arrangement, a staff man must be consulted before action is taken. However, line

manager is free to take action of his choice after consulting consulting staff. Compulsory consultation supplements supplements a more general requirement for successful successful staff sta ff work, the requirement that a staff should have access to any information that relates to his field of interest. Concurring Authority   At times, a staff staff man may be granted authority authority so that no action action can be taken taken until he agrees to it. For example, quality control inspector must pass on raw materials or semi finished products before they move to the next stage of production, or agreement with with employees over the matter of wages, should be entered only after the personnel personnel manager has agreed to it. The idea of concurring authority is that the staff viewpoint is incorporated into operating decisions. It is a better arrangement arrangement because of which line manager cannot take needless action. These considerations suggest that concurring authority is granted only when the viewpoint represented by a staff man is particularly important when possible possible delay in action will not be serious. For example, it may be prescribed that a finance manager cannot withhold capital expenditure simply because of his disapproval of capital expenditure plan, but he can withhold it because funds are not available or funds cannot be arranged. In government g overnment organisations, organisations, normally wideranging concurring authority is granted to staff men. LINE AND STAFF CONFLICT Line and staff relationship implies that both support each other harmoniously to achieve organisational objectives. objectives. However, there are frequent instances of conflict between line and staff in the organisations, resulting in friction and loss of time. The various factors leading to line-staff conflict can be grouped into i nto three categories: apprehensions apprehensions of line managers, apprehensions apprehensions of staff, staff , and nature of line-staff relationship. re lationship. Let us examine how these apprehensions apprehensions generate conflict.  Apprehensions  Apprehensions of Line Line Managers Line managers, who are responsible for the final results leading to the achievement of organisational objectives, objectives, feel that staff people work against them in the following f ollowing ways. i. Lack of Responsibility: Responsibility: Line  Line managers often allege that staff people do not carry any responsibility in the organisation, but enjoy e njoy authority. Lack of responsibility makes them complacent and they do not care for the ultimate objectives of the organisation. On top of all this, line managers contend that they will be criticised if things go wrong, while the staff will get the rewards if things go well. This Th is disparity between authority authority and responsibility responsibility and also between contributions and rewards is a source of jealousy  between line and staff. staff. ii. Encroachment of Line Authority: Line managers perceive that staff people encroach upon their authority by advising on matters which fall within their  jurisdiction. Whenever Whenever there is any such such encroachment, the result is resentment, resentment, hostility, and open or hidden reluctance to accept advice and recommendation.

iii. Dilution of Authority:  There is also a feeling that staff people dilute line authority. Line managers fear that their responsibility responsibility will be reduced re duced because of the addition of staff thereby making their job less challenging. Such a feeling of insecurity makes line managers suspicious of staff s taff managers. iv. Theoretical Bias: Often Bias: Often the advice a dvice and recommendation of staff people suffer from theoretical bias because of two reasons. First, they tend to think within the context of their own specialty, and thus lack practical implication. Second, as staff people are away from the actual operational scene, they are not able to fu lly appreciate the actual actual dimensions of the problems and their recommendations recommendations may not be practicable.  APPREHENSIONS  APPREHENSIONS OF STAFF STAFF MANAGERS MANAGERS Similar to the contention of line managers, staff people have their own arguments and try to find fault with line managers. The focus of the staff arguments centres around the following : i. Lack of Proper Use of Staff: Staff Staff: Staff people feel that line managers do not make proper use of their services and decisions are made without inputs from staff. They are informed after the action has been taken. By virtue of h is position, position, a line manager can accept, amend, or reject the advice of staff irrespective of its quality arid practicability. Further, when something goes wrong in the area of his operation, operation, staff person from concerned concerned field is made the scapegoat. ii. Resistance to New ideas: Line managers often resist new ideas because new ideas mean that there is something wrong with their present way of working. Thus new ideas are treated as fault-finding device in their operation. As against this, staff people are more innovative in the areas of their specialty. Because line people are reluctant to new ideas, many of the efforts of staff s taff people go waste. iii. Lack of Proper Authority: Staff Authority: Staff people feel that they contribute to the realisation of organisational objectives without really enjoying any authority. Line managers clearly hold most of the cards and enjoy enormous authority. It is not necessary to consult staff  before arriving at a decision. decision. Even when staff is consulted, consulted, it is not necessary necessary that staff staff advice is put into practice. As a result staff specialists specialists feel that if they have the best solution to a problem, they should have authority au thority over line managers to force the solution. Nature of Line-Staff Relationship Relationship In addition to the factors discussed so far, following inherent characteristics of line and staff relationship also contribute to conflicts and tensions. i. Divergent Backgrounds: Line Backgrounds: Line and staff-people, often have different backgrounds backgrounds and individual characteristics. Staff people in contrast to line, are generally younger,  better educated, educated, more poised in social social interaction, more articulate and individualistic. individualistic.  As a result, they often often look down on the less educated educated line people who must have have worked

their way up through the organisation. These differences create an atmosphere of mistrust and hatred between them. Thus, both of them work in an environment of hostility. ii. Lack of Demarcation Between Line and Staff: Though Staff:  Though in theory, line and staff authority is clear, often in practice, practice, demarcation between line and staff is rarely clear. Many jobs in line and staff defy description description and relationshi rela tionship p between them is not clarified. In such cases there is a possibility for overlap and gap in authority and responsibility responsibility which can affect personal relationships. iii. Lack of proper Understanding of Authority: Assuming Authority:  Assuming that line and staff authority is made clear in the organisation, in practice, people may fail to u nderstand the exact nature. This misunderstanding may lead to encroachment encroachment of authority either  by line or by staff people. people.  ACHIEVING HARMONY BETWEEN BETWEEN LINE AND STAFF The following guidelines, if understood thoroughly may solve many problems. 1. Line people have the ultimate responsibility for the successful operation of the organisation. Therefore, they should have authority for making o perating decisions. decisions. 2. Staff people contribute to achieve organisational objectives by making recommendations recommendations and providing advice in their respective fields. In some situation, they may be granted functional authority through which wh ich they can ensure that their recommendations recommendations are put in operation. 3. Since in most cases, solicitation of advice and acceptance of that is u sually at the option of the line people, it i t becomes imperative imperative for the staff to offer advice and service. 4. Barring few exceptional situations where time factor is of utmost u tmost importance importance for decision making, line should be impressed impressed upon the need for compulsory consultation. consultation. 5. Staff people should sell their ideas to line people. They should shou ld rely more on the authority of knowledge and competence rather than authority of position.

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How to make better use of Staff  Staff people are needed in the organisation because line people may not able to solve the problems which require special knowledge and expertise. The effectiveness of line people depends to a large extent on how they make use of staff. For making proper use of staff, following points p oints are important. 1. There should be encouragement encouragement and education to line people as to how to make maximum use of staff effectively. Line people cannot make use of staff unless they know  what a specialist can can do for them. At the same same time, staff people also have have a responsibility responsibility to let line people know how they can contribute for the better performance of line activities. 2. In order to make proper use of staff, they should not be kept busy in unimportant  work because it does does not serve any meaningful meaningful purpose. purpose. Instead, they should should be assigned critical work in the area of their specialty. 3. Staff people should be involved at the basic stage of planning of an activity rather than  when the problem becomes becomes critical. critical. When they are involved involved at the level of planning, many of the problems may not arise. 4. If line people have taken some actions directly affecting staff activities without without consulting staff people, they should be informed immediately about such actions. The information will help in removing misunderstanding, misunderstanding, if any, created in the minds of staff people. COMMITTEE FORM OF ORGANISATION ORGANISATION One of the most misunderstood concepts in management is the committee form of organisation called variously as board, commission; commission; ask force, team, etc. The essential nature of all these bodies bod ies is the same. The basic distinction that sets apart the committee from other organisation devices is the group action. In spite of the severe criticism against the usefulness of committees committees in organisations, they are very extensively used in the modern organisations at various levels. Koontz and O'Donnel define a committee as "a group of persons to whom, as a group, some matter is committed". Though it implies group action, there are many variations in the use of committees, particularly, in respect of the authority assigned to them. TYPES OF COMMITTEES Committees can be broadly classified into advisory committees and executive committees. committees. When committees committees are entrusted with staff authority, au thority, they are known as advisory committees. committees. That is, they play only an advisory role and cannot enforce implementation of their advice or recommendation. Works committees, finance committees, committees, new product development committees committees etc. e tc. fall in this category. On the other hand, whenever, committees committees are vested with line authority, au thority, they are called

executive committees. Unlike the advisory committees, executive committees not only take decisions, but also have the authority to implement them. The board of directors is a classic example of executive committee. Committees Committees may also be permanent or they may be temporary (adhoc). They may also  be formal or informal. informal. A formal committee committee is one which finds a place place in the organization chart with specific authority and responsibility. Formal committees, in general, are permanent in nature whereas informal committees may be permanent or temporary. They may also be classified into adhoc committees committees and standing committees. committees. The former is constituted for a specific s pecific purpose and then disbanded after it has performed the assigned task. The latter is more permanent and exists as long as there is need for it in the organisation. organisation. REASONS FOR THE USE OF COMMITTEES The use of committees in modern organisations, both business as well as non-business is so widely prevalent that it is hard to miss them in any organisation. The board of directors which presides the destiny of the organisation by itself is a committee. committee. The following are some major factors responsible responsible for the popularity of the committee form of organisation. i. Group Participation: Committee Participation:  Committee facilitates the involvement invo lvement and participation of more than one. The concept, in a way, is so close to the adage that "two heads are better than one". The fact that a group g roup of people with varied experiences and intelligence can throw a better light on the issues that are deliberated in the meetings cannot be disputed. Many of the inadequacies or limitations of an individual are compensated by collective wisdom and thinking. Wide ranging discussions can take place. Committee meetings undoubtedly become the forum for cross-examination and fertilisation of ideas. The exchange of information, information, viewpoints, beliefs and experience, ex perience, help in examining the issues involved more thoroughly which may not be possible in an individual judgment. ii. Diffusion of Authority: Fear Authority:  Fear of concentration concentration of authority in one individual is another contributing contributing factor for the constitution of committees. No single member of the committee committee can have absolute authority. Whatever the decision of the committee, it has to be approved by at a t least majority members. However, consensus consensus of all the members may also be required for certain issues. Thus, the possibility of au thority thority being misused and the exercise of discretion power in a wrong way to a larger extent, be avoided by entrusting the matters to be decided to a group. For instance, the existence of board of directors at the top itself amply indicates how shareholders entrust the overall responsibility responsibility of managing the organisation organisation to a larger body instead to a single individual. iii.Consolidation of Authority:  Usually in any organisation manager at a particular level, say a department head, or branch/section branch/section manager has only a portion of the authority. In some instances, the authority that a manager has may not be sufficient to take a decision in a particular way. In the case of a committee, the authority of all the

members will be pooled up. This Th is is what is meant by consolidation of authority. The authority of different individuals which is otherwise splintered is consolidated in the committee committee form. The collective c ollective authority thus pooled up enables the committee to decide on matters which are beyond the scope of individual authority. authority. iv. Representation of Interest I nterested ed Groups: The Groups:  The activiti a ctivities es of modern organisations are interrelated in such a way that many decisions effect a more than one department or section. In such a case, for better compliance of the decision, it is desirable to appoint a committee committee with representation representation to all those who are affected by a particular decision. Such a measure not only offers an opportunity for participation but also satisfies the ego of the individual members. members. The members naturally feel that they are also a party to the decision and therefore they tend to be loyal to the decision.  v. Co-ordination Co-ordination becomes becomes Easy : Coordination of the various plans, programmes and activities of various departments is an essential task  management. Committees are  very useful in that they they facilitate inter-departmental inter-departmental coordination. coordination. A committee committee provides the members first hand information about the overall plans. It facilitates facilitates contribution of suggestions for improvement, if any. The interaction among the members and the way how the information is shared by them, contribute for better co-ordination of the plans and thereby inter-departmental inter-departmental activities.  vi. A Tool of Management Development: Development: A  A committee can also be used used as a tool of management development. development. While experience of a manager on his job enables him to sharpen the skills in his particular area of specialisation, committees may widen his perspective and knowledge about the other related tasks. His participation in the committee committee meetings and the exposure thus gained enable e nable him to understand the larger picture. Valuable learning takes place where individuals can take an integrated view to solve the problems.  vii. Avoidance Avoidance of Action: It Action: It is interesting to note that more often committees committees are used to avoid action on a problem. This tendency, of course is more pronounced in  bureaucracies.  bureaucracies. At times, a manager manager may be unwilling unwilling to take action, but he cannot afford to avoid action also. The best option, open to him in such a situation, s ituation, is, to refer the matter to a committee. It is this particular phenomenon which often gives raise to so many jokes on committ c ommittees ees in organisations. organisations. Thus, a committee committee can be used to smoothen the tempers and passions of people. It is also used a s a means to overcome resistance, pressure, or opposition opposition from parties involved in an issue. DISADVANTAGES DISADVANTAGES OP COMMITTEES  As mentioned mentioned earlier, many jokes about bad management management revolve around committees. committees. The committee's notoriety for ineffectiveness often is traceable to misuse. Committees Committees are subject to mismanagement mismanagement and misuse. Here are a few definitions of a committee, committee, pointing the darker side of the use of committees. committees. "a committee is made up of the u nfit, selected selected by the unwilling, to do the unnecessary"

"a place where the loneliness of thought is replaced by the togetherness of nothingness". Though these definitions seem to be excessively hostile to the committee committee form of organisation, if proper care is not taken, there is little wonder that they may prove to be correct. The following are the problems, in general, with committees. i. High cost in Time and Money: The Money:  The constitution of a committee is an expensive affair. The time and money involved are quite considerable. considerable. More so, if the members are drawn from far off places. Lot of money has to be paid towards various allowances to the members. That apart executive time has got opportunity cost. After a series of o f meetings, if no decision is taken on the outcome is insignificant insignificant the expenditure of resources and the executive time in such as wasteful exercise is meaningless. It will be still ridiculous if a committee is assigned a problem that could be solved by a simple individual. Thus, one should not loose sight of the costs involved in appointing committee. committee. ii. Slow decisions: The decisions:  The very nature of functioning of the committee is not conducive for quick decisions. If consensus is insisted, the situation becomes still worse. All the members have to be informed of the agenda in advance. Modifications Modifications in the agenda, if there are any suggested by members have to be again ag ain circulated. Deliberations in the meeting may also take a long lo ng time. Valuable opportunities opportunities may be lost in the mean time as committee members are engrossed in the hectic deliberations. iii. Indecision: Quite Indecision: Quite often committee committee meetings end up in no decision Meetings get adjourned for want want of quorum and time for thorough discussions. Besides, many decisions may be taken on the basis of compromise. The decision thus arrived at, may be in no way better than the one which would have been taken by an individual who could c ould see the things as they are and acted a cted upon. The leveling effect in committee deliberations in which high premium is placed on conformity has gone disastrous affects. The result of the levelling effect is that the individual's thinking is brought in line with the group thinking. Consequently the decision thus reached need not be the best decision. iv. Minority Tyranny: Committees Tyranny: Committees normally tend to seek unanimous or nearunanimous decisions. Minority members who hold a different view are therefore in a strong position. More particularly, when the practice is to arrive at a decision through unanimity. The minority members members tend to take advantage ad vantage of such a situation and try to exercise tyranny over the majority. The problem becomes more complicated if members have the vet power. Similarly, majority can also put pressure on minority members members to force them to arrive at the decision.  v. Splitting Splitting of Responsibilit Responsibility: y: In  In any a ny system, people tend to work more efficiently  when their authority authority and responsibility responsibility are clearly specified. specified. Since many members are involved in the decision-making decision-making process of the committee, no individual member can be held responsible if the outcome of the decision is adverse. The major drawback is that it splits the responsibility and no member feels the responsibility for group action. SUCCESSFUL OPERATION OF COMMITTEES

The available evidence on the practices in the corporate sector shows that the use of committees committees in all types of organisations is on the increase. As the emphasis on the group decision-making decision-making and participation increases, so also the use of committees in the company's affairs. Inadequate care is exercised in respect of the following factors, the  benefit outweigh the disadvantages. disadvantages. i. Authority and scope must be specified:  The terms te rms of reference to the committee and the authority of it have to be clearly defined. That whether That whether the committee committee has the authority to make decisions, or its job is just to make recommendations. recommendations. If the scope and authority of the committee are not clearly defined, quite often, members may end up in deliberating issues that are not referred to the committee at all. ii. Size of the committee: Though there is no exact number regarding regarding the size of the committee, committee, the complexity of interrelationships interrelationships naturally increases with the size of the group. If the group is too large, it may be difficult di fficult for the members to communicate communicate effectively, on the other hand, if it is too small, the purpose behind the use of committee may be lost. As a general rule, a committ co mmittee ee should be large enough to promote deliberations and to provide an opportunity for the consolidation of wisdom and expertise of many members, Research indicates that the ideal committee committee size is five,  when all the five members possess adequate adequate skills and knowledge to deal deal with the subject assigned to the committ c ommittee. ee. However, if the committee is to have all a ll interested groups participate participate in its deliberations, the number may be large. If all the interested groups are not represented, represented, the committee's work may be criticised. In such a situation where the need for representation representation of the interested parties, makes the committee too large, one option to constitute sub-committees sub-committees by breaking down the problems to be studied. iii. Selection of Members: For Members: For the committee committee to be successful, successful, the members on the committee must be good at understanding the problems and analysing them. They must also be good at a t performing well in a group. Every member must have the right righ t temperament, verbal and analytical ability and capacity for working with others. Selection of members requires judgment about the personal characteristics characteristics of members, their functional background background and level in the organisation. The basic objective is meaningful deliberations in committee meetings that result in e ffective decisions. Committees are likely to function better if members are friendly, known to each other and respect each other. Committees which include members drawn from different levels are unlikely to function effectively because they are from the lower levels and may not  very actively participate participate in discussions discussions because of the the variances in this formal formal positions in the organisations. organisations. For example, workers workers representatives, and the boards of management of many organisations and the teachers representatives on the various administrative administrative bodies of universities are found to be not very effective purely because of this factor. iv. Nature of the subject matter: Careful selection of the subject matter to be entrusted to the committee is equally e qually important. Certain subjects can be handled effectively by a committee while others can be handled better by individuals. For

instance, research research and development which depend on the individual creativity cannot be entrusted to a committee. On the other hand, for the establis e stablishment hment of major objectives and formulation of policies and review and coordination of work, committee committee may be preferred.  v. Effectiveness Effectiveness of Chairperson: Chairperson: The  The chairperson, in fact, is the leader of the committee. committee. Therefore, the effectiveness of the committee depends on the chairperson's skills and motivation. His basic functions include planning for the meetings, preparing preparing the agenda, supplying some preliminary information to the members and conducting the meetings effectively. The chairman must not act in a prejudicial way and yield to the pressure of a few members. He has to monitor monitor and coordinate coordinate the proceedings such that effective decisions are taken by the committee. He has to see that the minutes of the meetings are recorded properly, circulated to all the members. Modifications suggested and action taken on recommendations recommendations should also be communicated. SUMMARY  Line positions may be defined as those directly responsible for achieving the organisation's goals. Staff positions positions provide expert advice and service to the line. Staff authority ranges from being limited to advising on request, to compulsory consultation, to concurrent authority, to functional authority. Because of the differences in the nature of authority between the two, it is not uncommon to hear about the conflicts between the line and staff managers. Each look at a t the other with suspicion. As a result, infighting and always trying for one upmanship are quite natural in organisations. The concepts of line and staff authority, reasons for the conflicts and the ways and means of a chieving harmony have been discussed in this lesson. In the second half of the lesson, committee committee form of organisation and the major issues related to committees such as types of committees, reasons for the use of committees, disadvantages of committees and the measures for making committees committees more effective, e ffective, have been dealt with. REVIEW QUESTIONS 1. Line-staff conflict occurs occurs for many reasons. Examine Examine the following adages; "Staff should be on tap, not top", and "staff should sell, not tell". 2. Describe the difference difference between the advisory authority, concurrent concurrent authority authority and functional authority. 3. What are the important sources sources of conflict between line and staff managers? How do  you resolve the conflicts? conflicts? 4. In spite of the serious drawbacks in in the functioning of committees, committees, they cannot be dispensed with? why? give reasons. 5. What measures do you suggest to make a committee committee function more effectively? effectively?

FURTHER READINGS  Arthur G. Berdan. Berdan. 1993. Management, Management, the Dryden Dryden press. New York. Harold Koontz. Cyril O'donnel O'donnel and Heinz Weihrich, 1984 Management, Management, McGraw-Hill, McGraw-Hill, Tokyo. George R. Terry and Stephen Stephen G. Franklin. Franklin. 1988. Principles of Management, Management,  AITBS, Delhi. Cawsey, T.F. 1980 "Why Line Line Managers Don't Listen to Their Personnel Personnel Departments", Departments", Personnel, Jan-Feb v . Clark, P.A. 1952. Organisational Organisational Design: Theory and Practice, Practice, American management  Association, New York. York. Drucker, Peter. F. 1974. Management Management Tasks, Responsibilities practices, practices, Harper Harper &Row, New York.

- End Of Chapter LESSON- 11 ORGANISATIONAL CULTURE AND CHANGE

Objectives  After studying studying this lesson, you should be able able to:    

Understand the importance of environmental environmental impact on business;  Appreciate the need need for change in response response to the demands of environment;  Analyse the forces that that resist change; change; and Describe the necessary measures that may be taken to overcome the resistance to change.

Outline Introduction The Indian Scenario Forces of Change if

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Internal Forces External Forces

Culture and Change Change as a Process Resistance to Change Possible Benefits of Resistance Questions to be raised when contemplating change Overcoming Resistance to Change Summary  Review Questions Further Readings INTRODUCTION Change is a universal and inevitable inevitable aspect of all organisations. organisations. In a way, the environment around the organisations thrust change upon them. To stay competitive, competitive, organisations are forced to improve quality, adopt new technology and at times, may have to redefine the business. It has to be borne in mind, competitors are are smarter and quicker. Added to that, product life cycles are becoming increasingly shorter and shorter. Markets emerge and disappear disappear in a flash. As a result, the adage that "Survival "Survival of the Fittest" is being replaced by "Survival of the Fastest".  As change is so universal, universal, organisations organisations which can adapt to change change only can survive. Though it is true that change can threaten an organisation's survival, survival, it also offers unprecedented opportunities opportunities for growth. That is why, seeing change as necessary for survival, and recognising it as and when it occurs is essential for effective management. management. THE INDIAN SCENARIO It is anybody's a nybody's knowledge that industrial development in India, in r etrospect, owes much to the concessions concessions and protection offered by the government. Constraints in transforming transforming the traditional traditional subsistence economy into an industrial one necessitated the government to play a catalytic role. Competition from within and from outside the country was kept kept to a minimum. minimum. Eventually, over the the years, the concessions led to complacency resulting in high high costs, poor quality and slackness slackness in operations. There have been few compulsions to modernise plant and equipment, update technology, and innovate new products.

Such a situation has completely changed, of late, consequent upon the enunciation of the new industrial policy. The T he withdrawal of permits and licenses l icenses has suddenly exposed the Indian corporate sector to stiff competition. competition. Indian industry is rather forced to wake up to the new realities and to stand on its own in the wake of so many changes that have  been taking place in the the environment. FORCES OF CHANGE Forces of Change exist both within the organisation and outside the organisation, that is, in the internal as well as a s external environment of the organisation. organisation. An organisation organisation has to respond to the changes swiftly with least inconvenience to the various interest groups. The organisation's success, therefore, depends on its ability to anticipate change and to refocus its capabilities to meet new demands. INTERNAL FORCES Internal forces for change arise because of the need for modifications in the strategy and consequently the structure of the organisation. Needless to say that an organisation organisation has to maintain stability while managing change. Both change without stability and stability  without change are are not desirable. Therefore, Therefore, a sound balance has to be be struck between the two. For instance, new employees have to be hired while older o lder employees retire, new products must be introduced while establishe e stablished d products are discontinued, discontinued, and new markets must be exploited while old ones are abandon a bandoned. ed. It is in a way, a continuous process. All these attempts or actions a ctions create internal forces for change. Each of these must be introduced in a manner that is not only consistent with an organisation's organisation's overall objectives, but acceptable to those affected by the changes. EXTERNAL FORCES External forces that lie in the environm e nvironment, ent, quite often, create the need for change. For example, in an increasingly dynamic, dynamic, interdependent and unpredictable world, virtually all organisations are affected by so many events that happen at the national and international international levels. Technological changes, political turbulence and the socio-cultural changes of the society in which the business exists exert a profound influence on the functioning of the business. Similarly, fluctuations in the world's leading economics have worldwide repercussions. These developments, both domestic and international in origin continue to outpace the ability of many organisations organisations to absorb them. Markets may vanish overnight. Competition for markets is now at the global level. le vel. Organisation's Organisation's work force these days, cuts across all nationalities and ethnic boundaries. The new realities, in fact, have created unprecedented opportunities opportunities for organisations that are willing to change and grow.

The way how the ITC has changed its gears, as the anti- smoking campaign all over the  world began to gain momentum momentum is a classic case in the Indian Indian corporate sector sector demonstrating fully the company's capabilities to adapt to changes. Quite skillfully, ITC succeeded in coming out of the cigarette company image by diversifying into various other core businesses, all of which are doing exceedingly well. Similarly, the small, Madras based Balaji industry's case also may be mentioned in this context. The low profile company, for a long time engaged in the liquor business, just in no time realised the social opposition to the liquor business in general and started making its presence fell in businesses like steel, power and hotel industry. Many more more diversification diversification plans of the company are in the drawing room stage. Likewise, the  Western India group group is also smart enough enough in identifying tremendous tremendous business potential potential in areas related to the development of anti-pollution systems, one of the thrust areas, these days, all over the world.

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CULTURE AND CHANGE Organisational Organisational culture refers to the common set of beliefs and expectations shared by members of an organisation. organisation. The changes in the environment environment of business may necessitate necessitate a change in the culture of the organisation. An organisation's organisation's culture is determined by several elements. (See exhibit -1) Important among these are its values, heroes, symbols and legends.

 Values  Values are organisation's organisation's beliefs about what is good or bad, desirable desirable or undesirable. The beliefs define the fundamental character of the culture of any organisation. In outstanding organisations, organisations, values are deeply felt and reinforced. reinforced. The top management's  vision is shared by people people down the line alike. Tata group companies companies are are known for their own culture. The companies still cherish the values passed on by the founders and hold them very dearly. For instance, Alacrity Foundations Foundations Limited, which is engaged in the housing construction construction is known for its reliability re liability and concern for the customer. There are hundreds of companies in the field in Madras, thanks to the general spurt in the demand

for houses in certain areas. But Alacrity is a household name in Madras and enjoys a high degree of reputation. Heroes, Champions or Star performers Organisation's values are primarily primarily reinforced by its lead players p layers - its heroes. Akio Morito of Sony, Ford's hero Lee Iococca who later turned around Crysler Corporation, Reliance's Ambani, Arvind Mills Sanjay Lalbhai, BPL's Nair, HCL's Shiv Nadar, etc., are the corporate heroes, to mention a few. This does not mean that such heroes are found only in toe founders or the CEOs of the organisations. Such people may be found at  various other levels also in in the companies, often often referred to as champions and star performers. By acknowledging the achievements and contributions of such achievers, organisations create role models for others to follow. As role models, heroes personify an organisation's values and reinforce its desired des ired culture. Symbols Symbols are nothing more than objects or events that convey meanings. They take the form of prizes, awards, plaques, slogans and includes dress also. They convey what is important in organisation. Important achievements achievements are celebrated with much gale and fanfare in many companies. Heroes are rewarded profusely. Symbols stress what an organisation values. For instance, Essar groups slogan "A positive Attitude", Telco's emphasis on 'Team work" and Arvind's Ar vind's "Global Endeavours" are only a few examples that inspire people. Symbols are the effective media to convey and promote organisation’s values and thus reinforce reinforce its culture. They create a sense of identity to those working for the organisation, making them feel something special. They further deepen an organisation's culture by facilitating individual commitment to collective goals, such as excellence, team spirit, innovation, customer satisfaction, etc. Legends  A legend is a story about an actual event or person. person. Legends help an organisation organisation to preserve its culture by imparting values to new employees. For example, events like one sales executive in U.S.A. hiring a plane to supply some spare parts to an important customer, IBM's Sr.Watson Sr.Watson calling on the chief of a public library quite accidentally and how it turned the fortunes of IBM later, are not few and far between in corporate history. Leading organisations organisations all over the world have such events in plenty. They form the company's folklore. In addition to providing guidelines for employees, they tell a great deal about the core values of the company. CHANGE AS A PROCESS Having examined what constitutes an organisation's culture, let us examine the process of change, psychologist Kurt Lewin suggested that successful change requires moving through three phases. Unfreezing, changing, and refreezing (see exhibit - 2).

