1.

Introduction to Management
Management:
“To manage is to forecast and plan, to organise, to command, to coordinate and control.”
— Henry Fayol
“Management is the art of knowing what you want to do and then seeing that it is done in
the best and cheapest way.”
— F.W.Taylor
“Management is concerned with the systematic organisation of economic resources and
its task is to make these resources productive.”
— Peter F Drucker
NATURE OF MANAGEMENT:
Universal process: Wherever there is human activity, there is management. Without
efficient management, objectives of the company can not be achieved.
Factor of production: Qualified and efficient managers are essential to utilization of labor and
capital.
Goal oriented: ​The most important goal of all management activity is to accomplish the
objectives of an enterprise. The goals should be realistic and attainable.
Supreme in thought and action: Managers set realizable objectives and then mastermind action
on all fronts to accomplish them. For this, they require full support form middle and lower levels
of management.
Group activity: ​All human and physical resources should be efficiently coordinated to
attain maximum levels of combined productivity. Without coordination, no work would
accomplish and there would be chaos and retention.
Dynamic function: Management should be equipped to face the changes in business
environment brought about by economic, social, political, technological or human factors. They
must be adequate training so that can enable them to perform well even in critical situations.
Social science: ​All individuals that a manager deals with, have different levels of
sensitivity, understanding and dynamism.
Important organ of society: Society influences managerial action and managerial
actions influence society. Its managers responsibility that they should also contribute towards
the society by organizing charity functions, sports competitions, donation to NGOs etc.
System of authority: ​Well-defined lines of command, delegation of suitable authority
and responsibility at all levels of decision-making. This is necessary so that each individual
should what is expected from him and to whom he need to report to.
Profession: ​Managers need to possess managerial knowledge and training, and have
to conform to a recognized code of conduct and remain conscious of their social and human
obligations.
Process: The management process comprises a series of actions or operations
conducted towards an end.

SCOPE OF MANAGEMENT
Although it is difficult to precisely define the scope of management, yet the following
areas are included in it:
1. Subject-matter of management: ​Planning, organizing, directing, coordinating and controlling
are the activities included in the subject matter of management.
2. Functional areas of management:​ These include:
Financial management includes accounting, budgetary control, quality control, financial
planning and managing the overall finances of an organization.
Personnel management includes recruitment, training, transfer, promotion, demotion,
retirement, termination, labor-welfare and social security industrial relations.
Purchasing management includes inviting tenders for raw materials, placing orders,
entering into contracts and materials control.
Production management includes production planning, production control techniques,
quality control and inspection and time and motion studies.
Maintenance management involves proper care and maintenance of the buildings, plant
and machinery.
Transport management includes packing, warehousing and transportation by rail, road
and air. Distribution management includes marketing, market research, price-determination,
taking market risk and advertising, publicity and sales promotion.
Office Management includes activities to properly manage the layout, staffing and
equipment of the office.
Development management involves experimentation and research of production
techniques, markets, etc.
3. Management is an interdisciplinary approach: For the correct implementation of the
management, it is important to have knowledge of commerce, economics, sociology,
psychology and mathematics.
4. Universal application: The principles of management can be applied to all types of
organizations irrespective of the nature of tasks that they perform.
5. Essentials of management: ​Three essentials of management are:
Scientific method
Human relations
Quantitative technique
6. Modern management is an agent of change: The management techniques can be modified
by proper research and development to improve the performance of an organization.

IMPORTANCE OF MANAGEMENT

1] Management is goal oriented:-

Management is concerned with achievement of specific goals. It is always directed
towards achievement of objectives. The success of management is measured by the extent to
which objectives are achieved.
2] Management is associated with group efforts:-
The business comes into existence with certain objectives which are to be achieved by a
group and not by one person alone. Management gets things done by, with and through the
efforts of group members. It coordinates the activities and actions of its members towards a
common goal.
3] Management is intangible:-
It is an unseen force, its presence can be evidenced by the result of its efforts up to date
order but they generally remain unnoticed, Where as mismanagement is quickly noticed.
4] Management is an activity and not a person or group of person:-
Management is not people or not a certain class but it is an activity, it is the process of
planning, organising, directing and controlling to achieve the objectives of the organisation.
5] Management is situational:-
Management does not advice best way of doing things. Effective management is always
situational. A manager has to apply principles, approaches and techniques of management after
taking into consideration the existing situation.
6] Management is universal:-
Most of the principles and techniques of management are universal in nature. They can
be applied to government organisation, military, educational institutes, religious institutes etc.
They provide working guidelines which can be adopted according to situations.
7] Management is concerned with people:-
Since management involves getting things done through others only human being
performed this activity with the help of planning and control. The element man can not be
separated from the management.
8] Management is the combination of art, science and profession:-
Management makes use of science as well as art. It is a science because it collects
knowledge with the methods and data, analyses and measures it and decision is taken with the
help of experiment. It is a systematic body of knowledge. Art means application of knowledge
for solving various problems. In modern times there is separation of ownership and
management, so professional experts are appointed.

FUNCTIONS OF MANAGEMENT:
Planning :
It includes forecasting, formation of objectives, policies, programmes, producer and
budget. It is a function of determining the methods or path of obtaining there objectives. It
determines in advance what should be done, why should be done, when, where, how should be
done. This is done not only for the organisation as a whole but also for every division, section
and department. Planning is thinking before doing.
Organising:
It includes departmentation, delegation of authority, fixing of responsibility and
establishment of relationship. It is a function of providing every thing useful to the business
organisation. There are certain resources which are mobilise i.e. man, machine, material,
money, but still there are certain limitations on these resources. A manager has to design and
develop a structure of various relations. This structure, results from identification and grouping
work, delegation of authority and responsibility and establishing relationships.
Staffing:
It includes manpower planning, recruitment, selection, placement and training. People
are basically responsible for the progress of the organisation. Right man should be employed for
right job. It also involved training of personnel and proper remuneration.
Directing:
It includes decision making, supervising, guidance etc. It reflects providing dynamic
leadership. When the manager performs these functions, he issues orders and instructions to
supervisors. It also implies the creation of a favorable work environment, motivation, managing
managers, managing workers and managing work environment.
Controlling:-
It is a process of checking actual performance against standard performance. If there is
any difference or deviation then these differences should be detected and necessary steps
should be taken. It involves three elements:
1. Establishing standard of performance.
2. Measuring actual performance with establishment.
3. Finding out reasons for deviation.

MANAGERIAL ROLES:
1. Figurehead
As head of a department or an organisation, a manager is expected to carry out
ceremonial and/or symbolic duties. A manager represents the company both internally and
externally in all matters of formality.
He is a networker but he also serves as an exemplary role model. He is the one who
addresses people celebrating their anniversaries, attends business dinners and receptions.
2. Leader
In his leading role, the manager motivates and develops staff and fosters a positive work
environment. He coaches and support staff, enters into (official) conversations with them,
assesses them and offers education and training courses.
3. Liaison
A manager serves as an intermediary and a linking pin between the high and low levels.
In addition, he develops and maintains an external network. As a networker he has external
contacts and he brings the right parties together. This will ultimately result in a positive
contribution to the organization.
4. Monitor
As a monitor the manager gathers all internal and external information that is relevant to
the organization. He is also responsible for arranging, analyzing and assessing this information
so that he can easily identify problems and opportunities and identify changes.
5. Disseminator
As a disseminator the manager transmits factual information to his subordinates and
other people within the organization. This may be information that was obtained either internally
or externally.
6. Spokesman
As a spokesman the manager represents the company and he communicates to the
outside world on corporate policies, performance and other relevant information for external
parties.
7. Decision-making
Managers are responsible for decision-making and they can do this in different ways at
different levels. The leadership style is important in decision-making. An authoritarian leader is
sooner inclined to make decisions independently than a democratic leader.
8. Entrepreneur
As an entrepreneur, the manager designs and initiates changes and strategies.
9. Disturbance handler
In his managerial role as disturbance handler, the manager will always immediately
respond to unexpected events and operational breakdowns. He aims for usable solutions.
The problems may be internal or external, for example conflict situations or the scarcity of raw
materials.

10. Resource allocator

In his resource allocator role, the manager controls and authorizes the use of
organizational resources.He allocates finance, assigns employees, positions of power,
machines, materials and other resources so that all activities can be well-executed within the
organization.
11. Negotiator
As a negotiator, the manager participates in negotiations with other organizations and
individuals and he represents the interests of the organization.This may be in relation to his own
staff as well as to third parties. For example salary negotiations or negotiations with respect to
procurement terms.

LEVELS OF MANAGEMENT:
In companies large number of persons are employed and placed at different places to perform
different managerial activities. To carry on these activities these employees are given the
necessary authority and responsibility. This grant of authority results in creation of chain of
authority. This chain is divided into three levels which result in the creation of three levels of
management.
The main levels of management are:

1. Top level management.

2. Middle level management.
3. Supervisory level, operational or lower level of management.

1. Top Level Management:

Top level management consists of Chairman, Board of Directors, Managing Director,

General Manager, President, Vice President, Chief Executive Officer (C.E.O.), Chief Financial
Officer (C.F.O.) and Chief Operating Officer etc. It includes group of crucial persons essential for
leading and directing the efforts of other people. The managers working at this level have
maximum authority.
Main functions of top level management are:

1. Determining the objectives of the enterprise. The top level managers formulate the main
objectives of the organisation. They form long term as well as short term objectives.
2. Framing of plans and policies. The top level managers also frame the plans and policies
to achieve the set objectives.
3. Organising activities to be performed by persons working at middle level. The top level
management assigns jobs to different individuals working at middle level.
4. Assembling all the resources such as finance, fixed assets etc. The top level
management arranges all the finance required to carry on day to day activities. They buy
fixed assets to carry on activities in the organisation.
5. Responsible for welfare and survival of the organisation—Top level is responsible for the
survival and growth of the organisation. They make a plan to run the organisation
smoothly and successfully.
6. Liaison with outside world, for example, meeting Government officials etc. The top level
management remains in contact with government, competitors, suppliers, media etc.
 Jobs of top level are complex and stressful demanding long hours of commitment
towards organisation.
7. Welfare and survival of the organisation.

2. Middle Level Management:

This level of management consists of departmental heads such as purchase department
head, sales department head, finance manager, marketing manager, executive officer, plant
superintendent, etc. People of this group are responsible for executing the plans and policies
made by top level.They act as a linking pin between top and lower level management. They also
exercise the functions of top level for their department as they make plans and policies for their
department, organise and collect the resources etc.

Main functions of middle level management are

1. Interpretation of policies framed by top management to lower level. Middle level

management act as linking pin between top level and lower level management. They
only explain the main plans and policies framed by top level management to lower level.
2. Organising the activities of their department for executing the plans and policies.
Generally middle level managers are the head of some department. So they organise all
the resources and activities of their department.
3. Finding out or recruiting/selecting and appointing the required employees for their
department. The middle level management selects and appoints employees of their
department.
4. Motivating people to perform to their best ability. The middle level managers offer
various incentives to employees so that they get motivated and perform to their best
ability.
5. Controlling and instructing the employees, preparing their performance reports etc. The
middle level managers keep a watch on the activities of low level managers. They
prepare their performance appraisal reports.
6. Cooperate with other departments for smooth functioning.
7. Implementing the plans framed by top level.

3. Supervisory Level/Operational Level/Low Level:

This level consists of supervisors, superintendent, foreman, sub-department executives;
clerk, etc. Managers of this group actually carry on the work or perform the activities according
to the plans of top and middle level management.
Their authority is limited. The quality and quantity of output depends upon the efficiency
of this level of managers. They pass on the instruction to workers and report to the middle level
management. They are also responsible for maintaining discipline among the workers.

Functions of lower level management are:

1. Representing the problems or grievances of workers before the middle level

management. The supervisory level managers are directly linked with subordinates so
they are the right person to understand the problems and grievances of subordinates.
They pass these problems to middle level management.
 2. Maintaining good working conditions and developing healthy relations between superior
and subordinate. The supervisory managers provide good working conditions and create
a supportive work environment which improve relations between supervisors and
subordinates.
3. Looking to safety of workers. Supervisory level managers provide safe and secure work
environment for workers.
4. Helping the middle level management in recruiting, selecting and appointing the workers.
The supervisory level managers guide and help the middle level managers when they
select and appoint employees.
5. Communicating with workers and welcoming of their suggestions. The supervisory level
managers encourage the workers to take initiative. They welcome their suggestions and
reward them for good suggestions.
6. They try to maintain precise standard of quality and ensure steady flow of output. The
supervisory level managers make sure that quality standards are maintained by the
workers.
7. They are responsible for boosting the morale of the workers and developing the team
spirit in them. They motivate ‘the employees and boost their morale.
8. Minimising the wastage of materials.

MANAGERIAL SKILLS:

Conceptual Skills

Conceptual skills present knowledge or ability of a manager for more abstract thinking.
That means he can easily see the whole through analysis and diagnosis of different states. In
such a way they can predict the future of the business or department as a whole.

As a first, a company includes more business elements or functions as selling,

marketing, finance, production, etc. All these business elements have different goals even
completely opposed goals. Think about marketing and production as a business function and
their specific goals. You’ll see the essential difference. The conceptual skills will help managers
to look outside their department’s goals. So, they will make decisions that will satisfy overall
business goals.

Conceptual skills are vital for top managers, less critical for mid-level managers, and not
required for first-level managers. As we go from the bottom of the managerial hierarchy to the
top, the importance of these skills will rise.
Human or Interpersonal Managerial Skills

Human or interpersonal management skills present a manager’s knowledge and ability

to work with people. One of the most critical management tasks is to work with people. Without
people, there will not be a need for the existence of management and managers.

These skills will enable managers to become leaders and motivate employees for better
accomplishments. Also, they will help them to make more effective use of human potential in the
company. Simply, they are the essential skills for managers.

Interpersonal management skills are essential for all hierarchical levels in the company.

Technical Skills

As the name of these skills tells us, they give the manager’s knowledge and ability to use
different techniques to achieve what they want to achieve. Technical skills are not related only
for machines, production tools or other equipment, but also they are skills that will be required to
increase sales, design different types of products and services, market the products and
services, etc.

For example, let’s take an individual who works in the sales department and has highly
developed sales skills achieved through education and experience in his department or the
same departments in different organizations. Because of these skills that he possesses, this
person can be a perfect solution to become a sales manager. This is the best solution because
he has excellent technical skills related to the sales department.

On the other hand, the person who becomes sales manager will start to build his next
type of required skills. It is because if his task until now was only to work with the customers as
a sales representative, now he will need to work with employees in the sales department in
addition to the work with customers.
 Technical skills are most important for first-level managers. What it comes to the top
managers, these skills are not something with high significance level. As we go through a
hierarchy from the bottom to higher levels, the technical skills lose their importance.

CHALLENGES OF MANAGEMENT:

1. Globalization: -

Globalization phenomenon is getting popular these days. Globalization of business

refers to the free flow of goods, services, technology, labor, capital information, across the
national boundary; it is closer economic integration among different countries in terms of flow of
good service, capital labor and technology. Globalization is the tendency of expanding business
in different countries. Managers have to work in boundary less world. There is no territory or
barrier in export and import business. Globalization invites global competition. Organizations
which were competing locally with local competitors now they have to compete with global
competitors. It is very difficult to organization to survive and develop in such situation.
Organizations should increase quality of product and reduce cost which is a challenge for
manager. Many organizations are becoming global these days. They are running their business
in different countries with different culture, climate, and geography, political and economic
system. It is a challenging work for managers to prepare executives officers who can run
business in such countries.

2. ​Workforce diversity:

Modern organizations are characterized by workforce diversity. Diversified workforce is

the reality of business these days. Organizations are becoming heterogeneous in terms of
ethnicity, gender, nationality, age group, etc. People having different religions, different
nationality works together under one roof. Different people have different nature and they show
different behavior because they come from different backgrounds. How to manage such
diversified workforce is a great challenge for managers. If such diversified workforce is managed
properly, the organization will be highly benefited because they also bring diversified skills and
knowledge. But, if they are not managed properly, they create serious problems.

3.​Quality assurance and productivity:

Quality is the ability of the product to satisfy customers need. How to improve the quality
of the product or how to assure customers about the quality of the product has become a great
challenge for management. Quality ensures organizations survival and growth. Organizations
use quality to compete with competitors. Only improving quality of product organizations can
face the global competition. Therefore, there must be continuous improvement in quality. Quality
improvement has no boundary. It is the race without final line. It is said that people buy quality
not product. And, to improve quality is really a challenge for management. Along, with
increasing quality to increase productivity again is another challenge for management.
Organization must try to achieve higher productivity. Higher productivity only helps to reduce
cost. Productivity is the ratio between input and output. Improved technology, employees,
regular skill development and better utilization of resources helps to increase productivity. Total
quality management is the latest approach or needs to improve quality.

4.​Technological advancement:

How to utilize advanced and sophisticated technology has become another challenge for
management. Technology has developed beyond the expectation of anybody in the world over
the last 100 years. Tremendous advancement has been made in production, distribution and
information technology. Managers must manage all this technology with the development of
computer, the face of information technology has absolutely changed. Introduction of internet,
email and other electronic media, have benefitted organizations in the field of production,
distribution and other areas of business. Decision making have been facilitated by information
technology. Technological advancement has changed the nature of job. Most of the jobs which
were performed by unskilled and semi-skilled labors previously, now they are performed by
skilled labors. Number of white collar job is increasing and blue collar jobs are decreasing.
Organization must train their employees about new technology. Only with new technology,
Organization can compete with other competitors.

5.​Ethics and social responsibility:

Ethics is the study of how our decisions affect other people. It is the study of people’s
rights and duties. The moral rules the people to make decisions and the nature of relationship
among people. Ethics is to follow social code of conduct, social norms, values and attitudes.
The decisions made by managers have a broad reach both inside and outside the organization.
So, managers must follow ethical norms and consider social responsibilities. Managerial
decision must be based on ethical ground. But, these days ethics id\s decreasing in business
world. So, many business organizations have unethical practice. Because of the unethical
practice of some business houses, all business world is blamed.

How to fulfill social responsibility is also a challenge for management. The concept of
corporate social responsibility has developed. Social responsibility means obligation of business
organizations towards society community, people, share holders, etc. To provide a quality
product at an affordable price, to develop more and more employment opportunities, to carry out
different development activities in society, to control pollution are some social responsibilities of
business organizations.

6.​Innovation and change:

Management must pay attention on innovation and change. Otherwise, they would go
out of business. Rapid innovations are taking place in technology, product and service. Product
life cycle is getting shorter and shorter. Product needs continuous improvement if the life span is
to be made long. New ideas, new techniques, new methods are being innovated; there must be
new inventions of ideas, new invention of product. Old and outdated product cannot satisfy
customers.

There is a change in the external environment, political and legal, socio-cultural,

economic and technological environment change rapidly. How to adjust with such change, how
to keep pace with such change, how to keep pace with such change that has become a
challenge for management.

7. Empowerment:

This is the age of empowerment. Role difference between management and workers has
narrowed down. Status between worker and manager is very narrow. Most of the decisions are
taken at operating level. Workers are free to plan and schedule their work. They are given more
and more autonomy and freedom. They participate in major decision making activities. Joint
goal setting and joint performance evaluation has become common. Self managed work team
had been established, more and more information are given to employees, and how to manage
such empower team has become challenge for managers.