Unfreezing : This phase involves recognising a need for change. It occurs when a situation is recognised as being deficient or inadequate in some way. For example, loss of a key customer, a dramatic drop in market share, unexpected decline in profits, key people leaving the organization organization are examples of o f crisis situations which call for s ome change. Changing: This phase involves modifying old ways so that new behaviour patterns patterns can be introduced. Changes may be minor or major though it is difficult to a dapt new patterns oversight, there are few options for the companies operating in a competitive competitive markets. Refreezing: This phase involves establis e stablishing hing new behaviour patterns. It is made possible through new training and orientation programmes, revised policies, updated procedures and other support mechanisms that reinforce new behaviour. RESISTANCE TO CHANGE Organisations, like like individuals tend to have die-hard altitudes and beliefs. As discussed in the proceedin p roceeding g paragraphs, behaviour patterns are firmly frozen, in that, people tend to think and act in a particular way regardless of the exigencies of the situation. They have to be unfrozen un frozen to make change possible. possible. It is because, change is received with some protest. Infact, resistance to change is a natural human reaction. Managers have to be familiar with the basic reasons for resistance resistance to change (see exhibit -3). We will now discuss the important reasons for resistance. resistance.

Threatened Self-interest: Organisation members normally normally behave in ways that will maximise max imise their goals which they consider most important. Consequently, individuals are likely to resist proposals for change if they believe they stand to loose something of value to them. This is  basically, due to the fear of insecurity. insecurity. In such circumstances, circumstances, they usually are more more concerned concerned about their own self-interests at the cost of the organisation's organisation's larger goals. Power, money, prestige, convenience, convenience, job security and professional competence, to name a few, matter much to the employees in the organisational organisational set-up. If they perceive threat to any of these due to the change, they naturally resist such change and always prefer status quo. Lack of Understandi U nderstanding ng and Trust

People also resist when they do not n ot understand understand the intended purpose of a change. Such a situation usually occurs when there is a lack of trust between the parties involved in initiating and those involve in adopting a proposed change. Distrust and suspicion suspicion often result in widespread rumours and distorted information. This makes e ffective communication communication difficult and poses a real problem in instituting change. It is important to note that people do not resist change per se, only the uncertainties that change can  bring. Such resistance resistance is easier to prevent prevent than to remove remove once it has developed. Therefore, it is important to tell employees in advance ad vance why a change is being made and how it will affect them. Different Assessments Resistance Resistance to change frequently occurs when organisation members differ in their evaluation of the relative merits and demerits of a p roposed change. Such evaluations obviously depend on what the individuals perceive to be the outcome of the change. In other words, it depends on what they think a proposed change will mean for themselves and also for the organisation. organisation. For example, we often hear how attempts a ttempts like automation automation of work is resisted and at some places sabotaged by the employees. It happens so  because in the the employees assessment assessment the disadvantages disadvantages outweigh the advantages. advantages. They fear loss of jobs and therefore therefore block such moves where they perceive the change will affect their careers. The divergent assessments of the effectiveness e ffectiveness of proposed changes often occur when information information concerning a change is not widely disseminated. Consequently individuals individuals possess different degrees of information and arrive at different assessments. However, it must also be noted that opposition to change is not always bad. Constructive opposition should be welcomed welcomed and would even prevent the organisation from committing committing mistakes. Pear of the Unknown People may also resist change because of person concerns about their abilities. They prefer familiar things and ways of doing things as compared to unfamiliar things. The unknown consequences consequences of change may present a psychological threat. Research Research evidence suggests that some people have a high degree of tolerance for change while the others have a low degree of tolerance. The latter category is afraid that they will be unable to develop the skills and behaviour demanded by a new position or by the unfamiliar circumstances circumstances associated with the change. Perhaps, Pe rhaps, this is the reason why status - quo tendency in behaviour and decision-making is found to be the biggest block in the adoption process. POSSIBLE BENEFITS OF RESISTANCE Resistance Resistance is not no t all bad. It can bring some benefits. It forces management to reexamine reexamine the change proposals so that it can be more sure that changes are appropriate. appropriate. This way, employees act as a check-and-balance check-and-balance to assure that management management properly plans and does not implement change in haste.

Resistance Resistance can also help to identify specific problem areas where a change is likely to cause difficulties, so that management can take corrective corrective action before it is too late. At the same time, management may also do a better job of communicating the change. Some amount of resistance resistance also gives gi ves management valid information about the intensity of employee emotions on an issue, provides emotional release for pent-up employe e mployeee feelings, and may encourage employees to think and talk more about a change so that they understand it better. QUESTIONS TO ASK WHEN CONTEMPLATING CONTEMPLATING CHANGE Some of the important reasons why change is resisted have been discussed thus far. The reasons may vary in importance from situation to situation. In view of the possible resistance, it is highly desirable de sirable that managers ask the following few questions questions while contemplating the change. change. The answers themselves themselves provide lot of clarity on the basis of  which appropriate appropriate steps may be initiated initiated to cope with the change. change. 

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 What are the consequences consequences of implementing implementing or not implementing implementing the proposed proposed change? Has the process of change and its effect on individuals individuals been clearly explained? How much resistance will the proposed p roposed change generate?  What would be the manifestation manifestation of resistance? resistance?  What is the level o trust between between the parties involved? involved? Do all parties involved have the information necessary to understand the reasons for the proposed change and benefits that will result? Have real incentives incentives been provided for accepting the proposed change?

OVERCOMING RESISTANCE TO CHANGE Several tactics are available for managers to deal with resistance resistance to change. Four of the important tactics, as could be seen in exhibit - 4 are discussed here. The selection of a particular tactic will depend on the factors specific to the situation.

Regarding the choice of the tactic to be used to overcome resistance to change, it may be helpful to identify the forces at play. Kurt-Lewin describes, in his force-field force-field analysis, a nalysis, an existing situation (the status-quo) as an equilibrium locked in between two opposing forces - driving and restraining (See exhibit - 5 ). Driving forces are those that direct  behaviour away from the the status-quo and facilitate facilitate change as opposed opposed to Restraining Forces which direct behaviour towards the status quo and impede the change. Therefore, it is the task of the manager to identify the two sets of forces and their intensity. A sound analysis of the forces helps in weakening the restraining forces forces and strengthening strengthening the driving forces.

Education and Communication: Communication: Those who initiate change in the organisation tend to possess first-hand information about the proposed change, which may not be readily available to the other members. members. The easiest way to counter resistance resistance to change is by sharing the information in a free and fair manner with the other members, members, at least those  who are to be directly d irectly affected affected by the t he change. People have to be educated as why change is necessary by making them realise the problem areas, if that warrant a change. Further, in many cases, resistance is largely due to misinformation misinformation or communication.  Adequate initiative initiative has to be taken to dispel the rumours rumours caused by misinformation. misinformation. Relevant facts have to be presented different viewpoints must be discussed to remove the understandings caused by distortions in communication. This tactic involves educational campaign, one-to-one one-to-one discussions, group presentations presentations and reports. reports. Participation: Involving all a ll those potential resisters in the decision-making decision-making process and implementation is by far the best strategy to be with resistance. resistance. The assistance and cooperation of organization members have to be sought. Participation involves open communication of the exchange of view points by all the parties involved. Such a participation, however is possible and yield results only when all the members are rational and possess the necessary expertise to contribute meaningfully. meaningfully. Each one has to act in good faith. Of course, procuring participation participation may be a time consuming consuming process. But, lot of time may be saved in the implementation implementation because the proposed change is already sold. Negotiation: Negotiation Negotiation: Negotiation which involves 'bargaining' to reach an agreement is another another equally important important tactic to handle resistance to change. This requires requires political skills on the part of the the managers. The access of this tactic tactic depends on on creating a give and take atmosphere. atmosphere. Since the process process involves reciprocation, reciprocation, the the change initiator must be  willing to concede certain aspects aspects of the change change so as to tailor the change to meet meet the interests of the the active resisters. resisters. This is quite quite a good tactic where where the willingness willingness of members is procured through through discussions based on give and take. It also provides an opportunity to nurture a continuing relationship. relationship. Coercion: If the stance taken by the members opposing change is rigid and all a ll the efforts at reaching consensus have failed, the last option open to managers is to compel acceptance by means of orders, by threats such as firing, transfer, demotion, etc. As already mentioned, coercion to the extent possible must be avoided. It may be u sed only as a last resort only when all the other tactics fail to yield results. It is also possible that the situation may turn from bad to worse if coercion is used indiscriminately. indiscriminately. Resistance to change can be reduced by helping employees to recognise the need for each changes to participate in it, and to gain from it. In essence, management's responsibility responsibility for change is fourfold:    

Make only useful, necessary change. Recognise it with adequate attention to human needs. Share the benefits of change with employees. Diagnose the problems that exist after a change and solve them.

SUMMARY  Changes in the environm e nvironment ent are so universal these days that those organisations organisations which can adapt to changes only can survive. Forces of change exist both within and outside the organisation. Internal forces for change arise because of the need for modification in the strategy and structure of the organisation. An organisation has to maintain stability  while managing change. change. External forces such such as technological, political, political, socio-cultural changes may also create the need for change.  An organisation organisation has to change its culture culture to meet the needs needs of change. The shared  values, heroes, symbols, symbols, and legends constitute constitute the culture of the the organisation. Any change has to be understood as a process which contains three phases: Unfreezing, changing and refreezing. Change, however important, is often confronted confronted with resistance from people. Change is normally received with some protest. Threatened selfinterest, lack of understanding and trust, different assessments about the change a nd the fear of the unknown are are some of the reasons for the resistance to change. Therefore, manager's primary responsibility responsibility while implementing change is to identify the factors factors that cause resistance and to weaken them. Necessary steps must be taken to overcome the resistance. Important among those are education and communication, participation, negotiation and coercion. This last measure coercion has to be used only when all other means fail to bring the desired effect. REVIEW QUESTIONS 1. Recall at least l east one incident in your organisation organisation where change was resisted. Apply the Force-Field analysis to the situation and describe describe the driving as well as restraining restraining forces for change in that situation. 2. Take a close c lose look at the post-liberalisation era in India, and describe the major developments that force a change in the Indian business. 3. Why is change resisted in organisations? Analyse 4. As a manager what initiatives initiatives would you take to see that change is smooth in the organisation. FURTHER READINGS 1. Anjaneya Swamy, G. 1993. "Liberalisation - call for Entrepreneurial Entrepreneurial Managers", MD1 Management Journal, Jan, 1993 issue. 2. Keith Davis, 1981. Human Behaviour at work, Tata-McGrawTata-McGraw- Hill, New Delhi. 3. Kurt Lewin, 1951. Field Theory in Social Science, (ed) Darwin Cartnight, Cartnight, Harper, New  York. 4. Mary kay Ash, 1984. mary Kay an people Management, Warner Warner books. New York.

5. Peter F. Drucker, Drucker, 1980, managing managing in Turbulent Times, Allied publications. publications. New Delhi. 6. Pradip N. Khandwalla, 1988, The Fourt Eye: Excellence through Creativity,, Creativity,,  A.H.Wheeler, Ahmedabad. Ahmedabad. 7. Thomas. J. Peters and Robert H. Waterman, 1982, In search of Excellence: Lessons from America's Best run companies,Harper & Row, New York.

- End Of Chapter LESSON - 12 HUMAN RESOURCE MANAGEMEN MANAGEMENT T

Objectives  After studying studying this lesson, you should be able able to: 

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 Appreciate the importance importance of human human resources in achieving achieving organisational organisational objectives; Understand the important steps in the human hu man resource management management process; and Describe the human resource planning and development techniques and practices.

Outline Introduction Human Resource Planning   

Recruitment Selection Compensation

Human Resource Development     

Orientation Training Performance Performance Appraisal Management Development Career Management

Summary  Review Questions Further Readings INTRODUCTION People constitute the key resource for any organisation. Without people there is no organisation. Among all the resources that an a n organisation uses, human resource undoubtedly, occupies a prominent place in achieving the objectives. Unless managers managers understand the scope, potential and limitations limitations of human hu man resource, resource, they will not be able to use this valuable resource effectively. It is, therefore, important for all the managers to understand and appreciate the techniques of staffing function, which is basically concerned concerned with management management of people. peopl e. Human resource management management is the term widely used these days in management circles for the staffing function. Koontz and O'donnel define the staffing function as "filling positions in the organisation organisation structure through identifying work force requirements, inventorying the people available, recruitment, selection, placement, promotion, appraisal, compensation, compensation, and training of o f needed people". Thus, staffing, as a managerial function involves the following steps: 

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Human Resource Planning: Planning : developing a plan to meet future human resource requirements. Recruiting: Recruiting : building a pool of potential job candidates for each job. Selection: Selection: evaluating job candidates and choosing the best from the pool of applicants created through recruiting. Compensation and benefits Administration : developing a salary structure structure and benefits package to attract, hire and retain employees. Orientation and Socialization: Socialization : introducing the selected individuals to their unit and organization and developing an understanding about the unit's and organization's expectations and preferred ways of "working there". Training: Training: developing programs to provide employees with the skills needed to perform their jobs effectively. Performance Appraisal: Appraisal: Developing procedures to evaluate employee performance and communicate communicate this evaluation to the employee. Promotion, Demotion, Transfer, Termination T ermination:: developing procedure to move people to positions positions of increased or decreased responsibility; widening their  job experience through through transfer to different different functions or locations, locations, or terminating terminating their employment. Management and Career Development: Development: develo  developing ping programs to increase abilities and effectiveness of all a ll management resources.

HUMAN RESOURCE PLANNING

 When management management formulates objectives for the organization, organization, it must also determine determine  what resources resources will be required to attain attain them. The need for money, money, materials, equipment and people is obvious. o bvious. But, unfortunately human resource planning often is not done formally or given the degree of attention it deserves. Human Resource planning is basically the application of the planning process to staffing and personnel-related problems. For convenience, convenience, It can be considered as having three stages. 1. Assessment Assessment of present supply, supply, 2. Assessment of future needs, needs, and 3. Development of a human resource resource programme programme to meet future future needs. Present Supply: Human resource planning in an organization logically begins with an assessment of present supply. Management must determine how many people are involved in the performance of each task required for each of its specific spec ific objectives. Management in addition, must evaluate the quality of its people. To accomplish this, some organizations have developed a skills inventory. This is a written record of the skills of all employees and the number of people possessing those skills. Future Needs: This stage of human hu man resource resource planning p lanning involves projection of future requirements to attain long and short- term objectives. Future environment and expansion plans of the organisation have to be taken t aken into consideration. Various management science science models have been developed to help organizations forecast their their future human human resource needs. Changes in the external ex ternal environment, environment, especially the economic environment can have a significant impact on an organization's future human resource needs. For instance, in India, in the last few years as a s computerisation computerisation of many operations is going on in a big  way in many organisations, organisations, there there is a spurt in the demand for systems systems analysts analysts and other computer professionals. After determining the exact number of people required, management must develop a programme to ensure proper supply of people as per the needs of the organization. organization. Development Development of a Human Resource Programme: The human resource programme consists of a specific timetable and the determination of specific actions required to attract, hire, train, or promote the people required to attain organizational objectives. Job Analysis: 'Job Analysis: 'Job analysis' is an important important tool through which, manpower requirements are assessed in organizations. In order to hire appropriate people,

management must know in detail, what tasks must be performed effectively and what the personal and social characteristics characteristics of the work are. These determinations are accomplished through job analysis. There are several methods for analyzing jobs. One is to observe the workers and formally identify and record the tasks and activities activities performed. Second method, is obtaining such information by interviewing the worker or supervisor. This of course,  would probably be less accurate accurate due to perceptual perceptual distortions. A third method method is to have the worker fill out a questionnaire questionnaire or write a description description of the job, he or she is handling and its requirem re quirements. ents. The information obtained through job analysis is the foundation for human resource planning, recruiting, and other purposes. Its most immediate immediate use is to create a job description. This is a summary summary of the major tasks, skill requirements and authority of the different types of Jobs in the organization. Each Each major category of job, such as secretary, stores clerk, advertising manager, or systems analyst would require a different description. description. RECRUITMENT Recruitment is the building of a pool of candidates for each job from which the organization can select the most appropriate. This is done after taking into account such factors as retirement, turnover, termination, termination, and expansion into new fields. Organizations usually recruit from both external and internal internal sources. External means of recruitment normally include placing ads in newspapers and trade magazines, using an employment agency or executive search firm, and sending recruiters to college campuses. Some organizations make make an explicit e xplicit policy that people in i n their community are welcome to apply for future vacancies. Most organizations prefer to recruit from within to the extent possible. Promoting from  within is less costly costly than an external source source and also tends to increase increase employee employee loyalty, morale and motivation. A potential disadvantage of promoting exclusively from within is that qualified people with fresh viewpoints are not brought into the organization,  which may cause stagnation stagnation in thinking. thinking. SELECTION In the selection phase of human resource planning and development, d evelopment, management chooses the most appropriate candidates from the pool of applicants created by recruitment function. function. In most cases, the person , chosen should be the one who appears to have the best qualifications to perform the actual job being filled. An objective selection decision may be based on the candidate's education, skill level, past experience, and personal characteristics. characteristics. When the job is one for which technical knowledge is the primary determinant determinant of performance, performance, such as a s research scientist, education and scientific background would probably be most important. For management positions, particularly particularly those on higher h igher levels, conceptual and interper i nterpersonal sonal skills are critical. Final selection is normally done on the basis of performance performance of the candidates in the various tests and interviews. The amount and intensity of testing and interviewing vary from job to job.

Tests: Behavioral scientists scientists have developed a variety of tests that attempt to predict how effectively a candidate will be able to perform a given job. One type of selection test measures the ability to perform tasks relevant to the job. Example would be a typing and shorthand test, which aim at demonstrating ability to operate a machine and having the candidate make an oral or written presentation. Another type of test measures psychological characteristics characteristics such as intelligence, motivation, drive, open-mindedness, open-mindedness, self- confidence, emotional stability and attention to detail. de tail. Interviews: Interviews are by far the most widely used selection se lection technique. technique. Even non-managerial non-managerial employees are not hired without at least one Interview. The selection of a Higher-level manager may involve many Interviews over the course of several months. Many of these tools used in the final selection of candidates are not free from errors. For example, there is a tendency to make a decision about the candidate based on the first impression and disregard or misinterpret misinterpret what is said during the rest of the interview.  Another mistake mistake is to evaluate an applicant applicant relative to the person person interviewed immediately before. If the earlier ear lier person was particularly poor, a mediocre candidate may be rated good or very v ery good. There is also al so a tendency for interviewers to rate more favorably candidates whose appearance, social attitudes, and mannerisms are most like their own. Some general recommendations for effective ef fective interviewing are:    

Create rapport with the candidate and allow him or her to feel comfortable. Focus on job requirements requirements throughout the interview. Don't evaluate on first impressions. Wait until all information is on hand. Have a set of structured questions questions that all appli a pplicants cants will be asked. However, be flexible enough to explore other issues that arise.

Compensation The type and quantity of rewards offered by the organization are critical to the quality of  work life. Research indicates indicates that rewards rewards influence the decisions decisions that people people make regarding whether they should join the organization, how much they should produce, absenteeism, and turnover. Many studies have found that absenteeism and turnover are directly related to satisfaction satisfaction with extrinsic rewards. When the workplace wo rkplace is pleasant and provides satisfaction, absenteeism tends tends to be low. l ow. When it is unpleasant, absenteeism will significantly increase. The term compensation refers to the monetary reward paid by an organisation to an employee for the work performed. It is directed towards remunerating remunerating employees for services(work) performed and motivating them to attain desired levels of performance".  An organisation cannot cannot acquire and maintain maintain an effective effective work-force, work-force, if it does not pay

competitive competitive rates ra tes and have a graduated pay structure that encourages people not to seek employment elsewhere. Development of a wage and salary structure is the responsibility of the personnel or human resources department. The organization's wage and salary structure is determined by such factors as results of compensation compensation surveys, conditions in the labor market, and the productivity and profitability of the organization. Compared to workers, Compensation Compensation structure for executives is more complex to develop because, in addition to salary, it often ofte n includes bonuses, profit-sharing plans, and stock options. In addition to wages and salaries, organizations provide their employees with a variety of benefits, typically called fringe benefits. Today, it is virtually ta ken for granted that  benefits such as vacations, vacations, sick leave, leave, health and life insurance, insurance, and pension schemes schemes are part of any permanent job. Other benefits that exist include subsidized cafeterias, transport and vehicle and housing loans at reduced interest rates prepaid legal services, physical fitness programmes, programmes, and study leave after a certain number of years of employment. Research Research evidence e vidence clearly shows that benefits benefits valued by one employee are not necessarily valued by others. The perceived value of benefits is affected by such factors as age, marital status, and family size. For example, persons with large families are usually highly concerned with comprehensive medical benefits and l ife insurance. Older people tend to be one more concerned with retirement benefits. benefits. Recognizing this, some organizations have developed what is referred to as a cafeteria system of compensation. compensation. The According to this approach approach the employee is permitted to select,  within limits, limits, a package most appropriate appropriate for him or her personally. personally. HUMAN RESOURCE DEVELOPMENT  At one time, the focus of staffing staffing function function was exclusively on recruitment recruitment and selection. selection. The idea was that once you find the right people, they would be able to get the job done. Modern well-managed organisations now recognize that acquiring appropriate people is only the beginning of human resource management. Whereas most of an oganization's oganization's resources are material objects that usually depreciate in value over time, it is only human resource which appreciates substantially substantially as years ye ars pass. Thus, for the good g ood of  both the organisation organisation and its employees employees as individuals management should should undertake a systematic systematic programm p rogrammee to develop its human hu man resources. Successful human resource development program will result in a work force better able and better motivated to perform the tasks of the organisation. Now we will discuss a number of techniques for developing people's pe ople's potential: performance appraisal, use of the reward system, training and development, and career management. The first step in making the new person as productive p roductive as possible, however, is proper orientation. orientation. ORIENTATION

If management wants the new employee to be successful on the job, it must keep in mind that organizations organizations are social systems and that each person is a unique being.  When the newly hired person person arrives, he or she she wrings the attitudes attitudes and expectations acquired through past personal and work experiences. These may or may not mesh with the prevailing social and work wo rk characteristics characteristics of the new position. For example, the new person's last boss may have been highly authoritarian and strongly preferred written communication. communication. He may therefore therefore believe b elieve that it is desirable to send memos rather than pick up the telephone, even though the new superior in fact prefers oral communication. communication. Commenting on this, Carroll and Tosi state, "more often than not, the typical organization member has a set of expectations about his job which are somewhat unrealistic unrealistic in terms of the organization's expectations. expectations. A period of adjustment and change takes place, and organization's organization's expectations become better known to the individual and management becomes more aware of the individual's expectations". During this adjustment period, the individual acquires ac quires new work attitudes through organization socialization. Edgar Schein defines organizational organizational socialization as "the process of 'learning the ropes', r opes', the process of being indoctrinated indoctrinated and trained, the process of being taught what is important in an organization or some subunit thereof". Organizations employ a number of devices, both formal and informal, to socialize an individual. Formally, the organization provides the Individual with information about itself during recruitment in an effort e ffort to ensure that the new candidate's expectations are realistic. This is often followed by training training in specific specific skills and a discussion discussion about what is considered effective performance. Rules, procedures, and guidance from superiors are additional formal ways of socializing people in an organization. organization. From informal work groups as discussed elsewhere, the new individual learns the unwritten rules of the organisation. TRAINING Organisations have a continuous need to ensure that their employees are able to perform their jobs effectively. One way of accomplishing this is by recruiting and selecting more qualified and capable people. This alone, however, will not suffice. Management should also undertake a systematic systematic programme to build the skills of its current employees employees and help them grow to full potential within the organisation. organisation. Its primary means of accomplishing this is through training and development programmes. Training is teaching employees skills, that will make them more effective in their current Jobs. The ultimate objective of training is to ensure that the organisation will always have a sufficient number of people with the skills and abilities needed to attain the organisation's organisation's objectives. There are three basic situations in which training generally is useful and needed. The first is when a person first joins the organisation. The second is when an employee is assigned to a different position or given new tasks to perform. pe rform. The third is when appraisal reveals that a person pe rson lacks certain skills required to perform the job effectively.

Requisites for effective training: A detailed discussion of training methods is beyond the scope of this lesson. The specific techniques are many and must be tailored to the job and organisation. The following, however, h owever, are some general requirements for a training programme to be effective: 

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People should be motivated to learn. They should understand the objectives of training and how it will improve their effectiveness effectiveness and thereby their own need and satisfaction. Management should create a climate conducive to learning. This includes encouragement, active involvement of the trainees in the process, a supportive attitude on the part of the trainer, and a willingness to answer questions. The physical setting may also be important. Some organizations organizations find it desirable to conduct training in special centres, rather than on the premises of the organization. If the skills taught are complex, training should be broken into sequential stages. The trainee should be given an opportunity opportunity to practice the skills acquired a cquired at each step before proceeding to the next phase of the sequence. Trainees should receive feedback on their performance performance and positive reinforcement for learning. This can come in i n the form of praise and recognition from the trainer.

PERFORMANCE APPRAISAL  After the individual is adequately adequately socialized and and has received the necessary necessary training to to perform the job effectively, the next step in developing human resources resources is to determine how effectively people are performing at present. This is the purpose of performance appraisal. Performance appraisal requires managers managers to gather gath er information on how effective each individual is at accomplishing delegated duties. Communicating Communicating this information to subordinates enables them to know how well they are doing and to correct themselves, if there are any deviations. Performance Performance appraisal also permits management to identify the outstanding performers and to promote them to more challenging positions. In basic terms, performance performance appraisal serves three general purposes: administr a dministrative, ative, informational, and motivational. motivational.  Administrative  Administrative Functions: Functions: Every  Every organization has a continuous need to evaluate its personnel in order to make administrative decisions decisions regarding promotion, transfer, and termination. Promotion Promotion helps the organisation organisation by enabling it to fill fi ll job openings with employees who demonstrate effective performance in their current positions. It helps the individual by satisfying needs for achievement, challenge, and self-esteem. sel f-esteem. Promotions are also excellent ways to recognise superior performance. However, when making promotion decisions, managers should only promote those individuals who they think have the capabilities to perform effectively in the new job. Transfer may be used to give a person a broader range of experience or because management feels he/she will be more effective in a different job. Sometimes Sometimes transfer is

used when a person is not performing effectively. effectively. A transfer in such situations is a demotion and puts the poor performer in a position where he or she can still make a contribution, contribution, but will not block the career progress of a h igh-performing igh-performing younger y ounger person or actually impede the th e attainment of organizational objectives. In situations where an individual has been given feedback and sufficient opportunity to improve performance, performance, but is unwilling or unable to meet the organisation's organisation's standards, termination is necessary for organisational objectives to be achieved. Wha tever the administrative administrative situation, a logical decision clearly cannot be made without an effective means of appraising performance. Informational Informational Functions: Performance appraisal is also needed to provide people  with information with with their relative level of performance. performance. When done done correctly, the individual will learn not only whether his or her performance is acceptable, acceptable, but also a lso specifically what strengths and weaknesses he or she has and which areas could be improved. Motivational Motivational Functions: Performance appraisal is also an important means of motivating people. By identifying strong s trong performers, performers, management is able to reward them fairly with praise, pay, pa y, and promotion. Consistent, positive reinforcement reinforcement for  behaviour associated associated with high performance performance should lead to similar similar behaviour in the the future. As you may have already realized, the informational, administrative, administrative, and motivational motivational functions of performance appraisal are interrelated. That is, Information leading to an administrative decision to promote a person should have a p ositive ositive effect e ffect on motivating a person to perform well. MANAGEMENT DEVELOPMENT Development refers to building skills that employees will need in order to perform effectively in a future position or job assignment. a ssignment. In practice, systematic systematic development programmes are most often used to groom managers for promotion. As with training, considerable considerable analysis and planning are required for management development to be successful. successful. Many organisations organisations send their employees e mployees to the various training programmes conducted conducted by Indian Institute of Management (IIMS), Administrative Staff College of India and other professional bodies from time to time. The organisation must first determine through performance appraisal what the abilities of its present managers are. Then, through job analysis, management should determine  what skills and abilities abilities are needed to perform each line and staff job job in the organisation. This enables the organization to determine which of its managers are best qualified to fill each ea ch position and which require training and development. After these determinations, determinations, management should construct construct a time-table for developing specific individuals who probably will be promoted or transferred. Development Development and Motivation: Motivation:

Managerial development, of course, is p rimarily undertaken undertaken to ensure that managers have the skills needed to attain organizational organizational objectives. Another consideration, closely unrelated to this is the need to provide satisfaction of higher-level needs for achievement, challenge and growth. Unfortunately, some organisations do not provide sufficient opportunities opportunities to satisfy these needs through additional responsibility and promotion. One study found that recent MBA graduates reported a large discrepancy  between their expectations expectations for personal personal growth and development opportunities opportunities and  what the companies companies actually provided. When When there are such such discrepancies, people people usually quit; Management turnover turnover is, needless to say, very undesirable because because of the high cost of recruiting managers and integrating them into the organisation. organisation. Replacing an employee can cost several times his or her monthly salary. Techniques for Management development can take place through lectures, small g roup discussions, case studies, reading, business games, and role playing. Courses in management and the many seminars on special topics organised quite often are  basically intended for management management development. development. Job rotation is also a widely used technique for development. By rotating a junior-level manager through various departments for periods of three months to a year, the organisation gives the new manager exposure to a wide range of activities. As a result, the young manager develops awareness of the problems of different departments, departments, the need for coordination, the dynamics of informal organisation and the interrelationships interrelationships  between objectives of different different subunit of the organisation. This This knowledge is vital to success in higher-level positions and useful for even lower-level ones. Japanese organizations utilize job rotation much more extensively than American organisations. One study found a strong relationship between the amount of challenge new management trainees received and their t heir subsequent career progress. Those individuals  whose initial tasks tasks were demanding and and challenging developed high performance performance standards and were better prepared for future assignments than those given less challenging tasks. The former group was also promoted more rapidly.

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CAREER MANAGEMENT  An extension of management management development, career management management programmes programmes have been developed by a variety of companies companies and consulting firms since the 1970s. Career management is a formal programm p rogramme e "designed to develop programs or paths by which employees progress in the organization, that helps them develop themselves to their fullest capacity, and that makes the best use of the ir talents from the organisation's point of view". Career management programmes programmes help the organisation use its people to full potential and help individuals achieve their capacities capacities to the fullest. This is important because, studies indicate that people usually have a rather passive attitude towards their careers. They tend to allow important career decisions to be initiated by others, rather than basing them on their own-interests, needs, and goals.  According to writers writers and researchers researchers in the field, career management management programmes programmes result in greater commitment commitment to the organization, organization, increased motivation and productivity, productivity, and less turnover and underutilization of employees. SUMMARY   Among the resources resources that an organization organization uses to achieve the objectives, objectives, human resource, undoubtedly constitutes the key resource. A sound s ound understanding understanding of the

management of people is therefore essential for a manager. The managerial function, staffing, is precisely concerned with the various aspects of human resource such as recruitment, selection, training, training, compensation and development of people to the fullest full est extent possible. The steps involved in human h uman resource planning such as assessment of present supply, future needs and development of a human hu man resource resource programme have been discussed in detail. Recruitment, its purpose and the various techniques used for the final selection of people to fill the th e positions in the organization are also examined. The lesson also focused its attention on human resource development de velopment.. Socialization of the employees, performance appraisal, the importance of training and the me thods used to update the skills has also been dealt with. REVIEW QUESTIONS 1. How is human resource planning necessary? What factors should a manager consider consider in human resource planning? 2. What are the important methods of recruitment? Discuss the relative advantages and disadvantages associated with each method. 3. How is the selection of employees is made in organisations? Do you suggest any  variations in the the intensity of selection selection procedure for for the various levels of positions positions in the organisation? Why? 4. What do you mean by performance appraisal? appraisal? How is it useful, u seful, for the development of human resources? 5. What are the significant trends that you have noticed in the human resources management, of late, in India In dia in regard to the selection, training and compensation. compensation. Give examples. FURTHER READINGS John B. Miner and M.G. Miner, 1977, Personnel and Industrial Relations: A Managerial  Approach, Macmillan, Macmillan, New York.  Wendell L. FVench, 1982, The The Personnel Management Process, Houghton Houghton - Mifflin, Boston. Stephen J. Carrol and a nd Henry L.Tasi, 1977, Organisational Behaviour, St. Clair P ress, Chicago. Leonard R. Sayles and and G. Strauss, 1977, Managing Managing Human Resources, Resources, Prentice-Hall, Prentice-Hall, Englewood cliffs, New Jessy.  Arthur G. Bedlian, 1993, 1993, Management, The The Dryden Press, New York. York.

- End Of Chapter LESSON - 13 THE DIRECTION FUNCTION

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To discuss the meaning and nature of direction function. To define the concept of leadership so as to enable the student to understand the fictions of leadership. To discuss the various theories of leadership.

 While planning, organising organising arid staffing can be be considered as preparatory preparatory managerial managerial functions, controlling is intended for checking the things in a way as we desire. The connecting link between these functions is directing. It is the live link that establishes meaningful interaction among superiors and subordinates through proper directions and guidelines. It is 'Directing' which initiates organised action with the purpose of fulfilling the corporate objectives. It creates appropriate work environment that facilitates efficient duties by the human beings. Thus it has become one of the portent functions of Management to achieve organizational o rganizational goals through proper instructions and guidelines. In order to clearly understand the direction function of Management, the following definitions are helpful: Urwick and Brech have defined this concept as "guidance, inspiration, the leadership of the work force f orce that constitute the real core of the responsibilities responsibilities of Management". Theo Haiman defines that "directing consists of processes processes and techniques useful useful in issuing Instructions and making certain that, operations are carried out as originally planned". One of the latest definitions definitions is given give n by Koontz and O' Donnell. They defined de fined that 'Direction' means "the interpersonal aspect of managing by which subordinates are led to understand, contribute effectively and efficiently to the attainment of enterprises objectives".  A review of the above definitions definitions reveal that the the direction function function consists of issuing issuing instructions, exercising supervision, providing leadership and securing motivation f rom the workers. Some of the important features of direction function, to sum up, have been listed below:

1. 2. 3.

4. 5.

It indicates scalar chain. It means that the top management management directs the middle midd le management which in turn influences the operations people. It encourages the Supervisor to act as a guide, interpreter, inte rpreter, teacher and coordinator. The direction function is not a static function but it is a living function. In other  words, it deals with guiding, training and and motivating motivating the subordinates in a desired manner. The most important characteristic of direction function is that i t deals with the human factor. Direction function mainly deals with use and development of human factor.

Failing to understand the role of the human factor in the realisation of organisational goals, leads to inefficiency and closure of the organisation. organisation. Hence, Direction function makes the executives to think in terms of  (a) issuing instructions instructions (b) proper supervision (c) motivation (d) leadership and (e) communication. communication. It is a well-known fact that without without paying proper attention to the above p oints, no manager can succeed in obtaining the goals. PRINCIPLES OF DIRECTION 1. 2. 3. 4.

There must be harmony among several objectives of the corporation. Conflicting attitudes must be reconciled. Inefficient workers should be removed  Appropriate policies policies and guidelines should should be framed freer, time time to time in order to secure efficient operations through the co-ordination of all the efforts.

TECHNIQUES OF DIRECTION Usually three kinds of techniques techniques are used for carrying out the direction function, such as: a) delegation of authority,  b) communication communication and c) leadership

'Leadership' is one of the most important important functions of the 'Direction' function. It encourages efficient use of all resources in an optimum manner for the benefit of the organisation. The following pages centre around the significance significance of the various facets of the Direction function. LEADERSHIP Management and Leadership are often confused as the same. No doubt, leading is an essential function of management. But that does not mean that management is just leading. It involves many things like planning, organising, staffing and controlling people. All these managerial functions become stale if managers do not know how to lead people. Particularly in modern organisations, somebody should show the way to others for attaining the goals. This characteristic feature is termed as 'leadership'. It is neither mere direction nor motivation. motivation. It is a live wire between plan and action. Ability to lead effectively is one of the keys for successful management. The leader must  basically and clearly understand understand the attitudes, attitudes, the values, the flow of authority authority and the purpose of organisation. It means that the essence of leadership is followership. Without followers there cannot be a leader. The concept of leadership has been defined by many authors au thors in different ways. Koontz Koontz and O' Donnell have defined this concept as "the art of influencing people so that they  will strive willingly and enthusiastically enthusiastically towards towards the achievement of group goals." It emphasises the fact that the leaders help the groups in understanding the objectives of the organisation. Thus leadership is an endless process of influencing people so that they will strive willingly and enthusiastically towards the achievement of group goals. FUNCTIONS OF LEADERSHIP 1. 2. 3. 4. 5.

Every leader, as a superior, has to delegate a part of his authority to the subordinates. Once authority is delegated, the leader must try to motivate the people to better levels of performance. performance. The leader must try to create good climate for achieving maximum operational operational efficiency. Promoting and protecting new novel areas.  A leader must always try to develop develop his own people from within. within.

Hence leadership is not bossing. The functions of a leader includes, apart from ordering, "teaching, inspiring, guiding, interacting, initiating and solving problems". It is an endless personal process. This personal personal ability to lead effectively is one of the keys to  become a successful successful manager. In other other words, people have to follow follow the manager in order to make make him a leader. Hence, the essence of leadership is followership. Motivation Motivation and leadership are closely related with each other as the leader l eader tries to understand the reasons for why people act as they do. INGREDIENTS OF LEADERSHIP

(i) Power :  A leader must know the nature nature and source of power besides its affective use in a responsible way.

(ii)Understanding (ii)Understan ding people needs, feelings, beliefs, values

:

 A leader must have the the ability to comprehend comprehend the of subordinates and different motivational forces.

(iii) Inspiring followers follower s induce and inspire his

:

It is a rare ability. A leader must always try to subordinates. He may have all personal qualities

like charm and appeal that may encourage the people to do d o what the leader  wants.

(iv) Style of leadership : The manner in which the leader adopts his capabilities to suit the situation conducive to goal realisation. Leadership is an important aspect of managing. This ability varies from individual to individual that depends upon the leader's explicit and implicit pattern of behaviour of influencing his subordinates. Considerable amount of research has been done on this aspect. It is difficult to summarise the whole quantum of theory in this chapter. However a brief attempt is made to identify some major theories which form the base for different leadership styles.

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TRAIT THEORY  This theory derives this belief from the philosophy of ancient Greeks and Romans that leaders are born and not made. But the acknowledged leaders like Napolean, Hitler, Lincoln, Ceasar, Kennedy, Mahatma Gandhi, Martin Luther King have n o uniform intellectual, social, physical and psychological characteristics. characteristics. To prove the concept of trait theory as valid, o one ne has to identify specific characteristics characteristics that all leaders possess. To sum up, Stogdil has identified some of the important traits as follows: a) Physical traits (appearance, (appearance, energy, height etc.) e tc.)  b) Intelligence traits (understandin (understanding, g, comprehending, decision decision making etc.) c) Personality traits (adjustability, (adjustability, aggressiveness, enthusiasm, enthusiasm, will power, self confidence etc.) d) Task related traits (initiative, perseverance, achievement, etc.) e) Social traits (co-operation, ( co-operation, interpersonal interpersonal relationship, group cohesion etc.) In addition to the above traits some more characteristics like ambition, honesty, creativity and charisma charisma have been identified identified as key traits. It is true that all leaders need not possess all the traits. And sometimes even non-leaders may possess either most or all of them. The trait approach to leadership has been blessed with the following limitations. 1. 2. 3.

It neglects the needs of the followers. It fails to recognise the relative importance importance of various traits under changing conditions. It does not separate the cause and the effect (whether leaders invariably invariably possess self-confidence or success makes the leaders to build confidence).

Different authors have propounded different theories explaining the leadership  behaviour and styles. The following section details the various styles styles of leadership. STYLES OF LEADERSHIP L EADERSHIP For the purpose of easy understanding, leadership styles may be conveniently studied as follows: (a) Styles based on the use u se of authority  (b) Styles based on behaviour behaviour (c) Other miscellaneous styles are explained below: (A) Styles based on the use of authority 

Depending upon how a leader uses his authorit au thority y one can identify three basic styles: (i) autocratic, (ii) democratic/participative, democratic/participative, and (iii) free-rein type. (i) Autocratic leader believes in power. He passes orders unilaterally and expects ready compliance. He believes that he is able to control people through rewards and punishment. (ii) Democratic leader believes in sharing sh aring ideas and opinions. He consults subordinates subordinates in the process p rocess of decision making. He encourages two-way communication and participation participation of subordinates in all types of decisions. (iii) Free-rein leadership is no leadership at all. The leader uses no or little power. He gives complete freedom to subordinates. People are encouraged to set their goals and means of achieving them. They are given high degree of independence in manning their operations. Real time situations vary from company to company and from manager to manager. There is no single uniform style of managing people in organisations. organisations. A manager may be autocratic at one instance (enforcing the rule ru le regarding safety devices) and democratic democratic at the other (consulting the followers regarding change of time at work schedule). (B) Styles based on behaviour Circumstances change constantly constantly creating new situations and challenges. The behaviour of the leader is moulded by the changing patterns of group attitudes and experiences. Different dimensions of a i- rider's behaviour have been thoroughly probed through Ohio studies.  According to these these studies a leader's behaviour behaviour is influenced by two two aspects- initiating initiating structure and consideration. (i) Initiating structure and consideration Initiating structure structure refers to the ex tent to which a leader defines and organises his own role as well as the roles of his subordinates. It spells out the task behaviour of a leader. On the other hand, consideration refers to the degree by which which the leader's behaviour is characterised by mutual trust, respect for subordinates and regard for their feeling. It indicates relationship behaviour. As initiating structure and consideration are two distinct features, existence existence of one does doe s not mean the absence of the other.

 Actual behaviour behaviour of a leader in a given situation may consist of combination combination of these two aspects. The following diagram (IV. 1 .a) gives give s the gist of the findings of the Ohio state studies on leadership: The above four quadrants have been representing various combination of task and relationship behaviour that a leader can exhibit at a particular point of time. Actual  behaviour varies among among these four alternative alternative combinations combinations depending upon the the situation. (ii) Managerial Grid Robbert R. Black and James S.Mouton have developed five different styles of leadership leadership through this concept of Managerial Grid. This concept has been exclusively used for training the managers through enabling them by identifying the various skills of leadership styles. This concept has been mainly based upon two important factors – (a) Concern for production (Task orientation) and (b) Concern for people (Relationship (Relationship orientation). The essence of this theory is presented in the following diagram No.(IV. l. b). In the above diagram, concern for production is shown on the horizontal axis and concern for people is identified on the verticle axis. The scale recorded varies from 1-9. It indicates that the concern for production/people production/people becomes more important to the leader as his ranking advances from 1-9 gradually. The five s tyles of leadership are  briefly explained in the following following lines. (a) Impoverished (1-1) : As :  As the rating indicates, indicates, this styles involves involves little concern for  both people and production. production. Leaders under this this style have minimum minimum involvement in their jobs and mostly act a ct as messengers, passing information from supervisor to subordinates. (b) Country-club (1-9) : A :  A sort of informal environment environment is .created wherein wherein everyone can coordinate the effort and accomplish the objectives in a relaxed and friendly atmosphere which is putting emphasis more more on the needs of the people, bothering little about production. production.

(c) Task : It is another extreme style of leadership l eadership commonly referred to as Autocratic Style. Here leaders are concerned concerned only with developing efficient operations by arranging a tight structure and conditions of work. They have little or no concern for people. (d) Team: It is also an extreme e xtreme style of leadership. Here, the leaders display a rare quality or ability inter-woven with the production needs of the enterprise with the needs of the individuals. In other words, these leaders believe that the h ighest concern concern for production as well as people alone can accomplish the organisational organisational objectives. (e) Middle of the Road (5-5): In reality, a leader may fall under any one of the above four styles. Sometimes, he may have a typical style which can be placed somewhere on the grid. Some leaders may have maximum maximum concern for production as well as for people. They set the objectives at moderate levels considering the feelings of the p eople.  Adequate level of production and and satisfaction satisfaction can he reaped through through this style. The Managerial Grid is a useful tool for identifying different leadership styles. The answer to the question what kind of leader he is depends upon the personality, characteristics, characteristics, enterprising ability, a bility, environment and other situations. (iii) Tri-dimensional leadership style  While the managerial grid and Ohio Ohio State studies studies have based upon two factors factors - Task oriented and relationship oriented for explaining the styles of leadership, Prof.W.J.Reddin has suggested effectiveness as the third factor in deciding the style of leadership. The term 'effective 'e ffectiveness' ness' refers to how the leader's personality interrelated  with the situation to which he is subjected subjected to operate his activities. activities. In this Tridimensional leadership style theory, how effective effective or ineffective are the leaders in a given situation can be understood very easily. When one's style is appropriate appropriate to a given situation, he is termed as effective and vice-versa. The basic styles are integrated with the concept co ncept of effectiveness and/or summarised summarised  below: a) High task and low relationship behaviour is termed as "dedicated" style. style.  b) High task and high relationship is viewed as "integrated" style. c) Low task and high h igh relationship behaviour is considered considered as related style; and d) Low task and low relationship behaviour is known as "separated style". Depending upon the effectiveness or ineffectiveness of the leader in a given situation. 3D style identifies the following real time challenging situations. Basic styles

Effective styles

a) Dedicated

Benevolent Autocrat

Ineffective style Autocrat

 b) Integrated

Executive

Compromiser

c) Related

Developer

Missionary 

d) Separated

Bureaucrat

Deserter

(C) Other styles None can succeed in explaining the best style of leadership because it depends upon  various factors. factors. No leader can be rigid or free free all the time. He has to adopt different  behaviour in different situations. situations. Since Since all the existing theories have have been proved to be inadequate, the situation is set se t for the development of contingency theories. theories. Some of the important contingency theories theories have been explained expla ined in the following paragraphs. 1) Fielder's Contingency Model: Fred E. Fielder and his associates of the University of Illinois have suggested a contingency approach to leadership. According to this approach, people become leaders not only by virtue of o f their personality attributes attributes but also by virtue of various situational factors including leader's ability to interact with group members. This theory holds that three major situational factors determine the success or otherwise of a given leader. They are: (a) Position power This indicates the degree of power of a position which permit permitss a leader to secure group members compliance compliance with his direction. In other words, a leader with clear position in power can obtain good followership fol lowership more easily. (b) Task-struct T ask-structure ure Here, the leader's success depends upon how clearly he spells and sells a ssigned tasks through his people so that subordinates are made more responsible and accountable for their performance. performance. (c) Leader-members Leader-members relationships relationships This is the most important dimension. While the power of a position and task structure are largely under the control of an organisation, organisation, developing effective e ffective relationships relationships depends upon the liking and willingness on the part of subordinates subordinates to a given leader. To sum up, a particular situation appears appears to be most favourable favourable to the leader when he is liked by his followers, when he gives clear-cut direction about the job, and when he is  blessed with appropriate appropriate position. position.

On the other hand, the situatio s ituation n becomes unfavourable to the leader when he is disliked, faces vague and unstructur u nstructural al jobs and an d has little power. Fielder's research has p roved that task-oriented leaders would be more effective under "unfavourable" or "favourable" situations. In contrast, relationships oriented leaders tend to exhibit better performance under situations that are moderately suitable to leaders. (2) Path-Goal theory of Leadership L eadership This theory is based upon the findings of various motivational motivational as well as leadership theories already proposed by various authors. Robbert House, who suggested the "Path Goal Theory", believes that the main function of a leader is to (a) clarify cl arify and set goals; (b) help subordinates find the best way for achieving the set-goals; set-goals; and (c) remove obstacles, if any. This theory is not suggesting any particular style. On the other hand, it is only suggesting the applicability of a relevant leadership style under different d ifferent situations. The success of a leader depends upon how well, i.e. can set the goals for his subordinates and help them in attaining a ttaining the same with minimum difficulty. Well established Path-Goal relationship leads to high rate of success through greater satisfaction among subordinates. When jobs are unclear and difficult difficult to achieve, subordinates are frustrated. They look forward for directions from the leader. The key to this approach is that the leader can influence influence the paths via behaviour in goals. (3) Leadership Continuum Real time leadership styles vary between the two extreme varieties -Authoritarian and Democratic. Democratic. Evolving different styles suitable to different situations has been well explained by Robbert Tannenbaum and Warren H.Schmidt through "Leadership Continuum Model". This model suggests a range of styles that can be a dopted to different situations. According to this theory, leadership effectiveness is the function of the leader, the follower and the situationa s ituationall variables. As per this theory, the following are the most important elements that may influence a leader's style. a) Forces operating in the leader's personality such as confidence, judgement, value systems, feeling of security, preference to a particular style etc.,  b) Forces operating operating in subordinates including including their knowledge, experience, experience, tolerance, tolerance,  willingness to accept accept responsibility responsibility etc. c) Forces of a given give n situation: The work situation is made up of a number of forces like team spirit, pressure of time behaviour time  behaviour of workers during during emergency situations. situations. They also exert lot of pressures on leaders. d) Forces of the organisational environment: Elements like planning, organising, directing and controlling have a definite influence on the organisational organisational environment. They also influence the subordinate's motives, expectations, rewards and relationships.

(e) Influence of the social environment via Labour Unions. Government Regulations. Consumer Courts and other outside parties may significantly affect the leader's  behaviour. Functions of Leadership style  Whatever might be the the style, every leader has to perform perform some functions. functions. Since leadership is the process of o f influencing people, it has ha s to perform multi-dimensional functions in obtaining the willing contributions of the subordinates. Some of the significant functions of leadership are briefly explained below: 1) Planning and organsing the organisational activities in a desired manner. 2) Influencing the subordinates to accomplish the goals through reward and punishment. 3) Motivating and directing the subordinates to better levels of performance through proper guidance from time to time. 4) Understanding the subordinates' expectations and aspirations and obtaining their  willing cooperation in in the realisation of organisational organisational goals. 5) Remove ambiguities and issue clarifications in order to make them more responsible on the job. 6) Creating a favourable organisational climate so as to retain and deve lop human resource. 7) Understanding the macro economic influence over the organisation organisation and steer the Company on the path of success. CONCLUSION There is no one best way of leading the people. Various theories propounded by eminent authors have only suggested the varieties of ways that are available for leaders in different situations. One has to grasp the knowledge to understand the total theory on the subject. Every leader has to adopt his own style depending upon the situation. How the leader influences the people is not important. important. What is important is how a leader l eader helps subordinates in accomplishing organisational organisational as well as personal goals. CASE STUDY 1 Problem of Leadership at the Top The Board of Directors of Ferrow Alloys Company has been searching for a right person to become president of its 'Metals Division'. The Board of Directors Di rectors has appointed appointed a "Search Committee" to look after this issue. Since the search committee has failed to

locate a proper person for this post, it has asked a sked the Directors to recommend recommend the name of any known person with suitable background. At last, the Board has received the nomination of Mr. Stanley, a nephew of Mr. Joseph, the largest l argest shareholder in the Company. The search Committee has decided to recommend Mr. Stanley's name for presidentship. They have accepted this proposal and Mr. Stanley was made president. In his first meeting with his executives, he put his mind like this.... "Let us work together in improving the efficiency of the operations. Each Each one of you will  be given an opportunity opportunity to comment on the standards standards that will be set for you; it it would  be nice, if you could think individually. individually. It would be too nice, nice, if you could think the point from the group's perspective. Let us stand unitedly and surpass the old records. The success of this Company will depend upon the ability of lead ership, and willingness on the part of employees employees in carrying carrying out the decisions. I solicit your support from all angles". QUESTIONS 1) What do you think of Mr. Stanley's Stanley's leadership style? style? 2) Describe Mr. Stanley's perception perception of the best leadership styles using using the 'Situational Theory of Leadership'? CASE STUDY 2 Choice of a Leader Mr. Rajesh is the Managing Director of a Paints Manufacturing Company. To increase sales, the Board of o f Directors wanted to start a full-fledged fu ll-fledged marketing department. Mr. Rajesh is entrusted with the task of finding a suitable candidate to head the proposed marketing department. After considering considering a number of candidates, he has narrowed down his choice to two persons: Venkat and Rajesh. Mr. Venkat has an excellent ex cellent track record in the company. During his fruitful association  with the company, company, to be precise, precise, ten years, he has always shown a high degree of enthusiasm and initiative in his work. He is still young (35 years) dynamic and aggressive. He is result-oriented and is, naturally, more interested in ends rather than means. One of the workers, testifying his leadership qualities, remarked thus: "Though he is harsh at times, you will know where you stand when you work with him. h im. When you have done a good g ood job, he lets you know k now it". Mr. Venkat is willing to shoulder additional responsibilities. responsibilities. He decides de cides things quickly and when action is required, he is 'always on his toes'. During his 15 years tenure in the Company, Mr. Rajesh has endeared himself to all his colleagues by his /superior workmanship workmanship and pleasing manners. He always believes in the principle of employee participation in the decision making process. Unlike Mr.  Venkat, he encourages encourages his subordinates subordinates to come out with with innovative ideas and useful useful

suggestions. Before arriving at a decision he always makes it a point to consult his subordinates. Not surprisingly, all his subordinates are very v ery pleased to work under him and praise his leadership lea dership qualities. Company records also bear evidence for the increase in the production soon after Rajesh became the head of his department. 1) Analyse the leadership qualities and styles of Mr. Venkat and Mr. Rajesh. 2) Between the two people, whom would you recommend for the position of a marketing manager. REVIEW QUESTIONS 1) What is Direction? Explain the scope and role of the direction function in modern organisations? 2) What are the principles of direction? Comment on the various aspects relating to the direction function. 3) Define the concept of Leadership. Mention some of the important qualifies of a good leader. 4) Comment on the five main Leadership positions positions depicted in 'managerial grid'. Which one would you advocate? REFERENCE BOOKS 1) Essentials of Management Management 2) Management Structures, -

Harold Koontz. Koontz. Arthus Elkins

Functions & practices 3) Management

- James A.F. Stoner Charles Wankel.

- End Of Chapter LESSON-14 MOTIVATION

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To define the concept "Motivation" and enable the student to understand the process of motivation. To identify the primary and secondary motives. To discuss the theories of motivation propounded by Mc Gregor& Maslow,  Vroom, Alderfer and Me Celland. To explain the importance importance of financial and non-financial incentives.

INTRODUCTION Organisations are successful when all the members contribute contribute their performance in an optimum manner in a desired way. The performance of a group directly depends upon the ability and willingness of its members together with the technology used. The term 'ability' refers to the individual's capability of handling the job at a certain time in a given way. While willingness depends upon the level leve l of motivation, technology is influenced by the level of research. Thus, symbolically. Performance = Ability x Motivation x Technology  Modern Organisations are are recruiting hundreds of people. Some of them may be good doers and some of o f them may be bad/poor performers. The Management cannot take the chance of removing poor performers. The only alternative left before it is to encourage and stimulate the poor doers in such a way that they are persuaded to contribute to the organisational objectives. Hence, the problem before the Management Management is how to motivate people. The concept 'Motivation' though looks l ooks simple, connotes different meanings in different situations. For the purpose of our study, it always indicates work motivation. MEANING The word "motivation" has been derived from the Latin word "movere". It means "to move with". The task of the Manager is to guide the people's action in a desired way. Motivation is a general term. It includes drives, desires, needs, wants, wishes and similar forces. The motive is an inner desire. It activates the individual towards a particular goal. Desires, needs and wishes are inborn impulses which stimulate the action of the individual. Motivation is the art of understanding understanding these motives and energising and directing the behaviour towards a particular goal.  According to Scot, motivation motivation means means "a process of stimulating stimulating people to action action and to accomplish desired goals". Koontz and O' Donnel define the concept of 'motivation' as "the act of inducing the subordinates su bordinates to act in a desired manner". In the words of

Encyclopedia of Management, the term 'motivation' 'motivation' refers to "the degree of readiness of an employee to pursue some organisational goals". Thus, motivation is the act of stimulating the subordinates to a desired course of action.  A review of the above definitions definitions throws necessary necessary light on the understanding of this this concept. All workers have got one or the other type of energies. Motivation is the art of energising the human skills in a desired way. The Energisation process process is a complex co mplex one since it involves understanding the needs and drives of the people. Hence, it is termed as a psychological process. Not only that, it is a continuous activity. activity. Even while the organisation is going good, the Manager has to practise motivation to keep the going  better since since motivation varies from individual to individual. individual. Different techniques techniques may be used by the manager to motivate the people from time to time. DIAGRAM NO.IV.2.A.

Motivation Motivation is a process that starts with a physiological or psychological deficiency which is called a need. Needs are created whenever there is an imbalance. They activate the human behaviour in a desired way for the fulfillment of the needs. They are actionoriented. They provide necessary encouragements to reach a particular goal. Tha t is why they are at the heart of the motivational process. Diagram (IV.2.A) exhibits the need - want - satisfaction chain that plays a prominent role in the motivational motivational process. Feeling of an unsatisfied need gives rise to wants. Fulfillment of human wants necessitates action which in turn, creates tensions. Actions of the individual, if properly directed, result in satisfaction. satisfaction. The point to member is that a fulfilled need ceases ce ases to act as a motivator. If one need is satisfied, a higher order need may emerge in the mind of the individual which further necessitates necessitates a higher order level of effort for fulfilling the same. Some people may get confused with the relationship  between motivation motivation and satisfaction. satisfaction. Motivation refers to the the drive and effort to satisfy satisfy a given want. Satisfaction refers to the contentment and feeling experienced by the individual when his want is satisfied. While 'motivation' 'motivation' implies the drive force for an outcome, satisfaction refers to the outcome outcome itself. Motivation is important important to management due to many reasons. (a) Higher Performance  A good motivational system brings brings out the latent and potent abilities abilities of the employees for the accomplishment accomplishment of organisational goals. It encourages them to contribute enthusiastically for better performance. Poorly motivated people may hinder the goals. (b) Low absenteeism and Turnover Motivated employees are highly committed and loyal to the organisation. They come punctually and stay for longer hours because they are satisfied individuals. It reduces labour unrest, absenteeis a bsenteeism m and turnover.

(c) Facilitates change Motivated employees are receptive and co-operative. Hence, motivation helps in eliminating the negative attitude of o f employees in overcoming the resistance. (d) Team Spirit  A high level of motivation motivation results in harmonious relations relations between Management Management and  Workers. It encourages encourages high level of morale morale and discipline. (e) Image of the Enterprise  A Company that provides satisfaction satisfaction through motivation motivation can project project better  better image in the eyes of the public. It enables the Company Company either in retaining or or attracting attracting talented  work force. It fulfills fulfills the creative desires of the of the people. That is why Rensis Likert has commented that motivation is the core of Management.