EVOLUTION OF MANAGEMENT:

Management started when man started living in groups. It relates to achieve certain
objectives. According to George management begin in family, and after that it is expanded in
tribes & finally the scope was increased up to urbanisation.

The reference of management was found in Babylonia (civilisation on the bank of the
Nile river). After that Egypt provides us with an example of decentralised organisation with little
control. Management thoughts are shown in planning and organising in the construction of
Pyramids.

The ancient philosopher first recognised the need for proper methodology for
employees’ selection and training.

Greek provides extensive documentation of management principles. These principles of

management are world wide famous. It is considered as management is an art. It includes
employees’ selection, delegation of authority, time study, motion study etc.

Looking at the entire process of management thoughts, in the early period management
was based on a trial basis. There was no exchange of ideas and no practice of communication.
Management is developing science. It grows accordingly to changes in the social & political &
economic changes. There are five stages of evolution of management thoughts.

1. Pre – Historical Period:

Management is as old as man. Awareness of needs & satisfaction of needs is the part &
parcel of management. In the ancient time in the villages, head of the village plans for the
villages. There was a good labor planning. Villages were isolated. The basic needs in the
villages were satisfied by the persons in the villages. Responsibilities were distributed among
the people to satisfy the basic needs.

2. Organised Society:- (Church & Military)

The next contribution to the development of organisation & management was by roman
church. 1500 years ago Chinese ruler advised government about management of human
institutions. The German public gives contribution towards management thoughts. During this
period management techniques were largely developed in administrative military & state
administration.

3. Industrial Revolution:-

This period is known as the period of scientific management. It is proved that

management is related with enterprise & business. In this period lots of technological changes
took place. With the industrial revolution the question of traditional management appears. The
traditional management concept was replaced by professional management.

4. Towards Consolidation:-

This stage marks the beginning of the work of investigation of principles of management
i.e. division of work, authority, responsibility, discipline, scalar chain. These ideas were
developed by ‘Henry Fayol’.

5. Recent Development:-

Recently management concepts are based on mathematical analysis. They are based
on linear programming, operational research, PERT (Programme Evaluation and Review
Technique), CPM (Critical Path Method). These techniques are useful in decision making,
controlling, problem solving etc. In today’s competitive world these techniques are essential for
controlling the cost that is why management is called as a separate profession.

CLASSICAL APPROACH:

“Classical approach of management professes the body of management thought based

on the belief that employees have only economical and physical needs and that the social
needs & need for job satisfaction either does not exist or are unimportant. Accordingly it
advocates high specialization of labour,centralized decision making & profit maximization.”

Classical approach is the oldest formal school of thought which began around 1900 and
continued into the 1920s. Its mainly concerned with increasing the efficiency of workers and
organizations based on management practices, which were an outcome of careful
observation.Classical approach mainly looks for the universal principles of operation in the
striving for economic efficiency. Classical approach includes scientific & administrative
management.

SCIENTIFIC MANAGEMENT:

Scientific management is a part of early management approaches. The chief contributor

of scientific management is F. W. Taylor. He is known as the Father of Scientific Management
(1856 to 1915) was born in the USA.

He did most of his schooling in France & Germany. He couldn’t finish his graduation &
join Midvale Co. (Steel Work). He worked there for 6 years. In 1884 he raised to the position of
Chief Engineers, as mean while he obtained a Masters degree in Physics, Mathematics &
Engineering.
 In 1898, he joined Bethlehem Steel Co. where he did his experiment to increase the
loading capacity of each worker with regards to material handling equipment. At first one worker
was engaged in loading 12.5 tons of iron. But with the help of time & motion study he proved
that one man can load 47.48 tons because of the change in the size of spade & systematic
arrangement of instruments. With the help of proper planning organisation can earn more profit.
Initially the workers in that company are 500 to 600 because of this the strength of workers
reduced to 140 and profit increased by 78,000 dollars.

Definition:-

Scientific management is concerned with exactly knowing what you want men to do &
then see that they are doing in best & cheapest way.

Contribution of F. W. Taylor :-

1) At Midvale Steel Co. he improved proper distribution of work for each worker.

2) In Midvale Steel Co. he analysed the work done by workers in specific job & allotted standard
time.

3) He also made experiments on time study & motion study to decide the workload of each
worker.

4) In Bethlehem Steel Co. he had made experiments with material handling equipment for
increasing the capacity of each worker.

5) In 1901, he presented a paper on differential piece rate system.

6) In 1906, he published an article on the art of cutting metals.

7) In 1903, he presented important paper on shop management – In that he explained gang

boss, speed boss, repair boss & inspector.

8) In 1911, he gave the principles of scientific management, for which he is remembered as

‘Father of Scientific Management’. In that he has explained:-

i) Friendly relationship between workers & management.

ii) Scientific education to the workers.

iii) Scientific selection of workers so that each worker could be given responsibility for the task.

iv) Development of the true science of management with proper analysis in the organisation.

Mechanism:-

1. Separation of Planning & Doing:-

 Before Taylor’s scientific management a worker used to plan about his work &
instruments necessary for that. Supervisors’ job was to see how the workers were performing.
This creates a lot of problems. So Taylor has separated planning & doing authority.

2. Functional Foremanship:-

Separation of planning from doing resulted into development of supervision system. In

this system 8 persons were engaged, out of that 4 persons were engaged in planning
department. They are time & cost clerk, routine clerk, instruction card clerk & disciplinarian. In
production process 4 personnel were engaged, they are speed boss, repair boss, supervisor &
gang boss.

3. Job Analysis:-

It is related with finding out the best way of doing. It means that least movements in
doing job. It will lead to complete production in less time & lesser cost. It includes:-

A) Time Study:-

It means determining the time required to complete a job in a particular time. The
movement which takes minimum time is the best one.

B) Motion study:-

It means study of movement while performing a job i.e. elimination of wasteful movement
in performing a job, only necessary movements are engaged.

C) Fatigue Study:​-

It shows the amount & frequency of rest required, while completing the work. After a
certain period of time workers feel fatigue & can’t work with full capacity. Therefore they require
rest in between. When rest is allowed they start working with full capacity.

4. StandardiSation:-

As far as possible standardisation should be maintained in respect of instruments &

tools, period of work, amount of work, working conditions, cost of production etc. these all things
are fixed in advance on the basis of job analysis.

5.​ ​Scientific Selection & Training of Workers:-

Taylor has been suggested that workers should be selected on scientific basis taking
into account their education, work experience, attitude & physical strength.

6. Financial Incentives:-

Financial incentives help to motivate workers in maximum efforts. Higher wages lead to
increase in efforts. He applied differential piece rate system. According to him, workers have to
complete the work within specified time and then only he will get wages at a higher rate per
piece & one does not complete a job gets a lower rate. Wages should be based on individual
performance & not on the position occupied.

7. Economy:-

Techniques of cost estimated & control should be adopted. Waste should be controlled
properly. Profit will be achieved with elimination of wastage. He explained how resources are
wasted.

8. Mental Revolution:-

Scientific management depends upon mutual cooperation between workers &

management. Taylor say’s great revolution takes place in the mental attitude of two parties
under scientific management. He has given systematic design of work. Labour management,
co-operation required a complete mental change on the part of both parties. The workers have
specific duties towards management & vice-a-versa. The method of scientific investigation &
knowledge should be accepted by both parties.

Criticisms:-

In the beginning, Taylor's scientific management was considered as something very

unique. But after some time it was subjected to several criticisms.

1) Taylor’s scientific management was related to production management. It takes practical

view of management & focuses attention only on the production management. Taylor’s study of
management has become the study of lower level management. He stressed on efficiency on
lower level. He has neglected marketing, financial and decision making aspects completely.

2) Scientific management is applicable to large scale organisation. It involves high expenditure.

It is a luxury for small scale organisation. It involves research, experiment & analysis. It is
difficult for small scale organisation.

3) It was also argued that devices of work analysis, time study & motion & fatigue study can’t
be applied in the practical life.

4) The idea of the best way of doing a job was also criticised. Everyone has his own natural
style of work & he can give best only if he is allowed to work in his style. The maximum
efficiency will be attained by the group & not by individual worker.

5) Wages of workers are not increased in a direct proportion of productivity. It leads to

exploitation of workers.

6) People are not ready to use the word ‘scientific’. The scientific does not have any
significance. Management is a social science and not an exact science.

ADMINISTRATIVE MANAGEMENT:

Henry Fayol has been considered as the real father of modern management. He was a
French industrialist and graduated as a mining engineer in 1860. In 1908, Fayol contributed his
famous “functional approach” to the management literature. Fayol’s writings were first published
in 1908 in French, but up to 1918, it was not translated into English. His ideas were accepted
after his death in 1925.
Henry Fayol has written a book for his contribution in which he has explained the
problems managing & organisation from top management point of view. He has used the term
administration instead of management.
Fayol also stressed that managers should possess physical, mental, moral, educational and
technical qualities to conduct operations of a business enterprise. While giving management
principles Fayol has emphasised on two things:-
i. The principles of management can be followed in every organisation.
ii. These principles are not fixed. They are flexible.
He has listed certain fundamental principles which are to be adopted by managers in dealing
with subordinates. These 14 principles are world wide applicable.

1) Division of Work(specialisation):-
A business activity carried out by small scale may be managed & controlled by
proprietor. As business expands, activities grow & need more people to control those activities.
Organisation is jointly managed by a group of persons. Fayol has advocated division of work to
take advantage of specialisation.
2) Authority & Responsibility:-
Authority represents a power enjoyed by a person of his position in the organisation. It
may be for taking decision, spending money or in many other ways. Responsibility is an
obligation created upon a person for the use of authority, which is entrusted to him. These two
terms are correlated. Fayol suggested that there must be a balance between authority &
responsibility.
3) Discipline:-
All the personnel serving in an organisation must follow discipline. Discipline is
obedience, application of behaviour & energy shown by an employee. Discipline may be self
employed or command discipline. Discipline can be obtained lower remuneration, dismissal,
demotion of position. While applying such circumstances proper proof should be taken into
account.
4) Unity of Command:-
Each employee should receive order from single superior. In the organisation structure it
should be clearly stated who is responsible to whom? & who should receive order from whom?

5) Unity of Direction:-
According to this principle each group of activity with some objective must have one
head. There is a difference between unity of command & unity of direction. Direction is
concerned with planning & unity of command is concerned with reporting.
6) Subordination of individual interest to general interest:-
In an organisation individual interest should not be given any importance. The manager
should always keep organisational interest before him & should determine such policies which
will be beneficial to the entire group & not just few personnel. It is responsibility to management
to create a common understanding between all.
7) Remuneration:-
Every employee must be paid an adequate remuneration for his services. Remuneration
should be fair & should provide maximum satisfaction to the person who is working in the
organisation. Personal factors such as demand for labor, the position of the labor & competition
as well as cost of living index should be taken into account. General Economic Conditions
should be considered while deciding the remuneration of an employee. In any case the
exploitation of the worker should be avoided.
8) Order:-
Fayol has suggested that at one position one person should be appointed. Each person
must have appropriated position in organisation.
9) Centralisation:-
It means the extent to which authority should be concentrated in the hands of top level
management. It may be centralised or decentralised. There are limitations of complete
centralisation & complete decentralisation. Therefore, there should be proper balance between
these two.
10) Scalar Chain: - (Straight line & Command)
It shows the straight line of authority from the highest level to lower level for
communication. Scalar chain is the extract of organisation chart & shows the responsibility or
position of everybody in an organisation.
11) Stability of Tenure:-
Effort must be made to keep the employee stuck to organisation so that the labour
turnover can be low by keeping a check on administrative cost of organisation. Care must be
taken to satisfy the staff otherwise there will be bad effect & loss of labour.
12) Equity:-
Equity is a combination of justice & kindness; equity in treatment & behaviour is liked by
everyone & it brings loyalty in the organisation.
13) Initiative:-
Within the limits of authority & discipline manager should encourage their employees for
taking initiative. Initiative is concerned with thinking. Thinking leads to execution of plan.
Initiative increases energy on the part of human beings.
14) Esprit De Corps:-
 This is a French term. It means manager is like a captain of a team who is responsible to
maintain high moral between all workers. It may be possible by effective communication among
all persons in organisation. His understanding & differences in opinions should not be harmful.
The best way of taking such situation is to establish dialogue between parties. Participation of
workers in the process of decision making is important.

Behavioural Approaches:

Behavioral management theory relies on the notion that managers will better understand
the human aspect to workers and treat employees as important assets to achieve goals.
Management taking a special interest in workers makes them feel like part of a special group.

As time went on, thinking shifted, and management started looking at employee
satisfaction and working conditions as a way to increase productivity. Theorists like Elton Mayo
and others studied employee productivity under different conditions to determine a connection.

Mayo's Hawthorne experiment provides a good example of this. In the Hawthorne

experiment, a group of telephone line workers were separated and observed working in a private
room. During their workday, the group members were given special privileges, like freedom to
leave their workstations, changes in pay rates, and even company-sponsored lunch. What they
discovered was the control group produced more than the other employees. The rationale for this
increased production was that the group felt that management was interested in their well-being.

Hawthorne Experiment:
The Hawthorne plant of Western Electric Company was manufacturing telephone system
bell. It employed about 30,000 employees at the time of experiments. Although company
provided benefits like pension, sickness benefits and other recreational benefits, there was a
great deal of dissatisfaction among the workers and productivity was not up to the mark.
In 1924, a team led by Elton Mayo (psychology) and Roethlisberger (Sociologist)
investigated the real causes behind this phenomenon. They conducted various researches in 4
phases from 1924 - 1932.

Part 1: Illumination Experiments

Illumination experiments were conducted to find out how varying levels of amount of light
at the workplace (a physical factor) affected productivity. Assumption was that higher
illumination increases productivity. The researchers found that as they increased the illumination
in the experimental group, both groups increased production. When the intensity of illumination
was decreased, the production continued to increase in both the groups. The production in the
experimental group decreased only when the illumination was decreased to the level of
moonlight. Thus, it was concluded that illumination did not have any effect on productivity. But
something else was interfering with the productivity.

Part 2: Relay Assembly Test Room Experiments

Under this study, two small groups of six female telephone relay assemblers were put in
separate rooms under close observation and control. Frequent changes were made in working
conditions such as working hours, rest periods, hot lunch etc., over a two year period.
Changes:
 1. Incentive system was changed. ​Each girl’s extra pay was based on the other five, rather
than output of the large group. Productivity increased as compared to before.
2. Two, 5minute rests - one in the morning session and other in the evening session were
introduced. It was later increased to 10minutes.
3. The rest period was reduced to 5 minutes but frequency was increased. The productivity
decreased slightly. The girls complained that frequent rest intervals affected the rhythm
of the work.
4. The number of rest was reduced to two of 10 minutes each. But in the morning coffee or
soup was served with sandwich, and in the evening, the snack was provided. The
productivity was increased.
5. Changes in work hours and workdays were introduced, like eliminating Saturday work,
allowing women to leave 1 hour early from 5:00pm to 4:00pm. The productivity was
increased.
As each change was introduced, absenteeism decreased, morale increased and less
supervision was required. Now, the researchers decided to revert back to original position, that
is no rest and no benefits. Surprisingly, productivity increased further instead of going down.
It was concluded that productivity is increased not because of positive changes in
physical factors but because of a change in the girls attitude towards work and their work group.
They developed a feeling of stability and sense of belongingness. They developed a sense of
responsibility and self discipline.

Part 3: Mass interviewing programme:

This program was conducted with about 20,000 employees,to study the human
behaviour in the company. The main theme is to determine employees attitudes towards
company, supervision, Insurance plans, promotion and wages.
The method was changed from direct interviewing to non-directive interviewing. Here,
the interviewer was asked to listen instead of talking, arguing or advising. The interview program
gave valuable insights about human behaviour in the company like
1. Worker's behaviour was influenced by group behaviour.
2. The position of worker is a reference from which the worker gives meaning to events,
features like hours of work, wages, etc.
3. The social demand of a worker are influenced by social experience in groups both inside and
outside the work plant.

Part 4: Bank wiring observation room experiments

The workers gave restricted output due to the following reasons
1. Fear of unemployment: If there would be production per head, some of the workers would
be put out of employment.
2. Fear of raising the standards: workers thought if they reached the standard set by
management, they would again raise the standard.
3. Protection of slower workers: the workers were friendly on and off the job. The faster
workers protected the slower workers by not over-producing.
4. Satisfaction on the part of management: management seemed to accept lower production
rate as no one was fired for restricted output.
Quantitative Approach
During World War II, Mathematicians, Physicists, and other scientists joined together to
solve military problems. ​The quantitative approach to management involves the use of
quantitative techniques, such as statistics, information models, and other simulations to improve
decision making.

Management Science

1. ​Today this view encourages managers to use mathematics, Statistics and other

quantitative techniques to make management decisions.

2. ​Managers can use computer models to figure out the best way to do something, saving
both money and time.

3.​ M
​ athematical forecasting helps make projections that are useful in the planning process.

4. ​Inventory modeling helps control inventions by mathematically establishing how and

when to order a product.

5. ​Queuing theory helps allocate service personal or workstations to minimize customer

waiting and service cost.

Systems Approach
The word ‘System’ is derived from a Greek word, which means to bring together or to
combine. ​Father of systems approach- Ludvig Von Bertalanffy. According to him, in order to
understand an organized whole, we must know both the parts as well as relation between them.
Elements of systems management

A system is an inter-related set of elements functioning as a whole. I​ t has sub-systems

​

which have synergy between them. Each subsystem has its define boundaries.

Classification of system

1. Open system​: An open system actively interacts with its environment. By interacting
with other systems, it tries to establish exchange relationships.
2. Closed system: It is self contained and isolated from the environment. It is a non
adaptive system. It does not receive inputs from other systems and does not trade with the
outside world.

Contributions of this approach to management.

1. Under systems approach, managers have a good view of the organization.

2. It gives importance to interdependence of the different parts of an organization and its
environment.

Contingency Approach

➢ I​ t emphasizes that there is no best way to manage. it is an “it all depends approach.
➢ The appropriate management actions and approaches depend on the situation.
➢ It tries to identify the best techniques that will be effective in particular situations at a
particular time.
➢ ​Managers with contingency view use a flexible approach, draw on a variety of theories
and experiences, and evaluate many options as they solve problems.
➢ This attempts to integrate all the management approaches.

Organizations are individually different, face different situations and require different ways of
meaning.

Popular contingency variables:

1.​ O
​ rganization size

2.​ R
​ outines of task technology

3.​ E
​ nvironmental uncertainty

4.​ I​ ndividual differences

Relationship between systems and contingency approaches:

1. Contingency management school has emerged out of systems management school.

2. Since the systems approach is too abstract to apply certain modifications can be made and
applied managerial action.
 3. The systems approach may specify situations under which an organization can function,
whereas, the contingency approach can specify the process which the organization may
try to adapt to its environment.