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TYPES OF MOTIVES  A motive is a personal personal and internal feeling. It is concerned with with the intrinsic forces forces operating within an individual which impel him to act or n ot to act in a given way. Motives are different types. They are grouped into three categories for the purpose of understanding in an easy way. i) Primary motives They are also termed as biological, physiological and unlearned motives. Primary motives always take precedence over the secondary motives. Primary motives include hunger, thirst, sleep, avoidance of pain etc.. Since all people are human and their  biological system system is common, the the make-up of the primary primary needs is essentially essentially the same among all the individuals. That is why they are called as "biological and unlearned motives". ii) As ii) As the society has been transforming, human needs have become complex. Primary motives are playing less prominent role and learned behaviour is playing a crucial role in motivating the people. A motive must be learned in order to be placed in the list of

secondary classification. Some of the important secondary motives are power, achievement, affiliation etc., power motive implies the need to manipulate others or dominate others. In modern organisations, a person's life style is more characterised by the need for competence which can be well met by the innate drive for power.  Achievement motive motive is another important important example of secondary secondary motive. It explains the the desire to perform in an excellent manner under competitive situations. The feeling of  belongingness is accepted accepted as an important important parameter in determining determining the positive positive human  behaviour. Similarly, Similarly, status and security security may also stimulate stimulate positive or negative human human  behaviour in work situations. situations. iii) General Motives Understanding the general motives is important since they are relevant to understand the basis of human behaviour. These motives are unlearned in the sense that they are not physiologically based. While the fulfillment of primary needs seek to reduce the tension, general needs induce the person to increase the stimulation. Motives like curiosity, manipulation manipulation and affection can be cited as best examples of general motives. If employees are not allowed to express their curiosity, they may not be motivated. Even general motives are very intense among human beings and play a crucial role in motivating people through inter-personal inter-personal relationships and by minimising conflicts. Thus, motivation has been viewed v iewed as a basic psychological psychological process consisting of primary, secondary and general motives.

- End Of Chapter LESSON - 15 THEORIES OF MOTIVATION

Several theories have been propounded pr opounded by eminent personalities explaining the reasons and process of motivation. Understanding these theories acts as a foundation for understanding the work behaviour of the people. Some of the significant theories theories have  been explained in the following paragraphs. THEORY 'X' AND THEORY 'Y': Douglas McGregor proposed two different theories theories namely Theory ‘X’ and a nd Theory ‘Y’ in 1960. Basically, these two theories explain about the human nature. While theory ‘X’ deals with the negative aspect, theory ‘Y’ dealing with positive aspect of the human  behaviour. Theory ‘X’ involves involves traditional approach approach and based upon the following following four assumptions held by the managers about the workers. a) Workers dislike work and are lazy.

 b) Since workers dislike dislike work, they must must be controlled with punishment punishment to achieve achieve the goals. c) They don't d on't want to take up u p responsibilities responsibilities for themselves and seek formal direction from the boss whenever possible. d) Workers place security of their job above all other factors associated associated with work and display little ambition a mbition..  As against these these negative views about the human behavior behavior and its nature, nature, McGregor listed out four different assumptions under theory ‘Y’. ‘Y’. They are: a) Workers can view the work as natural as rest or play;  b) Workers can exercise exercise self-direction and self-control, given the proper environment; environment; c) An average worker can accept responsibility and learn to grow; d) Workers are creative, imaginative imag inative and resourceful;. Frankly speaking, the above two theories have nothing to do with motivation. They explain about the nature of human behavior under two sets of different assumptions. assumptions. The assumption under theory 'X' that workers must be coerced and regulated for accomplishing accomplishing objectives is akin to the characteristic characteristic policy which has become obsolete method in managing people. However, these theories enable us to understand how the manager should mould under two sets of situations situations for getting things done. NEED HIERARCHY THEORY: The most well-known theory of motivation is Abraham Maslow's hierarchy of needs. He proposed that in every human being there exists a hierarchy of five needs. They are: i) Physiological or basic needs (eg. food, water, clothing, shelter etc.); ii) Safety and Security needs (eg. security of job, protection from harm etc.); iii) Love needs (eg. affection, friendship, belongingness, etc.); iv) Esteem needs (eg. Self-respect, status, recognition, achievement etc.);  v) Self actualisation needs (eg. growth, growth, fulfilment of ambition, ambition, bringing out the real potential etc.). The above needs can be depicted in the following Diagram No. (IV.2.B): DIAGRAM NO. (IV.2.B)

HIERARCHY OF NEEDS

 According to Maslow, Maslow, if lower need is satisfied, satisfied, the person moves moves up the ladder to the next higher order need. It means that if basic needs are satisfied, workers can be motivated by fulfilling the next higher order needs i.e. safety needs. This theory implies that workers are motivated by fulfilling unsatisfied needs rather than by satisfied need. Maslow separated the five needs into low (basic and safety needs) and higher (love, status and self actualisation) actualisation) order needs. While lower order needs are predominantly predominantly satisfied externally, higher order needs are satisfied satisfied internally. This theory has received  wide recognition recognition among the practicing managers managers because because of its logical link. This does not mean that this theory is free from criticism. criticism. The first criticism criticism is that this theory has not specifically mentioned about work related needs. Secondly, the strength of each need varies from individual to individual. Hence, strict ordering of human needs in the above a bove hierarchy hierarchy could not be proved empirically. empirically. Thirdly it is criticised that it only deals d eals with the content of motivation rather than the process of motivation. motivation. Two - Factor Theory  Frederik Herzberg and his associates conducted a research study and ha ve identified two sets of factors. According to this study, motivation motivation depends upon satisfaction. satisfaction. The two sets of factors affect satisfaction or dissatisfaction of workers. The first set of factors is termed as maintenance maintenance factors. They are salary, job security, working conditions, quality of supervision, interpersonal relationships, relationships, company's policy and administration. These factors are related to job environment. Presence of these factors is necessary to avoid dissatisfaction among workers. These factors ought to be maintained as a matter of compulsion in every work situation. The second set of factors is related to the content of the job. They include growth, advancement, recognition, recognition, achievement, ach ievement, accepting increased responsibility etc.  According to Herzberg, Herzberg, these factors factors are motivational motivational factors which which stimulate the  worker to better better levels of families. Hence, these these factors are termed termed as satisfiers. satisfiers. To sum up, while the first set of factors have to be maintained as a matter of compulsion compulsion in order to remove dissatisfaction the second set of factors alone are responsible for motivating people. This theory is also not free from criticism. criticism. Firstly, there is too much botheration about satisfaction, dis-satisfaction dis-satisfaction and the point of no satisfaction. satisfaction. There is no guarantee that satisfaction leads to productivity in in all cases. Secondly, the concept of satisfaction is influenced by a good number of off the job and on the job factors. Thirdly, the impact of situational variables have been ignored in this theory. Fourthly, like need hierarchy theory, it is also concerned with the content of motivation and not with the process of motivation.

 Vroom's Expectancy theory:  Victor Vroom proposed proposed this theory theory as an alternative to the the content models explained explained in the earlier paragraphs. It is the most widely known theory of motivation for the purpose of understanding the process of motivation. According According to this theory, a person's desire to work at any time can be conditioned by two factors. a) Existence of one or more personal goals on the part of the employee; and  b) His expectation expectation as to the relative worth worth of his performance performance for the attainment attainment of such goals. When the worker believes that his performance will lead to the fulfillment of personal goals, he tends to become a high p roducing worker worker and vice-versa. It has been stated by Vroom as given below: Force (Motivation) = Valence x Expectancy  Here the term "Valence" stands for the strength of an individual's preference for an outcome and expectancy to the probability that a particular action will lead to a desired outcome. This theory establishes four important links in the process of motivation. motivation. Efforts ~ Performance — Rewards/Awards ~ Goals. This theory has three important implications implications to managers. Firstly, it is necessary to provide appropriate rewards to satisfy the individual needs. Secondly, managers are required to establish a close link between efforts and performance between performance and rewards and finally between rewards and personal goals. Thirdly, this theory recognises the fact that there is no universally acceptable method for motivating people  because of the influence influence of contingency factors factors from time time to time.  Achievement  Achievement Theory  David Me Cleland has identified three basic motivating needs such need for power, need for affiliation, and need for achievement. Though all these three needs are important to management in understanding the process of motivation, to Me Clelan d need for achievement is of paramount importance. It is concerned with predicting the behavior of workers who have either high or low needs for achievement. Need for power has a great grea t concern for exercising exercising control and influence. People with this need, tend to be forceful, outspoken and demanding de manding in obtaining the work. People with need for affiliation are likely to be concerned with maintaining pleasant pleasant relationships. People with a high need for achievement have a strong desire for success. They love challenges.  Achievement motivated motivated people are blessed with with some special characteristics characteristics.. They are not gamblers and they dislike succeeding by chance. They like job situations. They like moderately challenging goals. They can influence their efforts through continuous

feedback of their performance. performance. They tend to become task-oriented people since they are  vitally concerned concerned with their personal achievements. achievements. The findings of this theory proved that achievement motivated people mainly come from middle-class families. This study further reveals that the need for achievement would be stimulated through class-room instructions and training programmes. This theory urges people to act on the basis of internally driven stimulus to improve their performance. performance. This theory has received wide recognition. ERG Theory  It is an improved model over Maslow's and Herzberg's theory theory on motivation. Clayton  Alderfer identified identified three groups of basic needs needs — Existence, Relatedness Relatedness and Growth. Growth. The existence needs are concerned concerned with physical well-being and survival (food, clothing, shelter, good-working environment etc). The relatedness needs emphasise the importance of interpersonal and group relationships. The growth needs are concerned concerned  with individual's inner inner desire for his personal personal development. This theory theory does not see see the needs as a hierarchy as stated by Maslow. It does not contend that a lower level need has to be fulfilled fu lfilled before satisfying a higher level need. Under this theory, a person's  background may may dictate that the relatedness relatedness needs will take precedence precedence over unfulfilled unfulfilled existence needs. It further assumes that the more the growth needs are satisfied, the more they will increase their intensity. In other words, this theory suggests that one class of needs might remain strong irrespective of the fact whether the other class of needs has been satisfied or not. Having discussed some of the important theories of motivation, a brief attempt is made to discuss the Management techniques that can be tried to increase motivation in work situations. Management generally uses financial and non-financial non-financial techniques to motivate employees. Financial Motivators The commonly accepted belief is that Motivation is directly or indirectly connected with money. It is true that money acts as a vehicle through which most of the higher order needs can be fulfilled. That is the reason why most of the organisations use money incentive as a means of offering satisfaction among staff. Productivity linked wages,  bonus, profit-sharing, profit-sharing, leave with pay, medical medical reimbursement, reimbursement, leave travel concession concession are included under this type of motivation. Experience proved that money is a most reliable motivator. Money as a reward for accomplishment is now accepted as a base for designing compensation methods. Besides money, there are some other motivators which deal either with personal development or with the environment of the employees. Dale Yoder has identified that  workers who set their own goals are capable capable of motivating. Therefore, Therefore, goal identification identification and participative management also have a great role to play in motivating the people.

Motivators  As the heading above states, states, they are not at all connected with money. money. In turn, they are connected with the position, work- culture and psychological mood of the employees. Some of the most commonly used measures under this heading are: a) Praise and recognition; recognition;  b) Status and pride; pride; c) Job enlargement; en largement; d) Job enrichment; e) Job security; f) Quality of work life. Recognition of the services of one employee may be shown in the form of praise. It may  be in the form of patting patting on the back of the employee, employee, recommending him him for promotion promotion or for entrusting confidential work etc. Similarly, provision of costly furniture, walldecoration and personal assistance will certainly enable the e mployees to feel proud  which in turn would would stimulate them for better better results. Enlarged Enlarged jobs may be entrusted entrusted to  work group so as to make them more more responsive responsive from planning phase phase to implementation stage. It makes the job less monotonous. Another method of motivating the people is job enrichment. Through this, job is made more interesting and challenging. It provides an opport op portunity unity for psychological growth of an employee. Job security is equally important. It implies that the employee will be continued with all economic and social security measures within the same plant. This kind of arrangement, arrangement, no doubt, encourages the worker to deliver better better performance.  Another concept concept gaining currency currency in modern organisations organisations for motivating motivating people is the quality of work life. Though this concept connotes different meanings meanings to different people, it refers to all aspects of worker's life with special reference to his personal and  work environment. environment. It includes fair compensation, compensation, good working working conditions, security, security, growth, protection, identity etc.

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Summary  The concept motivation cannot be studied in isolation. Motivating the work force is a complex and challenging assignment. A good g ood number of factors influence motivation in a variety of ways. Hence, it should be viewed from systems analysis. After all motivation is purely a psychological process. The basic process of motivation involves understanding about the needs, drives, action, and satisfaction satisfaction of the people pe ople at work. The above theories propose different approaches approaches to work motivation. motivation. While some s ome of those theories are rigid, some of them are dynamic. Understanding Understanding all these theories is important for effective management of human resource. It is the primary responsibility of every manager to create favourable climate either by offering financial or nonfinancial incentives for motivating the work force in a desired way. CASE STUDY (1)  You are incharge of a small departmental departmental store and have three three subordinates — Ram, Ram, Ravi and Gowtham. The key to the success of your y our departmental departmental store is to keep these employees as motivated as possible. Here is a brief summary summary profile on each of these subordinates.

Ram is the type of employee emp loyee who is hard to figure out. His absenteeism record is much higher than average. He greatly loves his family (a wife and three small children) and thinks they should be central to his life. The best way to describe Ram is to say that he is kind of a throwback throwback to the hippie generation generation and believes deeply in the values of that culture. As a result the things that a Company can offer him really inspire him very little. He feels that the job is simply a means of financing his family's basic needs and little else. Overall, Ram does an adequate job and is very conscientious, but all attempts to get him to do more have failed. He has charm and is friendly, but he is just not "gung - ho" for the Company. He is pretty much allowed to "do his own thing" as long as he meets the minimal standards of performance. performance. Ravi is in many respects opposite to Ram. Ravi is a likable l ikable guy, but unlike Ram, Ravi responds well to the Company's rules and compensation schemes and has a high h igh degree of personal loyalty to the Company. The problem with Ravi is that he will not do very much independently. He does well with what is assigned to him, but he is not very creative or even dependable when he is on his hi s own. He is also a relatively shy person and not very assertive when dealing with people outside the department. department. This hurts his performance to some degree because he cannot immediately immediately sell himself or the department to other departments in the Company or to top management. Gowtham, on the other hand, is a very asserti a ssertive ve person. He will work for money and  would readily change jobs for more money. He He really works hard for the the Company but expects the company also to work for him. In his present job, he feels no qualms about  working a sixty hour hour week, if the money is there. there. Even though the company company did not give him a raise on the premise that he was already making too much, he is quite a driver.  A manager at his last last place of employment employment indicated that, while while Gowtham did do an excellent job for the Company, his personality was so strong that they were glad to get rid of him. His former boss noted that Gowtham just seemed to be pushing all the time. If it was not for more money, it was for better fringe benefits; he never seemed satisfied. 1) Can you explain Ram's, Ravi's and Gowtham's motivation motivation by one or o r more of the work motivation motivation models discussed discussed in this chapter? REVIEW QUESTIONS 1) Define the concept 'Motivation'? Bring out the significan s ignificance ce of motivation in a modern organisation. 2) Compare and contrast Maslow's Hierarchy of Needs Theory and Herzberg's Two Factor Theory. 3) Explain the salient features of Vroom's Expectancy Theory of Motivation. 4) What is need for f or achievement? Explain how Me Clelland was successful in explaining the process of motivation motivation through his theory.

5) "Theory X and Theory Y" are not theories of motivation, instead they explain the nature of human behaviour with some basic assumptions - Comment. 6) Explain the role played pl ayed by financial and non-financial incentives incentives in motivating the  work-force.  work-force. REFERENCE BOOKS 1) Principles of Personnel Management Management

- Edwin Flippo.

2) Human Behaviour at work

- Keith Davis

3) Organisational Behaviour

- Fred Luthans

4) Personnel Management

- C.B. Memoria

5) Management

- Koontz & Weihrich.

- End Of Chapter LESSON-16 COMMUNICATION

LEARNING OBJECTIVES  After reading this lesson, you should be able to: to:     

Understand the meaning & rote of communication communication function in an organisation; Describe the basic communication communication process; Identify different communication networks; Explain the reasons for barriers in communication; communication; and Offer suggestions to maintain effective communication in an organisation. organisation.

INTRODUCTION The word communication has been derived from the Latin word "Communis "Co mmunis"" which implies common. Therefore, the term 'Communication' refers to the process of transferring transferring information from sender to receiver with the sole purpose of creating common understanding among the parties concerned. It is only the means by which one person can influence another. That is why it deals primarily with people. It is a basic need of the modern Management The desire for communication is as strong as the desire for food. It touches every facet of the managerial activity. Some people view it as a

life line of the modern organisation. organisation. It includes telling, advising, directing, ordering ordering and commanding. It presupposes shared environment. One need not over e mphasise mphasise its pervasiveness, imagine the world without words. It is just like a jungle. The present rate of economic development in any nation is possible only because of interaction among people. Hence, we cannot visualise the world without communication. Meaning and Definition Definition Peter Little has defined this concept as "a process by which information is passed  between individuals and organisations organisations by means of previously previously agreed symbols". symbols". Newman viewed it as "an exchange of facts, ideas, opinions or e motions by two or more persons". Communication Communication does not simply mean only transmission of information but also includes interpretation interpretation and understanding of the message. It is an exchange of thoughts and information to create mutual understanding u nderstanding and confidence. confidence. To conclude, Louis. A Alien opines that "Communication "Communication is the sum total of all the things that one person does when he wants to create understanding in the mind of another". That is why Chester I. Barnard said, "the first executive function of any leader is to develop and maintain a good system of communication". Because Because good communication communication serves as a linking process by which all parts of an organisational system are tied-up closely. DIAGRAM IV III A  Process of Communication Communication

Process of Communication (Diagram IV.3.A) The above diagram depicts the process of communication. It involves the Sender, the Message, the Receiver, and the Purpose Purpose of communication. communication. Every communication  begins with the sender. sender. The information to be be transmitted transmitted by the sender is known as the Message. It may be oral or written. What kind of mode of message is the best depends upon the situation. The message should reach the receiver in a proper pr oper way and that too in proper time. The receiver should also think in equal e qual wave length for the purpose of understanding the real meaning of the message. Communication is not complete unless it creates understanding among the parties concerned. People with closed minds, weak channels (or, channels with loopholes) and technical technical barriers barriers will create problems in communication. communication. Effective steps must be taken from time to time to remove the  bottlenecks that that come in the way of creating creating understanding among people. For which which purpose, proper feedback is a must. It refers to the response given by the receiver for the purpose of facilitating further communication and greater clarity in u nderstanding. nderstanding.

Good feedback enables the sender to know whether or not the message has been properly received and interpreted. interpreted. Types of Communication Depending upon the channel, communication may be broadly studied s tudied under two types — formal communication and informal communication. The diagram (IV.3.B) below represents the flow of information and the types of such flows:

(A) FORMAL COMMUNICATION COMMUNICATION It refers to the flow of information information in the official o fficial lines of hierarchy. It strictly adheres to the chain of command. It is a deliberate deliberate effort to inform all the issues to appropriate officers. It is mainly connected with work-related matters. By virtue of this, it is more authentic, systematic systematic and dynamic. But at the same sa me time, it is inflexible and slow in effectiveness. Formal communication communication flows in three different d ifferent directions: directions: i) Downward; ii) Upward; and iii) Horizontal. The discussion relating to these three types of communication is presented in the following paragraphs. i) Downward Communication : It refers to the flow of information from superiors superiors to the subordinates. Here, information flows from top to the bottom. It is most commonly found in formal settings. It is mainly used for directing and controlling people in getting ge tting things done. Downward communication includes instructions, instructions, policy statements, orders etc. ii) Upward Communication : It involves transmission transmission of information information from subordinates to superiors. It serves as a feedback. It enables the management in knowing how far the commands of the superiors have been carried out. It encourages open door policy of exchanging ideas between superiors and subordinates. Since the flow of information from bottom to top is non-directive, it is usually found in participative and democratic organisations. organisations. It gives a chance to the subordinates to release emotions by raising their complaints or grievances. But upward communication gives better results only when the officer is open minded and receptive. iii) Horizontal Communication : It refers to the flow of information among people  working at the same level level of authority. That is why it is termed as lateral communication. Since message flows among the same cadre people, status barriers

don't exist. This kind k ind of arrangement encourages greater coordination among different departments. It may take in one or more of the following fo llowing forms: — Meetings, — Conferences, — Letters, — Office memos etc.. Sometimes, even horizontal horizontal communication communication is hampered because of specialist approaches adopted by different officers over a single issue. Modern organisations have  been using all these types of communication communication in one way or the other. other. No one is substitute to the other. Each one is having having its own relative relative merits and and demerits, the management has to use the appropriate type in a judicious manner for obtaining good results. (B) informal communication The term 'informal communication' refers to the flow fl ow of messages, opinions and expectations among people through informal contacts. It grows out of social contacts  between people who work work together. It is not not bound by any rule or or regulation. It is purely unofficial and unplanned communication. communication. Information circulates like a grapevine ignoring the lines of authority. The managers can obtain lot of u seful information about the real opinions of the subordinates through through this method. me thod. Things that cannot be done through formal communication can be accomplished through grapevine. Since it is flexible, it can take in any a ny direction without bothering ego or status by the people. It motivates the people and helps in building team work. But, grapevine communication communication is handicapped by the circulation of rumors ru mors and half-truths. Another disadvantage associated with it is lack lac k of complete information and authenti au thenticity. city. Despite these  weaknesses,  weaknesses, the role of grapevine communication communication cannot be be ignored. It is an integral integral part of any organisation. organisation. Both formal and informal types of communication communication must be tried in a balancing way. FORMS/METHODS FORMS/METHODS OF COMMUNICATION There are many methods at man's command regarding communication. The world is  bombarded by information. information. The offices of the the modern organisation organisation are highly revolutionised through the use of o f intercom, telephone, telex, teleprinter and fax machines. Information Information is made available on finger tips. In this world of technological advancement, man remains remains to be a talking machine, the management has to select one or more of the available methods for effective e ffective communication communication purpose. The following diagram (IV.3.C) illustrates different methods of communication:

Basically, there are two forms of communication - verbal and non-verbal. non -verbal. Verbal communication communication may take the form of oral or written communication. communication. In oral communication, parties exchange their ideas through spoken words. That is why it is also referred to as face-to-face communication. communication. It takes less l ess time and the feedback is quick. It gives ample scope for adjustment and correction of the original message. But, its effectiveness is nullified due to lack of documentary evidence regarding regarding such conversation.  A written communication communication is is always put in the form of written words. All official official letters, circulars, memos, statements statements and reports are the best examples of written written communication. communication. It provides a permanent record for future reference. It is suitable for lengthy messages. It offers more authentic information. Despite these advantages, It is time consuming, and less flexible. Quite often, it is proved to be expensive and tedious. Non-verbal communication communication does not use words. It is a language beyond verbal communication. communication. Transmitting the messages through charts, graphs, maps, sign boards etc., is now increasingly tried by the organisations. By seeing these visual-aids, information can be easily grasped or understood. One need not explain how the bar diagram gives clear clues regarding the performance of an organisation. organisation. Meaning can be quickly received through the visual-aids. Non-verbal communication communication includes body language. It helps in understanding the warmth of feelings and emotions. It may take the form of gestures, facial expressions, feeling of touch etc. The following gestures exhibit the real feelings as stat s tated ed opposite to them. Gesture

Feeling

1) Shrugging of shoulders

-

Fear, Anxiety 

2) Raising legs

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Enthusiasm

3) Shake-hand

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Friendliness

4) Patting

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Warmth and affection

5) Shaking-head

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Rejection of an Idea

6) Raising eye-brows

-

Surprise

DIAGRAM: IV: III: D COMMON COMMUNICATION NETWORK 

Each of these methods of communication has to play an important role at one time or the other. In fact, all these forms of communication are in use in making communication

more effective. While choosing a particular method, the knowledge of the sender, the importance of the message and the situation must be duly considered. NETWORK MODELS Communication Communication networks are usually compared compared with the nervous system of the human  beings because they they also perform the same same functions. Both Both carry signals from from one position to the other. Communication Communication networks are not u usually sually that much effective, as a nervous system in their functioning because of inbuilt impediments. Communication Communication  becomes effective effective when it is fully understood, believed and accepted by the the receiver. Every communication network must satisfy satisfy the above ab ove acid test. The term network implies the link through which information is flowing from one end to the other in an organisation. Every organisation can develop its own pattern of flow of information. information. A network indicates the path pa th over which communic c ommunication ation is transmitted from one person to the another. In other words, it indicates indicate s the route through which information information flow for decision-making. The most commonly used network have been illustrated in the diagram (IV.3.D). The above diagram exhibits different forms of networks like chain, wheel, circle and "Y". The diagram depicts five level hierarchy. hierarchy. The chain network represents a five-level structure structure where communicati c ommunication on takes place from either e ither top to the bottom or from  bottom to the the top. Under this form, there there is no scope for horizontal horizontal communication. communication. Here, communication flows directly down the authority line. For example, the clerk prepares the bills, the supervisor certifies the same and reports the same to the  Accountant, who in in turn reports the the same to Accounts Accounts Officer and he reports the matter to the Manager. This indicates chain network.  A wheel network indicates indicates two levels of authority authority only. It indicates indicates a typical example example  wherein supervisor supervisor establishes establishes direct link with four four subordinates. It is clear clear that there there is no interaction among subordinates. It is best suitable to situations where quick action is needed. In contrast to this, a circle network allows all members to inter i nteract act with adjoining members. It is best suitable to three level positions viz. officer, supervisor and subordinate. This network is widely used since it produces higher level of satisfaction among subordinates. The 'Y' network integrates integrates the advantages of wheel network at the top and chain network at the bottom. In this diagram, we can see two subordinates (D and E) reporting to the supervisor (C) who in t urn reports to two officers (A and B). As against this, all-channel network allows the subordinate to communicate communicate freely with the other four. There are no restrictions. All members have equal number of channels and an opportunity to share equal amount of information. A typical A typical example for this is "Committee" "Committee" where all members are treated on par with each other in sharing views. Each one of the above networks has its own merits arid demerits. There is no single network that can yield desired results in all situations. The effectiveness of a given network depends upon the speed, accuracy, need, cost and time factors. Best results can  be obtained by using all these forms forms of networks, at one one time or the other, depending depending upon the situation.

Barriers to Effective Effec tive Communication Communication Effective Communication is essential for the success of any organisation. One of the most common problems faced by the modern manager is communication break-downs. Several obstacles will come in the way of o f creating perfect understanding. Successful Successful executives should develop the skills of communicating effectively. It needs minimisation of misunderstanding and creation of understanding among the parties concerned. Since modern executives spend 90 percent of their time on telling, listening, reading and  writing; a part of their their communication communication may be misunderstood misunderstood or misinterpret misinterpreted ed or distorted. Executive needs to understand the reasons for poor communication communication so as a s to  become effective in communic communication. ation. Barriers of communication communication can exist exist in the sender. In the message, in the receiver, in the feedback or in the organisational organisational structure. Some of the important communication communication barriers are briefly discussed in the following paragraphs. (A) LANGUAGE & SEMANTIC BARRIERS (i) Absence of Common Language  A single word may give give different meanings to different different people. The meanings meanings of the  words are not in in the words but with the the people. In Companies, workers workers usually come from diverse backgrounds. Language problem bound to ex ist between a Hindi speaking  worker and an English English speaking boss. For For effective communication, communication, they need to develop a common language. The term "Fat-mouthing" is used by the bl ack people (US) to represent the meaning of "talking too much". In contrast, the literal meaning is different. (ii) Semantic Barriers In addition to language la nguage barriers, semantic barriers also present a problem in making communication communication effective. Words like light and cheap give sometimes positive and sometimes negative meanings. It is because of the fact that the intended meaning is  wrongly interpreted interpreted by the receiver. To illustrate illustrate this, read read the following sentence. "Shoes are required to eat here". This sentence is written at the entrance of a Cafeteria of a University. A student wrongly interpreting the message has written with a piece of chalk like this: "Socks may be eaten outside the Cafeteria". The above example illustrates il lustrates how the intended meaning is misinterpreted through semantic barrier. (iii) (iii) Poor Vocabulary  Poor vocabulary on the part of a manager does not allow him either to write or speak effectively. Similarly, poor vocabulary does not allow the receiver to understand the message clearly and completely.

(B) ORGANISATIONAL ORGANISATIONAL BARRIERS (i) Hierarchical Barriers Modern organisations organisations are characterised characterised by the existence of people belonging to various levels of hierarchy. For eg: Workers, Supervisors, Shop Floor Managers etc. It is quite common that equal status people talk to each other without inhibitions. A lower level employee may find it difficult to communicate freely about his problems with his superior. Similarly, subordinates are afraid of unpleasant and critical comments comments from their superiors. A gap in understanding always exists because of the differences in their respective positions held in the same organisation. (ii) Too much specialisation at work spot Technological advancement leads to highly specialised jobs a t work place. Every worker is doing his specialised task without bothering about the nature of other person's work. The phase of the work is so tight that it hardly allows the worker to come out of his compartment compartment and communicate freely with fellow workers. This kind of work situation separates people and thus creates problems in communication. communication. (iii) (iii) Wrong choice cho ice of medium The success of any communication communication directly depends upon the medium through which it is sent. A particular type of medium may be best suitable to a given situation. situa tion. To illustrate this point, consider the following examples. Situation Situation

Right Medium

Wrong Medium

1) Smuggler

Flashing torch

Oral instructions

2) Traffic Policemen

Hand gestures

Oral instructions

3) Business Executive

Telephone

Oral instructions

on confidential work  Choosing a wrong medium may create problems in communication. Selecting the most appropriate medium is the primary step in effective communication. communication. (C) PHYSICAL BARRIERS (i) Noise Poor telephone connections, loud noise and unexpected interruptions interruptions may create difficulty either in listening or in understanding the real content of the message. If the message is written, sometimes, either bad hand writing or o r smudged type script s cript may hamper the effective flow of communication.

(ii)Time Timing of communication is also important important in creating proper understanding. understanding. If an employees does not communicate with his boss for undue long time means it creates misunderstanding. misunderstanding. A guest who arrives at mid-night will not be able to be a good communicator. communicator. Similarly, the phone call at mid-night might irritate irritate the receiver and dampens his communication. communication. (iii) Distance Distance can be a strong barrier of communication. Long chain of command or existence of several layers of supervisor may impede the real message of communication. communication. Long communication communication networks and distance between superior and subordinate may create difficulties in communication. The functioning of mechanical devices like telephones and telex might be affected by the distance in transmitting transmitting the messages. Communication Communication problems are bound to be there in between wife and husband if they stay away long time. (iv) Age Factors like age, maturity educational background will ce rtainly influence communication communication process. Generation gap creates gap in style of speech, standards of  values and judgement. There There is some positive positive relationship between between chronological age and maturity of thought and understanding. (v) Sex Usually, men are considered considered to be more aggressive, self- confident, assertive and acquisitive than women. By virtue of this fact, they turned to be good communicators. In contrast to this, women are brought up under the philosophy that the quality of assertiveness is unfeminine. Women with feminine ideas and closed broughtup try to avoid eye-to-eye contact with superiors and speak inaudible. i naudible. Hence, they turned to be poor communicators. (D) PSYCHOLOGICAL BARRIERS More than fifty percent of the communication problems are attributable to psychological  barriers. Psychological Psychological aspects like attitudes, attitudes, perception, interest, belief, prejudices etc., may come in the way of o f proper understanding understanding of a message between between the sender and the receiver. (i) Attitude (i)  Attitudes s and Values Our thinking is influenced by our attitudes and values. They tend to be different from one person to the other. Hence, they create barriers. A message which runs contrary to the beliefs is not easily acceptable. Emotional attitudes are so strong that they di stort understanding among the people.

(ii) Perceptions Communication barrier arises as a result of different perceptions of the same message/object by two people. There is nothing wrong if two friends f riends express different different opinions about a given movie. Similarly, a fifty p aise coin appears to be a big money to a poor man and a small one to a rich man. That all depends upon how one perceives the idea. Differences Differences in judgements inhibit communication. (iii) Lack of Interest Interest creates understanding. Effective Communication requires proper interest among the parties concerned. It enables them to pay adequate attention to the message. Lack of interest leads to mistrust which hampers effective communication. There may  be many talkers but few listeners. listeners. Lack of interest interest leads to poor listening. listening. Hence, effective communication demands interest among the parties concerned. (iv) Poor Retention One of the weaknesses weaknesses of the human hu man being is his inability to retain total quantum quantum of information received. received. Poor retention acts as a barrier in effective communication. communication. At each level from top to the bottom if some information is retained, then, communication  becomes ineffective. ineffective. (v) Filtering Filtering refers to the process of manipulation of information by the sender so that it  will reach the receiver either either in a favourable or unfavourable unfavourable way. A superior superior may  withhold information information thinking that subordinates subordinates do not need need it. Filtering of information information increases with the levels of hierarchy. If a supervisor su pervisor comments comments that "your work can be improved", the subordinate may filter the meaning and receives the message that "your  work is no good", (vi)Fear The feeling of fear undermines undermines communication. communication. People with fear, whether whether real or imagine, distort information. Fear is a psychological inhibition inhibition that prevents them from exchange of ideas freely and kills the initiation. Fears are of different types. a.

 b.

Fear of misinterpretation: misinterpretation: A  A worker who would like l ike to enquire about his possibility of getting promotion may not do so because the boss might think that the worker is not happy with the existing job. Fear of exposing exposing to criticism: Information criticism:  Information is held back deliberately by the  worker when he knows very little. Individuals retain retain information due due to fear of  being criticised criticised when they cannot offer offer explanation.

c.

Fear of reprisal: Employees reprisal: Employees are usually refrained by frank talk or criticism that is unpleasant to their superiors since they may take action against aga inst workers.

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Having discussed some of the important barriers to effective communication, an attempt is made to discuss the ways and means available to us for removing the same. Either misunderstanding misunderstanding or no n o understanding it mars the real meaning of the massage. To make the communication communication effective, the following fo llowing suggestions have been offered. 1) Clarity in message The sender must be very clear as to the real content of the message. It should be expressed in simple language so that the receiver can understand it easily and quickly. Technical vocabulary must be avoided. 2) Completeness of message Incomplete message delays action, spoils relations and increases increases costs. The message should contain all important details. In other words, it must be complete, timely and adequate. 3) Understand the needs of the receiver The sender of the message must be aware a ware of the needs, feelings, perceptions and level of understanding of the receiver. The message should be designed from the receiver's point of view. 4) Use appropriate channels c hannels Channels of communication communication are different types. Each type best fits into a given situation. A judicious combination combination of formal and informal, oral and written media will help to improve the effectiveness of communication. 5) Consist Con sistency  ency  The message should be consistent with the policies and programmes programmes of the organisation. No two messages should be mutually conflicting, for it leads to confusion.

6) Feedback  Communication Communication is essentially a two way process. Feedback indicates the return flow of communication. communicat ion. The sender should know whether the receiver understood the message or not. Continuous feedback improves future communication. 7) Mutual trust and a nd Confidence Communication Communication is an interpersonal process. Encouraging mutual trust and confidence among the employees is a must for making people more personal pe rsonal and intimate. This type of organisational organisational climate is good g ood for effecti e ffective ve communication. 8) Repetition It calls for repeating an idea or message message over and over through different methods. It will ensure proper understanding and action. This removes doubts, suspicion and confusion. Repetition, thus, leads to greater clarity and effectiveness. ESSENTIALS OF EFFECTIVE COMMUNICATION Effective communication plays a prominent role either in expanding or diversifying the activities of an organisation. It is a key to success. If the manager has to survive in these days of stiff competition, he has to develop sound communication communication skills. The essentials of effective communication are briefed up and given below: i) Positive and pleasant approach by the parties concerned. ii) Good tone with accurate modulation helps in creating proper understanding. iii) Clarity of purpose and objective behind communication communication should be known to the parties. iv) Adequate knowledge of the problem helps in developing proper understanding understanding about the message.  v) Greater emphasis emphasis to "you" attitude attitude greatly facilitates the flow of information information without without interruption.  vi) Follow appropriate appropriate courtesy while communicating communicating with different different levels of people. CONCLUSION Organisations Organisations are not existing in vacuum. v acuum. They are in the midst of people. Problems are more with people than the world of things. Communication Communication which is a dynamic and interpersonal interpersonal process is bound to have some problems. These problems should be removed in order to minimise minimise bottlenecks and maximise maximise the effectiveness of communication process.

CASE STUDY (1) Royal Television Company  Royal Television was established in 1969. It was founded by Mr.Ramana. Mr.Ramana. From its humble beginning, the Company could able to reach the leve l of nation's largest television and allied product Companies. By 1990, its sales figure has reached Rs.300 crores per annum with 300 workers and five manufacturing locations. Through out its growth, the founder remained very active and knew every worker. When the founder used to call them by name, workers felt very happy and developed a sense of belonging and personal loyalty. No union could be established esta blished because of perfect understanding  between workers workers and Management. Management.  As the Company grows grows from one level to the other, other, Mr. Ramana Ramana was worried that the the Company was losing its "small-Company" spirit and communication becomes difficult.  As a result, he was under under the impression impression that Company's Company's objective were not properly properly understood and workers are failing in understanding understanding the other person's work. Due to this product development and marketing were suffering. To overcome this communication communication problem, he appointed a ppointed a Director-Communication Director-Communication and tried differ d ifferent ent communication devices like bulletins in house magazine and "Fact Books" covering all departments. In addition to this, the Company has appointed different Committees Committees and sponsored meetings to discuss Company matters. Also, the Company has encouraged its employees to participate in "Communication "Communication work-shops".  After spending considerable considerable time, time, effort and money, Mr. Mr. Ramana was thoroughly thoroughly disappointed as the twin problems (problem of communication communication and small company feeling) still exist. QUESTIONS 1) What are the reasons for Mr. Mr. Ramana's Ramana's disappointment? disappointment? 2) In your opinion, What is is the real problem? problem? 3) What are your your suggestions for improving improving communication communication in the Company? CASE STUDY (2) Bombay Fashion House Bombay Fashion House was established 50 years back as a single store by Mr. Verma. It is now having 30 branches spread throughout the state of Maharashtra. Mr. Gopal (eldest son of Mr. Varma) joined his father after graduation in Management Course. The success of this Fashion House is mainly attributable to Mr.Varma's drive and knowledge of apparel business. He always keeps his hands in touch with buying, advertising, designing and sales. He knew all the Managers of chain stores personality. Mr. Mr. Varma

used to conduct business meetings with his h is senior executives once in every e very month and  visits each store store once in every 2 months. months. Mr. Varma is worried now-a-days because his policies are not carried out ou t properly. Many of the employees joined, in unions. He is getting reports that many of his workers and Branch Managers are doing jobs just like that without showing any real drive an d imagination. He is also vitally concerned about the resignation of some of the b est  workers and executives from the Company. Company.  When Mr. Gopal, walked walked into the office as 'Assistant 'Assistant General General Manager', the twin problems faced by the business are put before him by his father. Mr. Varma believed that his son who took some courses in Management will surely help him thr ough proper suggestions. QUESTIONS 1) If you are Mr. Gopal, What would you say to your father? 2) What problems do you see in this Case? 3) How your theoretical knowledge in motivation are Communication will help in improving the functioning of the Stores. REVIEW QUESTIONS 1) Define Communication. Discuss the various steps involved in the process of Communication. 2) "Communication is sharing of understanding" understanding" - Comment. 3) Explain the relative merits and demerits of various types of communication. 4) Why is feedback so important to Communication? Communication? Suggest some guidelines for the effective use of feedback. 5) Explain briefly about the various networks of Communication Communication and state the conditions under which they will be most effective. 6) What are the barriers of effective Communication? Communication? Suggest some measures to overcome the same. 7) "Effective Communication is the lifeblood of the organisation" organisation" Comment. REFERENCE BOOKS 1) Personnel Administration Administration

- Charles A. Brown

2) Human Behaviour at work

- Keith Davis

3) Management

- Koontz & Weihrich

4) Personnel Management

- C.B. Memoria

5) Dynamics of Personnel Personnel Administration Administration

- Monappa

- End Of Chapter LESSON-17 DECISION - MAKING

LEARNING OBJECTIVES  



 

To understand the meaning of decision making process: To appreciate the various alternatives through which one can make better decisions; To understand the implications implications involved in decision-making decision-making process process under under certainty, uncertainty and risk conditions; To evaluate the various approaches to decision-making process; and To evaluate different models and techniques that help in decision-making decision-making process.

INTRODUCTION Decision-making Decision-making is an integral part of most of the top manager's duties. Not even a single day passes without taking decisions particularly in modern organisations. Hence, management and decision-making decision-making are considered as inseparable. In fact, whatever a manager does, he can do it only by taking some decisions. All matters relating to planning, organisation, staffing, directing and controlling are engrossed in de cisionmaking process. That is why it is aptly pointed out that management is essentially a decision-making process. process. The survival surv ival and future success of any enterprise is directly related to the ability to take timely and appropriate decisions decisions by the executives. Thus, decision-making is said to be the heart of management. Lot of planning exercise is to be initiated by the manager before taking any viable decision. Questions like what to do, when to do and how to do are to be examined clearly  before allocating resources resources on different managerial managerial activities. activities. Unfortunately, these these resources are scarce. So, the manager has to carefully plan and decide what to do or

 what not to do. Wrong Wrong decisions quite quite often are proved to be be either costly or futile exercise. To prevent such losses, decision-making decision-making process remains to be the core area in all planned activities of the modern corporations. MEANING Koontz and Weinrich have defined this concept as "the selection from among alternatives of a course of action." According to this definition, picking one course of action among alternatives available is termed as decision-making. decision-making. In the words of of George Terry, "decision-making is the selection of a particular course of action, based on some criteria, from two or more possible alternatives." We may define this concept as "the process of choosing between various alternatives for achieving achieving a specified s pecified goal". Every decision must take into i nto consideration consideration needs and future uncertainties. The famous decision theorist, Herbert Simon has identified three major steps in the decision-making decision-making process. The first step s tep involves the recognition and understanding of the real problem. In the second phase, various alternatives may be devel oped. The third step involves careful assessment of alternati a lternatives ves available for taking a better decision. decision. Characteristics (1) Decision-making is a continuous c ontinuous process. (2) The question of decision-making comes into picture only when there are alternatives. (3) A decision-maki dec ision-making ng process must always be rational and purposeful. (4) Decision-making is an intellectual process supported by good reasoning and sound  judgement. (5) Decision-making is all pervasive in the sense that all al l levels of managers need need to take decisions of varied nature. (6) Decision-making is always related to future only. Types of Decisions Managerial decisions may be broadly classified under two categories - the first category includes the typical, routine and unimportant decisions decisions and the second sec ond category covers most important, vital and strategic decisions. Apart from this classification, classification, decisions are taken at different levels for meeting meeting different problems. The following paragraphs present a bird's eye view of different type of decisions decisions taken by the executives from time to time. (i) Organisational Vs Personal Decisions

Chester. I.Bernad has explained about this classification classification of decisions. d ecisions. Decisions taken by the manager in his official capacity are termed as organisational organisational decisions. These decisions have a direct impact in the functioning of the firm. Also, the authority for taking such decisions can be delegated de legated to the subordinates. For instance, decisions relating to reward systems or transfer of workers can be cited as examples under this category. In contrast to this, sometimes, decisions may be taken by the manager in his individual capacity. Such decisions are termed as personal decisions. They may partly affect the personal life and partly affect the organisation. For Instance, decision to quit the organisation comes under this category. (ii) Routine Vs Strategic Decision Routine decisions Involve little risk and uncertainty. Hence, they do not call for extraordinary judgement and thinking. They are mostly related to day-to-day conduct of the business. Most of the routine decisions are taken repetitively. That is why they are Norma taken at lower levels of management. management. On the other hand, strategic decisions are taken by the top level leve l management. Either Either they are concerned concerned with policy matters or  with long-term commitments commitments of the the organisation. They They require thorough understanding, understanding, analysis and best judgment pertaining to location of the plant, type of technology and channel of distribution are the best examples of this type. (iii) Policy Operating Operat ing Decisions Policies act as guidelines gu idelines for future action. Hence, decisions pertaining to policies are usually taken by the top management. management. They are considered to be very important important since they affect the total organisation. While operating decisions are administrative in character, they help in translating policies into action. For instance, decision relating to a new incentive scheme may be termed as a policy decision. Decisions relating to the methodology of implementation of such incentive scheme are termed as operating decisions. (iv) Programmed Vs Non-programmed Decisions Programmed decisions usually deal with routine and repetitive problems. For dealing such problems, systematic policies, procedures and rules are established. Programmed P rogrammed decisions can be taken with little ease as everything goes according to some set of rules.  As against this, non-programmed non-programmed decisions decisions cover mainly mainly unexpected unexpected events and challenges. Each of such problems is a special one. In other words, each problem is unique in nature. For dealing with such special problems, executives usually refer them to the top management. For tackling such situations, the manager needs expertise, intuition and creative thinking. (v) Individual Vs Group Decisions Decisions taken by the individual in his personal capacity are known as individual decisions. Organisations Organisations which are small s mall in size can accommodate this type of decisionmaking process. When organisations grow in size and s tature, complex problems do

come into picture. Group decisions are considered to be the best under such situations. Group decisions represent the thinking of more than one executive. The commonly held  belief is that "two brains brains can certainly think think in a better way than than one." Having discussed some of the important types of decisions in the earlier paragraphs, a  brief attempt is made made to identify some common common elements in the the decision making process. These elements form as important steps for carrying out decision-making decision-making process systematically. systematically. The various steps involved in the decision-making decision-making process are explained below with the help of the following figure.(V. 1 .A)

Step (1) Defining the problem The first step is to de termine termine what the real problem is. A problem is half-solved when it is correctly diagnosed. Money and effort are going to be wasted if problem is not determined de termined correctly. correctly. That is  why, accurate diagnosis diagnosis of the real problem is necessary to find find out right solution. solution. One should look at the real causes and for the remedial measures by touching the inner details of the problem. Touching only the outer surface surface of the problem pr oblem and arriving at decisions may lead to fallacious conclusions. conclusions. Step (2) Analysing the problem Once the problem is clearly defined, then, it must be analysed in the light of data pertaining to various factors that surmount the decision. de cision. Every situation may have some advantages and limitations. Necessary emphasis emphasis should be laid on locating the limitations and obstacles in achieving a desired result. Necessary care should be exercised in avoiding personalised bias in judging certain factors. Analysis of crucial factors provides a sound basis for making effective decisions. Step (3) Developing alternatives The analysis of the problem becomes complete once it throws light on several alternative solutions. In fact, the success of decision-making process depends upon the ability of an executive in developing alternative solutions to a given problem. This requires lot of imagination, experience and judgement. Exploring the positive or negative impact of such alternatives forms as a solid base for sound decisions. Step (4) Evaluating Alternatives Once the alternatives are developed, the next step is to evaluate them in terms of their cause, time, impact, objectives etc. Many a time, either marginal cost or cost benefit analysis is used to bring out the tangible benefits of each of such alternatives. Each alternative solution may have its own merits and demerits. They should be compared  with other alternatives alternatives for the the purpose of appraising appraising the real impact. impact. Peter F Drucker Drucker

has identified risk, economy, time and limitations as important criteria for evaluating the consequences of different alternatives. Step (5) Selecting Se lecting the best possible solution Selection usually involves choice making. making. It is the last step in decision-making process. The manager has to select such an alternative course of action which can make the maximum contribution contribution to the goal. It is not always a lways possible to select the best alternative for a given problem. That is why the manager has to rely upon such course c ourse of action  which can yield good results results under a given set of circumstanc circumstances es and limitations. limitations. Step (6) Implementing the decision Once the best alternative is selected, it must be implemented. This step mainly deals  with the execution of the decision decision taken. It involves involves development of step step by step plans, selling the idea to subordinates and seeking co-operation from the needy people. At this stage, the decision is converted into action. The decision must be implemented in the right time and that too in a proper way. Step (7) Evaluation of Decisions The final step in de cision-making cision-making process is evaluation. The actual results of the decision should be compared with the expected results in order to locate; the reasons for deviations. This review is a continuous process and it generates information for necessary feedback for further improving the decision-making process in future. fu ture. Rationality Rationality in decision-making decision-making The term 'rationality' refers to objective and intelligent action. A decision is said to be rational if appropriate means are chosen to accomplish desired desired objectives. It implies that decision-maker tries to maximise maximise the values v alues in a given situation s ituation by choosing the most suitable course of action. A good decision depends on the maker's being consciously aware of the factors that set the stage for the decision. Obtaining complete complete rationality is not always possible. That is the reason why people prefer to take satisfactory decisions instead of ideal or o ptimum decisions. Managers are not always confronted by the problem of rationality in decision-making. In practice, they confine themselves to few important alternatives which have limited risks combined with favourable consequences. consequences. Limits of Rational Decision-making Decision-making Managers are not always rational in their decision-making. They cannot always abide by the demands of rationality rationality in decision-maki de cision-making ng process. There are some s ome limitations  which are briefly explained explained in the following lines.

(a) Since decisions are related to future. Managers cannot foresee foresee all the consequences accurately. Moreover, lack of complete knowledge about the problem also makes it impossible to choose a good decision. (b) Because of time and cost constraints, constraints, all complex variables that have a bearing on decision cannot be examined fully. Hence, the decision-maker decision-maker is forced to strike a  balance between complete complete rationality rationality and hard realities on the the ground. The impact of of all the variables cannot be ascertained because some of them may be intangible. (c) The conseq co nsequences uences of various alternatives alternatives cannot be anticipated accurately. Hence, decisions taken under uncertainty cannot guarantee g uarantee the success of decision-making decision-making process. (d) Human factors like value systems, perceptions, social factors, institution etc., are the main limits on rational decision-making. decision-making. Managers, being human beings, are a re greatly influenced by their personal beliefs, attitudes a ttitudes and biases. Because of this, the capability of a decision-making process varies from individual to individual and from situation to situation. Every manager is vitally concerned with the above limitations in his approach to rational decision-making. decision-making. He has to collect all the relevant information and try to overcome the above limits on rationality and choose the most rational decision for solving any g iven problem. Barriers to effective Decision-making  Apart from the above above limitations, decision-making process process remains to be ineffective ineffective  because of the existence existence of various barriers barriers in organisation organisation structure. These These barriers impede the process of identification of problems, its analysis and the development of the solutions. Elbing has identified some of the important barriers that can block managerial effectiveness in choosing the most suitable decision. Some of them are listed  below. (i) The tendency of a human-being human-being to evaluate eva luate a given problem with pre-conceived notions, acts as a stumbling block in understanding the real situation. (ii) Though it is dangerous, managers feel safer if they do not change change what is familiar. Eventually, the ineffective decision of a familiar way becomes accepted rather than considering new and innovative means. (iii) Many managers fail to demarcate the symptoms from the main problem. (iv) Many managers have a tendency to respond respond to the problem instantaneously instantaneously without proper information and thinking. If they gather more information, information, they become more aware of their options.

(v) Similarly, the tendency to equate a new challenge with that of old experience is common with many managers. This often causes managers to look for what is familiar rather than what is unique in new problem. The above problems are mainly responsible for either indecision or for half-decisions in the modern organisations. Knowledge Knowledge of the above problems will surely help the managers in arriving at pragmatic decisions. The following sug gestions can be offered to overcome the above barriers so as to make the managers more effective in decisionmaking process (1) Avoid premature evaluation. (2) Initiate impartial probing by avoiding personal biases on the outcome. (3) Develop a sound system that can supply adequate information for making decisions. (4) Encourage group leaders to respond to a given situation and compare the pros and cons of the solutions offered by the two groups for making an effective decision. (5) Encourage innovative thinking among the subordinates so as to identify the crux of the problem without waste of time and money. (6) When decisions of critical and pivotal in nature are to be taken, encourage group thinking. For this, the problem is to be presented to the subordinates first and they are asked to develop as many solutions as possible in a free environment. TECHNIQUES OF DECISION-MAKING (1) Brainstorming Brainstorming is the oldest and widely followed technique form encouraging creative thinking. It was originally developed by A.F, Osborn. It involves the use of a group. This is an approach to improve problem discovery and solving by encouraging subordinates to give their ideas and solutions in a free environment. It starts on the premise that  when people interact interact in free environment, environment, they will will generate creative ideas. Continuous Continuous interaction through free discussions may result in spontaneous and creative thinking. The larger the number of solutions, the fairer are the chances in locating an acceptable solution. Established research proves that one hour brainstorming system is l ikely to generate 50-150 ideas. It is interesting to note that while most of them are proved to be impracticable, impracticable, at a t least, some of them merit serious consideration. This group process is not without limitations. It consumes lot of time and therefore, is an expensive exercise. Secondly, it emphasises only quantity of solutions which more often than not proved to  be superficial. By overcoming the above above limitations, limitations, a modern manager manager can use this as an effective tool. (2) Synectics

 When compared compared to Brainstorming, Brainstorming, synectics is is a new concept developed developed by Williamb J.J. Gordon. The term 'synetics' is derived from a Greek word which refers to "Fitting together of diverse elements". It starts on the premise that this concept encourages encourages novel thinking for the development of alternatives through putting together d ifferent ideas which are distinct from each other. A given problem is presented to a group of people with different backgrounds and varied experiences. It is the responsibility of the group g roup leader to present the problem and lead the discussions in order to stimulate creative solutions. This approach ensures on the spot evaluation of members suggestions. The leader who is a technical expert is always assisting assisting the group in evaluating the feasibility of their ideas. Experience shows that synectics has been less widely used than "Brainstorming". When the problem is real tough and challenging, this approach is used for effective decision-making. decision-making. Like Brainstorming it also suffers from the same range of limit l imitations. ations. (3) Operations Research The origin and development dev elopment of operations research is attributed to military operations and applications in II nd World War. The war put tremendous pressure on the use of available scarce resources for various strategic and tactical operations. The success of operations research research in developing options of effective and efficient nature was instrumental instrumental in making this approach rather dependable in decision-making decision-making process. Now-a-days, greater emphasis has has been laid on the use of mathematical models models to reflect different options and constraints constraints in a situation and their effect on a selected goal. This quantitative approach to decision-making is usually referred as "Operations "Operations Research". Research". Of late, it has become an invaluable tool in the kit of a decision-maker. Operations Research employs optimizing models like Linear Programming, Project Management, Inventory Inventory Control, Decision Theory and Waiting Line Theory. Operations Research is the systematic method of studying the basic structure, functions and relationships of an organisation organisation as an open system. It always adopts a system s ystemss approach to management in getting things done. It is constantly interested in developing optimal solution with limited resources in a given situation. It covers six steps in its approach to problem solving. They are: (a) Identification of a problem; (b) Construction of a mathematical mathematical model to investigate the problem; (c) Developing a good solution; (d) Testing of the model in the light the data available; (e) Identifying and setting up of control points; (f) Implementation of the option as a solution to a critical problem (putting a solution to  work).

In essence, Operations Research attempts to develop the best solution that will contribute to organisational goals. Limitations of Operation Research: i. ii. iii.

iv.

Operations Research technique technique is not a panacea to all the problems of modern management. In other words, it is not the end. Since Operations Research does not take intangible aspects into consideration, subjective judgement becomes difficult under this model,  As the Operations Research Research technique technique directly depends upon the use of mathematical and statistical tools, it is increasingly becoming complex and costly exercise, Since decision making is a human process, it cannot be predicted properly. At the same time, the impact of such factors cannot, be measurable.

(4) Delphi Technique It is a technique technique normally used for forecasting forecasting future events. It is a group decision making technique. Under this method, independent opinions are sought f rom the members repeatedly so as to develop a best solution to a given problem. The success of Delphi technique depends upon a simple technique of understanding the problem from the other man's perspective. perspective. This ensures success. Though it is a useful technique, since it involves time and cost, it cannot ca nnot be tried in all situations. situa tions.

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CASE STUDY (1) Renuka Tin manufacturing was facing problems in meeting production schedules and producing quality products. In view of recent trends in globalisation of Indian market, good number of orders were received from developed nations. The problems of meeting rush orders from foreign countries is placed before the operations research department. The OR department has located some weaknesses of the unit like lack of automatic equipment and poorly designed production process. To overcome these weaknesses, weaknesses, the management has proposed to invest Rs. 70,00,000 for buying ne w automatic equipment and rearranging the production process. It is contemplated contemplated to increase the output by 40 percent by committing Rs.70 lakhs of investment. It is expected that this increase in output will enable the unit to meet foreign orders without disrupting the

normal business. Further, it is estimated that new ne w facilities and reorganised production process coming together will generate savings which can pay off Rs.70 lacks in three  years. QUESTIONS 1) If you are a Manager, would you advocate additional investment based on the recommendations recommendations of OR department? 2) What additional information would you seek before the decision is implemented? 3) What controls do you suggest for getting projected savings as a matter of reality? CASE STUDY (2)  Women as Chief Executive Executive Officer The demand for managers with good g ood background is great. Mrs. Vedavathi Malhotra was one of the most sought after a fter executives in India in 1990s. She was the first women to head an industrial undertaking ATLAS & Co., in India. This Company is biggest one in making cycle’s spare parts. The background of Mrs. Vedavathi Malhotra is really interesting. After receiving her degree in Economics Economics and Business Administration Administration from IIM Calcutta, she worked for Rallies India Ltd. When Rallis sold its spare parts division to BSA cycles, she worked as a marketing Executive for B SA. While ATLAS Company is in loss, her services as Chief Executive were called on. She helped in achieving "turn around" and the Company is getting small profits. An International Company like IBM  would like to hire the services services of Mrs. Vedavathi Vedavathi Malhotra at a slightly higher pay but she rejected the offer. QUESTIONS 1) Why was Mrs. Vedavathi Malhotra a much sought after Executive? Executive? 2) What factors might have motivated her to be in ATLAS? REVIEW QUESTIONS 1) Define decision-making. Describe the different types of decision 2) Describe the planned or step by step approach in decision-making process. 3) Briefly explain exp lain about the barriers of decision-making decision-making process. 4) How Operations Research Research is helpful in decision-making? Identify the limitations of Operations Research? Research? 5) What other techniques can be tried by the management in making effective decisions?

REFERENCES BOOKS: 1) Essentials of Management Management

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Harold Koontz & others.

2) The process of Management -

William Newman and others

3) Management

A.G. Bedian.