IT Approach to Management
The current trend is that every manager embraces Information Technology (IT) solutions
for delivering quality services with improved administration. IT empowers everyone to perform
effectively and efficiently for instance, retailers adopt new technologies, such as the
self-scanners; Indian Railways adopt surge pricing wherein the railway tickets cost more when
there is heavy demand-if the demand is less, the tickets cost less. Increasing volumes and
value of e-transactions these days, is an indication of the wide acceptance of IT in both
government and non-government circles including social sector. Automation is the current
buzzword everywhere whether the organisation is in the agriculture, manufacturing or service
sector. In other words, it has become an integral part of our lives. Virtually there is no sector
which is not revolutionized by IT. IT extensively deployed to develop IT applications, business
solutions and devices. The extent has been so widespread that one can switch on the air
conditioner even while sitting at the office.
Every organisation, irrespective of its size, today earmarks certain budget to embrace
the new IT technologies so that they can delight their customers with quality service. IT
approach triggered cost reduction and profit maximisation besides increasing service efficiency.
Social media, mobile technologies, analytics and cloud technologies (SMAC) are the leading
technologies in the IT space besides artificial intelligence, big data analytics, machine learning,
robotics, etc. to management has directly approach to management has contributed to
improvement in quality of life, shortening of transaction time large number of jobs in both
software and hardware. IT approach is also known for loss of jobs, but, it is observed that new
jobs and software are created. This means that everyone must keep learning about new IT
technologies on a continuing basis. Self-service kiosks in restaurants, airports, retail
establishments, etc., facilitate the customer to complete the transactions faster. Companies like
Uber and Ola revolutionised the erstwhile overcrowded transport market through integration of
customers, channel partners (Auto/cab drivers are called channel partners) and other regulatory
agencies through Global Positioning System (GPS), one of the super formats of IT approach to
Management. The IT approach to management delivers a unique experience to every
stakeholder including customer, employee, team leaders, management, owners, general public
and regulatory agencies.
 2. PLANNING & DECISION MAKING
INTRODUCTION TO PLANNING
Have you ever imagined how modern business organisations are built? Definitely,
promoters or founders would have been people of vision. They carefully translated through good
management. In other words, they planned well, which implies that studied the prevailing
business conditions then and worked out how they could make products and services. Planning
efforts depending upon their size would have varied. that became a means to their success.

PLANNING
Planning is the first function of a manager. It provides the necessary guidelines for for
the entire organisation. Since all future actions in the organisation will be based be careful and
thoughtful. Planning bridges the gap between the present (where we want to be).
It may not be possible to make things happen without planning. Not planning means
leaving It is necessary to gain control over future events. Planning helps managers do things in
an orderly necessary 'to think' on the basis of available data before taking a particular decision.
Definition
In the words of Koontz and O'Donnell, planning 'involves selecting missions, objectives
and achieve them; it requires decision making, that is choosing from among alternative future
courses Planning is both a managerial function and an independent process by itself. As a
process, with:
(a) Identifying goals,
(b) Exploring different alternatives to achieve them
(c) Evaluating each alternative
(d) Selecting the best alternative for implementation.
Planning is a systematic development of action. It involves choice and ends with the
selection of the best alternative. Planning is deciding in advance what is to be done in future'.
What is to be becomes clear when objectives, policies, procedures and programmes are
selected from the action.
Nature of Planning
The nature of planning reveals the following features:
I. Goal oriented: Planning centres around the corporate mission and goals. So planning is
oriented. It contributes positively to the achievement of mission and goals. It identifies taken to
achieve the targeted results efficiently and economically.
2. Intellectually demanding process: Not everybody can be good at planning. Planning is One
should be capable of thinking in a systematic manner. It is so because planning demands skills
such as vision, foresight, imagination and analytical skills to take rational decisions.
3. Involves choice: There are alternatives available to achieve a particular target, The manager
select the best alternative based on the merits and demerits of each of them.
4. Basis for other functions: Since planning is the first function of the manager, the results form
the basis for all other managerial functions
5. All pervasive in nature: All managers have to plan. Planning is essential for all
organisations-small or big, domestic or foreign, profit-making or service oriented. Managers at
the top, middle levels in any organisation have to systematically plan for the future. Thus,
planning is pervasive.
6. Continuous and dynamic: Business environment is complex and keeps changing.
Consequently, also need to be dynamic. They have to be worked out for a given timeframe at
the end must be reviewed and new plans prepared for the next year. Thus, planning is a
continuous.
7. Flexible in nature: Plans should not be rigid. They should be flexible in nature and
accommodate change in circumstances.
8. Intends to enhance efficiency: The aim of planning is to achieve the maximum targets costs
and quickly. So all plans should be cost effective and worth their investments. The plan should
be more than its costs.

General Framework for Planning

PLANNING PROCESS:
8 Main Steps Involved in Planning Process

Step # 1. Perception of Opportunities:

Perception of opportunities is not strictly a part of the planning process. But this
awareness of opportunities in the external environment as well as within the organisation is the
real starting point for planning. It is important to take a preliminary look at possible future
opportunities and see them clearly and completely.

All managers should know where they stand in the light of their strengths and
weaknesses, understand the problems they wish to solve and know what they gain. Setting
objectives depends on the awareness. Planning requires realistic diagnosis of the opportunity
situation.

Step # 2. Establishing Objectives:

This is the second step in the planning process. The major organisational and unit
objectives are set in this stage. This is to be done for the long term as well as for the short range.
Objective specify the expected results and indicate the end points of what is to be done, where
the primary emphasis is to be placed and what is to be accomplished by the various types of
plans.

Organisational objectives give direction to the major plans, which by reflecting these
objectives define the objective of every major department. Major objectives, in turn, control the
objectives of subordinate departments and so on down the line. In other words, objectives from a
hierarchy.

The objectives of lesser departments will be more accurate if subdivision managers

understand the overall enterprise objectives and the derivative goals. Managers should also have
the opportunity to contribute their ideal to setting their own goals and those of the organisation.

Step # 3. Planning Premises:

After determination of organisational objectives, the next step is establishing planning

premises that is the conditions under which planning activities will be undertaken. Planning
premises are planning assumptions the expected environmental and internal conditions.

Thus planning premises are external and internal. External premises include total factors
in task environment like political, social, technological, competitors, plans and actions,
government policies. Internal factors include organisation’s policies, resources of various types,
and the ability of the organisation to withstand the environmental pressure. The plans are
formulated in the light of both external and internal factors.

The nature of planning premises differs at different levels of planning. At the top level, it
is mostly externally focused. As one moves down the organisational hierarchy the composition
of planning premises changes from external to internal. The major plans both old and new will
materially affect the future against which the managers at lower units must plan.

Step # 4. Identification of Alternatives:

The fourth step in planning is to identify the alternatives. Various alternatives can be
identified based on the organisational objectives and planning premises. The concept of various
alternatives suggests that a particular objective can be achieved through various actions.

For example, if an organisation has set its objectives to grow further, it can be achieved in
several ways like expanding in the same Field of business or product line diversifying in other
areas, joining hands with other organisations, or taking over another organisation and so on.
Within each category, there may be several alternatives.

The most common problem is not finding alternatives but reducing the number of
alternatives so that the most promising may be analysed. Even with mathematical techniques and
the computer, there is a limit to the number of alternatives that can be thoroughly examined. The
planner must usually make a preliminary examination to discover the most fruitful possibilities.

Step # 5. Evaluation of Alternatives:

The various alternative courses of action should be analysed in the light of premises and
goals. There are various techniques available to evaluate alternatives. The evaluation is to be
done in the light of various factors. Example, cash inflow and outflow, risks, limited resources,
expected pay back etc..

Step # 6. Choice of Alternative Plans:

This is the real point of decision-making. An analysis and evaluation of alternative

courses will disclose that two or more are advisable and beneficial. The first one is selected​.

Step # 7. Formulation of Supporting Plan:

After formulating the basic plan, various plans are derived so as to support the main plan.
In an organisation there can be various derivative plans like planning for buying equipment,
buying raw materials, recruiting and training personnel, developing new product etc. These
derivative plans are formulated out of the basic or main plan and almost invariably required to
support the basic plan.

Step # 8. Establishing Sequence of Activities:

After formulating basic and derivative plans, the sequence of activities is determined so
those plans are put into action. After decisions are made and plans are set, budgets for various
periods and divisions can be prepared to give plans more concrete meaning for implementation.
 The overall budgets of an enterprise represent the sum total of income and expenses, with
resultant profit or surplus, and budgets of major balance sheet items such as cash and capital
expenditures.Each department or programme of a business or other enterprise can have its own
budgets, usually of expenses and capital expenditures, which tie into the overall budget.

If done well, budgets become a means of adding together the various plans and also set
important standards against which planning progress can be measured.

​Types of Plans:

1. Strategic Plans

• ​Apply to the entire organization.

• Establish the organization’s overall goals.

• Seek to position the organization in terms of its environment. • Cover extended periods of time.

2. Operational Plans

•​ Specify the details of how the overall goals are to be achieved. • Cover short time period.

3. Long-Term Plans

• Plans with time frames extending beyond three years

4.Short-Term Plans

• ​Plans with time frames on one year or less

5. Specific Plans

• Plans that are clearly defined and leave no room for interpretation
6. Directional Plans

• Flexible plans that set out general guidelines, provide focus, yet allow discretion in
implementation.

7. Single-Use Plan

• A one-time plan specifically designed to meet the need of a unique situation.

8. Standing Plans

•​ O
​ ngoing plans that provide guidance for activities performed repeatedly.

Management by Objectives (MBO):

Management by objectives (MBO) is a systematic and organized approach that allows

management to focus on achievable goals and to attain the best possible results from available
resources. It aims to increase organizational performance by aligning goals and subordinate
objectives throughout the organization. Ideally, employees get strong input to identify their
objectives, timelines for completion, etc.

Management by Objectives (MBO) was first outlined by Peter Drucker in 1954 in his
book 'The Practice of Management'. In the 90s, Peter Drucker himself decreased the significance
of this organization management method, when he said: "It's just another tool. It is not the great
cure for management inefficiency... Management by Objectives works if you know the
objectives, 90% of the time you don't." According to Drucker managers should "avoid the
activity trap", get so involved in their day to day activities that they forget their main purpose or
objective? Instead of just a few top-managers, all managers should:

● Participate in the strategic planning process, in order to improve the implement ability of
the plan.
● Implement a range of performance systems, designed to help the organization stay on the
right track.

MBO managers focus on the result, not the activity. They delegate tasks by "negotiating a
contract of goals" with their subordinates without dictating a detailed roadmap for
implementation. Management by Objectives (MBO) is about setting yourself objectives and then
breaking these down into more specific goals or key results.

The principle behind Management by Objectives (MBO) is to make sure that everybody
within the organization has a clear understanding of the aims, or objectives, of that organization,
as well as awareness of their own roles and responsibilities in achieving those aims. The
complete MBO system is to get managers and empowered employees acting to implement and
achieve their plans, which automatically achieve those of the organization.
 The MBO style is appropriate for knowledge-based enterprises when your staff is
competent. It is appropriate in situations where you wish to build employees' management and
self-leadership skills and tap their creativity, tacit knowledge and initiative. Management by
Objectives (MBO) is also used by chief executives of multinational corporations (MNCs) for
their country Managers abroad.

In Management by Objectives (MBO) systems, objectives are written down for each level
of the organization, and individuals are given specific aims and targets. "The principle behind
this is to ensure that people know what the organization is trying to achieve, what their part of
the organization must do to meet those aims, and how, as individuals, they are expected to help.

This presupposes that organization's programs and methods have been fully considered.
If they have not, start by constructing team objectives and ask team members to share in the
process."

"The one thing an MBO system should provide is focus,'' says Andy Grove who ardently
practiced MBO at Intel. So, have your objectives precise and keep their number small. Most
people disobey this rule, try to focus on everything, and end up with no focus at all.
The mnemonic ​S.M.A.R.T. is associated with the process of setting objectives in this
paradigm. "SMART" objectives are:

·​ Specific - Target a specific area for improvement.

​

·​ Measurable - Quantify or suggest an indicator of progress.

​

·​ Assignable - Specify who will do it.

​

·​ Realistic - State what results can realistically be achieved, given available resources.
​

Time-bound - Specify when the result(s) can be achieved.

MBO Principles

❖ Cascading of organizational goals and objectives

❖ Specific objectives for each member
❖ Participative decision making
❖ Explicit the time period
❖ Performance evaluation and feedback.
Process of M.B.O.

The M.B.O approach is result oriented approach & based on the idea of effective
participation of all the members for achieving objectives. It includes following steps:-

1) Defining Job:

Every employee is asked to define his job with the necessary details. The supervisor is
also asked to do the same exercise independently. The job specifies the responsibilities of each
personnel for attainment of goals. It is finalized in the joint meeting of superior & subordinate.

2) Setting Objectives:

In this stage the objectives to be achieved are decided by all concerned parties & key
results areas are also finalized. They are prepared on proper background for further action &
results are achieved by the staff. In this process long term & short term objectives are finalized.

3) DevelopingActionPlan:

Such action plan is based on objectives & useful for suitable follow up for achieving
objectives. The action plan gives clean direction to concern parties & brings unity in the whole
organization. Action plan is prepared jointly.

4) Conducting Periodical View:

Periodical view is useful for execution of action plan. Such review suggests actual
performance of the plan. If there is any deviation remedial action can be taken.
5) PerformanceAppraisal:

M.B.O. provides as a tool for performance appraisal to superiors. It helps to improve the
performance of staff in the future. Appraisal need to be done with trust & confidence.

6) Achieving the Objectives:

The important aspect of M.B.O. is to achieve the objectives within definite limits. These
are achieved with the participation of old. For this understanding, communication & co-operation
is required.

Development of Business Strategies:

Business Strategy refers to what the organisation wants to follow to achieve its vision
and mission.
Vision
Vision refers to what an organisation want to become and achieve at some point of time
in future. An organisation may wish to bring good things to life; it may wish to enable people and
organisations to realise their fullest potential or it may wish to create an outstanding value to its
stakeholders by developing products and services to help people and organisations to become
more creative, innovative and joyful.
Mission
Vision when translated into the written form becomes mission. For instance, the
organisation may wish to increase its customer base from 5 million to 10 million in the next 6
months or reduce its cost of sales by 20% or enhance its sales through exports by 25%, etc.
Mission statements are inspiring in nature and they bring the stakeholders together and ignite
passion that can deliver extraordinary results. Mission statements should be in brief so that they
are remembered easily and energise the employees.

1. Gather the facts

To know where you’re heading, you have to know where you are right now. So before
you start looking ahead, you should review the past performance, or the current situation. Look
at each area of the business and determine what worked well, what could have been better and
what opportunities lie ahead.

There are many tools and techniques available to help with this process, such as SWOT
(Strength, Weakness, Opportunities and Threats) analysis.You should look internally at your
strengths and weaknesses. And for the opportunities and threats you should look at external
factors. A great framework for looking at external factors is PESTLE (Political, Economic,
Social, Technological, Legal and Environmental). The most important part of this process is
involving the right people to make sure you’re collecting the most relevant information.

2. Develop a vision statement

This statement should describe the future direction of the business and its aims in the
medium to long term. It’s about describing the organisation’s purpose and values. Business gurus
have debated long and hard about what comes first – the vision, or the mission statement. But, in
practice, you could develop both at the same time.

3. Develop a mission statement

Like the vision statement, this defines the organisation’s purpose, but it also outlines its
primary objectives. This focuses on what needs to be done in the short term to realise the long
term vision. So, for the vision statement, you may want to answer the question: “Where do we
want to be in 5 years?”. For the mission statement, you’ll want to ask the questions:

•​ What do we do?
​

•​ How do we do it?
​

•​ Whom do we do it for?
​

•​ What value do we bring?

​

4. Identify strategic objectives

At this stage, the aim is to develop a set of high-level objectives for all areas of the
business. They need to highlight the priorities and inform the plans that will ensure delivery of
the company’s vision and mission.

By taking a look back at your review in step one, in particular the SWOT and PESTLE
analysis, you can incorporate any identified strengths and weaknesses into your objectives.
Crucially, your objectives must be SMART (Specific, Measurable, Achievable, Realistic and
Time- related). Your objectives must also include factors such as KPI’s, resource allocation and
budget requirements.

5. Tactical Plans

Now is the time to put some meat on the bones of your strategy by translating the
strategic objectives into more detailed short-term plans. These plans will contain actions for
departments and functions in your organisation. You may even want to include suppliers.

You’re now focusing on measurable results and communicating to stakeholders what they need
to do and when. You can even think of these tactical plans as short sprints to execute the strategy
in practice.

6. Performance Management

All the planning and hard work may have been done, but it’s vital to continually review
all objectives and action plans to make sure you’re still on track to achieve that overall goal.
Managing and monitoring a whole strategy is a complex task, which is why many directors,
managers and business leaders are looking to alternative methods of handling strategies.
Creating, managing and reviewing a strategy requires you to capture the relevant information,
break down large chunks of information, plan, prioritise, capture the relevant information and
have a clear strategic vision.

DECISION MAKING
Decision making is defined as selecting a course of action from among alternatives. It is
the core of planning. The organisations will have different plans only when decisions are taken in
terms of commitment of resources. The main job of a manager is taking decisions on what to do,
when to do, do, how to do, where to do and answering all other such questions. Decisions give
direction to organisations.
Decide means arriving at a solution that ends uncertainty or dispute. Decide originated
from Latin decidere which means to cut off. Decision making is an integral part of the job of a
manager or leader. It is the essence of the job description.A competitive compensation or salary
package is paid to the managers because they have to take decisions.
There are a number of cases where bad decisions and bad decision making are considered
as the root cause for the collapse. The decisions are made every time and everywhere. The
decision making is a discipline that entails the following:
1. ​Realise:​ when and why decisions are needed.
2. ​Declare the decision: Announce what the decision is and answer all questions such as who,
what, how, where, etc.
3. ​Generate alternatives: ​generate a complete set of alternatives, gather the information to
identify possibilities and probabilities, and ultimately make a choice that best fits the
organisational values.
4. ​Commit resources and act: Once resources are committed, it becomes irreversible. So lot of is
required in this stage.
Seldom all these four are carried out consistently or consistently well. If these are done
well as required, most problems are solved in time. In some other cases, mere decisions do not
yield results. How well the decisions are well-implemented matters a lot for quality results.

Programmed & Non Programmed Decisions:

Programmed Decisions:
Decisions related to structured situations, where the problem is more or less routine and
repetitive in nature are known as programmed decisions. For example, problems related to leave
are solved by policy relating to leave rules. Employees who take leave according to leave rules
Eire granted leave and those who do not follow the leave rules may not be granted leave. The
routine problems may not always be simple.
There may be complex routine problems. For example, the production department
follows a routine that managers order for inventory when it reaches the reorder point. If there is a
sudden increase in demand for the product, managers cannot wait for inventory to reach the
reorder point to make fresh orders. Orders are placed before this level is reached. Ordering
inventory is, thus, the problem of routine nature but ordering inventory before the reorder point
is a routine but complex problem.
In either situation, managers depend on pre-established criteria for taking decisions.
Various policies, schedules and procedures guide these decisions and, therefore, policies and
procedures should be as clear as possible. Since decisions are based on predefined standards,
they do not require much of brainstorming and are taken normally by middle and lower-level
managers.
Managers do not think of innovative ways to solve routine problems. Therefore, they can
concentrate on important and crucial activities. These decisions also involve some amount of
certainty, i.e., outcomes of these decisions are, by and large, known.
Various types of programmed decisions are:
(1) Organisational decisions
(2) Operational decisions
(3) Research decisions, and
(4) Opportunity decisions.