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- End Of Chapter LESSON - 18 COORDINATION

LEARNING OBJECTIVES      

To define the concept of coordination; To identify the need and significance s ignificance of coordination; To understand different d ifferent types of interdependency interdependency concepts; To review the principles of coordination; To explain the various approaches to effective coordination; To identify the problems in coordination.

Harmonious relationships between between the various divisions and departments of an organisation are a must for its smooth functioning. The activities of the various divisions have to be blended and unified so as to give them a commonness of the purpose. Hitherto, the concept coordination was viewed as a s one of the functions of management. Now, it is regarded as the essence of the management process. It helps in achieving harmony among individual efforts towards the accomplis a ccomplishment hment of group goals. Group goals cannot be achieved ach ieved automatically. Individual Individual efforts must be integrated and synchronised inorder to attain common objectives. It is a dynamic concept. It implies an orderly arrangement of group efforts to ensure unity of action. According to Henry Fayol, to co-ordinate is to harmonize all the activities of a concern so as to facilitate its functioning on the path of success. Probably in smaller organisations, there is no need for coordination where all activities are performed by one person. With the increasing growth and complexity of modern organisations, organisations, the need for coordination becomes inevitable. Lack of proper coordination results in inefficient operations, delays, frustrated feelings and waste of time. Meaning

 According to E. F. L. Brech, "Coordination "Coordination is balancing and keeping keeping together the team  by ensuring suitable allocation allocation of task to the various various members members and seeing that tasks are performed with due harmony among the members themselves."  According to Farland, Farland, "Coordination "Coordination is the process whereby whereby an executive develops an an orderly pattern of group efforts and secures unity of action in the pursuit of common purpose." This definition views coordination as the task of integrating the individual needs with that of the organizational organizational goals through proper linking. Characteristics The above observations reveal the following features of coordination. i) Coordination is not a distinct function. function. But represents represents the the essence of management. management. ii) The outcome of the coordination coordination is to attain the common common purpose. iii) Coordination is essential essential in all work situations where where people work together. together. iv) Coordination is a continuous continuous and an ongoing process. process.  v) Coordination does not arise spontaneously spontaneously or by force. It is the the result of concerted concerted action.  vi) Coordination is required in group efforts but not in individual individual efforts. Need for Coordination Existence of disintegrating forces emphasises the need for greater coordination coordination among  various divisions divisions of an enterprise. These These integrating forces may act as barriers barriers to effective coordination. They are summarised below: (I) Increasing Specialisation: Coordination becomes essential when the principle of specialisation has been p ractised ractised in work situation. The activities activities of the unit may be divided on the basis basis of product, function, region. The greater the number of units, the larger the number of specialisations. Every executive is mostly worried about his units performance. It results in conflicting interests within the same organisation. organisation. A good coordination paves the way for effective integration of efforts of all people for the accomplishment of a common goal. (ii) Empire building motive  As stated above, each each executive is deeply motivated motivated by the performance performance of his own unit in question. This kind of attitude a ttitude may well fulfil his personal ego but isolates him from

others. Organisational Organisational goals cannot be accomplished with this kind of o f tendency. Coordination is essential to ease out this situation. (iii) (iii) Personal conflicts between employees Employees are human beings. Personal rivalries, jealousies and p olitics in the work situation are bound to create problems to the management. For example, conflicts  between line and staff and and differences between between production and sales sales personnel create create problems in the smooth s mooth functioning functioning of an organisation. Coordination helps in harmonizing group efforts. (iv) Subordination of individual interest to that of organisational or ganisational interest interest Individual interests are important for developing loyalty, integrity, hard work, initiation and motivation. Organisational interests are much more important than individual interests. For achieving this, subordination of individual needs to that of organisational organisational goals is a must. The purpose of o f coordination is to attain this desired end. The importance of coordination need not be over emphasised. The primary task of management is to coordinate effectively all the activities. It is the end result of managerial process. It is a creative force through which members of the organisation are encouraged to contribute to group goals voluntarily, willingly and enthusiastically. It emphasises system's approach approach to management. The various functions of management cannot be viewed in isolation, but has to be viewed in totality. Coordination allows personal satisfaction satisfaction on one hand and social satisfaction on the other hand. It, thus, promotes efficiency efficiency and tones up the general level of employee morale.

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Types of Coordination Depending upon the nature and coverage, coordination may be studied under different d ifferent types. On the basis of its coverage, coordination may be divided into two types, such as, internal and external. Another type of classification classification is possible on the basis of its flow under two headings, mainly, vertical and horizontal coordination. coordination. Internal and External E xternal Coordination Coordination

Coordination between units of the same organisation organisation is termed ter med as internal coordination. It summarises the activities of different units so as to make the organisation more effective. Organisations are not free from the influence of external environm env ironment ent Hence, establishing a close link between organisations and external environment is a must either to survive or surpass the growing competition. competition. External environment e nvironment includes includes technology, competition, competition, market forces, customers, government policy etc., External coordination tries to coordinate all these forces up to the advantage of an organisation. organisation.  Vertical and Horizontal Coordination Coordination between different levels of hierarchy down the line is termed as "vertical coordination". coordination". It ensures that all levels of people, from top to the bottom, work in harmony. It is greatly facilitated by a technique like delegation of authority to the lower levels of hierarchy. Coordination between people of the same cadre and between different departments at the same level is termed as ''Horizont ' 'Horizontal al Coordination". Coordination".  Another classification classification depending depending upon its content views coordination from a different angle. Procedural and Substantive Coordination Coordination Procedural coordination coordination implies the specifications specifications of different units u nits in the same organisation. On the other hand, substantive substantive coordination is concerned with the content of organisational activities. Principles of Coordination Mary Parker Follet has laid down the following four principles for effective coordination. coordination. These principles help every manager in discharging his functions. (i) Early Start Thinking function of the management precedes the doing function. The task of coordination becomes relatively relatively easy if it starts at the planning stage. Free exchange of ideas helps in clearing doubts and remove misunderstanding. Hence, plans must be prepared in consultation with all people. pe ople. Plans become successful if coordination is practised at initial stage. Securing coordination becomes impossible at later stages like execution of work. (ii) Direct Personal Contact It stresses the importance of direct contact in removing conflicts and misunderstanding. Effective coordination is best achieved through direct di rect personal contact. Direct communication communication is the most effective way to convey real feelings to facilitate greater coordination. (iii) Continuity 

Coordination is an unending process. It cannot be left to chance. The management has to continuously strive hard to maintain ma intain perfect balance balance among a mong different units/people. Continuous coordination coordination helps the manager in adjusting and re-adjusting re-adjusting the range of activities so as to minimise minimise wastages, misunderstanding and apathy. (iv) Integration The fourth principle of coordination calls for integration of efforts for achieving a common purpose. For this purpose, coordination coordination demands reciprocal reciprocal relationship rela tionship among all the concerned. Interdependence Interdependence and Coordination Coordination Coordination influences all functional activities of management. In a similar way, all other activities influence coordination. This is termed as a s "Interdependence". "Interdependence". Such an interdependence interdependence is imperative for the success of any organisation. organisation. Such interdependence interdependence of work units has been categorically classified under three heads by James D.Thompson. They  (a) Pooled interdependence; interdependence; (b) Sequential interdependence; and (c) Reciprocal interdependence. (i) Pooled Interdependence  When departments/units/divi departments/units/divisions sions are not directly directly dependent on each other, but indirectly responsible for overall performance of the enterpri e nterprise, se, it is termed as "Pooled interdependence". interdependence". It represents represents a situation where failure of one unit/division leads to the failure of the entire enterprise. Each unit/department makes its own contribution and supports the main system in its own way. (ii) Sequential interdependence interdependence It refers to a situation where the output of one department becomes the input of the other. This type of interdependence interdependence usually exists in process industry. (iii) (iii) Reciprocal Interdepende I nterdependence nce It refers to two way interdependence. Here, the output of one becomes input input of the other and vice-versa.  Approaches for for Achieving Achieving Effective Coordination Coordination Different organisations adopt different mechanisms for achieving e ffective coordination. coordination. There is no single method of coordinating the managerial activities that can be

universally acceptable. J.D. Thomson has identified three important categories of approaches for achieving effective coordination. All of them are integrative mechanisms. Each one of them is explained ex plained below. 1. Integration through standardisation standardisation:: It involves the development of standard rules and procedures through which the job holders/ departments have to direct their activities in order o rder to ensure consistency consistency in operations. 2. Plans and Schedules: Separate plans and schedules may be prepared for each departments or units. At corporate level, all plans are merged and integrated so as to obtain optimum results. Coordination becomes easy since departmental departmental plans are flexible than standards. 3. Mutual adjustments: Activities adjustments: Activities of company company are coordinated coordinated through mutual adjustments among the sister units/depar u nits/departments tments on contingency basis. Here cooperation is assured between between the needy unite un ite for the purpose of getting ge tting the things done. In traditional organisations coordination is sought to be achieved through standardisation standardisation and planning. The usual methods followed by the traditional and  bureaucratic organisations organisations for achieving effective effective coordination coordination are listed below. 1. Developing elaborate system system of rules and procedure procedure for sorting sorting out recurring recurring problems. 2. Non-routine problems problems are to be referred referred to higher-ups. 3. Where decisions decisions relating to new policy matters matters have to be taken taken up, they may may be referred to special committees. committees. Traditional organisations could able to reap advantages ad vantages through following the above mechanisms for obtaining higher degree of coordination coordination among sister units. This traditional approach is best suitable to normal and predictable conditions. But this kind of approach is : adequate to meet the requirements of a modern organisation organisation under a dynamic environment. More More sophisticated methods have been developed by the researchers for the purpose of improving coordination. John Child suggested the following forms of coordination for improved functioning fu nctioning of the organisations, 1. For understan u nderstanding ding business problems and offering solutions, direct contact between between managers and employees facilitates greater g reater coordination. 2. While too much rapport is required between between employees e mployees and departments, better coordination may be obtained through the appointment of liaison officers.

3. While there are a re inter departmental conflicts which cannot be solved immediately, coordination may be attained through special task forces which would deal special situations. 4. Special committees may be appointed to deal with the recurring problems of inter departmental conflicts. 5. An organisation which is too big with several divisions may find it difficult to coordinate the total range of activities in a systematic manner. To ease out this problem, a coordinating department may be created within the organisation on par with other departments to perform this special function. 6. If things are too complicated, matrics type of organisation may be developed for establishing effective coordination. coordination. Under this method, functions of some of the personnel may be integrated with the functions of other departments. This kind of arrangement encourages effective understanding between various divisions/departments. divisions/departments. This facilitates higher degree of coordination among the member units of organisati or ganisation. on.  Van de Ven and others proposed proposed three approaches approaches as basis for coordination. coordination. They are summarised below: a) Impersonal mode: This model envisages designing of rules, ru les, procedures procedures and programmes suitable for smooth functioning of the organisation. organisation.  b) Personal mode: Here, human beings are encouraged to find out now things are going on and to discriminate discriminate what to do and what not to do through through effective feedback. Personal involvement surely contributes to effective coordination. c) Group mode: When mode: When operations are are large, a single individual cannot coordinate coordinate properly. This model suggests establishment of committees, task forces, meetings etc. The logic behind this approach is that "two brains brains can think better than one brain."  As stated earlier, no no single approach approach to coordination is proved proved to be useful to all organisations. The suitability of a pa rticular approach to coordination depends upon factors like size of the organisation, complexity of its work, nature of work force, force, certainty and uncertainty conditions conditions delegation of authority etc. The process of coordination becomes useful and meaningful only with the delegation of appropriate appropriate authority. In order to minimise the problems of overriding departmental interest interest for the cause of of the organisational organisational objective effective coordination is needed. For Fo r example, a finance finance manager may issue a direction that no overtime allowance be paid to workers. At the same time, production manager is worried about realising realising production target. He may issue mother direction that production workers are entitled to overtime allowance. This might have been done in his anxiety a nxiety to realise production target. This situation results in

misunderstanding misunderstanding and conflicts. The solution s olution for this type of problem lies with effective coordination among member departments. Coordination process is essential to make unified whole out of diversified factions on smooth lines. It pervades all the managerial managerial activities from planning to controls. Big organisations are now creating separate departments for coordination among departments. New rules and procedures may be developed to minimise problems like red-tapism, overriding goals, blind loyalty and friction. Co-ordination Vs Co-operation The term co-operation refers to collective efforts of people who associate themselves  voluntarily to achieve some some predetermined predetermined objective. It indicates about the willingness of individual to help hel p each other. It is the result of voluntary v oluntary attitudes of people in organisation. However it cannot be a substitute for coordination. While co-operation facilitates coordination, coordination, coordination is all inclusive including cooperation. Coordination involves deliberate effort on the part of management to bring together the activities of various individuals / divisions / units in order to provide unity of a ction. Coordination does not arise automatically. It requires conscio c onscious us efforts, whereas cooperation is the results of voluntary efforts put by the people. Thus this scope of coordination is wider than co-operation. co-operation. Summary  The term coordination refers to orderly arrangement arrangement of group efforts for the purpose of accomplishment accomplishment of objectives. It is the basic responsibility responsibility of every manager. It is a continuous process. process. Unlike previously it is not viewed as a distinct activity but considered as the quint essence essence of management. management. The problem of coordination comes into picture when management is dealing with group efforts but not with individual efforts. The term coordination should not be confused confused with cooperation. The significance of coordination results in efficiency, morale and optimum use of resources. On the basis of scope and a nd coverage, coordination coordination may be divided into different types. Namely internal Vs external, vertical Vs horizontal, h orizontal, procedural Vs. substantive. Different techniques are available for achieving higher degree of coordination. Similarly Similarly different managements deal the problem proble m of coordination through different di fferent approaches. Whatever the approach, it has to clarify the role of manager regarding his authority and responsibility responsibility for the purpose of attaining optimum use of resources to the common cause of the organisation. organisation. CASE STUDY (1) Modern Foods Modern Foods has been facing the twin problems of productivity and morale at Delhi Plant. A new plant at Kanpur has been set-up by taking all precautions to overcome the problems of Delhi Plant. The work activities activities together with pay norms have been entrusted to a "coach" instead of to a "supervisor" at Kanpur Plant. At new Plant,

 workers organised organised themselves themselves as a 'team' and decided what to do, when to to do and how to do? This approach a pproach facilitates facilitates wider span of management and greater clarity in goal pursuit. Costs and labour turnover have come down. In fact, Modern Food accepted the new plant as a model unit.  After five years, many many executives resented resented this system system and they were under under the impression that their authority and expertise were ignored. Competition Competition between teams and team leaders developed and this has created the problem of coordination. Workers felt uncomfortable about deciding pay rates of their fellow-workers. Due to pressure of changing scene, some some aspects of the plant system have been changed. changed. Supervision is made stiff and more management positions positions are created. This created an impression that the management is not happy with the experiments of Kanpur Plant. QUESTIONS 1) Why did Modern Foods try a new way of getting things done fit Kanpur Plant? 2) Identify the Coordination problems witnessed in this case. 3) Suggest ways of maintaining morale through better coordinated efforts. REVIEW QUESTIONS 1) "Coordination is the very essence of management" Do you agree? Give reasons. 2) What is Coordination? Discuss the essential characteristics. characteristics. 3) Describe the importance of coordination. coordination. Discuss tin techniques technique s of achieving achiev ing effective coordination. coordination. 4) Write short notes on the following: a) Types of Coordination  b) Principles of Coordination Coordination c) Approaches to Coordination REFERENCE BOOKS 1) Essentials of Management Management 2) Management

- Harold Koontz & others -

James AE Stoner and Charles Wankle

- End Of Chapter -

LESSON - 19 CONTROL

LEARNING OBJECTIVES     

To understand the meaning, steps and the process of control; To examine the pre-requisites pre-requisites and characteristics characteristics of control process; To illustrate the importance importance of control system; To analyse the methods of control; To describe the role of integrated integrated control system.

INTRODUCTION Controlling is an important important element of management process, process, it is mainly concerned with measurement and correction of performance in order to attain pre-determined goals. Planning and controlling are closely inter-connected with each other. Plans cannot be carried out automatically. The managers have to regulate the activities, review the, progress and steer the operations to conform to plan. Hence, control concerned concerned with the attainment of organisational objectives through regulating individual performance. It is not an exaggeration to state that the success or failure of any organisation depends upon the control process. It touches every facet of the managerial activity. Control process in the organisation organisation can be compared compared with that of a thermostat which regulates the room temperature. Controlling is the function of every manager. It is mainly concerned with the execution of plans in a desired way so as to obtain better results. In the words of Henry Fayol: "Control consists in verifying whether everything everything occurs in conformity with the plans p lans adopted, the instructions received and principles established". Its object is to point out weaknesses weaknesses in order to rectify them and prevent recurrence". In a way, it is acting as a facilitating function. Definition  According to EFL Brech, Brech, "Control is checking checking performance performance against pre-determined pre-determined standards contained contained in the plans with a view to ensure adequate progress and satisfactory performance". performance". As per this definition, control guides actions towards some pre-determined goals. In the words of George R. Terry, 'Controlling is determining when is using accomplished, that is evaluating the performance performance takes place according to plans'. This definition emphasized the fact that the managerial activity of controlling compels the events to conform to put through appropriate corrective measures.

To understand the real meaning of control, the definition given by T. Haiman is useful. To him, "Control is the process of checking to determin de terminee whether or not plans are being be ing adhered to, whether or not proper progress is being made towards the objectives and goals and acting, if necessary, to correct any deviations". This definition summarises the purpose of control. As per this definition, control involves measurement of performance against standards set for the purpose of initiating corrective action. The above definitions give rise to the following characteristics characteristics for control concept. (i) Last Function of Management Control follows other managerial functions like planning, staffing, organisation organisation and directing. Hence, it is considered as the last function. (ii) All Pervasive Control ensures consistency consistency in action in a desired way. Control affects other managerial functions and, in turn, affected by them. Hence, it is termed as all pervasive. (iii) Continuous Process There is a wrong notion that control is needed when something's going wrong. wrong. It is a dynamic process of measuring, checking arm regulating the managerial managerial activities in an un-interrupted manner. As the process of management is incomplete without controlling, controlling is considered, as an unending u nending process. (iv) Forward Looking Past activities can neither be improved nor controlled. Control does not only deal with the post-mortem of what has happened but also regulates the activities for improved performance in the near future. Thus, control is looking at future through the eyes of the past. (v) Objectivity  Control is not an end in itself. It is only a means for accomplishing accomplishing pre-determined objectives. Control without objective lacks sense and proves to be unworthy of its existence. (vi) Delegation Control becomes meaningless without proper authority. When authority is delegated, control compels the delegator to discharge his duties in a proper p roper way. (vii) Feedback 

It refers to efficient system of reporting back for effective control. Continuous monitoring and review of operations are essential for effective control in any organisation. (viii) Information Information is the key to success. Control depends upon the information regarding regarding the actual performance. Accurate Accurate and timely availability of feedback is the basis for the success of control. Planning Vs Control There is a close relationship relationship between planning and control. These two are supplement to each other. While planning is looking ahead, control makes use of standards for improving future on the basis of the past experience. BASIC CONTROL PROCESS The basic control process Involves three steps: (i) Establishing standards; (ii) Measuring performance; and (iii) Compare the results wetly standards and correcting deviations. The details of these three steps are given g iven below. (i) Establishment Establishment of standards The term standard refers to 'norm' or some criteria of performance. Standards are either qualitative or quantitative goals to be attained. To illustrate some of the standards, we may consider the following verifiable goals, performance, productivity, productivity, profitability, etc., are the best examples of quantitative quantitative standards. Innovations, social responsibility responsibility and morale are the examples of qualitative standard. The management may establish standards on the basis of past experience. These standards are helpful to management either for measuring the performance or Judging the success or failure of the organization. (ii) Measurement of Performance It is essenti e ssentially ally a comparison process wherein wherein the actual are measured against standards for the purpose of detecting de tecting the deviations but measurement measurement is not always al ways practicable. practicable.  Yet, a forward looking manager manager has to work work it out to prevent reoccurrence reoccurrence of mistake committed by the management. The purpose of the measurement of performance is to alert the management about the probable departures from the established path for taking appropriate actions.

(iii) Correction of Deviation Control does not end with the measurement of performance and its comparison with standards. Appropriate Appropriate corrective action is to be taken on the basis of feedback obtained. Taking corrective action sevens to be

more appropriate while the work is in progress. When the from that of standards, reasons for such variances are analysed to identity the root causes. Once reasons are known, it is easy to take corrective action at an appropriate time. For this purpose, the management management needs control information. The basic control process is shown in figure V.3.A. It illustrates that the d esired performance in the form of standards are laid down from plans. Actual performance is the result of management operations like Organizing, Staffing & Directing. Measurement and comparison of actual performance gives rise to i dentification dentification of deviations. Corrective action is initiated on the basis of analysis of causes for the occurrence of deviations. All appropriate measures must be launched to correct deviations which form the basis of future desired performance. That is why effective ef fective control system system should try to overcome the weaknesses of traditional feedback system of getting communication to be modified as feed forward system. The main difference between these two systems lies with the flow of information, while information information is the end e nd product of feedback; it is the Input of o f the control system in feed forward tie. It is an innovative way of monitoring real time information to adopt the functioning of the organization to suit the dynamic conditions. conditions. Feedback Control The term 'Feedback' refers to the process of adjusting future actions, on the basis of information about past performance. It is vital to the management because it guides gu ides corrective actions. A good control system always depends upon effective feedback of information. But, feedback always consumes time. Management control cannot be instantaneous because because of this time lag. lag . The traditional view is that planning is a forward looking exercise, controlling is a backward looking exercise. But, a good control system should be futuristic. That is why Harold Koontz observed that: since past cannot be changed, effective control should be aimed at preventing present and future d eviations from plans. The present age of computerization computerization comes handy in obtaining feedback on a real time basis. It means that it inculcates incul cates "act now" philosophy in control process.

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Importance of Control The importance of control in an organization need not be over emphasized. Many  benefits accrue out out of effective control control system. To highlight the importance importance of control, control, the benefits of control are summarized to in the following paragraphs. 1. Facilitates Decision Making The purpose of control is to take corrective corrective actions. Corrective measures involve right decisions so as to bring the actual performance to that of a desired level. Majority of the executive decisions are centering around control points. Hence, control facilitates facilitates decision making process in any organization. 2. Checks on Delegated Authority  No single manager can obtain the total things in the organization. He has to delegate authority for the purpose of getting things done through his subordinates. Control enables the manager to check whether or not the delegated authority is being properly used by the subordinates. 3. Basis for Future Action Through the evaluation of final results control helps in spotting mistakes and  weaknesses  weaknesses in the process of implementation implementation of plans. plans. Control supplies useful useful information for future planning and organizing. A good control system enables the manager to correct the shortcomings in order to pave a smooth route for future activities. Such a system of control guides and directs action towards the organizational organizational objectives. 4. Improves Employees Morale Effective control system enables the management to identify i dentify changes that are effecting the organization so that subordinates subordinates can take advance action to cope-up with threats and opportunities created by such change. It allows timely feedback of information to the subordinates for taking appropriate measures to protect their positions. This ensures a sense of o f security and comfort among employees which in turn, contributes to higher degree of motivation and morale.

5. Promotes Efficiency in Operations Control enables the manager to take note of the activities, to detect deviations and to make adjustments in operations. It ensures him that the enterprise moves in a way as planned. It tells the manager whether the objectives are being achieved or not. If not, it helps the manager to revise the plans for achieving goals. Thus control contributes contributes to organizational efficiency. 6. Basic of Co-ordination Control tells the managers what to do and what not to do for the purpose of establishing harmony among various divisions. Control provides unity of direction and tries to establish equilibrium between means and ends. Thus control pr omotes co-ordination co-ordination  between different different of the organization organization 7. Exerts Psychological Pressures Control influences the behavior of the employees in a positive p ositive way. Workers become become cautious in their duties because their performance is subject to evaluation and control. A good control system brings necessary pressure on the employees to become good doers. Not only that, control makes the the people to act promptly for minimizing the the wastages and losses. Establishing a control system itself is not a panacea for all the ills of organization. A control system may have the following limitations. 1. Absence of Proper Standards The success of an organization depends upon both tangible and intangible factors. While tangible factors are easily controllable, intangible aspects like quality of supervision, inter-personal inter-personal relationships, public relations, brand loyalty etc., cannot be quantified for establishing standards. 2. Limitations of Corrective Actions Operating conditions conditions of a business are highly dynamic and volatile. It is not possible to take corrective actions all the time. No business enterprise would have incurred l osses had the corrective action been proved to be corrective or productive. It means that there are several limitations in taking corrective corrective actions. 3. Human Reactions Controls invite opposition from the subordin su bordinates ates because they interfere in their thei r freedom. Controls will not work unless u nless people accept them. People oppose controls  when they are biased, biased, unreliable td subjective. 4. Cost of Control

Establishing a good control system is not so easy. It needs elaborate effort, time and money. In modern organisations where man-machine man-machine systems go hand in hand, establishing a control system is a complicated process. process. This may result in excessive cost than the benefits of control. Pre-requisites Pre-requisites of Control  An effective and adequate adequate system of controlling controlling must fulfill the following following requisites. a) Plan: Plan: There is a close c lose inter-relationship inter-relationship between planning and controlling. They are not substitutes but supplement to each other. Plans without control are worthless and control without plans are meaningless. Controls must be always based on plans.  b) Proper Organisati Organisation on Structure: Any Structure: Any control process process yields good result only only  when the responsibility responsibility for detecting detecting the deviations and initiating initiating corrective corrective actions is clearly defined and identified along the liner of hierarchy throughout the organisation. Controls, to be effective, be supported by by a good organisational structure. c) Suitability: A Suitability:  A sound control system must must suit the needs of the enterprise. enterprise. Control points designed for a manager manager are inappropriate inappropriate for a supervisor. Controls must be tailored to the needs of an a n organisation. d) Promptness: A Promptness:  A good control system should should detect and report the the mistakes before before the matter becomes serious. It should allow prompt action by the management at correct time. e) Forward Looking: Controls should be forward looking l ooking character. character. They should sh ould be directed towards future. Since past is dead, things can be improved through control system in future. Control becomes useless if it fails to predict future. f) Flexibility: Control should not be static. They should remain workable under dynamic business conditions. Since controlling is a continuous activity, it should be flexible enough to be adopted a dopted to changing conditions conditions of an organisation. g) Objectivity: As Objectivity:  As far as possible, control control should serve a specific purpose. They They should develop impartial standards for the purpose of minimising friction. h) Economi Ec onomical: cal: The benefits from control should be greater than cost. Controls are feasible and desirable when their expected benefits excess costs. Expensive and inappropriate control control should be avoided. i) Simple: A Simple: A good control system should be easy to understand u nderstand and simple to administer. Too elaborate and complicated control system, quite often, fails to deliver the goods.

 j) Acceptable: Controls will not work unless people accept the same. They should be acceptable to those to whom they are applicable. Since control is for people, it must be acceptable to the people. Integrated Control System Control touches each and every activity a ctivity of the organisation. Whether the a ctivities ctivities are strategic or routine, the control should strive to obtain effectiveness. Control covers all levels of managers from top to bottom. They affect other managerial managerial functions in a great  way. But some controls controls may be disliked by subordinates subordinates on the plea plea that they are unreasonable and unacceptable. This type of dislike among employees about control process should be removed by creating a favourable environment. The effectiveness of control is destroyed through the resistance resistance of employees. To overcome the above difficulties and to obtain cooperation and participation of employees in the matters of control, the management has to develop an integrated system of control. Any control that is intimately interconnected interconnected and intertwined intertwined with other managerial functions is termed as an Integrated Control System. It is of very importance to modern management in view of their operation in complex environment. The details of such an integrated system are summarised below: a) Control and Planning: Planning: Since control refers to the use of activity for compelling events to conform to plans, it is evident that these two functions are interrelated. Planning, involves setting the activities and controlling keeps them on the right track. Planning is meaningless without control and control is blind without proper plans. The planning, function contributes to the smooth discharge of control by way of providing control standards through programs and budgets. Control function contributes to the adoption of new and revised plans.  b) Control and Organising: Organising: The term organising refers to a forma grouping of of activities for the purpose of achieving organisational organisational objectives. objectives. It ensures that objectives are achieved through optimum utilisation of resources in an orderly manner and that too in the shortest possible time. Resources like money, money, material, machinery and skilled man power are limited. These resources must be effectively used and controlled. It may no longer be possible for one man to control all the operations. That is  why it is necessary necessary to delegate some some responsibility responsibility and authority to the subordinates. Control becomes easy when authority is delegated. delega ted. Control receives negative response and becomes ineffective when authority is centralised. Not only that effectiveness of control directly depends upon the method of grouping of activities and level of delegation of authority. c) Control and Directing: Directing: It is the heart of administration. Since it tells the people  what to do, how to do, where where to do and when to do. Activities Activities like leadership and communication communication play an important role in influencing the behaviour behav iour of subordinates in securing desired performance. performance. This aspect is closely related with control function. While leadership guides action, control compels these actions to adhere plans. Communication ensures free flow of timely and relevant information. Control uses this information as a

feedback for taking corrective action. Information is backbone for regu lating the activities in any organisation. CONCLUSION In order to make the control process as an effective tool in the hands of management, it should be integrated with other managerial functions. All important and critical/aspects should be brought under the purview of control process for obtaining obtaining better results. Control should not be isolated from the main stream of managerial functions. Control function becomes effective when it is integrated with other managerial functions. Control is not a perfect substitute substitute for sound managerial practices and cannot ensure  business success success on its own merit. merit. For obtaining obtaining results, the management management has to develop an integrated i ntegrated approach. CASE STUDY (1) The Chairman of the Reliance Finance Corporation Mr. Aditya was too critical about the ongoing things of the company. He invited his Executive Vice-President Mr. George and Controller of Finance Mr. Merchant for discussions. discussions. While all of them were in deliberations, Mr. Aditya complained that he was wa s not informed about the inner details of the operations of the company on time and he was getting information only when small and controllable issues become crises. Mr. Aditya was under the impression that he was kept in dark by his team of executives and was further Isolated by non-receipt of important information. information. He suggested to his senior executives to design a system within 15 days which can inform everything to him in time. Bu t Mr. George is surprised to hear the comments of his Boss Mr. Aditya. After the closure of the meeting, Mr. Ge orge  wondered: "While everything everything lies in the periodical reports reports submitted by him to the Chairman, why still he is craving for a system?" sys tem?" QUESTIONS (1) Whether the Chairman was getting needy information or not? (2) If you are Mr. George, what you would do to keep the Chairman happy through effective control? CASE STUDY (2) Hindustan Corporation Hindustan Corporation is a leading consumer consumer product manufacturing concern. It is a multi-product and multi-unit organisation. Though its products are enjoying good  brand loyalty, the entry of competitive competitive products from 'Asian 'Asian Tigers' (Countries like like Thailand, Taiwan, Singapore etc.) has caused a larming situation. situation. The Chairman C hairman and Managing Director of the Hindustan Corporation-Mr.Abhiman reviewed the situation and came to the conclusion that the company can withstand the pressures of close competition competition only when its scare resources are optimally used with effective cost control.

Mr. Abhiman summoned all of his plant Managers and informed informed about the precarious situation. He further ordered ordered each one one of them to install an effective control system system  within 10 days. The The Plant Manager, in turn, called called the Asst. Manager and passed on the order to him. The Asst. Manager then assigned the task to his Foreman to attend the same.  After 10 days, the Foreman Foreman informed informed to the Asst. Manager Manager that he could not find find a control system suitable to the company's c ompany's need despite his review of current literature from reputed journals. QUESTIONS (1) Do you think that the Foreman should have worked little little hard in tracing a suitable system of control through books and journals? (2) Suggest ways and means means open for developing developing effective control system? system? REVIEW QUESTIONS (1) What is control? Discuss the basic steps in the control process. (2) "Planning is looking ahead and control is looking back" Comment. (3) Discuss the nature and characteristics characteristics of control process. (4) Examine the 'Pros and Cons' C ons' of Controlling. (5) Briefly explain the basic requirements requirements of a good control system. (6) Explain the need for integrated control system in modern business organisations. organisations. REFERENCE BOOKS 1) Bedian,A.G. -

"Management", Mc.Graw-Hill Mc.Graw-Hill

2) Fayol, Henry - "General & Industrial Industrial Management", Management", Pitman Pitman

- End Of Chapter LESSON - 20 SPAN OF CONTROL

LEARNING OBJECTIVE  

To understand the meaning and nature of the concept of span of controls To examine Graicuna's Theory together with its advantages and disadvantages.

The term 'span of control' is also a lso known as "span of authority", "spar of supervision" supervision" and "span of management". In modern organizations, the term "span of management" management" is gaining currency because span is related to more of management management than of control and supervision. Modern executives believe that control and supervision nearly constitute constitute an integral part of management process. No single executive can control and supervise all the activities of a large sized company. Every executive needs the assistance of several subordinates in sharing the work. The top executive, irrespective of his education and experience, takes the support of others since he is incapacited by human limitations. This gives rise to the need for others assistance in controlling the activities. Meaning Span of control implies the limitation on the number of subordinates that one manager can effectively supervise at a particular time. The quality of supervision becomes poor and coordination becomes weak when large number of subordinates work under a single executive. On the other hand, if the number of subordinates is too small, the abilities of the executives may not be used fully. A balance between these two extremes must be maintained In order to use full potentialities of the executive. The problem of span of control arises because an executive has limited time, knowledge and capacity. No one can effectively supervise an infinite number of subordinates. A manager can pay attention only on a limited number of subordinates. subordinates. Deciding the optimum number of subordinates that a manager can effectively supervise supervise at a t a particular time is not an easy  job. May be it is is varying from manager to manager. manager. Hence, span of control control is a person to person concept.  According to Peter Peter F. Drucker, span span of control refers to the the limit of number of subordinates reporting reporting directly to a superior. Koontz and ODonnell ODonnell used this term te rm to represent the limit on the number of persons that an individual can effectively manage. Opinions are divided on what should be the appropriate limit/span. limit/span. Different authorities have suggest different levels for e ffective supervision. supervision. For example, Lyndal L yndal F.Urwick suggested that no executive can effectively e ffectively supervise the work of more than five or six subordinates. While Hamilton gives this figure as 3-6, J.C.Worthy suggested the number of 20. These suggestions given by various experts reveal the fact that there is no one ideal number that can be universally applied. In real life, spans differ f rom situation to situation. In a research survey of hundred large companies conducted by the  America Management Management Association, Association, the number number of executives reporting reporting to the top

executives varied from 1 to 24. While 26 top executives had 6 or less than 6 subordinates, in respect of others it was 9. A similar study conducted on 41 smaller companies reveals some interesting points. Two executives of 25 companies supervised supervised 7 or more subordinates. Similar Similar type of studies revealed comparable results. Problems of levels (Span) 1. Existence of too many levels is expensive because the organisation has to bear the  burden. 2. Too many levels (span) complicate complicate the free f ree flow of communication. Omissions Omissions and mis-interpretations mis-interpretations increase with wide spans. That is why it has been rightly said that levels are "filters" of communications. 3. Existence of too many levels and numerous departments create create problems even in planning and control process. A well-defined well -defined plan loses clarity and coordination coordination as it passed on to the lower and lower levels. In a similar way, control becomes difficult with too many managers. 4. Handling of superior - subordinate relationships on smooth lines is a must for the success of any enterprise. Larger spans and too many managers may complicate the harmonious relationships between workers and management. 5. Division of activities among various departments and creation of h ierarchical ierarchical levels l evels are not completely desirable as departmentalisation departmentalisation is not an end for achieving effectiveness in organisation. Graicunas Theory   V.A.Graicunas,  V.A.Graicunas, a French management management consultant consultant explains, with with the help of mathematical calculations, that as the number of subordin su bordinates ates increased arithmetically, the number of relationships re lationships among them increased increased geomet g eometrically. rically. Graicunas has identified three types of superior - subordinate relationships and direct, cross and group relationships. The direct single relationship arises from the direct contacts of the superior with his subordinates. The cross relationships refer to the mutual relationships among subordinates working under a common superior. The direct group relationships arise between the superior and subordinates subordinates in all a ll possible combinations. Ex:- 'B' is a supervisor supervisor and he has two subordinates subordinates 'X' and ‘Y’. ‘Y’. Graicunas calculated the possible number of relationships as follows: (i) Direct relationships

=

B – X

2

B – Y  (ii) Group relationship

=

B X&Y

2

B Y&X  When a third subordinate subordinate 'Z' reports to 'B', 'B', several new relationships relationships arise by taking taking the total number of relationship to 18. The number of various relationships in a particular case can be calculated with the help of o f the following formula:  Where 'r' refers to the total total number of relationships, relationships, and 'n' stands for number number of subordinates on the basis of the above formula; the number of possible relationships  with different number number of subordinates subordinates is summarised summarised below:  ____________________________________________________________  ____________________________________________________________  _______ No. of subordinates

No. of relationships

 ____________________________________________________________  ____________________________________________________________  _______ 1

1

2

6

3

18

4

44

5

100

6

222

7

490

8

1,080

9

2,376

10

5,210

11

1,04,86,154

 ____________________________________________________________  ____________________________________________________________  _______ The above table illustrates how arithmetical increase in the number of subordinates results in increase in the number of relationships relationships in a geometric proportion. proportion. Graicunas

has prescribed a maximum of six subordinates as the most desirable span of control. But in reality, relationships as per Graicunas formula do not occur daily. One thing is clear that it throws sufficient light on the fact that every subordinate adds pressure on the superior's work of maintaining relationships at the spot. To summarise summarise the findings and principles of this theory: (i) There is a limit to the number of subordinates that an individual manager can effectively control. (ii) The exact number of such span depends upon the situation and its underlying  variables like pressure pressure of work-load, energy, energy, knowledge and attention attention of the superior, degree of team-work.

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Criticism (i) The span of control cannot be rigid and universal. The actual span of control is determined by a number of factors which have not been covered by Graicunas' Theory.

(ii) This theory ignores the frequency and severity of relationships that have not been dealt within this theory. (iii) The Graicunas' theory has left out certain possible cross relationships like 'B’ to XY, X to YB and Y to XB etc. (iv) This theory only explains one side of the coin ie., superior relationships with subordinates. It grossly ignores the superior's sideways and upward rela tionships. Span of Control and Levels of organisation Organisation levels exist because there is a limit to the number of persons a manager can supervise effectively. Ever growing organisation must add new levels to its structure. structure. Determination Determination of appropriate span of control to suit the levels of organisation is very important for two reasons. Firstly, the span of control affects the efficient use of superior and subordinate relationships for obtaining better performance. Narrow span results in under-utilisation of manager's services and over-controlling over-controlling of subordinates. On the other hand, too wide span may lead to over-straining of a manager and lack of effective control over subordinates. Secondly, span of control has an important bearing on the shape of organisation structure. structure. While a narrow span results in a "tall" organisation, a wide span leads to a 'flat' structure. This can be effectively depicted through diagrams (No.V.4.A and V.4.B) Diagram V iv A  ORGANIDATION WITH NARROW SPANS

Diagram V iv A  ORGANIDATION WITH WIDESPANS

Narrow span refers to the existence of too many levels in the organisation. The main advantage of narrow span is that effective leadership and control can be directly exercised on subordinates. Superior can easily communicate and effectively coordina c oordinate te the efforts of his subordinates since their number is small. Direct contact, close supervision and tight control can help improve the performance pattern. Organisations  with narrow spans spans suffer from several several limitations. Too many many levels hinder two way way communication communication when a message has to pass through different levels. Its effectiveness may be reduced. Large number of managers is required which results in additional salaries and high cost of management. Thirdly, a tall structure may have its adverse impact over morale because of the absence of close link between top executive and  bottom worker. worker.

To overcome these difficulties of narrow span (tall structure), some of the modern companies have adopted wide span structures. Wide span prevails in flat organisations. Here, one can find fewer levels of authority. It indicates that the chain of command is short. Because of this, communication communication tends to be quicker qu icker and more effective. Employees also develop morale because they feel that they are nearer to the top executive. This system allows delegation of authority and development of subordinates. It is common that subordinates feel more autonomous and independent in wide span organisational structures. Despite these advantages, flat organisations are subject to many disadvantages. Firstly, supervision and control tend to be loose and less effective  because a single executive executive may not have enough enough time and energy to supervise supervise all subordinates. Secondly, the problem of co-ordination gets magnified with wide spans. Due to this, the performance performance of subordinates is likely to be pruned. Flat structure structure with  wide span is not at all suitable suitable to large manufacturing organisations organisations that that have developed  business vertically. vertically. Deciding the best span is not that much easy. The span of control must be arrived at by proper balancing of two important factors factors such as organisational levels and supervisory load. Not only that, this span of control is directly affected by another two important  variables such as capacity of the the top executive to manage manage his work and capacity capacity of subordinates in carrying out the work. Apart from these factors, there are many other factors which help us in determining the actual size of span of control. They are explained briefly in the following paragraphs: (1) Management Policies They have a great bearing on span of control. If the policies are clear and comprehensive, comprehensive, it results in increase increase in span of control. Clarity in plans, definiteness in fixing up responsibility and use of standing plans reduce the pressure of decision making by the top executive. Hence, span of control will increase. (2) Nature of work  If the nature of work is routine, uniform, uniform, typical and mundane, mundane, it can be effectively monitored and regulated through programmed decisions. It leads to increase increase in the span of control. In contrast to this, volatile and complex work together with high riskdecisions is usually found at the top management. That is why at top level, one can find limited span of control, (3) Line and staff relationships relationships If a line manager receives adequate staff help, he can bear high level of work-load and can have a larger span of control. Existence of good superior and subordinate relationships based on faith and mutual confidence is an essential pre-requisite to widen the span of control. On the other hand, if the superior is tactless in handling the relationships with subordinates, he will have limited span of control. (4) Quality of subordinates

If subordinates are experienced and well-train we ll-trained ed in challenges through self-confidence self-confidence and control, they will need minimum supervision from the boss. It will certainly improve the span of control. (5) Other Factors The span of control in practice is affected by a good number of factors. For eg: Time availability, degree of decentralisation, control practices. They are bound to have impact over the size of span. We may come across limited span when the work is to be supervised through personal observation. Similarly, Similarly, wider span of control may prevail  when the work of the the subordinates can can be controlled through through written reports. CONCLUSION Span of control or supervision has assumed unique importance at present. The modern  business has grown grown in. size, complexity, complexity, diversity and coverage. coverage. Problems of the top executives have increased considerably. The biggest task before the chief executive is how to reduce the work-load of less l ess important nature nature in order or der to keep close control over important and critical activities. The modern managements are trying to obtain between results through practising different techniques. Span of control comes handy in easing out his work load. CASE Study (1) Planning and Control at Kitplay Ltd. Kit Jay Ltd. has been very successful successful since 1977 in selling Toys in India. The success of this Company is attributable to two person – Mr. Dilip - technical expert, Mr. Parimal the marketing genius. However, the success did not last for a very long time partly  because of the introduction introduction of the LEO Toys Toys and Personal Computers. Computers. The Company is fast losing its market. Kitplay Company thought of exercising tight control and professional approach in management. Mr.Arjun Mr.Arjun was lured from Plastics India Ltd to give Kitplay a new direction. d irection. To bring the Company under control, Mr. Arjun employed cost cutting measuring to improve its profitability. Spending on Research has been increased so that new products may be developed to retain its market share. Efforts were made to reduce duplication and friction among the departments. departments. A new reporting procedure is evolved for improving effectiveness in communication. communication. All efforts e fforts are made to control the inventory level which was hither to a serious se rious problem. These measures combined combined with a successful successful strategy of launching new products have helped the Company in achieving tremendous success. As a result, one put is increased by 200 percent and profit by 15 0 percent within two years. QUESTIONS 1) What is relationship between planning and controlling?

2) How coordination is helpful in this case? REVIEW QUESTIONS (1) What do you understand by 'span of control'? How would you determine the optimum span of control in a given gi ven situation? situation? (2) Discuss critically the theory the ory propounded by V.A. Graicunas. (3) Explain the factors that help to d etermine the actual span of control in any business. (4) How does the span of control influence the organisation structure? structure? Discuss in brief the comparative merits and demerits of narrow and wide spans. REFERENCE BOOKS 1) Koontz & O' Donnel

-

"Management - A Book of Readings" Me Graw Hill

2) Keith Davis

-

Human Behaviour at work 

3) American Management

-

Notes on Theory of organisation.

- End Of Chapter LESSON-21 MANAGEMENT BY OBJECTIVES

LEARNING OBJECTIVES:  After reading this this chapter, the student student must be able to:     

understand the concept of Management By Objectives (MBO); develop an insight about the concept of MBO; understand the process of MBO; familiarise you with qualitative and quantitative objectives: and understand the various benefits benefits and limitations of MBO programme programme

INTRODUCTION:

 A general purpose of control control involves a manager and sub-ordinal agreeing agreeing on objectives, recording actual performance and then, review actual with that of standards. The manager, then has a number of options for correcting any variations. This approach was original; suggested by Peter Drucker and popularised by George Odiorne. It is termed as Management by Objectives. It is now practised throughout the world. While some managers view this technique as a motivational technique, others consider it as a planning and control device. Management by Objectives calls for minimizing controls and maximizing motivation through internally driven superior-subordinate superior-subordinate relationships. The key to MBO is the internal relationships between superior and subordinate in setting realistic objectives for the subordinates. In simple, MBO is made up of four steps. a) Joint goal setting;  b) Pragmatic planning, planning, c) Self-control by all people, and d) periodic appraisal. Thus, management by objectives calls for regulating the entire process of managing in terms of meaningful, specific and identifiable objectives at different levels of the organisation. Clear objectives serve as juice to action. It is not possible to have quantifiable quantifiable objectives every time. Under such circumstances, the management has to develop qualitative objectives for easy accomplishment accomplishment of results. In India, the philosophy of MBO was introduced introduced by GEC of USA in late 960s. Since then, this concept is gaining currency throughout India. Since the concept MBO directly influences planning as well as organising directing and controlling, it constitutes a basis for improving the overall process of management.

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MEANING AND DEFINITION: Management by objectives (MBO) is both a philosophy and technique te chnique of management. Its main emphasis is on results but not on methods of doing it. As a philosophy,

management by objectives is based on the assumption that the conversion of broad organisational goals into more specific and personalised objectives which result in higher level of commitment and improved level of performance. Management Management by objectives is also synonymously referred to as "Management by Results" "Goal Management", Management", "Accountability "Accountability Management", "Management by Motivation" Motivation" and "PRIDE" (Performance, Results and Individual Development Evaluation). The concept MBO has been defined by different experts in different ways. Some of the  well known definitions definitions are presented below. below. George Odiorn defines MBO as "a process whereby the superior and subordinate managers of an organisation jointly identify its common goals, define each individuals major areas of responsibility in terms of results expected of him, and use these measures measures as guides for operating the unit and assessing the contribution contribution of each of o f its members".  Another interesting interesting definition definition was given by J.W. Humble. He defines defines the MBO as a dynamic system which seeks to integrate the company's need to clarify and achieve its profit and growth goals with the manager's to contribute and develop himself. It is a demanding and rewarding style of managing a business.  Another definition definition which is more fascinating fascinating has been been given S.K. Chakraborthy. Chakraborthy. He opines that "MBO is a result-centered, non-specialist, non-specialist, operation of managerial process for the effective utilisation of the resources of the organisation by integrating the individual with the organisation and the organisation with that of environment. The above definitions-throw necessary light on the real meaning of the concept, MBO. To, conclude, we may define this concept concept as a "comprehensive approach focusing focusing on objectives, providing guidelines and developing positive motivation among all people for the attainment of desired results". An insight into the above definitions, reveals some of the characteristics of MBO. They are briefly explained below: 1) Goal orientation: orientation: Management By Objectives focuses on the attainment of objectives of a firm generally established by the management. management. It is desirable for each manager to have his own goal in line with the organisational goals. This kind of arrangement will will enable the management to blend long term objectives like survival and growth with that of personal objectives like executive job satisfaction. 2) Participation: The key to MBO is the mutual relationship relationship between superior and subordinate in setting the realistic objectives. It is characterised characterised by a high degree of participation participation by all a ll the concerned people. It helps in improving motivation and morale pattern of the participants. Participative management is a pre-requisite for the success of MBO programme. 3) Key Result Area (KRAs): Areas (KRAs): Areas which are critical critical and important to the the organisation as a whole are termed as Key Result Areas (KRAs). It enables the management to pay greater attention to priority areas which have significant impact on the success or failure of o f the organisation. organisation.

These Key Result Areas are to be properly co-ordinated so as to make maximum contribution contribution to the th e success of the organisation. organisation. 4) Systems Approach: Management by Objectives is a systems approach approach to managing any organisation, it is true because it is trying to integrate the personal goals with that of the organisational objectives. MBO approach signifies viewing things in totality rather than in isolation. 5) Optimum Utilisation: Management By Objectives is proved to be useful and productive only when it ensures optimum utilisation of men materials, machines, machines, money and methods. It acts as a s a mechanism through which each of them contributes effectively for the success of the organisation. 6) Dynamic Concept: MBO is a simple and dynamic concept. It can be fixed by all types of managers irrespective of the fact whether they are concerned c oncerned with commercial commercial or social organisations. It yields good results in small as well as big organisations. 7) Practical: MBO is a practical, concept which which turns the concept into practice. This is possible through operational process through which performance performance is measured periodically by exercising self- control for future results. 8) Multiplicity of Accountability: Accountability: The results through MBO and their accounta a ccountability bility is not centralised because every manager is made accountable through his individual goals set by the organisation. organisation. Thus, it paves a wa y for multiple accountability centres  which discourage discourage "buck passing" passing" and "credit grabbing". grabbing". The technique technique of MBO is mainly  based upon decentralised decentralised planning and centralised centralised control. 9) Total Approach: MBO attaches equal Importance to all economic, technical, social and human discussions of an organisation. organisation. In other words, it represents a totalitarian approach. It combines micro level advantages with that of macro-level for the purpose of attaching the best results. The above characteristics represent the total philosophy of management MBO, in essence is not representing a single technique, but depicts the whole process of the management. management. It is centering around goals, participative decision-making, periodic reviews, feedback and performance improvement For obtaining these things, it also covers human behaviour, actions, and motivation. HIERARCHY OF OBJECTIVES Objectives state the end results. They determine the shape of future events. The ef forts of an organisation are properly directed when the objectives are clear. That is why setting proper objectives is the key to success of any management. Different objectives objectives may be set for different levels le vels of management. These objectives objectives when they are arranged in a sequential order give rise to a hierarchy of objectives. These objectives may be general or specific. They may sometimes sometimes cover long term and sometimes short term goals. The objectives at higher level act as ends and that of the lower level as the means.

This is also called means end chain of objectives. For example various sections of a production department work together to fulfil the main objectives of the production department. This means that the sectorial goals contribute to the departmental objectives. Similarly, Similarly, if all departments try to accomplish their own objectives, it leads to the attainment of overall corporate objective objective of mission or purpose.

Figure VI. 1 .A shows the hierarchy of objectives from broad broad level to the individual or micro level. It is stated below in clear terms. Every organisation has a basic mission or purpose of its existence. ex istence. The machine indicates long-term commitments reflecting values, beliefs bel iefs and management philosophy. It provides grand design or purpose for which the organisation is existing. Long-term objectives of the corporation reflect the socio-economic purposes. It indicates that the objective of top management is to render service to society and at the same time obtain good returns on the investment. Overall corporate objectives can be  well met through well designed designed medium term objectives objectives which lay emphasis emphasis on profit through service and satisfaction to the consumers. Every organisation is supported by long-term as well as short-term objectives which are further supported by divisional or departmental departmental plans. Under systems approach, approach, each objective is sub-divided into goals and targets which are inter-related with each other.  When these things things are inter-woven with with each other, they represent represent a systems systems approach.  A good management must must see that overall objectives missions missions purposes purposes are fulfilled along with the accomplishm a ccomplishment ent of individual departmental divisional results. The overall objectives set at the top level are divided and further sub-divided sub-divided into goals and targets and identified with each level of management. management. A good management management must always keep the sub-ordinates well aware of their common and final objectives to be attained in the organisational organisational context. TYPES OF OBJECTIVES  A modern organisation organisation cannot have a single objective such as profit maximisation. maximisation. Every organisation may have different objectives objectives at a single point of time. What is needed is that each of these objectives must must be integrated and coordinated for the fulfillment of overall objective of the organisation. These objectives may be broadly classified under two types. External and Internal. A brief discussion is presented in the following lines: External Objectives The most important external objective of any enterprise is to serve the needs of a customer through its product/service. Every organisation organisation must try to maximise the profits. An organisation is a social institution and service to the society should be an important external objective. Similarly, an organisation must be a good neighbourer

since it offers active support to government, education and health programmes. It must aim at minimising the problem of pollution for ensuring good quality of life. In this manner, an organisation must fulfill its responsibilities to the community, community, society and government besides its own customers. Internal Objectives The primary internal objective of any a ny organisation is maximisation of profit. Next to that, fulfillment of employees' needs and desires is another an other important internal internal objective. Employees' cooperation and support can be easily Obtained through providing job security and satisfaction, satisfaction, Shareholders constitute an important segment of the organisation. Every organisation must strive hand to get fair return on income. Profit is the life-blood of an enterprise. It is an indicator of economic efficiency. Profit is needed  both for survival survival and growth. Unless an organisation organisation fulfills fulfills the above objectives, it is difficult to continue successfully in the near future. Qualitative Qualitative Objectives Every organisation is bounded by some qualitative objectives. These objectives are not measurable easily. Some of the important of them are briefly explained below: 1) Survival: In these days of growing competition, survival is the first objective of a ny enterprise. It enables the unit "to be in the industry as a live unit." Unless the organisation hits this objective, its future is bleak. 2) Growth: Growth is the second objective. Some organisations may grow fast and some others being slow. A growing organisation is a living symbol of its successful activities. Organisations Organisations can never be static in future. fu ture. Moreover, the future of any organisation depends upon its ability to grow by absorbing all changes in fu ture. 3) Service: Every organisation is created to offer either a product or service to the customers. The service objective enables the organisation organisation to produce g ood quality products at fair price. Obtaining customer satisfaction through after-sale-service is the paramount consideration for the success of business. 4) Social Objectives: From the point of view of the society, every organisation is doing in its own way for the development of the society. Some value should be created  by every enterprise enterprise through transformation transformation of inputs into into useful output. This ensures ensures  welfare to members members of the society. 5) Personal Objective: Enterprises cannot be run only with money, material and machinery. machinery. Manpower is required to manage the whole show. Workers being human  beings, their desires, desires, ambitions and aspirations aspirations must be taken taken care of. The objective of any a ny organisation is to satisfy the economic, e conomic, social and psychological interests of the workers.

QUANTITATIVE QUANTITATIVE OBJECTIVES 1) Profit Objective: Many people believe that profit is the primary objective of any enterprise. Infact, it is not. In a modern society, the primary objective is to render service. Profit is only a bi-product of this service. Since profits are easily measurable, quite often, they are accepted as sine-quo-non of business success. 2) Market Share: Modern organisations are striving hard to capture more share in the market. A higher level of market share is an indication of its leadership in the line of activity. Even this quantifiable objective of market share is intimately influenced by qualitative aspects like quality of the product, after sale-service, image etc. 3) Turnover: An Turnover: An organisation, which which maintains a low profile, profile, may try to attain higher higher level of turnover. It indicates its primary position to earn profits through optimum utilisation of existing resources. 4) Productivit Pr oductivity: y: Another  Another important objective objective of the modern organisation organisation is to maintain the highest level of productivity. It refers to a state of affairs in which maximum results are obtained through minimum utilization of resources. It is a commonly accepted notion that higher the productivity productivity level, the greater the changes of maximum profit. MANAGEMENT MANAGEMENT BY EXCEPTION Network in any organisation must be efficient enough to feed relevant information to the superiors at appropriate time to act. To keep managers from being bogged down in communications communications about how ho w matters are progressing, control communications communications are often  based on the Management Management by Exception Principle. Principle. A manager will not be be disturbed for routine matters. This principle suggests that the controlling superior should be informed about an operation's progress only if there is a significant deviation from the normalcy. This will enable executives e xecutives to concentrate on problem solving and future f uture plans. CASE STUDY (1) Surya Electric Bulbs is a large l arge multi-product Company. Mr. Jayadev is the chief architect of the Company in steering the affairs on successful successful lines. Mr. Lakshman, Lakshman, with 25 years of experience, became the new Chief Executive Officer of the Company. He pondered over the question. "How to keep long-term profitability intact?" He focused his attention on new ways of developing strategies. The new strategy is to increase its market share lest l est foreign companies may enchroach its market with higher quality products, p roducts, faster and cheaper. While Surya's high technology products exhibited strong performance, its traditional products have been started dwindling partly because of recession and partly because of foreign products;

The Company's original strategy of long-term profits is slowly given-up to market share. Mr. Lakshman would like to keep the Company either as No. 1 or No.2 in terms of market share. In order to achieve this objective, discretion in spending is given to Divisional Managers. Mr. Lakshman Lakshman is of the view that innovative way of marketing products alone can ensure future. QUESTIONS (1) Is the Company's new policy of netting more market market share to profits appropriate? appropriate? (2) How you would advocate the new objective? REVIEW QUESTIONS 1) What is an objective? What What are benefits and and limitations of objectives? objectives? 2) What is a hierarchy of objectives? Describe Describe the classification of objectives objectives under quantitative quantitative and qualitative headings. 3) What do you understand by "Management "Management by by Objectives". 4) Explain the meaning meaning and process of Management Management by Objectives. Objectives. 5) Discuss the strengths strengths and weaknesses of Management Management by Objectives. REFERENCE BOOKS 1) The Practice Practice of Management

- Peter F. Drucker

2) Management Management by Objectives

- John Humble

3) Management by Objectives

- Chakravarty S.K.

4) Management by Objectives

- George Odiorne

5) Effective Management Management by

- William Reddin Objectives

- End Of Chapter LESSON-22 SUPERVISION

LEARNING OBJECTIVES  

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To understand the meaning and significance significance of supervision. superv ision. To identify the role of o f supervisors in the day to-day administration of modern organisations. To specifically look into the changing profile of supervisor's responsibilities responsibilities under dynamic conditions. conditions. To understand the process pr ocess of selection and training of supervisors. super visors. To identify the factors that contributes to effective supervision.