Non-Programmed Decisions:
These decisions are taken in unstructured situations which reflect novel, ill-defined and
complex problems. The problems are non-recurring or exceptional in nature. Since they have not
occurred before, they require extensive brainstorming. Managers use skills and subjective
judgment to solve the problems through scientific analysis and logical reasoning.
Subjective judgment is based on assessment of the situation. In objective judgment (in
case of programmed decisions), past experience forms the basis for decision-making. These
decisions involve a fair degree of uncertainty since outcomes of decisions are not always known.
These decisions are based on partial ignorance as the alternatives and their outcomes cannot be
known in advance. They are taken in the context of changing, dynamic environmental
conditions.
For example, an increase in advertising expenditure, effective salesmanship, upgraded
technology, quality controls, brand image and reasonable prices are expected to increase sales
and profits. If, despite all this, profits are declining, it requires immediate decision-making and
such decisions are non-programmed decisions.
These decisions are taken by top-level managers. As we move up the organisational
hierarchy, the need for taking non-programmed decisions increases.
Different types of non-programmed decisions are:
(1) Personal decisions,
(2) Strategic decisions,
(3) Crisis intuitive decisions, and
(4) Problem-solving decisions.
There is no clear line of demarcation between programmed and non-programmed
decisions. Decisions are neither totally programmed nor non-programmed. They are a
combination of both and lie on a continuum of decision; between totally programmed decisions
at one end of the continuum and totally non-programmed decisions at the other end.
CLASSIFICATIONS OF DECISIONS BASED ON MANAGERIAL LEVEL
Decisions can be classified based on the managerial level into:
(a) Strategic decisions
(b) Tactical decisions
(c) Operational decisions
Strategic decisions:
These are made at the top level management to address critical issues that confront the
survival and success of the organisation. Some examples for strategic decisions include (a)
whether to export or not (b) whether to acquire a firm or merge with another (c) whether to issue
shares or debentures through an IPO etc.
Tactical decisions:
These are made at the middle level management to translate the strategic decisions into
action. They are relatively short and easy to understand than strategic decisions. They are
made with strategic focus. For instance, where the top management decides to issue shares
through an Initial Public Officer (IPO), now the next decision required is to appoint the merchant
bankers to handle the issue. In addition, it is also required to appoint registrars to issue,
bankers to issue, etc. This is an example for tactical decision. Tactical decisions bring more
clarity in terms of addressing by uncertainty and complexity.
Operational decisions:
Operational decisions are taken by the bottom level managers. In the preceding
example of IPO, certain decisions in respect of appointment of merchant bankers, the terms and
conditions including their commission, time frame, etc.have to be decided. These decisions
bring more clarity and set a blueprint for action.
Another example Take the case of war. Decisions on mobilisation of military resources
and efforts and overall deployment of troops to win a war are strategic decisions. Decisions on
winning a battle are tactical decisions. Decisions on mobilising the resources and soldiers on
the enemy hideouts are operational decisions.
Steps in Problem Solving and Decision Making

1. Defining the Problem:

Defining the problem is a problem half solved. Sufficient time should be spent on
defining the problem. It is very difficult to define the problem. The manager is responsible for
defining the problem.
E.g.: - Like a doctor, he has to take into account all the symptoms before giving medicine. A
manager must carefully diagnose the problem & should tackle it tactfully.

2)​ Collection of Data:

Information can be collected from internal sources as well as external sources. Right decisions
depend upon the quality of information collected by the management.

3) ​Analysis of the Problems:

Subject to systematic study depth information should collected & it should be classified
properly. Information is based on facts, speculation and assumption. Normally 98% information
should be based on facts, 2% on speculation, 0% assumption.

4) Finding causes of problems:

This is the most important aspect of understanding the problem. It is a complicated
process to find out the exact cause is very essential.

5) Identification of Resources:
It is necessary to identify available resources & the use of resources for achievement of
goals. The management must make the list of resources that are available for solving the
problem.

6) Development of Criteria for successful Solution:

Criteria should not be established as early as possible. This criteria is useful for choosing
the best alternative & divert the resources accordingly. This criteria is divided into “must & want”.
The must criteria are satisfied first & want criteria later on.

7) Development of Alternatives:
Development of alternatives is the most important step in the process of decision
making. The effectiveness in decision making depends upon the development of alternatives.

8) Selection of Alternatives:
In order to select the best alternative following points should be considered i.e. risk,
economy, time, availability of resources.

9) Implementation of Decisions:
Implementation means putting the selective alternative into action. The process of
implementation starts with assigning the responsibilities. Management must focus on the duties
of the person. He must consider following points:
1. Effective communication
2. Time for Decision Making
3. Acceptance by employee.
Individual and Group Decisions

Individual decisions:
These decisions are those which are taken by individuals in the managerial cadre right
from CEO to the first line supervisors. Managers in organisations are bestowed with authority
and they are expected to take decisions. They are paid for taking appropriate decisions to
address the problems. They are responsible for results also. Given a particular problem they
can call for all the data, information reports (both factual and analytical), pros and cons of
alternatives and suggested courses of action.
The manager is expected to decide on the best alternative. He cannot delegate or
abdicate this authority to decide. Most of the managers follow their sixth sense or intuition, Once
they understand their problem, they will get indications based on their experience, maturity,
vision and environmental context; they get a feel of the probable solutions. Take the case of
Mukesh Ambani who stepped into the field of Oil and Gas despite the fact that his
world-renowned consultants suggested not to enter this field. Precisely the senior executives at
the top level and middle level are paid heavily for this. With their vision and speed in action, they
can steer the organisations towards the mission and goals. They forecast what could be likely
problems and follow a proactive approach involving all their teams and groups and deploying
the resources.

Group decisions:
​These decisions are those which are made by more than one manager. It is very likely
that organisations believe in collective wisdom and hence the CEOS appoint a committee to
take decisions on product-related decisions which call for designing, manufacturing and
marketing. The Vice-presidents of each of these divisions need to sit together along with the
Vice president (finance) and take decisions in the best interest of the organisation. The Board of
Directors is another example for plural executive body intended to make several vital corporate
decisions. At the lower levels, some important committees include management committee,
planning committee, budget committee, operation committee etc. These committees comprise
senior managers entrusted with key decision making and coordinating functions.
Every functional manager further may call for a departmental meeting wherein all the
managers at the middle and lower levels will take part in deciding several issues for effective
marketing, such as promotion, pricing etc. This also is an example for group decision making.

Group Decision Making: ​An Evaluation

The advantages of the group decision making include (a) pooling of the diverse
expertise, knowledge authority, and individual perspectives (b) quality decisions (c) collective
responsibility (d) and easier implementation as every one is part to the decision. There are
certain disadvantages also. There could be considerable delay in decision making. The group
members may take time to find coordination as every one comes with their personal
perspectives. It is quite likely that the quality of decisions may get diluted due to lack of
rationality and responsibility. There is nobody to take responsibility in group decisions.
Bounded Rationality and influences on Decision Making:

Corporate management is a responsibility that comes with a lot of challenges. Managers

are often required to attend to issues and difficulties that need resolution, clarity and decisions. A
significant portion of these matters is paltry while others are exceptionally vital to the prosperity
of the organisation, particularly concerning strategic performance and the organisation’s bottom
line.

Bounded rationality about decision making proposes that people don’t utilise ideal
decision- making approaches as a result of cognitive limitations in the capacity to understand and
oversee complex information and also a consequence of difficulties related with impediments in
information accessibility. Rather, the idea proposes that people embrace approaches that are
more constrained and which depend upon heuristics to make the decision-making process
manageable, which incorporates the way toward generating and assessing options for
conceivable activity.

The above concept presumes that managers, who are for sure leaders, are halfway
discerning and thus would dependably consider the encompassing condition to guarantee that
they settle on the best decisions that will suffice at the moment.

​Principles of Bounded Rationality

1. ​As no one can make a decision affecting the past, decisions must operate for the future
and the future in almost all cases involves uncertainties.

2. ​The capacity of the human mind to perceive, retain and retrieve complete knowledge
and information on past, present and future events is not unlimited. Again, information
is neither readily available nor is it a free commodity. The cost of information collection
vis-a-vis its reliability and relevance is an important consideration.

3. ​It is difficult to recognize all the alternatives that might be followed to reach a goal,
because of human cognitive constraints. It is neither necessary nor feasible to generate
the entire set of alternatives. The computational capabilities of the decision maker are
also limited. In most cases, not all alternatives can be analyzed, even with the latest
analytical techniques and tools like computers.

4. ​With all his’ knowledge and intelligence, the average decision maker has his own soft
emotions. He cannot completely shut off his subjective viewpoints from influencing the
decision process.

Because of the limitations mentioned above, a decision maker would rather be more
interested in a choice which is satisfactory and sufficient. In other words, a manager must settle
for limited rationality or “bounded” rationality.
 Since it is not possible for managers to be fully rational in practice, they sometimes
compromise with their dislike of risks their desire to “play it safe”to interfere with the desire to
reach the best solution under the circumstances.

This has been termed “Satisfying”, that is, choosing a course of action that is satisfactory
or good enough under the circumstances.

GROUP PROBLEM SOLVING AND DECISION MAKING

The problem-solving process involves thoughts, discussions, actions, and decisions that
occur from the first consideration of a problematic situation to the goal. The problems that
groups face are varied, but some common problems include budgeting funds, raising funds,
planning events, addressing customer or citizen complaints, creating or adapting products or
services to fit needs, supporting members, and raising awareness about issues.
Organizational challenges are many times disruptive to productivity. Group problem
solving is the process of bringing together stakeholders who through their analytical decision
making abilities can influence the outcome of the problem. The use of groups in problem solving
is encouraged as groups tend to evaluate diverse solutions and action plans. The core
objectives of the group are identifying the problem and developing solutions. This five-step
systematic group problem solving process provides a defined strategy for a teamwork approach
to generating creative and workable resolutions.

Group Decision Making and Problem Solving Process

1. Define the Problem

Provide history relevant to the problem. Make a comparison: how are things now versus
the way you would like them to be? How long has the problem existed? How frequently does it
occur? Who is affected by the problem?
2. Determine Causes
Look for the cause of the gap between the present (what's now) and the desired (future)
state or resolution.
3. Develop Alternative Approaches
Brainstorm. (Write exactly what is said. Capturing specific words can be powerful.) Make
a list of as many possible solutions as you can. Do NOT judge correctness or feasibility here.
Just list everything.
4. Assess the Consequences
Ask what possible results may come from each alternative. Who is affected? Who pays?
Are there uncontrollable challenges?
5. Develop Action Plans
Identify what you want success to look like. Use the Action Planning Worksheet to
choose feasible alternatives that are acceptable to the group. Note: This is where most of the
work is done!

Creativity and Innovation in Managerial Work:

Creativity is imagining. Innovation is doing. There’s no doubt that, no matter what the
size, your business needs to foster creativity and innovation together to stay competitive and to
retain awesome teammates.
 Creativity and innovation are vital for effective decision making and improve the quality
of managerial functioning. Out of the box thinking, unconventional way of looking at the
business perspectives enhance managerial efficiency. Innovative products and services bring life
to business and society and thus managers show that they can add value to their organisations.

Creativity:
Creativity is a mental process involving the generation of new ideas or concepts, or new
associations of the creative mind between existing ideas or concepts.
Creativity can be used when confronted with a decision making problem. People differ in their
inherent creativity, to overcome from routine.
Thinking up new things
Creativity is ...“A state of doing, not being”
Creativity is expressed and brought to life in terms of products and services through
organisations. Creativity plays a critical role in the society. Individual/organisational creativity and
innovation play a vital role in fulfilling customers' needs, creating jobs, and contributing to the economy.
Even local governments solve their problems in a creative way to meet the needs of the community, and
thereby enhance the quality of life for the citizens
Creativity refers to the ability to produce work in a novel, original and unexpected way in an
appropriately useful manner. It explores how the constraints can be overcome and value to the society.
Creativity is a synonym to idea, invention, or breakthrough.
If you want to be creative you need to do creative things The creative process has two
fundamental stages:-
A) Generating ideas ( produce)
B) Evaluating ideas
Steps to Personal Creativity
1. Believe in yourself
2. Question traditional assumptions
3. Expand your problem-solving styles
4. Practice thinking in new ways

Innovation:
Innovation is about creating value and increasing efficiency, and therefore growing our business.
“Without innovation, new products, new services, and new ways of doing business would never emerge,
and most organisations would be forever stuck doing the same old things the same old way.”

“Doing new things”

Innovation is about creating value and increasing efficiency, and therefore growing your
business. "Without innovation, new products, new services, and new ways of doing business
would never emerge, and most organizations would be forever stuck doing the same old things
the same old way."

Innovation is a process of generation, acceptance, developing and implementing a new idea,

process, product or service. It may be technical (process improvement) or social (quality circle). It focuses
on taking a creative idea and bringing it to fruition in terms of profits or customer satisfaction, job
satisfaction, lower costs and faster service. In other words, for an idea to see the light of the day, or to
bring the concept to market, its potential must be recognised; adequate funds must be committed and
provided a conducive environment is to be provided to overcome all the obstacles such as technological
challenges, competitive pressures, entry barriers, etc.

Process of Innovation

a) Idea generation (Making)

b) Idea screening (test )

c) feasibility (Practically)

d) implementation (Completion)

Turning Ideas Into Opportunities

• Opportunity Recognition:-

• The defining act of entrepreneurship.

• Need to create an environment where people are encouraged to generate ideas...

• Then, the challenge becomes how to “ screen ” ideas to find the best opportunities. Screening
Ideas:-

• Are they Opportunities?

•​ W
​ hat important customer problem can you solve?

• How are you going to do it?

• How many customers are there that are willing to buy from you? • Why can only you provide
the solution?

• How can you defend against others?

 3.Organization and HRM

INTRODUCTION:

An organization is more known by how it is visualized, planned, and executed. The

elements of this chapter reveal how the effectiveness can be built in by developing the right kind
of organization.

Organization and Organizing

Very often, these terms are used interchangeably, which is not correct. Organization is
different from organizing. Organizing is one of the functions of management where as the
management functions are performed. Organizing is the means to achieve the plans. If planning
involves making a road map for the chosen destination, then organizing is the means by which
you reach your chosen destination.

Organizing is a process of:

Determining, grouping, and structuring the activities

Creating roles for effective performance at work

Allocating necessary authority and responsibility for results

Determining detailed procedures and systems for different problem areas such as coordination,

Communication, decision-making, motivation, conflict resolution, and so on. The ultimate result
of organizing is organization. In other words, organizing function ends with creating a structure
of relationships. It explains who is responsible for a given task. If the entire organization is
viewed as a system, its sub-systems are the departments of production, marketing, finance, and
personnel.

Organization: Formal or Informal?

Organization may be formal, informal, or both. It is said to be formal when it is created for
achieving a common purpose. Certain rules and regulations always govern it. The chief
executive calls his staff for a meeting at a given time and when the staff meets, it is called a
formal organization. A formal organization comes into being when persons in official capacity
(a) are able to communicate with one another, (b) are willing to act in an atmosphere of
cooperation, and (c) share a common explicit purpose on the other hand, after the meeting is
called off, when some staff stay back to discuss their personal problems with the chief executive,
it is said to be an informal organization.
 Another simple example for an informal organization is a cricket team with members
drawn from different levels in the organization. The same team becomes a formal one, once it is
placed under the control of a captain.

The whims and fancies, or likes and dislikes of the members bind the informal
organization, not the rules and regulations of the organization. However, it is the informal
organization that determines the success of formal organization. It is so because the rules and
regulations do not yield results, and they condition the behavior of people in the organizations.
The degree of participation and involvement of people in the organization enhances the quality
of the results. Only informal organizations such as weekend meets, cultural meets, sport meets,
and so on, develop bonding which, in turn, strengthens the degree of participation and
involvement of people in the organizations.

Imagine the effect on the morale of the student whose progress is monitored by the
Principal who appreciates him while chatting with his faculty and students! With this, the other
students also get inspired! This informal organization (the student, the principal, and the faculty)
could strengthen the Discipline and overall functioning of the formal organization, in this
example, the college.

It was Elton Mayo who contributed to the concept of informal organization. Informal
organizations are not reflected in the organization charts. But, the informal relationships are
dynamic in nature. They are capable of affecting the relationships in the formal setting. A
manager can lead and direct the subordinates better, to the advantage of the organization, if he is
aware of the importance of these interpersonal relationships.

​Relationship between Management and Organization:

Management and organization are closely related. The nature of organization depends
upon the goals of management. Management is concerned with defining the purpose of
organizations, fulfilling it by adapting to change and maintaining a functional balance among the
various conflicting forces and factors at work.

The process of management is adequately influenced by the advances in the organization

theory, such as self appraisal, networking, the learning organization, and so forth. The manager
is concerned with his people, work and structures, and systems and procedures. Can the manager
function ignoring the other variables such as goals of the organization, available technologies,
the values and beliefs of the organization? No. The reason is that a change in one variable will be
affecting one or more variables also. Thus, management and organization are closely related. To
manage successfully is to balance these factors in a way that meets the needs of the organization
at a given time.

The character and structure of the organization may be contingent on several factors such
as technology in use or the organizational environment, and so on. The best way of structuring
organizations keeps on changing, based on the situation. This theory is called the contingency
theory or the situational theory.

​Principles of Organization:

1. Principle of unity of objectives:

Organizational goals, departmental goals, and individual goals must be clearly defined.
All goals and objectives must have uniformity. When there is contradiction among different level
of goals desired goals can’t be achieved. Therefore, unity of objectives is necessary.

2. Principle of specialization:

Sound and effective organization believes on organization. The term specialization is

related to work and employees. When an employee takes special type of knowledge and skill in
any area, it is known as specialization. Modern business organization needs the specialization,
skill and knowledge by this desired sector of economy and thus, efficiency would be established.

3. Principle of coordination:

In an organization many equipment, tools are used. Coordination can be obtained by

group effort that emphasize on unity of action. Therefore, coordination facilitates in several
management concepts

4. Principle of authority:

Authority is the kind of right and power through which it guides and directs the actions of
others so that the organizational goals can be achieved. It is also related with decision making. It
is vested in particular position, not to the person because authority is given by an institution and
therefore it is legal. It generally flows from higher level to lowest level of management. There
should be an unbroken line of authority.

5. Principle of responsibility:

Authentic body of an organization is top level management, top level management direct
subordinates. Departmental managers and other personnel take the direction from top level
management to perform the task. Authority is necessary to perform the work .only authority is
not provided to the people but obligation is also provided. So the obligation to perform the duties
and task is known as responsibility. Responsibility can’t be delegated. It can’t be avoided.

6. Principle of delegation:

Process of transferring authority and creation of responsibility between superior and

subordinates to accomplish a certain task is called delegation of authority. Authority is only
delegated, not responsibilities in all levels of management. The authority delegated should be
equal to responsibility

7. Principle of efficiency:

In enterprise different resources are used. The resources must be used in effective
manner. When the organization fulfill the objectives with minimum cost, it is effective.
Organization must always concentrate on efficiency.

​8. Principle of unity of command:

Subordinates should receive orders from single superior at a time and all subordinates
should be accountable to that superior. More superior leads to confusion, delay and so on.

9. Principle of span of control:

Unlimited subordinates can’t be supervised by manager, this principle thus helps to

determine numerical limit if subordinates to be supervised by a manager. This improves
efficiency.

10. Principle of balance:

The functional activities their establishment and other performances should be balanced
properly. Authority, centralization, decentralization must be balanced equally. This is very
challenging job but efficient management must keep it.

11. Principle of communication:

Communication is the process of transformation of information from one person to

another of different levels. It involves the systematic and continuous process of telling, listening
and understanding opinions ideas, feelings, information, views etc, in flow of information.
Effective communication is important

12. Principle of personal ability:

For sound organization, human resources is important. Employees must be capable. Able
employees can perform higher. Mainly training and development programs must be encouraged
to develop the skill in the employees

13. Principle of flexibility:

Organizational structure must be flexible considering the environmental dynamism.

Sometimes, dramatically change may occur in the organization and in that condition,
organization should be ready to accept the change

14. Principle of simplicity:

 This principles emphasizes the simplicity of organizational structure, the structure if
organization should be simple with minimum number of levels do that its member an understand
duties and authorities.

Organizational Structure:
Types of Organizational Structures:

Line organization:
Line organization is the basic framework for the whole organization. It represents a direct
vertical relationship through which authority flows. This is the simplest and oldest, known as
chain of command or scalar principle. The authority flows from top to the lower levels. Every
person is in charge of all the persons under him and he himself is accountable to his superior
only.
This organization is a vertical structure where one person delegates authority to his
subordinate and who in turn delegates to his subordinate and so on. Authority flows vertically
from top level person to all the persons responsible for the execution of work. Responsibility, on
the other hand, flows upwards. Everybody is responsible for his work and is accountable to his
boss.
Since authority and responsibility flow in an ‘unbroken straight line, it is called line
organization. In the words of J.M. Lundy, “It is characterized by direct lines of authority flowing
from the top to the bottom of the organizational hierarchy and lines of responsibility flowing in
an opposite but equally direct manner.”
This form of organization is followed in military establishments. The
‘Commander-in-Chief is at the top with various other officers at the lower levels. The officers at
downward positions derive authority from the top. The modern military organizations do not
entirely rely on line organization. They have staff wings like intelligence, medical and so on.

Merits of line organization:

1. It is very simple to establish.

2. It clearly defines the authority, responsibility and accountability of a job

3. It can be easily adapted to the requirement of the organization.

4. Managers have exclusive authority over their unit so they can easily make changes in the
functioning of the unit when required

5. There is definite authority at every level so that everyone can take decisions quickly.

6. Every employee knows to whom he/she is responsible and from whom they receive their
orders.

7. It confirms scalar principle of organization where one subordinate receives the orders from
single superior.

8. All activities relating to single department are managed by one individual.

9. There is clear cut definition of authority and identification of responsibility, relationships and
so on.
Demerits of line organization:

1. The line executives are generalists and not specialists.

2. The top level managers are overloaded with work.

3. There is concentration of authority at top level only. If top level managers are not capable
there may be failure.

4. All managers and supervisors handle their job on their own ways independently with grow the
line organization my find it difficult to maintain effective coordination between different
departments and units.

5. There is only one way communication i.e. from top to bottom

6. It is not suitable for large organization

7. There is possibility of nepotism and favoritism.

8. There is replacement problem during absenteeism of top authority

9. It can be autocratic.

Functional Organization:
F.W. Taylor, who is better known as the father of scientific management developed the
concept of ‘Functional Organization’. As the very name suggests, functional organization
implies that the organization should be based on various functions. Taylor’s functional approach
is mainly based on principle of specialization and tries to bring about organizational balance.
 The functional structure is based on an organization being divided up into smaller groups
with specific tasks or roles. For example, a company could have a group working in information
technology, another in marketing and another in finance.
Each department has a manager or director who answers to an executive a level up in the
hierarchy who may oversee multiple departments. One such example is a director of marketing
who supervises the marketing department and answers to a vice president who is in charge of the
marketing, finance and IT divisions.
An advantage of this structure is employees are grouped by skill set and function,
allowing them to focus their collective energies on executing their roles as a department.
One of the challenges this structure presents is a lack of inter-departmental
communication, with most issues and discussions taking place at the managerial level among
individual departments. For example, one department working with another on a project may
have different expectations or details for its specific job, which could lead to issues down the
road.
In addition, with groups paired by job function, there’s the possibility employees can
develop “tunnel vision” — seeing the company solely through the lens of the employee’s job
function.
The principle of specialization embodies the concept that both the workers and the
supervisors can develop a higher degree of proficiency by separating the manual from the mental
requirements. Taylor recommended that there should be fictionalization even at the shop level
where workers have to produce goods. He felt that the usual practice of putting one foreman in
charge of some 40 to 50 workers should be avoided.
Advantages:
Specialization:
This system derives the benefits of specialization. As every functional in charge is an
expert in his area, he will guide using his specialization and with the help of the subordinates, try
to attain the specified objectives.
Increased efficiency:
This type of organization ensures enhanced efficiency as the workers operate under the
expert and competent personnel and perform limited operations.
Limited duties:
The functional foremen have to carry out the limited number of duties concerning their
area of work. This considerably reduces the burden of work and makes possible for the foreman
to carry out the work in the best possible manner.
Scope for expansion:
Functional organization offers a great scope for expansion of business enterprise without
any dislocation and loss of efficiency as each man grows on account of his own specialty.
Flexibility:
It is flexible pattern of organization. A change in organization can be made without
disturbing the whole organization. In the words of Louis A. Allen, “Function as a whole can he
cut by eliminating positions at the lower levels without seriously affecting its total performance.”

Disadvantages:
Conflict in authority:
The authority relationship violates the principle of ‘unity of command’. It creates several
bosses instead of one line authority. It leads to conflict and confusion in the minds of the workers
to whom they should obey and whom they should ignore.
Difficulty in pinpointing responsibility:
On account of the non-application of the principle of ‘unity of control’, it is very difficult
for the top management to fix the responsibility of a particular foreman. There arises a tendency
for shirking of responsibility.
Expensive:
This pattern of organization is quite impracticable and expensive. Multiplicity of experts
increases the overhead expenditure. The small organizations cannot afford to install such a
system.
Discipline is slackened:
Discipline among the workers as well as lower supervisory staff is difficult to maintain as
they are required to work under different bosses and this may hamper the progress of the
organization.
Lack of co-ordination:
Appointment of several experts in the organization creates the problem of co-ordination
and delay in decision-making especially when a decision requires the involvement of more than
one specialist.
Line and Staff Organization:
The line and staff organization is an improvement over the above mentioned two systems,
line organization and functional organization. The line organization concentrates too much on
control whereas the functional system divides the control too much.
The need was, therefore, for a system that will ensure a proper balance between the two.
The need has been fulfilled by line and staff organization. The system like line organization also
owes its birth to army.
The commanders in the field who are line officers are assisted by the staff that helps them
in formulating strategies and plans by supplying valuable information. Similarly in organization,
line officers get the advice of the staff which is very helpful in carrying on the task in an efficient
manner. However, staff’s role is advisory in nature. Line officers are usually assisted by staff
officers in effectively solving various business problems.

Advantages of Line and Staff Organizations:

Specialization:
This type of organization is based on planned specialization and brings about the expert
knowledge for the benefit of the management.
Better decisions:
Staff specialists help the line manager in taking better decisions by providing them
adequate information of right type at right time.

Lesser Burden on line officers:

The work of the line officers is considerably reduced with the help of staff officers.
Technical problems and specialized matters are handled by the Staff and the routine and
administrative matters are the concern of Line Officers.

Advancement of research:

As the work under this type of organization is carried out by experts, they constantly
undertake the research and experimentation for the improvement of the product. New and
economical means of production are developed with the help of research and experimentation.

Training for line officer: Staff services have proved to be an excellent training medium for Line
Officers.

Disadvantages of Line and Staff Organization:

Conflict between line and staff authorities:
There may be chances of conflict between line and staff authorities. Line Officers resent
the activities of staff members on the plea that they do not always give correct advice. On other
hand staff officials complain that their advice is not properly carried out.
Problems of line and staff authority:
There may be confusion on the relationship of line and staff authorities. Line Officers
consider themselves superior to Staff Officers. The Staff Officers object to it.
Lack of responsibility:
As the staff specialists are not accountable for the results, they may not perform their
duties well.
The system is quite expensive:
The appointment of experts involves a heavy expenditure. Small and medium size
organisations cannot afford such a system.
More reliance on staff:
Some of the line officers excessively rely on the staff. This may considerably reduce the
line control.

Matrix Organization:
A hybrid organizational structure, the matrix structure is a blend of the functional
organizational structure and the projectile organizational structure.
In the ​matrix structure​, employees may report to two or more bosses depending on the
situation or project. For example, under normal functional circumstances, an engineer at a large
engineering firm could work for one boss, but a new project may arise where that engineer’s
expertise is needed. For the duration of that project, the employee would also report to that
project’s manager, as well as his or her boss for all other daily tasks.
The matrix structure is challenging because it can be tough reporting to multiple bosses
and knowing what to communicate to them. That’s why it’s very important for the employees to
know their roles, responsibilities and work priorities.
Advantages of this structure is that employees can share their knowledge across the
different functional divisions, allowing for better communication and understanding of each
function’s role. And by working across functions, employees can broaden their skills and
knowledge, leading to professional growth within the company.
 On the other hand, reporting to multiple managers may add confusion and conflict
between managers over what should be reported. And if priorities are not clearly defined,
employees, too, may get confused about their roles.

Departmentalization:

Grouping related functions into manageable units to achieve the objectives of the
enterprise in the most efficient and effective manner is departmentalization. A variety of means
can be utilized for this purpose. The primary forms of departmentalization are by function,
process, product, market, customer, geographic area, and even matrix (also called project
organization). In many organizations, a combination of these forms is used.

Function:

​ erhaps the oldest and most common method of grouping related functions is by specialized
P
function, such as marketing, finance, and production (or operations). Sometimes this form of
 departmentalization may create problems if individuals with specialized functions become more
concerned with their own specialized area than with the overall business. An example of
departmentalization by function:

​Process:

Departmentalization can also take place by process. This type of departmentalization,

which often exists in manufacturing companies.

Product:

Whenever specialized knowledge of certain products or services is needed,

departmentalization by product may be best. This usually occurs in large diversified companies.
Market:

When a need exists to provide better service to different types of markets,

departmentalization by market may be the appropriate form. An example of a business serving
nonprofit markets, which uses the market form of departmentalization.

Geographic Area:

When organizations are spread throughout the world or have territories in many parts of a
country, departmentalization by geographic area may provide better service to customers and be
more cost effective.

Combination Approach:

Many organizations, particularly large, physically dispersed and diversified

organizations, utilize several different forms of departmentalization.
Delegation:

Delegation is an administrative process of getting things done by others by giving them

responsibility. All important decisions are taken at top level by Board of Directors. The
execution is entrusted to Chief Executive. The Chief Executive assigns the work to departmental
managers who in I urn delegate the authority to their subordinates. Every superior delegates the
authority to subordinates for getting a particular work done. The process goes to the level where
actual work is executed. The person who is made responsible for a particular work is given the
requisite authority for getting it done.

There is a limit up to which a person can supervise the subordinates. When the number of
subordinates increases beyond it then he will have to delegate his powers to others who perform
supervision for him. A manager is not judged by the work he actually performs on his own but
the work he gets done through others. He assigns duties and authority to his subordinates and
ensures the achievement of desired organizational goals.

Characteristics of Delegation:

Inclination is the assignment of authority to subordinates in a defined area and making

them responsible for the results.

Delegation has the following characteristics:

1. Delegation takes place when a manager grants some of his powers to subordinates.

2. Delegation occurs only when the person delegating the authority himself has that authority i.e.
a manager must possess what he wants to delegate.
3. Only a part of authority is delegated to subordinates.

4. A manager delegating authority can reduce, enhance or take it back. He exercises full control
over the activities of the subordinates even after delegation.

5. It is only the authority which is delegated and not the responsibility. A manager cannot
abdicate responsibility by delegating authority to subordinates.

Types of Delegation:

General or Specific Delegation:

When authority is given to perform general managerial functions like planning,

organizing, directing etc., the subordinate managers perform these functions and enjoy the
authority required to carry out these responsibilities. The chief executive exercises overall
control and guides the subordinates from time to time.

The specific delegation may relate to a particular function or an assigned task. The
authority delegated to the production manager for carrying out this function will be a specific
delegation. Various departmental managers get specific authority to undertake their departmental
duties.

Formal or Informal Delegation:

Formal delegation of authority is the part of organizational structure. Whenever a task is

assigned to a person then the required authority is also given to him. This type of delegation is
part of the normal functioning of the organization. Every person is automatically given authority
as per his duties. When production manager gets powers to increase production then it is a
formal delegation of authority. Informal delegation does not arise due to position but according
to circumstances. A person may undertake a particular task not because he has been assigned it
but it is necessary to do his normal work.

Lateral Delegation:

When a person is delegated an authority to accomplish a task, he may need the assistance
of a number of persons. It may take time to formally get assistance from these persons. He may
indirectly contact the persons to get their help for taking up the work by cutting short time of
formal delegation. When the authority is delegated informally it is called lateral delegation.

Reserved Authority and Delegated Authority:

A delegator may not like to delegate every authority to the subordinates. The authority
which he keeps with him is called reserved authority and the authority which is assigned to the
subordinates is delegated authority.
Pre-Requisites for Delegation:

Every superior tries to retain as much authority as possible. The load of work or
circumstances may compel delegation downwards. If the authority is not willingly delegated then
it will not bring desired results. It is important that appropriate authority should go downwards so
that work is undertaken smoothly and efficiently. The process of delegation will be complete
only if following prerequisites are fulfilled.

Willingness to Delegate:

The first prerequisite to delegation is the willingness of the superior to part with his
authority. Unless the superior is psychologically prepared to leave his authority, delegation will
not be effective. If a superior is forced to delegate authority downward without his sweet will, he
will try to devise methods to interfere with the subordinate’s working. He may over shadow the
subordinate to such an extent that every decision is implemented with the approval of the boss or
performance may pass through him with his close scrutiny. It will be better not to delegate
authority unless the superior is mentally prepared to do so.

Climate of Trust and Confidence:

There should be a climate of trust and confidence among superiors and subordinates. The
subordinates should be given enough opportunities or real job situations where they use their
talent and experience. In case they make some mistakes then superiors should guide and correct
them. The superiors should trust their subordinates and should not take them as their competitors.
The climate of trust and confidence will help the subordinates to learn and grow and this will
help the process of delegation.

Faith in Subordinates:

Sometimes the superiors do not delegate authority with the fear that subordinates will not
be able to handle the job independently. They are not confident of the qualities of subordinates
and do not want to take risks. The superior may be over conscious of his skill and competence
with the result that he is hesitant to delegate authority. The superiors should avoid this type of
thinking and attitude. They should have faith in their subordinates and should rather help them in
learning the job properly. After all the superiors also learnt many things from their superiors and
present subordinates are also to take up higher responsibilities. The climate of faith will help the
subordinates to learn the things faster and take up more responsibilities.

Fear of Supervisors:

There is often a fear among superiors that their subordinates may not over take them,
once they are given higher responsibility. This is a case of inferiority complex. The superiors
may give many logics for delegating authority but this fear is one of the important causes. The
superiors should avoid this type of thinking and have positive attitude towards subordinates.

The subordinates should be encouraged to take up more responsibilities and they will
have more respect for the superiors and their ability have faith in their subordinates and should
rather help them in learning the Job properly. After all the superiors also learnt many things from
their superiors and present subordinates are also to take up higher responsibilities. The climate of
faith will help the subordinates to learn the things faster and take up more responsibilities.

Empowerment:

Empowerment is a modern management tool to improve the quality of working life for
ordinary employees, in an empowered environment; employees feel satisfied and perform better.
With renewed enthusiasm, they take part in managerial decision making, designing fair payment
system, job enrichment schemes appreciation awards.

There is strong association between employee empowerment and employee satisfaction

measured in terms of employee turnover, service quality, productivity level and customer
satisfaction. Employee empowerment philosophy centers `on ​'enabling, energizing, engaging
and enthusing'​. Empowerment is viewed as a means to give employees chances to make decision
without consulting their superior.

When empowered, employees feel they are given trust and authority by the organization
to make decision. Since empowerment practices start with an employee's knowledge of the job
description thus the employees are clear on their job scope.

As part of empowerment, employees are trained to handle customer requests and

problems, to handle different situations by making right decisions without consulting their
higher-ups. Decision making is the main focus of employee empowerment where employees are
given a guideline during their training on what to follow to resolve a conflict, how to make a
right decision, etc.

Employee’s satisfaction is strongly affected by the working environment. Trust is the

first stage in empowerment this reduces the burden and gaps in management hierarchy.
Empowered employees are the energized lot. Is the responsibility of top management to design
systems and processes that bring uniformity in bringing? Consistency in the performance of
these energized and empowered employees. This definitely helps building a long-term
employment relationship.

Strategies for Empowerment:

Here are the strategies for empowerment that make the members of the organization to
work with guidance in line with organizational vision, mission, objectives and values. The
leaders need to train senior managers to create an environment of empowerment for lifelong
association.

Here are select strategies for leaders to practice how to empower:

1. Foster open communication: Bottom-up or open communication is much powerful when

compared to top-down communication. In open communication, employees can present their
thoughts, Feelings and observations known easily and regularly. Use the feedback effectively
and constructively. Never think of antagonizing employees for their criticism. Appreciate and
reward the new ideas. Focus on creativity and innovation so that the organization becomes a
buoyant one with high degree of new thinking and different perspectives.

2. Reward self-improvement: To overcome complacency and stagnation among the employees,

encourage and reward them for self-improvement, have budget and time in place for personal
development and training. Motivate employees to set a plan for growth and reward them as they
advance. This is one sure way of creating leadership opportunities.

3. Encourage safe failure: Let the employees experiment on a continuous basis. Even if they
fail, keep on encouraging them to move forward. They should not feel that failure will cost the in
future. This makes them more risk averse. Promote an environment where they can' try new
things while protecting the interests of the organization. Develop laboratory environment to test
new ideas and learn from the failures, if any. Unless the employees will gain understanding and
feel comfortable, they cannot focus on testing their new ideas on the field and bring innovation
in the organizational perspectives. Exhibit high degree of trust and support in the employees'
ability to accomplish a work assignment.

4. Provide sufficient authority and plenty of context: Delegate adequate authority so that the
employees can develop the feeling of "I can do my job" and then address every problem in their
work front. Further, give them ideas to experiment. Give them every opportunity to clearly
understand the core values, purpose and direction of the company so that they can easily make
consistent decisions and take appropriate action at any junction. Promote shared vision to
develop leadership across cadres.

5. Encourage to work beyond the given role: The vision of each job needs to be articulated.
The employees need to think beyond their job roles and description within their functional area
so that they bring dynamism into their own well defined roles. Also support their independence
in the job roles by providing necessary skills and resources. Encouraging cross-learning so that
they overcome the silo approach and develop an integrated perspective of the entire organization
by benefiting from each other's skills and knowledge.

6​ . Fix accountability for results: To understand the consequences of failure and need for
making an extra effort, every employee needs to be held accountable for results. Also keep
appreciating and reward their efforts through consistent and diligent measurement of
performance for their high morale.
 To sum up, employee empowerment is a means by which the employees are given the
authority to analyze situations autonomously and take proactive decisions. An empowered
employee develops a sense of a sense of ownership towards the company and takes up the
responsibility to take it to greater heights of excellence.