INTRODUCTION Modern organisations are doing business in a big way. They are recruiting hundreds of  workers for the the purpose of managing managing the task or mission. mission. In fact, management management alone cannot do the total activity in an organisation. It takes the help of various levels of of executives in transforming transforming the inputs into output. The lower level of managerial managerial hierarchy is usually termed as supervisors. They act as a link between top management and workers. The smooth running of organisation organisation much depends upon the constructive role of supervisors. Hence Hence supervisors form an integral part of management in getting things done. MEANING The word supervision means overseeing the work of the employees. Overseeing Overseeing can be done at various levels i.e. from top to bottom. At lower level, the foreman might supervise the work of a shop floor worker. At higher level, the superior officer might oversee the activities of his junior officer. For instance, marketing marketing manager may directly supervise the work done by his assistant marketing marketing manager. However the term supervision strictly strictly refers to the lower level management which oversees oversees the work of of  blue coloured workers. At top and middle levels, levels, managers are busy busy with giving guidelines and directions to the other management members in getting things done. Supervisors alone are directly in touch with the workers in the day-to-day administration administration of the organisation. organisation. That is why, they are called as first line managers. The misconception that supervisors exist only in production department is bad. Supervisors exist in all the departments but they may be identified with different names in different functional areas, such as foreman, gagman, overseer, chief clerk etc. Position Position of Supervisors Supervisors are blessed with authority and they are termed as first line executives. They are entrusted with the task of getting things done smoothly with the he lp of workers in accordance accordance with the standards dictated by the top management. In discharging their duties together with their functions, supervisors supervisors normally involve with giving g iving orders, issuing instructions, prescribing methods, determining the procedures, explaining the company's policy to the workers and inspiring people. For the purpose of obtaining

things, the supervisors must have leadership qualities and communication abilities. At lower level, authority is delegated and duties du ties are assigned to the workers by the supervisors. As delegates of authority they are also accountable for performance to the original delegator of authority. The process of delegation goes down the line of authority. The process of delegation is stopped with the supervisory level of management in an organisation. Supervisors are primary responsible for executing jobs through employees in a best possible manner. They extend all help hel p and assistance needed by the employees, in extending such help, supervisors draw supportive supportive assistance from the members of staff services like engineering, engineering, accounting, training and personnel departments. departments. The role of supervisors cannot be undermined because they act as liaison officers  between executives executives and operating workers. workers. They should should be blessed with lot of human skill as they are expected to confront with with innumerable number of problems in day today administration. In fact they act as pillars in obtaining needed cooperation from  workers. They create create enthusiasm, in realising the targets, targets, among workers. workers. The faulty supervision may create problems even to the top management in getting needed performance. An over enthusiastic supervisor may mar the "will to do" of the workers and may further stand as a bottleneck in accomplishing things. He must have broad understanding about the expectation of top management and desires of workers. In this  way, he is acting as as a live wire between the various various levels of people in extracting extracting work in a desired way.

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SUPERVISORY RESPONSIBILITIES - A CHANGING PROFILE: (1) STATUS: The status of supervisor is changing from time to time and that too from organisation to organisation. This is because the responsibilities of a supervisor undergo rapid change with the passage of time. Till 19th century, supervisor supervisor was given wide authority to dictate and control people working under him. In those days he used to have lot of power ranging from hiring, placement, training, termination to rewards and punishments. He used to occupy pivotal position in the organisati o rganisation on because there were no specialist functional managers. That is why his responsibilities are all pervasive in olden days. But in the 20th century, century, management of an organisation is purely organised on functional basis. While personnel manager is responsible for hiring a nd firing,

promotion and demotion, rewards and punishment-production punishment-production manager dictates the timing, scheduling and routing of the product. Staff specialist takes care of o f inspection and quality control. With this the role and responsibility of a su pervisor are undergoing change from time to time. At present the supervisor's responsibilities are mostly limited to passing instructions and overseeing overseeing the work in a routine way. His services are no more sought after to inspire the people with his guidance and direction. (2) POSITION: POSITION: As supervisors are first line managers, they are accountable for their deeds. While executing the work with the help of o f employees, supervisors take lot of assistance from the staff members who are specialists in their area of operations. For instance, cost accountant gives advice on different aspects pertaining to cost reduction.  An industrial engineer engineer may lend advice on keeping keeping wastage at minimum. minimum. Actually the supervisor is supposed to take advice and service from the staff members and lead the operating people efficiently. But in reality the staff members overshadow the role of supervisor. It is because of the fact that staff are highly qualified, highly paid and well placed in terms of status. As a result, resu lt, staff tries to dominate supervisors. At present the power of supervisors has been seriously eroded by the role of the staff members. Supervisors are asked to get the things done without proper authority. This is an organisational anomaly. The position of supervisor is weakened with the increasing role of super- specialists in modern organisations. organisations. (3) RECOGNITION RECOGNITION :  : Progressive enterprises enterprises and realistic realistic managements have started realising that the role of supervisors cannot be ignored at any cost. It is simply because of the fact that the supervisors su pervisors are responsible responsible for better human relations at the work spot, and good results can be obtained only through e ffective supervision. Mutual Mutual trust and confidence together with good interpersonal relationships relationships can be developed at the  work spot only through through good supervision. The top management management has to sanction sanction the requisite authority, power and recognition to the supervisors to make the supervisors as effective team leaders at ground level. Failure to recognize the role of supervisor leads to frustration, indiscipline, indiscipline, lack of orderliness at shop-floor level.

- End Of Chapter LESSON - 23 QUALITIES OF A SUPERVISOR 

Since supervisor is a live link between top management management and operating people, he should  be well-versed in human relations. He needs varied varied skills. Some of the important important qualifications of supervisor are summarised below: -

(a) Technical knowledge: knowledge: This quality enables the supervisor to be in touch with ongoing work and issue necessary instructions instructions for obtaining smooth performance. (b) Human Skill: Skill : Understanding the human being in a human way is a pre-requisite pre -requisite for successful management of work force at shop-floor shop-floor level. (c) Communication Skill: Skill : A poor communicator cannot be an effective supervisor. Good communication skill enables the supervisor to become strong in convincing and commanding the work force. (d) Emotional Stability : Unlike employees, a good supervisor should not be allowed  by emotions. In turn, turn, he must be stable in thinking thinking and free from biased-feelings. biased-feelings. (e) Judgement: Judgement: As supervisor is is confronted confronted by a good number of unexpected unexpected problems at the work spot, this quality enables him to judge the facts judiciously. (f) Analytical ability : This quality is required to enable the supervisor to analyse a given situation in the light of past and present events for the purpose of projecting future events accurately.

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TRAINING SUPERVISORS The supervisor is a line manager. He is expected to lead operating people at the lowest level. This attribute can be acquired through experience and training. There are a good number of methods that are helpful he lpful in trainin tra ining g supervisors. Some of the important methods are briefed up in the following lines. a) Conference and lectures : Through this method, the supervisor is made to know his duties, responsibilities, responsibilities, powers, human-relations know-how and management methods. This method is mainly useful for imparting the practical knowledge relating to the work.  b) Case studies studies : This method enables the supervisor to develop broader about the expected problem and develop insight offering background knowledge of various work situations together with the possibility of stimulating various alternatives to meet different contingencies contingencies is the sole aim a im of a case study method.

c) Apprenticeship : It is a type of 'On-the-Job training' given to the supervisor to acquaint with himself about the realities of work situation. It is an indispensable indispensable tool for training raw candidates into successful supervisors. Under this method, new candidates are placed before an experienced supervisor who gives instructions, clarifies doubts and explains the techniques of work. d) Manual : It is a booklet containing what to do and what not to do type of instructions on topics of supervisory interests. All supervisors are g iven a copy of the manual so as to acquaint them with all al l the work related aspects. In a way manuals act as guides and help the supervisor in dealing the challenges of work situation. Having discussed some of the important important methods of training, an attempts made to trace the factors that are held responsible for EFFECTIVE EFFECTIVE SUPERVISION in organisations. organisations. 1) Human Skill Human skill is that type of skill which enables the supervisor to understand the human problems in a human way. It is mainly concerned concerned with feeling, guiding gu iding and inspiring people towards better performance. The supervisor has to develop expertise in handling  various aspects pertaining to interpersonal interpersonal relations. relations. He has to integrate integrate the personal personal needs of the employees with that or organisational organisational goals. He has to act like a counselor in guiding and advising workers workers who are emotionally disturbed. In simple, the level of inter-personal inter-personal relationship and the quality of human relations directly depend upon the level of human skill on the part of the supervisor. supervisor. 2) Technical Skill Technical skill is that type of skill which enables the supervisor to understand minute details of work aspects. In fact there is a direct d irect relationship relationship between level of technical te chnical knowledge and supervisory competence. competence. Supervision cannot be complete and through  without technical knowledge. 3) Managerial Knowledge  Apart from the above above skills, a supervisor must must have knowledge knowledge pertaining to managerial managerial aspects like goal setting, planning, scheduling, directing and controlling. He has to comprehend comprehend the managerial policies and pursue them carefully for obtaining coordinated efforts. The greater the managerial skill of a supervisor, the more effective  will be the result of supervision. supervision. 4) Authority  Supervisors are to be given necessary authority. It enables them to influence the work of employees. Neither too much nor Inadequate supervision is not congenial for effective supervision. In other words, authority of a supervisor should commensurate with his duties. 5) Feed-back 

Supervisor should be allowed regularly to present their views and suggestions to superiors on all matters of work situation. If a supervisor supe rvisor is refused to have any direct access to superiors, he feels isolated and neglected. Hence the management has to pay adequate attention to the opinions opi nions of supervisors. This kind of two way communication makes the supervision much more effective. 6) Routine Work  The supervisor must be free from routine and typical work. The number of reports to be filed must be reduced. Relief from routine and non-supervisory non-supervisory duties will enable the supervisor to pay greater g reater attention attention on important aspects for getting more productivity. 7) Attitude Close supervision is bad. It kills initiation and enthusiasm on the pail of employees. Experience proves that liberal attitude and loose supervision is made productive. He should always develop favourable attitude towards, employees. Such an attitude makes him more dependable and honourable in the eyes of employees. CONCLUSION Supervision is a must in all organisations. It is directly connected connected with guiding bluecoloured work force. It deals with what to do, ho w to do, where to do a and nd when to do aspects of work. Good supervision ensures smooth flow of work. It contributes to good human relations in the organisation. organisation. Every organisation has to strive hard in developing good supervision so as to reap full benefits out of it. The quality of supervision can be imparted through training. Out of several methods, on the job training is proved to be effective. Every management has to take necessary steps that are favourable to effective supervision. REVIEW QUESTIONS (1) Explain the meaning and significance significance of supervision supervision in an organization organization (2) How supervision is unique when compared to other lefts of management? management? (3) What are the responsibilities of a g ood supervisor? supervisor? (4) Briefly explain about the supervisory qualifications. (5) Discuss the factors that contribute contribute to effective effective supervision. REFERENCE BOOKS 1) Management - A systems and contingency contingency Analysis - Harold Koontz & Cyril O' Donnel

2) Management - James A.F.Sto A .F.Stoner ner and Charles Wankel. Wankel. CASE STUDY (1)  A small firm had about 12 supervisors reporting reporting to different managers. managers. Working hours hours  were 9 A.M to 5 P.M. Mr. Ramesh, Ramesh, who is considered to to be a tough guy, is a committed committed supervisor. On one morning, he noticed that two of his senior workers were were about ten minutes late to work and some of the junior workers were coining late by 15 minutes, He circulated a memo among all his employees Informing that all of them should be punctual. The next morning he observed that all employees, were present at the work spot sharp by 9 A.M. He thought that his decision decision seems to be effective. One afternoon, he called on one of his workers at about 4.30 P.M. and discussing discussing the details of next day's production schedule. At 4.55 P.M., the wo rker stopped listening listening and gently remained the supervisor that the day's work is over by 5 P.M. Most of the workers started leaving the premises by 5 P.M. even without clearing the job on hand. QUESTIONS 1) How effective effective was was the the supervisor's supervisor's decision? decision? 2) Had he considered considered all the alternatives alternatives and consequences? consequences? 3) If you were be in his position, what wha t would you have been done? CASE STUDY (2) Godavari Furniture Company  The Godavari Furniture Company has been manufacturing high qual ity furniture for the last 50 years. It has decided to manufacture manufacture kitchen cabinets. Mr. Venkat was asked to handle this new job with the help of new team of workers. Even without meeting new workers. Mr. Venkat informs to Mr. Raman a furniture designer, "I am going to have trouble with new workers" When Mr. Raman asks Mr.  Venkat why he he expects difficulties. difficulties. Mr. Venkat repttes repttes that cabinet workers workers are are selfcentred, and they do not want to work regularly. You have to tell them what to do since they are not creative at all. As expected, workers are not cooperative cooperative and they believe bel ieve that it is very difficult to work under him since he is impatient. QUESTIONS 1. What made Mr. Venkat to have have such assumptions assumptions about the the work force? force? 2. How effective effective was Mr.Venkat as a team builder?

- End Of Chapter LESSON - 24 SOCIAL RESPONSIBILITIES RESPONSIBILITIES OF A BUSINESS

LEARNING OBJECTIVES 

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To describe the business as a component of social system in this pluralistic society. To understand the meaning of the concept "Social Responsibility". To explain the arguments of for and against the concept of social responsibility of  business. To explain the forces influencing the social responsibilities of a business. To understand the relationship rela tionship between the business and its environment.

INTRODUCTION The term "business" means "many things to many people". To some, it refers to the enterprise doing any economic and commercial activity. Whereas for o thers, it refers to the development through adding economic values in a given society. Sometimes, it refers to private enterprise and sometimes, sometimes, it indicates indica tes public sector undertakings. Strictly speaking, the term 'business' refers to any type of enterprise that is engaged in either manufacturing or trading for the purpose of giving satisfaction to the consumer. Now-a-days, business is being done on large scale basis. In the light of increasing competition, the modern business has become more complex. It exerts lot of influence over the socio- economic set up of the society. It affects large number of people in the community. For instance, instance, it influences the economic and social life l ife styles of the consumers, investors, investors, workers, shareholders and the general g eneral public. The modern  business is regarded regarded as an important important and integral part of the socio-economic fabric of the society. Hence, its success or failure directly depends upon the approval or disapproval/acceptance disapproval/acceptance or rejections rejections of its activities/goods. Modern business is operating in a pluralistic society. It indicates that many groups represent their own interest in a business setting. Each group will exert influence on the other groups, which in turn affects the business. It implies that there are several implications for business. Now the question before the managers is how to develop a socially relevant and profitable business. business. MEANING

The term, "Social responsibility" is related with public interest and social welfare. It is the obligation on the part of the management management to initiate actions either to protect or promote the social interest of a pluralistic society with a sole objective of striving in future. It is a deliberate de liberate and intelligent effort on the part of the business executives to  win the confidence of people representing representing varied interests. interests. HISTORICAL PERSPECTIVE Till 1900, business was viewed as a profit making mechanism. Today, this thinking has undergone a change. The real question before the managers is - what wha t the social responsibility responsibility of business mostly is?. Though it is not a new question but has received  wide attention with with the publication of of a book entitled "Social Responsibiliti Responsibilities es of the Business" by Howard R. Brown. He suggested that every business should consider the social implications of its decisions. Every business business firm is a social institution. It does d oes not flourish on its own. When business firm operates its business in a stable and predictable environment, it need not pay much attention to the influence of society. But modern corporations have been experiencing ups and downs under dynamic real time conditions. Changes in attitude of workers, shareholders, supplies, customers etc., certainly influence the successful functioning of the modern business. Now, the day has come to question ourselves whether modern business houses have some responsibility to improve the conditions of the world or to improve their own profits. Peter F. Drucker has pointed out that a healthy business unit cannot exist for a long time in a sick society. In his view, business unit is not only an economic unit but al so a social one. It means that business unit is surrounded by various groups, each having its own interest. The management of the modern organisations organisations are now charged with the responsibility responsibility to distribute corporate rewards or resources among these interest groups, in an equitable manner. In other words, the management is expected to provide good profits and products, fair wages, employment opportunities, local resource development and community support. The logic behind this argument is that, modern business organisations cannot escape their obligations to the society, since they are the integral part of it. Business houses continue continue in the long term only when they are accepted by the society. s ociety. Hence, they cannot ignore social problems and it might lead to se lf-destruction. lf-destruction. That is  why Keith Devis pointed pointed out that in the long run those those units which do not serve serve the society in a responsible way are going to lose their own ground. That is why it is extremely difficult to separate the social, political and ethical environments from that of the activities of a business. The social environment is comprised of beliefs, desires attitudes and customs of people. The political environment is made up of government government policies, agencies and their regulations. Ethical environment includes minimum accepted standards in serving the needs of the people, Hence, the concept of social responsibility requires the business organisations to consider the impact of their decisions and actions in society. PERSPECTIVES PERSPECTIVES OF CORPORATE SOCIAL RESPONSIBILITY  RESPONSIBILITY 

Modern business organisations organisations are integral i ntegral part of the society. They take resources from society and transform them into products products and offer the same for the benefit of the members of society. Hence, every business is a ccountable for its deeds and activities. act ivities. Every business organisation is yielding some power and influence. For instance, implementing implementing reservations to S.C, B.C people in employment is an important social issue. Since business houses are primary employers, e mployers, they are responsible for helping the society in the issue of reservations. Every business must reveal information about its activities. Similarly it s hould also absorb information from society regarding its expectations and needs. A socially responsible organisation organisation should be willing to work like a open system and monitor its programmes through social audits. Now, more and more organisations are constrained constrained to think about the social effect of their activities apart from the factors like profitability and technical feasibility. feasibility. In the words of Keith Devis, every e very business will receive higher profits, if it pays attention towards solving social problems. For this purpose, he suggested that social costs must be included to the total costs and let the user pay for the social effects. For example, if  water is polluted by any business business concern, concern, the user of the product should should pay an additional price for developing ways to clean the water. Similarly planting trees, developing good educational institutions institutions and health clinics, may contribute to additional costs in the short term. But certainly, they create a favourable impact on society. It is now increasingly realised that even business houses should act as responsible citizens. In determining a firm's social responsibility, managers must identify the groups that are influenced by its activities. The following diagram (VI.3.A) illustrated how various groups of people are affected by the activities of a business.

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Social Responsibilities of Managers 1. RESPONSIBILITY TO CUSTOMERS Every business unit has to provide good quality products pr oducts at reasonable reasonable prices in required quantities, at a time when needed by the customers. Under any circumstances, it should not involve in hoarding, black marketing, marketing, giving false fal se information about the products etc. While there is i s nothing wrong in releasing advertisements advertisements explaining the salient features of the product, it should avoid wooing the customers through through cheap gimmicks. 2. RESPONSIBILITY TO SUPPLIERS Every organisation should provide correct information regarding its financial position to its suppliers and creditors. Fairness in all transactions transactions should be ensured. It should make prompt payment of interests on borrowings borrowings and other dues. 3. RESPONSIBILITY TO EMPLOYEES Since employees are the backbone of the organisation, it should pay ade quate attention in satisfying the social and economic needs which affect their life. They should be paid fair and reasonable remuneration for their work. Every organisation is obligated to

make the work place better and pleasant. Every manager has to realize the fact that any improvement in the quality of work life will create a healthy work climate. 4. RESPONSIBILITY RESPONSIBILITY TO OWNERS Shareholders are the real owners of the modern corporations. They are large in number and spread throughout the country. That is why the professional manager, lies a primary obligation to invest in the best possible manner and see that such investments ensure ensure good returns. He should be honest and fair in all his dealings. He should report the day to day activities and the strengths and weaknesses weaknesses of the organisation to the share holders 5. RESPONSIBILITY TO SPECIAL INTEREST GROUPS Every organisation has to provide accurate information and promote constructive constructive relationships with other interest groups like dealers, suppliers, creditors, welfare organisations etc. It should view them as partners in a cooperative endeavor. It should inculcate interest in fulfilling the aspirations of these interest groups of community  community  6. RESPONSIBILITY TO GOVERNMENT The primary responsibility responsibility of any business unit is to obey the laws of the country. Not only that it should pay all types of taxes honestly to the government, it it should also a lso follow fair trade policies and practices. In a annular way, every business has to avoid unhealthy practices like bribing government officials and ge tting things done through foul means. 7. RESPONSIBILITY TO SOCIETY  Since organizations are members of the societ s ociety, y, they should always strive hard in improving the physical environment and for developing human resources in a desired manner. Every business unit has to contribute for wealth creation, which helps in the elimination of poverty and backwardness among the people. It should pay utmost attention in preserving and maintaining the environment. environment. It should act as an a n equal opportunity for employer in providing jobs. It should follow the ways of minimizing minimizing the impact of pollution. The concept of corporate corporate social responsibility responsibility in gaining g aining currency even in India. Companies like TISCO, DCM, GODREJ, KIRLOSKAR, KIRLOSKAR, Reliance, ITC have accorded top most place for social s ocial responsibilities. responsibilities. Most of these t hese companies, are socially committed in providing better facilities facilities and amenities to the members of the society through the provision of better housing, medical, educational, recreational facilities. Managers have realized that concern for profit is not only the factor but discharging social obligation is also of vital importance in the modern  business.  ARGUMENTS IN FAVOUR OF SOCIAL RESPONSIBILITY  RESPONSIBILITY 

Throughout the world, business organisations employ majority of the work force and control 70% of the financial resources. Any decision relating to these human as well as financial resources bring major consequences in society. It is simply because of this factor, modern business corporations are gaining power and further more obligated to the society through their deeds. Because of this, there the re are a number of arguments argument s favouring greater involvement involvement of business in social social action. They are summarised summarised as  below: 1. Business is basically basically receiving demand for its products products and services services from society. Hence, it has to respond favourably favourably to the changing needs and expectations expectations of the society. In other words the the concept of social responsibility responsibility balances corporate mission with corporate responsibilities. 2. Every business has to operate its its activity only in the social social system. The creation creation of a  better and healthy social environment benefits benefits both society society and business. Society gains through fulfillment of its desires, creation of employment opportunities, better facilities and community development development through business business development. A good social environment is a boon boon to the business business flourishment. flourishment. Business units tend tend to promote promote good will, public interest and corporate trust which in turn contribute to the long term success of the corporations. 3. Voluntary social involvement discourages discourages creation creation and implementation of government regulations and interventions. It results in mutual trust and confidence and ensure greater freedom and flexibility for business organisation organisation in decision making. 4. Socially responsible acts enhance the image of the business organisation. organisation. They can attract investment as well as talented human resource which in turn may contribute to the success of the enterprise. 5. Modern business organisation organisation cannot be isolated i solated from the main social system. Its internal activities are bound to create an impact over the external environment. environment. Some decisions of the organisation may help in solving the social problems such such as air and  water pollution. This kind kind of action, by any standard, standard, is sure to help in the the development of a healthy society. 6. Business organisations are blessed with all types of resources. Every society has some problems. It is the business that has to respond in solving these social problems through creative and novel ideas. It is true that money and enterprise are needed for tackling any social problem. 7. Business organisations, as members of society, have a normal obligation to use the resources of society in a meaningful way so as to contribute c ontribute to the welfare of all. Such Su ch a social involvement immensely benefits the interest of the shareholders in the long term.  ARGUMENTS AGAINST AGAINST SOCIAL SOCIAL RESPONSIBILITY  RESPONSIBILITY 

1. Business is primarily an economic unit. Since the business of business is business, its main task is to maximise profits. Social involvement may reduce its profit. pr ofit. Management cannot invest funds irrationally to satisfy the public expectations. That is why Milton Friedman pointed out that spending in the name of social responsibility is a theft  because, managers managers are trying to distribute distribute what is not theirs. theirs. 2. Social responsibility is mainly related to the government and other civic organisations. For various social problems the business has no readymade solutions. Spending money on social actions a ctions may erode the business of its scarce resources. Social responsibility responsibility is clearly anti-business philosophy and intended to mollify public anger. 3. Business people are not trained to pursue social goals. They are not competent to  justify the social goals. Their training and experience experience is with economic economic matters and and their skills may not match to solve social problems. 4. Profit is a dynamic concept that motivates motivates the economic forces all around the world for future progress. Management cannot do anything including philanthrophy and solving social problems unless profits are sufficient. 5. Managers are not king makers. makers. They are not even magicians. We cannot expect that that they can perform miracles. Nobody can offer a quality product pr oduct at through away price and still get profits. pr ofits. Similarly it is not possible to pay high rates of taxes and divert money on unrelated social projects. The best thing is to strike a balance between these two. 6. There is no near unanimity of thought on this topic. There is no complete support in favour of corporate social responsibility. responsibility. Due to this, th is, there is a disagreement among groups of people who are related to business as to what constitutes the social responsibility? 7. Finally, even the business is involved with social involvement through incurring additional costs. It is the society that has to pay for even these social costs. A business unit is not a charitable institution. Hence, it has to recover what all it has expended. Having discussed the pros and cons of the concept, social responsibility responsibility of business, bu siness, one can conclude that socially responsible people will obey the laws of the land. Every person in the society has social responsibility responsibility to discharge. The same rule applies to Professors, Doctors and Lawyers and to those who act for and in the name of corporations. CONCLUSION Society creates institutions and they cater to the requirements of members of society. In fact, no enterprise exists in isolation from its external environment whether social, economic, technological, technological, political and ethical. Every business man must be responsible in helping the society while solving several se veral social social problems. Though the purpose of a  business house is business business yet it has to think think about social good. History History proved that only

such business house which paid utmost attention attention to the fulfillment of social values and expectations could establish lead over others in the long term. CASE STUDY (1)  Air Pollution Pollution The amount of air pollution to which an average urban man is subjected to is very high. hi gh. Factories and automobiles are primarily responsible for air pollution. Though little attention was paid earlier, it has become a vital concern today. Realising the urgent need to control air pollution, Government is trying to bring an enactment, Lohia Scooters is a leading two wheeler manufacturer in India. It has a market share of 40% i n the two  wheeler market. Since Since the Government Government is contemplating contemplating to bring a comprehensive comprehensive act  with stringent punishments, the Management Management of Lohia Lohia Machines convened convened a meeting of all the two wheeler manufacturer manufacturer and discussed the pros and cons of new enactment. Prolonged deliberations, no concrete conclusions were arrived because most of t he manufacturers manufacturers (whose market share is less l ess from 50%) maintained indifferent attitude. Most of these manufacturers would like to adopt ‘wait and see pol icy’. But Lohia Scooters cannot adopt such a policy because it is a market leader. It has two approaches before it. Firstly, it would like to investigate all the parts of scooter, that contribute to air-pollution. air-pollution. After obtaining obtaining needed data, it would like to suggest ways and means of keeping air-pollution at minimum. This kind of arrangement arrangement is inevitable  because it is a market market leader and it would like to prevent the government king king new act. It would like to improve its image through its social expensiveness. Secondly, Lohia Scooters is also contemplating to redesign the total scooter so as to keep up with the expectations of the Government and public. publ ic. Manufacturing Manufacturing a new generation scooter which causes less air pollution p ollution may take 2 years. The Management is expecting that the improved product can still bring good demand for its scooters. With this, it hopes that it can recover the investment investment within 5 years. QUESTIONS 1. In increasing public awareness, awareness, which one of the above two approaches do you advocate? 2. Why in your opinion, other manufacturers manufacturers maintained indifferent attitude attitude to social action? CASE STUDY (2) To Invest or Not to Invest in India

Many foreign companies face a dilemma d ilemma involving socio-economic socio-economic and political po litical issues of Indian sub-continent. sub-continent. One question that many many firms face is whether to invest in India or not. Arguments Argumen ts are in either way.  Arguments in favour (1) Foreign companies can bring bring more money and better technology technology which may benefit India in transforming the rural economy into a dynamic industrialised industrialised society. (2) Recent policy initiatives initiatives liberalising the Indian economy pave a way for easy entry of foreign firms. (3) India is a rich country with poor people. Foreign companies companies can take the advantage  with little ease for making making profits.  Arguments against against (1) India is a multi-religious multi-religious and multi-lingual society. Problems may come come up at any any time due to lack l ack of understanding among various various sections of people. (2) The recent instance instance of demolition demolition of Babri Masjid has paralysed paralysed the economic economic functioning of the Indian society so ciety and eroded the confidence of foreign investors. (3) Despite liberalization, many Governmental Governmental and Banking regulations still hold good. (4) Lack of will-power and political sagacity is another handicap for peace and stability in the Indian sub-continent. sub-continent.  With this kind of debate, top executives of foreign foreign companies are confronted confronted by a decision whether to invest or not to invest in India. QUESTIONS (1) If you are a re asked to decide, as a representative representative of foreign company, what would be  your decision? decision? (2) Do you think thi nk other things other than profit also matter in deciding the investment. How in your opinion, other external factors will influence your decision-making? decision-making? REVIEW QUESTIONS (1) Define the concept 'Social 'Social responsibility' and bring out its significance. (2) What are the the major social responsibilities of a business manager? (3) Explain briefly how external environment affects the successful functioning of a modern corporation? corporation?

(4) Discuss the arguments in favour of and against the concept "Social responsibility"? REFERENCE BOOKS 1) Management- A Global Perspective Perspective - Weihrich and Harold Koontz (McGraw- Hill). 2) Social Responsibilities Responsibilities of Business- Howard. R. Bowen (Harper & Brothers) Brothers)  3) Management- Structures, Functions and Practice:, Arthurs Elkins (Wesley. publications).

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