Centralization:

Centralization refers to the process in which activities involving planning and

decision-making within an ​organization are concentrated to a specific ​leader or location. In a
centralized organization, the decision-making powers are retained in the head office, and all
other offices receive commands from the main office. The executives and specialists who make
critical decisions are based in the head office.

It is a rule which means that the power of decision making of the organization remains
under control of the top level management. It is also said that everything which decreases the
role of subordinates can be termed as centralization because top level management retains
everything. There are three types of centralization that are departmental centralization,
centralization of performance and centralization of management.

Advantages of Centralization

1. A clear chain of command

A centralized organization benefits from a clear chain of command because every person
within the organization knows who to report to. Junior employees also know who to approach
whenever they have concerns about the organization. On the other hand, senior executives follow
a clear plan of delegating authority to employees who excel in specific functions. The executives
also gain the confidence that when they delegate responsibilities to mid-level managers and other
employees, there will be no overlap. A clear chain of command is beneficial when the
organization needs to execute decisions quickly and in a unified manner.

2. Focused vision

When an organization follows a centralized management structure, it can focus on the

fulfillment of its vision with ease. There are clear lines of communication and the senior
executive can communicate the organization’s vision to employees and guide them towards the
achievement of the vision. In the absence of a centralized management, there will be
inconsistencies in relaying the message to employees because there are no clear lines of
authority. Directing the organization’s vision from the top allows for a smooth implementation of
its visions and strategies. The organization’s ​stakeholders such as customers, suppliers, and
communities also receive a uniform message.
3. Reduced costs

A centralized organization adheres to standard procedures and methods that guide the
organization, which help reduce ​office and administrative costs​. The main decision-makers are
housed at the company’s head office or headquarters, and therefore, there is no need for
deploying more departments and equipment to other branches. Also, the organization does not
need to incur extra costs to hire specialists for its branches since critical decisions are made at the
head office and then communicated to the branches. The clear chain of command reduces
duplication of responsibilities that may result in additional costs to the organization.

4. Quick implementation of decisions

In a centralized organization, decisions are made by a small group of people and then
communicated to the lower-level managers. The involvement of only a few people makes the
decision-making process more efficient since they can discuss the details of each decision in one
meeting. The decisions are then communicated to the lower levels of the organization for
implementation. However, if lower-level managers are involved in the decision-making process,
the process will take longer and conflicts will arise. It will make the implementation process
lengthy and complicated because some managers may object to the decisions if their input is
ignored.

5. Improved quality of work

The standardized procedures and better supervision in a centralized organization result in

improved quality of work. There are supervisors in each department who ensure that the outputs
are uniform and of high quality. The use of advanced equipment reduces potential wastage from
manual work and also helps guarantee high-quality work. Standardization of work also reduces
the replication of tasks that may result in high ​labor costs​.

Disadvantages of Centralization

1. Bureaucratic leadership

Centralized management resembles a dictatorial form of leadership where employees are

only expected to deliver results according to what the top executives assigned them. Employees
are unable to contribute to the decision-making process of the organization, and they are merely
implementers of decisions made at the higher level. Even when the employees face difficulties in
implementing some of the decisions, the executives will not understand because they are only
decision-makers and not implementers of the decisions. The result of such actions is a decline in
performance because the employees lack the motivation to implement decisions taken by
top-level managers without the input of lower-level employees.

2. Remote control

The organization’s executives are under tremendous pressure to formulate decisions for
the organization, and they lack control over the implementation process. The failure of
executives to decentralize the decision-making process adds a lot of work to their desk. The
executives suffer from a lack of time to supervise the implementation of the decisions. It leads to
reluctance on the part of employees. Therefore, the executives may end up making too many
decisions that are either poorly implemented or ignored by the employees.

3. Delays in work

Centralization results in delays in work as records are sent to and from the head office.
Employees rely on the information communicated to them from the top, and there will be a loss
in man-hours if there are delays in relaying the records. It means that the employees will be less
productive if they need to wait long periods to get guidance on their next projects.

4. Lack of employee loyalty

Employees become loyal to an organization when they are allowed personal initiatives in
the work they do. They can introduce their creativity and suggest ways of performing certain
tasks. However, in centralization, there is no initiative in work because employees perform tasks
conceptualized by top executives. It limits their creativity and loyalty to the organization due to
the rigidity of the work.

Decentralization:

Transfer of decision making power and assignment of accountability and responsibility

for results. It is accompanied by delegation of commensurate authority to individuals or units at
all levels of an organization even those far removed from headquarters or other centers of power.

1. “Decentralization refers to tire systematic effort to delegate to the lowest levels all authority
except that which can only be exercised at central points.” —Louis A. Allen

2. “Decentralization means the division of a group of functions and activities into relatively
autonomous units with overall authority and responsibility for their operation delegate to timed
of cacti unit.’—Earl. P. Strong

3. “Decentralization is simply a matter of dividing up the managerial work and assigning specific
duties to the various executive skills.”—Newman, summer and Wairen

Thus, decentralization is concerned with the decentralization of decision-making

authority to the lower levels in managerial hierarchy.

Degree of Decentralization:

The degree of decentralization is determined by:

(a) Nature of the authority delegated,

(b) How far down in the organization it is delegated,

(c) How consistently it is delegated.

So, the degree of decentralization is determined by the authority given. For example,
manager A in a company is given the authority to buy certain material worth Rs. 1500 whereas
manager B is allowed to do similar type of work to the extent of Rs. 4500.

It is clear that the degree of decentralization is less in case of A. Similarly decisions about
the matters referred, measure the degree of decentralization depending upon the power to take
decisions vested in an officer without the need of getting consent of somebody else.

Advantages of Decentralization:

1. Reduces the burden on top executives:

Decentralization relieves the top executives of the burden of performing various

functions. Centralization of authority puts the whole responsibility on the shoulders of an
executive and his immediate group. This reduces the time at the disposal of top executives who
should concentrate on other important managerial functions. So, the only way to lessen their
burden is to decentralize the decision-making power to the subordinates.

2. Facilitates diversification:

Under decentralization, the diversification of products, activities and markets etc., is

facilitated. A centralized enterprise with the concentration of authority at the top will find it
difficult and complex to diversify its activities and start the additional lines of manufacture or
distribution.

3. To provide product and market emphasis:

A product loses its market when new products appear in the market on account of
innovations or changes in the customers demand. In such cases authority is decentralized to the
regional units to render instant service taking into account the price, quality, delivery, novelty,
etc.

4. Executive Development:

When the authority is decentralized, executives in the organization will get the
opportunity to develop their talents by taking initiative which will also make them ready for
managerial positions. The growth of the company greatly depends on the talented executives.

5. It promotes motivation:

To quote Louis A. Allen, “Decentralization stimulates the formation of small cohesive

groups. Since local managers are given a large degree of authority and local autonomy, they tend
to weld their people into closely knit integrated groups.” This improves the morale of employees
as they get involved in decision-making process.
6. Better control and supervision:

Decentralization ensures better control and supervision as the subordinates at the lowest
levels will have the authority to make independent decisions. As a result they have thorough
knowledge of every assignment under their control and are in a position to make amendments
and take corrective action.

7. Quick Decision-Making:

Decentralization brings decision making process closer to the scene of action. This leads
to quicker decision-making of lower level since decisions do not have to be referred up through
the hierarchy.

Disadvantages of Decentralization:

Decentralization can be extremely beneficial. But it can be dangerous unless it is

carefully constructed and constantly monitored for the good of the company as a whole.

Some disadvantages of decentralization are:

1. Uniform policies not followed:

Under decentralization, it is not possible* to follow uniform policies and standardized

procedures. Each manager will work and frame policies according to his talent.

2. Problem of Co-Ordination:

Decentralization of authority creates problems of co-ordination as authority lies dispersed

widely throughout the organization.

3. More Financial Burden:

Decentralization requires the employment of trained personnel to accept authority, it

involves more financial burden and a small enterprise cannot afford to appoint experts in various
fields.

4. Require Qualified Personnel:

Decentralization becomes useless when there are no qualified and competent personnel.

5. Conflict:

Decentralization puts more pressure on divisional heads to realize profits at any cost.
Often in meeting their new profit plans, bring conflicts among managers.
Recentralization:

It is a process of taking back the authority from the divisions or departments where the
purpose of decentralization is not achieved. Since business conditions are volatile and uncertain,
the process of decentralization may not yield the expected results. In cases where there are many
complaints from the customers or vendors, the head office may roll back the authority delegated
to the branch offices. Recentralization is quick response from the corporate office to contain the
damage and deputes one of its senior officials to handle the situation.

This way recentralization is viewed negatively both at the divisional office and corporate
office. Where the decentralization has failed, the head office institutes a detailed enquiry, call for
all the reasons of failure, analyze how it can be corrected and identify who has to be trained
further to improve the service quality. Once the corporate office feels that situation is under
control and the divisional office is fully geared up to handle the situation competently, then the
authority can be delegated back.

Benefits of Recentralization:

I. It offers scope for the managers to correct the situation instantly.

2: It improves the confidence level of the stakeholders.

3. The head office can take stock of the situation and decide the next best course of action.

It is a quick response tool to uphold service quality by improving leadership competence, staff
motivation, improves service delivery by addressing the delays and increased bureaucracy.

ORGANIZATIONAL CULTURE AND ORGANIZATIONAL CHANGE:

​INTRODUCTION:

Organizational climate and organizational culture are the two buzz words that constitute
glue because of which the employees of different cadres stick to the organization. Employees
wish to continue with an organization because they perceive that they have an excellent
Organizational climate and organizational culture. There are many corporate groups in India and
abroad which are known for their distinct organizational culture. Organization may have
different varieties of Organizational culture and yet are quite successful.

Organizational culture may vary in broader terms but the essence of Organizational
culture remains the name in terms of ensuring sustainability and competitiveness. It is the duty of
the founder or the leader create Organization climate and ensure that there is conducive work
culture in the organization that the employees feel proud, happy and comfortable in contributing
their best to the organization.

Organizational CLIMATE:
 Organizational climate is an overall 'feeling' that is conveyed by the physical layout, the
way the members the organization interact, the way they conduct themselves with customers and
other stakeholders such as creditors, shareholders, employees, customers, and the government
agencies and regulators.

Organizational climate refers to a set of properties of the work environment, perceived

directly or indirectly by the employee and this is often considered to be a major force to motivate
the employees to perform better Organizational climate varies from time-to-time within the
organization or a given situation. The recurring patterns of behavior of employees of different
cadres across the Organizational hierarchy, the attitudes feelings of the employees constitute the
essence of Organizational climate.

ORGANISATIONAL CULTURE:

Culture is characterized by deeply held values, beliefs and assumptions, symbols, ideals
of heroes and rituals. Organizational culture is the sum totals of an organization’s past and
present assumptions, experience philosophy and the values that hold it together. Organization
culture refers to the what predominantly prevails in an organization, namely, the value system,
collaboration and co-operation, trust, transparency, integrity, teamwork, equity, recognition for
merit, equal opportunities to all, diversity and little bias for nationality or gender, etc. Most of the
multinationals are preferred destinations for the employees only for this reason.

Organizational climate and organizational culture reflect the overall context, environment
or a given situation when compared to organizational climate, organizational culture is relatively
deep and stable. Organizational culture is defined as a pattern of basic assumptions-invented,
discovered or developed given group as it learns to cope up with its problems of external
adaptation and internal integration.

These are considered valuable and therefore the new members who join the organization later
are taught correct way to perceive and think in relation to these problems. The dress norms,
stories people tell about the current or past happenings, formal rules and regulations, procedures,
formal codes of behavior, rituals tasks, pay systems, the technical words, and jokes only
understood by inside employees, etc., all these manifest organizational culture. The way these
are interpreted or perceptions are analyzed, beliefs are expressed valued varies and is totally
governed by organizational culture. This way, organizational culture is a complex phenomenon
as thus, organizational culture is either invented or acquired knowledge which the top
management (including founders) uses to interpret and generate behavior. It deals with basic
values, norms and beliefs.

Organizational culture is one of the factors that determine the internal climate and
external response. When individuals are recruited, they join the organizations with the values and
beliefs they have oriented with earlier. In many cases, these are considered inadequate to take
organizations forward
 Hence, every organization makes it mandatory to train the new recruits on what it wants
them to adhere to organizational culture refers to the specific characteristics of the organization
and what distinguishes it from other organizations.

It is what people outside and inside perceive about the functioning of the organization it
refers to the meanings people attach to interrelated bundles of experiences they have at work. It
speaks about the values and behavior that contribute to the unique social and psychological
environment of an organization. It is expressed in its self-image, inner functioning, interactions
with the outside world and future expectations.

How to Create and Maintain an Organizational Culture:

Organizational culture cannot be created overnight. It evolves over a period of time. The
employees keenly observe what their leader (or founder of the organization) says and does. What
they can practice they observe, what they cannot they may not. It is the responsibility of the
leader to present his vision, mission and goals with clearly defined strategies, policies,
procedures and schedules so that the members of the organization adhere to these and condition
their values, behavior and beliefs to this framework. At times, the founders setup the
organization, but may not sow the seeds of a strong culture. In such a case, dominant personality
may be assigned the task of creating a strong culture across different levels in the organization.
Sam Walton (Wal-Mart), Steve Jobs (Apple), JRD Tata (Tata Group), N. R. Narayana Murthy
(Infosys), Deepak Parekh (HDFC Group) are some of the corporate leaders who created
everlasting organizations with strong organizational cultures.

The process of developing organizational culture can be structured into the following steps:

1. The founder comes up with an idea of a new enterprise.

2. The founder creates a core group either with some of his/her family members or hired
professionals who share a common vision with the founder? In other words, the core group
believes that the idea of the founder can be operationalized and it is worth pursuing while taking
care of some risks inherently associated with the new enterprise. They consider that it is worth
spending their time and resources this new responsibility

3. The founding core group joins hands in creating a new organization. Their immediate task is
to craft strategies for raising funds, obtain patents, initiate registration as per legal procedures,
set-up corporate office, design organization structure, and present their vision and mission. The
functional strategies take shape based on the requirements and detailed discussions

4. Right persons are recruited for right positions across the organization and these join the
organization slowly organizational culture evolves.
Maintaining Organizational Culture:

Maintaining organizational culture is an uphill task. Once organizational culture is

initiated and begins to develop, there are several ways to get the acceptance of core values to
maintain the culture.

Entry-level personnel need to be carefully identified and trained to adhere to the current
organizational culture using standardized procedures. Screen out such candidates who do not fit
in the organizational culture.

Organizations collapse if there is no fit between newcomer's and supervisor's perceptions

of organization culture. When the newcomers are placed, they need to be carefully oriented to
the organizational norms and values. They need to be extensively and carefully reinforced to
field experience. As they move upwards their career path. Their performance is evaluated and
additional responsibilities are assigned based on the progress. The achievers are separated based
on a meticulously designed metrics and are rewarded in terms of promotions higher
responsibility, foreign assignments, etc.

The performance of the executives is evaluated based on their orientation to

organizational values and functional achievements such as building sales volumes, enhancing
profit margins or making changes that increase effectiveness, sourcing economies, cost
reduction, new patents, etc. These are some of the metrics used to separate the performers from
non-performers.

The functional managers and the top management share with their teams and groups the
stories and folklore that validate organizational culture and the way of doing things. The folklore
helps the members of the organization to understand why things are done in a particular way.
One of the most familiar forms of folklore is story narration that ends with the moral that the
organization wishes to reinforce. For instance, tell a story to the employees how the malpractices
can lead to collapse of the whole organization and the moral of the story is never to indulge into
malpractices.

Recognize and promote those with energy, aggressiveness, team play and who exhibit
extraordinary consistency in displaying tough mindedness, motivational skills, energy and ability
to get things done through others. Identify those who adhere to and promote organizational
values and practice what they preach. These are to be projected as role models to promote the
organizational culture to new people in the organization. Weekly recognitions, one-on-one social
recognition can build and sustain organizational culture.

Changing Organizational Culture:

Organizational culture need not be the same all through the life of an organization. In
fact, organizational culture is a function of expectations of customers, employees, creditors,
competitors in particular and society at large. If technology changes, customers expect faster
service and organizations do not respond to these changes, they may collapse like Kodak. Kodak
missed opportunities in digital photography, a technology that it invented. Kodak failed to see
digital photography as a disruptive technology. This strategic failure was the direct cause of
Kodak's decades-long decline as digital photography destroyed its film-based business model.
How fast one can change with time and technology is also an essence of the organizational
culture. If the organizations do not adapt to new conditions they may not survive.

Particularly when external and internal conditions change in an organization,

organization’s culture also changes. The best example of organizational culture is that it is
literally built around the change. When change is anticipated because of new demands of staff,
customers, unions, regulators and other stakeholders, it is imperative that organizational culture
must also be reoriented to these new demands.

Sick units once revived cannot continue with the same organizational culture. Particularly
when products change, the technology changes, employees need to reorient themselves to new
technologies, understand how the products need to be changed, how to satisfy the customer
demands through anticipating change, continuous learning, enriched skills, staff relationships
roles and contemporary organizational structures such virtual teams, network structures, etc., that
work together to reinforce traditional cultural patterns. The traditional cultural patterns do not
change but how the products are delivered in the new business environment change.

Organizational Change:

Organizational change refers to any alteration that occurs in total work environment.
Organizational change is an important characteristic of most organizations. An organization must
develop adaptability to change otherwise it will either be left behind or be swept away by the
forces of change. Organizational change is inevitable in a progressive culture. Modern
organizations are highly dynamic, versatile and adaptive to the multiplicity of changes.

Change is a constant force in every organization. Sometimes this is because a company is

growing, sometimes a company needs to down-size and other times companies identify a need to
restructure in order to better achieve their goals. While organizations generally understand the
need to embrace change in order to achieve objectives and remain competitive, many struggle to
manage all aspects of this change to ensure that initiatives are smoothly implemented, and that
both individuals and the organization are appropriately supported throughout. Learning how to
manage the organizational change process is a key to achieving the objectives of the change
initiative, regardless of what the change entails.

The simple fact is, change is pivotal in any organization. Managed poorly, the process
creates major problems for the culture, people and ultimately the entire operation. Managed well,
it provides the platform for growth and success.

A systematic approach to OCM is beneficial when change requires people throughout an

organization to learn new behaviors and skills. By formally setting expectations, employing tools
to improve communication and proactively seeking ways to reduce misinformation, stakeholders
are more likely to buy into a change initially and remain committed to the change throughout any
discomfort associated with it.

The term ‘organizational change’ implies the creation of imbalances in the existing
pattern of situation. When an organization operates and functions for a long time, an adjustment
between its technical, human and structural set-up is established. It tends to approximate
equilibrium in relation to its environment. In other words, organization members evolve a
tentative set of relations with the environment. They have an adjustment with their job, working
conditions, friends and colleagues etc. Change requires individuals to make new adjustments.
Hence the fear of adjustment gives rise to the problem of change and resistance to change.
Individual comes in to danger. On the other hand, groups resist change where their existence is in
danger or a total change in overall work environment is contemplated. Management of change
may be defined as a conscious and concerted initiative by those who are in-charge of the destiny
of the business undertaking or firm to keep a constant and intelligent watch over the behavior of
uncontrollable forces, to assess their impact and influence of the controllable forces, and to
evolve appropriate strategies and action programmes to maintain a dynamic equilibrium between
the controllable and uncontrollable forces. The controllable forces are those forces about which
sufficient information is available. Such forces can be managed easily. Uncontrollable forces are
those about which not much is known. These forces exert a powerful influence on the behavior
of controllable forces and limit the scope of managerial action.

Successful OCM strategies include:

• Agreement on a common vision for change -- no competing initiatives.

• Strong executive leadership to communicate the vision and sell the business case for
change.

• A strategy for educating employees about how their day-to-day work will change.

• A concrete plan for how to measure whether or not the change is a success -- and
follow-up plans for both successful and unsuccessful results.

• Rewards, both monetary and social, that encourage individuals and groups to take
ownership for their new roles and responsibilities.

Causes of Organizational Change:

(A) External Pressures:

I. Change in Technology and Equipment​:

Advancements in technology are the major cause (i.e., external pressure) of change. Each
technological alternative results in new forms of organization to meet and match the needs.

ii. Market Situation​: Changes in market situation include rapidly changing goals, needs and
desires of consumers, suppliers, unions etc. If an organization has to survive, it has to cope with
changes in market situations.

iii. Social and Political Changes​:

Organizational units literally have no control over social and political changes in the country.
Relations between government and business or drive for social equality are some factors which
may compel for organizational change.

(B) Internal Pressures (Pressures for Change from Within the Organization):

I. Changes in the Managerial Personnel:

One of the most frequent reasons for major changes in the organization is the change of
executives at the top. No two managers have the same style, skills or managerial philosophies.

ii. Deficiencies in the Existing Organization​:

Many deficiencies are noticed in the organizations with the passage of time. A change is necessary to
remove such deficiencies as lack of uniformity in the policies, obstacles in communication, any ambiguity

etc.

iii. Other Factors:

Certain other factors such as listed below also demand a change in the organization.

·​ Employee’s desire to share in decision-making

​

·​ Employee’s desire for higher wage rate

​

·​ Improvement in working conditions, etc.

​
TYPES OF CHANGE:

There are various areas within the organizational domain where changes can be brought about for
operational enhancement of the organization as well as desirable behavior of members. The various types
of changes that can have considerable impact on the organizational culture are:

a) Strategic Change: This is a change in the very mission of the organization. A single mission may have
to be changed to multiple missions. For example, when British Airways acquired a major part of U.S. Air,
the culture of the entire organization had to be modified to accommodate various aspects of American
organizational culture into the British organizational culture.

b) Structural Change: Decentralized operations and participative management style have seen more
recent trends in the organizational structure. Since these structural changes shift the authority and
responsibility to generally lower level management, it has a major impact on an organization’s social
climate and members have to be prepared to develop a team spirit as well as acquire skills to make
on-the-spot decisions at points of operations.

c) Process-oriented ​Change​: These changes relate to technological developments, information

processing, automation and use of robotics in the manufacturing operations. This means replacing or
retraining personnel, heavy capital equipment investment and operational changes. This would affect the
organizational culture and hence changes in the behavior patterns of members.

​d) People-oriented: Change Even though, any organizational change affects people in some

form, it is important that the behavior and attitudes of the members be predictable and in
accordance with the expectations of the organization and be consistent with the mission and
policies of the enterprise. These changes are directed towards performance improvement, group
decision, dedication and loyalty to the organization as well as developing a sense of
self-actualization among the members. These can be developed by closer interaction with
employees and by special behavioral training and modification sessions.
HUMAN RESOURCE MANAGEMENT-HRM

INTRODUCTION:

Behind the production of every product or service there is a human mind, effort and man
hours (working hours). No product or service can be produced without the help of human beings.
Human beings are the fundamental resource for making or constructing anything. Today many
experts claim that machines and technology are replacing human resources and minimizing their
role or effort. However, indeed, machines and technology are built by the humans; they need to
be operated or at least monitored by humans. Maybe because of this reason, companies have
continuously been searching for talented, skilled and qualified professionals to further develop
latest machines and technology, which again have to be controlled or Monitored by humans to
bring out products.

It is undisputed fact that humans are being replaced by artificial intelligence which means
robots. But all jobs cannot be handed over to Robots, to say in other words robots have its own
limitations and all roles cannot be handled by robots. Though British theoretical physicist
Stephen Hawking, Cambridge professor expressed about destruction of middle-class jobs due to
raise of artificial intelligence, he still felt that natural intelligence or need for application of
human mind is inevitable in certain roles.

This unit deals with the basic concepts underlying human resource management (HRM).
HRM is an extension of personnel management. Among all the factors of management, it is the
human factor that is very dynamic, and this is to be carefully identified, developed, nurtured, and
honed to achieve organizational goals. Gone are the days when organizations could be
considered as successful with mere product-orientation. Particularly during the 1990s, the
economic changes compelled the industries to get more competitive and the industries realized
that focusing on the human resource factor is a better strategy to gain a clear edge over others,
more so in times of survival and expansion. This chapter deals with the basic concept of
personnel management and the related aspects including recent developments.
Importance of managing human resource

Managing human resources is one of the key functions of business organizations. Human
resource management has, in recent years, become a pervasive and influential approach to the
management of employees in market-oriented economies. The very fact that some of the leading
corporate such as the Nagarjuna Group have started referring to the human resources department
as the human potential department' stands testimony to this reality.

Why name 'Human Resource Management'?

Human: r​ efers to the skilled workforce in the organization.

Resource: ​refers to limited availability or scarceness.

Management: ​refers how to optimize and make best use of such limited and a scarce resource so
as to meet the ordination goals and objectives.

Definitions:

Many great scholars had defined human resource management in different ways and with
different words, but the core meaning of the human resource management deals with how to
manage people or employees in the organization.

Edwin Flippo ​defines- HRM as “planning, organizing, directing, controlling of

procurement, development, compensation, integration, maintenance and separation of human
resources to the end that individual, organizational and social objectives are achieved.”

The National Institute of Personal Management ​(NIPM) of India has defined human
resources personal management as “that part of management which is concerned with people at
work and with their relationship within an enterprise. Its aim is to bring together and develop
into an effective organization of the men and women who make up enterprise and having regard
for the well – being of the individuals and of working groups, to enable them to make their best
contribution to its success”.
HUMAN RESOURCE MANAGEMENT (HRM)

Human resource management is the process of managing the human resources of an

organization in tune with the vision of the top management. In other words, it is through the
human resources that the management attempts to convert its vision and mission into action.
HRM is a strategically-driven process. It represents an intensely-unified and holistic approach.
HRM directly addresses the business-related issues. HRM functions in the Indian industries
include the following:

● Empowering employees and institutionalizing employee involvement.

● Focusing on productivity and team-building.
● Developing flatter organizational structures.
● Developing a more people-sensitive management style and organizational culture.
● Developing human resource information systems.
● Strengthening of organizational communications.
● Evaluating self-appraisals and providing feedback.

Human resource management encompasses several concepts and functions of

management with respect to human resources both at the micro and macro levels in an
organization. The related concepts are personnel management, industrial relations, and the most
widely-referred function of human resource development.

The Scope of HRM

The scope of HRM is very wide. It consists of all the functions that come under the
banner of human resource management. The different functions are as follows −

Human Resources Planning:

It is the process by which a company identifies how many positions are vacant and
whether the company has excess staff or shortage of staff and subsequently deals with this need
of excess or shortage.

Job Analysis Design:

 Job analysis can be defined as the process of noticing and regulating in detail the
particular job duties and requirements and the relative importance of these duties for a given job.

Job analysis design is a process of designing jobs where evaluations are made regarding
the data collected on a job. It gives an elaborate description about each and every job in the
company.

Recruitment and Selection:

With respect to the information collected from job analysis, the company prepares
advertisements and publishes them on various social media platforms. This is known as
recruitment.

A number of applications are received after the advertisement is presented, interviews are
conducted and the deserving employees are selected. Thus, recruitment and selection is yet
another essential area of HRM.

Orientation and Induction:

After the employees are selected, an induction or orientation program is organized. The
employees are updated about the background of the company as well as culture, values, and
work ethics of the company and they are also introduced to the other employees.

Training and Development:

Employees have to undergo a training program, which assists them to put up a better
performance on the job. Sometimes, training is also conducted for currently working experienced
staff so as to help them improve their skills further. This is known as refresher training.

Performance Appraisal:

After the employees have put in around 1 year of service, performance appraisal is
organized in order to check their performance. On the basis of these appraisals, future
promotions, incentives, and increments in salary are decided.
Compensation Planning and Remuneration:

Under compensation planning and remuneration, various rules and regulations regarding
compensation and related aspects are taken care of. It is the duty of the HR department to look
into remuneration and compensation planning.

Features of HRM:

Human Resource Management as a discipline includes the following features −

● It is pervasive in nature, as it is present in all industries.

● It focuses on outcomes and not on rules.
● It helps employees develop and groom their potential completely.
● It motivates employees to give their best to the company.
● It is all about people at work, as individuals as well as in groups.
● It tries to put people on assigned tasks in order to have good production or results.
● It helps a company achieve its goals in the future by facilitating work for competent and
well-motivated employees.
● It approaches to build and maintain cordial relationship among people working at various
levels in the company.

Basically, we can say that HRM is a multi-disciplinary activity, utilizing knowledge and
inputs drawn from psychology, economics, etc.

Human Resource Management is a process of bringing people and organizations together

so that the goals and objectives of each are achieved. In this chapter, we will discuss how
important it is to ensure that the HR functions are properly aligned with the overall business
strategy of an organization.

IMPORTANCE OF HUMAN RESOURCE MANAGEMENT

In the past, the personnel departments were perceived as the 'health and happiness' crews.
Their primary job activities involved planning company picnics, scheduling vacations, enrolling
workers for healthy coverage and planning retirement parties. That has certainly changed during
the past three decades.
 Labour laws have placed many new requirements concerning hiring and employment
practices on the employees. Jobs, in their nature, have also changed. They have become more
technical and require employees with focused skills.

Earlier, an employee performed a job in a specific department, working on particular

tasks with others who did similar jobs. Today's employees work on project teams with various
people across the organization(s).

HRM function is viewed as very important because of its wide and varied contribution to
the growth of the organization in the long-run.

Many entrepreneurs do not realize this, In their view organizational interests are main and
HRM function is secondary. Very few entrepreneurs are aware of the fact that this 'secondary
function facilitates the performance of the 'main' function, in an effective manner. Without
HRM, the organization is like a blind person. In other words, the HRM function sets the
direction for the organization to perform better.

The contribution of HRM can be observed from the following list which is only
inclusive, but not exhaustive of benefits.

(a) It ensures that the right person is selected for the right job.

(b) It develops the human resources through continuous training and development. A learning
atmosphere

Is promoted in the entire organization. This changes the frame of mind of the employees from
‘dictating to 'receiving'

(c) It guides the management by participating in overall strategy and policy making, and in
determining

The right kind of human resource management practices that is suitable in a given context,

(d) It increases the employee productivity.

(e) It enhances the employee commitment to the organization.

(f) It ensures the right kind of work culture in the organization. This is the first step to ensure
discipline the organization.

(g) It promotes an understanding between the management and workers. Thus, harmonious
industrial

Relations are developed. This is a prerequisite for higher productivity.

BUSINESS STRATEGY:

INTRODUCTION:

Though human resource (HR) functions form the basis for every organization to perform,
the only way to excel is to align its HR policies with business strategies. This chapter focuses on
HR strategy as business strategy; how to align HR strategy and business strategy; some of the
HR strategies designed exclusively to complement business strategy, talent management as a
process and its models; the concept of strategic human resource management (SHRM) and what
is happening in that space. SHRM elevated HRM much above all the other functional areas and
as such CEOS choose from their options in consultation with their Chief HR.

HUMAN RESOURCE MANAGEMENT (HRM) AND BUSINESS STRATEGY:

Human resource management, as a management function, is designed to maximize

employee performance in the process of achieving strategic objectives of an organization. People
within an organization, function within the framework of policies and systems. It is the
responsibility of HR department to oversee the design recruitment and selection, training and
development, performance appraisal and reward systems, industrial relations and change
management systems. HR department is also concerned with legal compliances involved
management of human resources. Since the goal of HRM function is to maximize employee
productivity performance, it is essential it should be integrated with the business strategy so as to
create a value proposition and thus directly contribute to the profitability of the organization.

HR Strategy as Business Strategy:

It is increasingly recognized that longevity and success of the business is directly

determined by the quality of human capital available and how it is improved from time-to-time.
The current trend is that the business leaders closely interact with the HR leaders to improvise
complementary goals for human resources and the complete business. Whether it is productivity
or increasing profits or reducing the costs or increasing market share, the best way is to cultivate
a relationship between HR and C-level executives such as Chief Executive Officer (CEO), Chief
Marketing Officer (CMO), Chief Finance Officer (CFO), etc., by demonstrating how each of
these gets affected as a result of HR strategy. In other words, there is clear link between HR
strategies and business performance and hence HR strategy is being closely integrated with the
business strategy.

The HR strategy should be developed in such a way that it supports and complements the
business strategy in terms of markets, customers and other stakeholders so that the employees
develop unique skills which are hard to copy and are sustainable. This makes them highly
differentiated and stay focused.

The HR strategy should be designed in such a way that it is overarching and extends to
all the aspects covered in business strategy and focuses on talent management, personality
development and reward management.

A good HR strategy should be designed based on detailed analysis of markets and

competition and thus should address the business needs. It can be turned into actionable
programmes. It must be coherent and consider the needs of the organization as a whole. It should
cover about how people should be managed and developed; what steps should be taken to ensure
that the organization can attract and retain the talented people as required; and ensure that
employees continue to be committed, motivated, engaged.

Commitment and involvement should be promoted, sense of ownership should be

developed by treating the employees as partners, making them regulate themselves on their own
rather than controlled mechanism and ensuring that there is trust and values that govern
organizational relations.

Every department has to work hard to be successful and design their strategies in line
with the business strategy and HR department is not an exception. HR strategies need to be
crafted in such a way that they complement the process of executing business strategy. The scope
of the markets in terms of local, national and international jurisdiction should be identified so
that the companies can improve their overall performance by designing HR strategy

Some of the HR strategies designed exclusively to complement business strategy are as

given as follows:

1. Flat organization structures

2. Functional flexibility

3. Virtual organizations

4. Team structures

5. Open communication

6 Dissemination of information

7. Structuring work

8. Critical thinking and problem solving

9. Large focus on creativity and innovation

10. Challenging jobs

11. Intrinsic job satisfaction

12. Job rotation

13. Merit pay and profit sharing

14. Involvement in quality management processes

15. Employee empowerment

16. Human capital management

17. High-performance management

18. Corporate social responsibility

19. Organization development

20. Knowledge management

21. Talent management

22. Employee relations.

TALENT MANAGEMENT:

Talent management refers to the skills of attracting highly skilled workers, integrating
new workers, and improving and retaining current workers to meet the current and future
business objectives.

Companies involved in a talent management strategy shift the duties of employees from
the human resources department to all managers throughout the company. It is also called
Human Capital Management (HCM).

Talent management is basically concerned with coordinating, collaborating and managing

the different talents people have to offer within a company. This is done by studying and
examining each individual on the basis of their skills, talent, personality and character in relation
to filling a particular vacancy within the company.

Every individual has different skills to offer and the difficult part for a company is
choosing those individuals who fit in with the existing company culture. Effective HR
procedures will be able to identify these individuals and appoint them appropriately.

Functions of Talent Management:

After gathering all the skilled people required for the job, we need to handle them. This is
not possible without specifying the operations that need to be undertaken in talent management.
Various functions that organizations should perform with the help of HRM and other
departments are given below

● Talent requirement analysis

● Allocating the talent resources or sources
● Influencing talents towards the organization
● Recruiting or nominating the in house or outsourced talents
 ● Managing combative salaries or professional fees
● Training and progress of talent pool
● Performance examination of talent
● Career and prosperity planning
● Withholding management

We can conclude that talent management or human capital management is a set of

business practices that manages the planning, acquisition, development, retention and growth of
talent in order to achieve business goals with optimized performance.

Advantages of Effective Talent Management:

If talent management is done properly, it would lead the organization prosper

wonderfully, as all the employees in the firm would be masters in their own department and will
give their best to achieve the goals and objectives of the company. That way, the competency
gap between necessary competencies by the industry and available competencies minimizes
significantly.

The main advantages of effective talent management are −

● Continuously grooms the organization's effectiveness and efficiency.

● Helps in achieving the targeted business goals with superior performance.
● Improves organization's overall culture and work climate.
● Provides people with high level of satisfaction with their jobs.
● Improves withholding of talent and reduces people turnover.
● Manages better overall growth of people associated with the organization.

It is essential that the right candidates having the required skillset are recruited in order to
make use of their skills and utilize them for the development of both the individual as well as the
company. This is possible only with the help of talent management.

"Talent Management" has become one of the most important buzzwords in Corporate HR
and Training today. In this article we will explain the history, principles, and processes of talent
management and help readers understand our research agenda in this important area.
From Personnel to Strategic HR to Talent Management:

Stage 1: Personnel Department:

In the 1970s and 1980s the business function which was responsible for people was
called "The Personnel Department." The role of this group was to hire people, pay them, and
make sure they had the necessary benefits. The systems which grew up to support this function
were batch payroll systems. In this role, the personnel department was a well understood
business function.

Stage 2: Strategic HR:

In the 1980s and 1990s organizations realized that the HR function was in fact more
important - and the concepts of "Strategic HR" emerged. During this period organizations
realized that the VP of HR had a much larger role: recruiting the right people, training them,
helping the business design job roles and organization structures (organization design), develop
"total compensation" packages which include benefits, stock options and bonuses, and serving as
a central point of communication for employee health and happiness.

The "Head of Personnel" became the "VP of HR" and had a much more important role in
business strategy and execution. The systems which were built up to support this new role
include recruiting and applicant tracking (ATS), portals, total compensation systems, and
learning management systems. In this role, the HR department has now became more than a
business function: it is a business partner, reaching out to support lines of business.

Stage 3: Talent Management:

We are now entering a new era: the emergence of "Talent Management." While strategic
HR continues to be a major focus, HR and L&D organizations are now focused on a new set of
strategic issues:

● How can we make our recruiting process more efficient and effective by using
competencybased" recruiting instead of sorting through resumes, one at a time?
● How can we better develop managers and leaders to reinforce culture, instill values, and
create a sustainable "leadership pipeline?”
 ● How do we quickly identify competency gaps so we can deliver training, e-learning, or
development programs to fill these gaps? How can we use these gaps to hire just the right
people?
● How do we manage people in a consistent and measurable way so that everyone is
aligned, held accountable, and paid fairly?
● How do we identify high performers and successors to key positions throughout the
organization to make sure we have a highly flexible, responsive organization?
● How do we provide learning that is relevant, flexible, convenient, and timely?

These new, more challenging problems require new processes and systems. They require
integration between the different HR silos -- and direct integration into line of business
management processes. Today organizations are starting to buy, build, and stitch together
performance management systems, succession planning systems, and competency management
systems. TheHR function is becoming integrated with the business in a real-time fashion.

Defining the Talent Management Process:

Organizations are made up of people: people creating value through proven business
processes, innovation, customer service, sales, and many other important activities. As an
organization strives to meet its business goals, it must make sure that it has a continuous and
integrated process for recruiting, training, managing, supporting, and compensating these people.
The following chart shows the complete process:

​Workforce Planning: ​Integrated with the business plan, this process establishes workforce
plans, hiring plans, compensation budgets, and hiring targets for the year.

Recruiting: ​Through an integrated process of recruiting, assessment, evaluation, and hiring the
business brings people into the organization.

Onboarding: ​The organization must train and enable employees to become productive and
integrated into the company more quickly.

Performance Management:​By using the business plan, the organization establishes processes
to measure and manage employees.
Training and Performance Support: ​of course this is a critically important function. Here we
provide learning and development programs to all levels of the organization.

Succession Planning: as the organization evolves and changes, there is a continuous need to
move people into new positions. Succession planning, a very important function, enables
managers and individuals to identify the right candidates for a position. This function also must
be aligned with the business plan to understand and meet requirements for key positions 3-5
years out. While this is often a process reserved for managers and executives, it is more
commonly applied across the organization.

Compensation and Benefits​: clearly this is an integral part of people management. Here
organizations try to tie the compensation plan directly to performance management so that
compensation, incentives, and benefits align with business goals and business execution.

Critical Skills Gap Analysis: ​this is a process we identify as an important, often overlooked
function in many industries and organizations. While often done on a project basis, it can be
"business-critical." For example, today industries like the Federal Government, Utilities,
Telecommunications, and Energy are facing large populations which are retiring. How do you
identify the roles, individuals, and competencies which are leaving? What should you do to fill
these gaps? We call this "critical talent management" and many organizations are going through
this now.

STRATEGIC HUMAN RESOURCE PLANNING (SHRP)

Human Resource Planning (HRP):

E.W Vetter viewed human resources planning as “a process by which an organization

should move from its current manpower position to its desired manpower position. Through
planning management strives to have the right number and right kind of people at the right places
at the right time, doing things which result in both the organization and the individual receiving
maximum long-run benefit”.

According to Leon C Megginson human resources planning is an integrated approach to

performing the planning aspects of the personnel function in order to have a sufficient supply of
adequately developed and motivated people to perform the duties and tasks required to meet
organizational objectives and satisfy the individual needs and goals of organizational members.

Strategic HRM is defined as the process of aligning and linking all HR systems,
processes, procedures and initiatives with the strategic objectives of the organization. It is an
approach to achieve competitive advantage through strategic deployment of a highly committed
and capable HR using array of cultural, structural and HR techniques. The next section highlights
some of the features and outcomes of SHRM.

Components of Human Resources Planning:

Estimating Manpower Requirement

● Workload analysis
● Workforce analysis
● Absenteeism
● Labor turnover
● Recruitment & Selection
● Induction & development
● Personnel Development
● Ensuring quality to products & services
● Overall assessment & performance & fine- tuning

Objectives of Human Resources Planning:

The important objectives of manpower planning in an organization are

● To recruit and retain the human resources of required quantity and quality.
● To foresee the employee turnover and make the arrangements for minimizing turnover
and filling up of consequent vacancies.
● To meet the needs of the program of expansion, diversification etc.
● To foresee the impact of technology on work, existing employees and future human
resources requirements.
● To improve the standards, skills, knowledge, ability, discipline etc.
 ● To assess the surplus or shortage of human resources and take measures accordingly.
● To maintain congenial industrial relations by maintaining optimum level and structure of
human resources.
● To minimize imbalances caused due to non-availability of human resources of the right
kind, right number at the right time and right place.
● To make the best use of its human resources.
● To estimate the cost of human resources.

Advantages of using SHRP:

Human resource planning can be defined as the process of identifying the number of
people required by an organization in terms of quantity and quality. All human resource
management activities start with human resource planning. So we can say that human resource
planning is the principle/primary activity of human resource management. The process of HRP
plays a very important role in the organization. The importance of HRP can be explained as
follows.

1. Anticipating future requirements: - ​Thru this process of HRP, the company is able to find
out how many people will be required in the future. Based on this requirement the company
could take further actions. This method also helps the company to identify the number of jobs
which will become vacant in the near future.

2. Recruitment and selection process: - ​The recruitment and selection process is a very costly
affair for a company. Many companies spend lakhs of rupees on this process. Therefore
recruitment and selection must be carried out only if it is extremely necessary. HRP process
helps to identify whether recruitment and selection are necessary or not.

3. Placement of personnel: - ​Since the HRP process is conducted for the entire organization, we
can identify the requirements for each and every department. Based on the requirement, we can
identify existing employees and place them on those jobs which are vacant.

4. Performance appraisal: - ​HRP make performance appraisal more meaningful. Since

feedback is provided in performance appraisal and employee is informed about his future
chances in the same company, the employee is motivated to work better. Information for all this
is collected from HRP process.

5. Promotion opportunity: - ​HRP identifies vacancies in the entire organization including all
the branches of all the company. Therefore when the company implements promotion policy it
can undertake its activities in a very smooth manner.

Limitations of human resource planning:

1. The future is uncertain: - ​The future in any country is uncertain i.e. there are political,
cultural, technological changes taking place every day. This affects the employment situation.
Accordingly the company may have to appoint or remove people. Therefore HRP can only be a
guiding factor. We cannot rely too much on it and do every action according to it.

2. Conservative attitude of top management: - ​Much top management adopts a conservative

attitude and is not ready to make changes.

3. Problem of surplus staff: - ​HRP gives a clear out solution for excess staff i.e. Termination,
layoff, VRS. However when certain employees are removed from company it mostly affects the
psyche of the existing employee, and they start feeling insecure, stressed out and do not believe
in the company. This is a limitation of HRP i.e. it does not provide alternative solution like
re-training so that employee need not be removed from the company.

​4. Time consuming activity: - ​HRP collects information from all departments, regarding
demand and supply of personnel. This information is collected in detail and each and every job is
considered. Therefore the activity takes up a lot of time.

​5. Expensive process: - ​The solution provided by process of HRP incurs expense. E.g. VRS,
overtime, etc. company has to spend a lot of money in carrying out the activity. Hence we can
say the process is expensive.
Factors affecting SHRP in the organization OR ​Reasons for increased importance for
SHRP:

1. Employment: ​HRP is affected by the employment situation in the country i.e. in countries
where there is greater unemployment; there may be more pressure on the company, from
government to appoint more people. Similarly some company may force shortage of skilled labor
and they may have to appoint people from other countries.

2. Technical changes in the society: ​Technology changes at a very fast speed and new people
having the required knowledge are required for the company. In some cases, companies may
retain existing employees and teach them the new technology and in some cases, the companies
have to remove existing people and appoint new.

3. Organizational changes: ​Changes take place within the organization from time to time i.e.
the company diversify into new products or close down business in some areas etc. in such cases
the HRP process i.e. appointing or removing people will change according to the situation.

4. Demographic changes: ​Demographic changes refer to things referring to age, population,

composition of workforce etc. A number of people retire every year. A new batch of graduates
with specialization

5. Shortage of skill due to labor turnover: ​Industries having high labor turnover rate, the HRP
will change constantly i.e. many new appointments will take place. This also affects the way
HRP is implemented.

6. Multicultural workforce: ​Workers from different countries travel to other countries in search
of job. When a company plans it‘s HRP it needs to take into account this factor also.

7. Pressure groups: ​Company has to keep in mind certain pleasure. Groups like human rights
activist, woman activist, media etc. as they are very capable for creating problems for the
company, when issues concerning these groups arise, appointment or retrenchment becomes
difficult.
The process of Human Resource Planning​:

1. Analyzing the Corporate Level Strategies​: Human Resource Planning should start with
analyzing corporate level strategies which include expansion, diversification, mergers,
acquisitions, reduction in operations, technology to be used, method of production etc. Therefore
Human Resource Planning should begin with analyzing the corporate plans of the organization
before setting out on fulfilling its tasks.

2. Demand forecasting​: Forecasting the overall human resource requirement in accordance with
the organizational plans is one of the key aspects of demand forecasting. Forecasting of quality
of human resources like skills, knowledge, values and capabilities needed in addition to quantity
of human resources is done through the following methods.

a) Executive or Managerial Judgment: Here the managers decide the number of

employees in the future. They adopt one of the three approaches mentioned below
b) Bottom-Up approach​: Here the concerned supervisors send their proposals to the top
officials who compare these with the organizational plans, make necessary adjustments
and finalize them.
c) Top-Down approach​: Here the management prepares the requirements and sends the
information downwards to the supervisory –level who finalizes the draft and approves it.
d) Participative Approach​: Here the supervisors and the management sit together and
projections are made after joint consultations.
e) Statistical Techniques​: These methods use statistical methods and mathematical
techniques to forecast and predict the supply and demand of Human Resources in the
future.
f) Ratio-Trend analysis​: In this method depending on the past data regarding number of
employees in each department, like production department, sales department, marketing
department and workload level, etc ratios for manpower are estimated. Past values are
plotted and extrapolated to get fairly accurate future projections.
g) Work Study method​: This technique is suitable to study the correlation between volume
of work and labor i.e. demand for human resources is estimated based on the workload.
 Work study method is more appropriate for repetitive and manual jobs when it is possible
to measure work and set standards.
​ echnique is named after the Greek Oracle at the city of
h) Delphi Technique​: ​Delphi’ T
Delphi. In this method, the views of different experts related to the industry are taken into
consideration and then a consensus about the Human Resource requirement is arrived at.
Delphi technique is used primarily to assess long-term needs of human resources.

3. Analyzing Human Resource Supply​: Every organization has two sources of supply of
Human Resources: Internal & External. Internally, human resources can be obtained for certain
posts through promotions and transfers. In order to judge the internal supply of human resources
in future human resource inventory or human resource audit is necessary. Human resource
inventory helps in determining and evaluating the quantity of internal human resources available.
Once the future internal supply is estimated, supply of external human resources is analyzed.

4. Estimating manpower gaps​: Manpower gaps can be identified by comparing demand and
supply forecasts. Such comparison will reveal either deficit or surplus of Human Resources in
the future. Deficit suggests the number of persons to be recruited from outside, whereas surplus
implies redundant employees to be re-deployed or terminated. Employees estimated to be
deficient can be trained while employees with higher, better skills may be given more enriched
jobs.

5. Action Planning​: Once the manpower gaps are identified, plans are prepared to bridge these
gaps. Plans to meet the surplus manpower may be redeployment in other departments and
retrenchment. People may be persuaded to quit voluntarily through a golden handshake. Deficit
can be met through recruitment, selection, transfer and promotion. In view of shortage of certain
skilled employees, the organization has to take care not only of recruitment but also retention of
existing employees. Hence, the organization has to plan for retaining existing employees.

6. Modify the Organizational plans​: If future supply of human resources form all the external
sources is estimated to be inadequate or less than the requirement, the manpower planner has to
suggest to the management regarding the alterations or modifications in the organizational plans.
7. Controlling and Review​: After the action plans are implemented, human resource structure
and the processes should be controlled and reviewed with a view to keep them in accordance
with action plans.

RECRUITMENT AND SELECTION:

Recruitment:

Meaning of Recruitment:
In case of need for manpower, managers hire people by inviting applications from
candidates to apply for the post. It is ensured that people applying for specific posts have skills
required for that job. There is a need, therefore, to ascertain job description and job specification.
Managers invite applications only from candidates qualified for the posts. The process of inviting
applications is known as recruitment.

It is the “process of finding and attempting to attract job candidates who are capable of
effectively filling job vacancies.”After conducting job description and job specification, the
required position is advertised to attract a sufficient number of candidates suitable for the job.

The number should neither be too large nor small as:

a. Attracting too many candidates requires sorting out large number of applications which is time
consuming and also costly, and

b. Attracting too few applicants limits the choice for the suitable candidate.

Recruitment is not selection or appointment. It is only an application for a job out of

which personnel manager selects the most qualified and suitable person whose job specifications
match the job description.

Sources of Recruitment:

There are two sources of recruitment:

1. Internal sources

2. External sources
1. Internal Sources of Recruitment:
It invites applications from people within the organization. Applications are invited to
promote people to higher posts (promotion) or transfer to other departments at the same level. A
senior post in production department, for example, may be filled by juniors in the production
department or surplus staff in the production department may be shifted to the sales department.
Employees assume responsibilities of the same status in transfers and higher status in
promotions.

Merits of internal recruitment:

Internal recruitment has the following merits:
(a) Motivation:
Since employees know that higher positions will be filled from within the organization,
they work hard to get promotions at higher posts.

(b) Recognition:
When internal candidates are considered for promotion, they gain social recognition
amongst the organizational members.

(c) Familiarity with the organizational set up:

Candidates promoted from within the organization are familiar with the organization
structure and know the organization better than outsiders. Both organization and employees
know each other and need for orientation does not arise. It promotes socialization and familiarity
with people and procedures as people internal to the organization take less time in socializing
with the organization.

(d) Costs:
Recruitment from within the organization is less costly than recruitment through external
sources. Organizations save money on inviting applications from outside through advertisements
or other ways.
(e) Loyalty:
If candidates are considered from inside the organization, it develops positive attitude
amongst employees. They associate with the organization and work with dedication and
commitment. This promotes loyalty as employees envision a secured future in the organization.

Limitations of internal recruitment:

Internal recruitment suffers from the following limitations:
(a) Limitation on the number of employees to be recruited:
Since recruitment is made from within, the number is restricted only to internal
employees. People outside the organization who may be more talented are not considered to
serve the organization.

(b) Promotes complacency:

Rather than employees are being motivated to work, they may become complacent
because they are sure of promotions by seniority. They may work according to old work
schedules and not change their way of working.

(c) Conflict amongst workers:

Employees not considered for promotion may develop conflicts with those who are
promoted. This reduces organizational efficiency.

(d) Dynamic organizations:

Organizations working in the dynamic environment where technological and competitive
forces are fast changing, may not find suitable internal candidates to manage the higher
positions. People recruited from outside may be more innovative and dynamic.

Outside people may bring new ideas to promote growth of the organization. It also
facilitates diversification as new brains can manage new businesses. Expenditure on recruiting
people from outside may be less than training and developing expenses on employees who are
promoted from within. Internal recruitment is suitable for organizations operating in a stable
environment.
Internal Sources of recruitment:

Internal recruitment can be made from the following sources:

(a) Notice boards:
Vacancies are put on the notice board. Candidates can see them and apply for the posts.

(b) Circulars:
Information about vacancies is circulated through circulars.

(c) Personal contacts and references:

Applications can be invited through personal contacts and references.

2. External Sources of Recruitment​:

When organizations recruit people from outside the organization, it is called external
recruitment. It is the “process of finding potential external candidates and encouraging them to
apply for and/or be willing to accept organizational jobs that are open.” If internal candidates are
not suitable to perform the jobs, external recruitment helps the organization take benefit of new,
young blood by allowing outsiders to take up the jobs.

Merits of external recruitment:

External recruitment has the following merits:
(A) Suitable for dynamic organizations:
Organizations responsive to changing environment get more innovative, dynamic and
experienced employees from outside.

(b) Large pool:

External recruitment offers a large pool of candidates to choose from. Chances of
appointing worthy candidates increase in external recruitment.

(c) Infusion of young blood:

Young, new and dynamic people can be appointed with innovative ideas. Though
existing matured employees are more experienced, young blood is more challenging. They adopt
new ways of learning without following the old routine better than the matured and experienced.
(d) Spirit of competition:
Recruitment from outside motivates internal candidates to compete with them. They work
to perform better to compete for higher positions.

(e) Realistic job preview:

It is a “technique used during the recruiting process in which the job candidate is
presented with a balanced view of both the positive and the negative aspects of the job and the
organization.” When employees apply for a job knowing its positive and negative aspects, they
perform their jobs better.

Limitations of external recruitment:

The external recruitment suffers from the following limitations:
(a) Costly:
External recruitment is costlier than internal recruitment as it involves advertising, tests,
interviews etc. Above all, the candidates may not maintain stability of tenure with the
organization. They leave the organization when they find better jobs elsewhere.

(b) Dissatisfaction amongst internal candidates:

Internal candidates who are denied promotions feel dissatisfied which can affect
productivity. This can also raise conflicts as internal employees may not readily socialize with
external candidates.

(c) Orientation:
Organizations have to spend a lot of time in orienting the employees towards the
organization structure. However, time is a constraint if the new employees do not understand the
organization’s working to contribute to output. Investment in time is an asset as it tunes
employees to understand their job. These can be public employment agencies run by the
Government and private employment agencies
Sources of external recruitment:
External recruitment can be made from the following sources:
(a) Advertisements:
This is the most widely used source of external recruitment. Job vacancies are advertised
in the newspapers, specifying the nature of the job, type and number of people required,
qualification and experience of applicants, their duties and responsibilities, method of
application, etc. Special reference can be made to provisions for overtime, travelling, etc.

A mention can also be made for salaries (whether negotiable or not). Interested
candidates read the advertisement and apply for the post. Companies have a wide range of
advertisement media like magazines, journals, newspapers, television, radio etc. They can choose
a medium they find most appropriate to them. Advertisement must be appealing as it projects the
image of the company.

The contents and presentation of advertisement should enable the candidate to make a
firm decision on whether or not he wants to apply for the job. However, advertisements bring
huge number of applications. It involves a lot of time in screening and taking action.

(b) Educational Institutions:

Many companies approach educational institutions (colleges, universities etc.) and recruit
candidates to suit their requirements. This is known as campus recruitment. Companies generally
hold group discussions and interviews to recruit candidates from educational institutes. Some
institutions have placement cells linked to companies.

They help the students find jobs suitable to their qualifications and knowledge.
Companies get fresh but inexperienced candidates through this source. Some employers also
fund the education of students in schools and colleges on the agreement that students will work
for their companies after completing their studies.

(c) Employment Agencies:

These agencies have a list of candidates with different qualifications and experience.
Companies approach these agencies and get information about people who can fill their
vacancies. Managed by private individuals and institutions. They charge fees for rendering
services which may be lump-sump or percentage of salary of the job attached to the service.

Though this is a costly source of recruitment and also takes place outside the organization
over which it does not have much control in terms of implementation of recruitment policies, it
has the following advantages:

I. The organization does not have to advertise the vacant position.

ii. It saves considerable time which organizations can use for other productive activities.

iii. It provides specialized services to organizations which do not have specialized human
resource/personnel department.

iV. Media:

Television and Radio sometimes announce lists of candidates with specific qualifications
who are in need of jobs. Companies can approach the media and recruit people of their
requirement.

V. Professional Associations:
Companies that need professionals for top positions can approach professional
associations (Institute of Engineers, All India Management Association etc.) and get a list of
candidates with desired professional qualification. These associations charge high fees for
providing recruitment services but provide candidates whose qualifications meet the
organization’s requirements. The benefits usually far outweigh the costs of recruitment paid to
these specialized agencies.

Vi. Word of mouth:

Sometimes, recruitments are made through word of mouth. Trade unions or employees
give references of people interested in joining the enterprise. Managers select desired candidates
to fill the job vacancy. Employees’ recommendation also helps in recruiting people at the lower
level. Employees satisfied with their jobs also recommend their friends or relatives for vacant job
positions. Employers also have the advantage of recruiting people through known sources.
Vii. Casual applications:
Many candidates submit applications to companies with their resume in the hope to get a
job there. Companies prepare a list of such candidates and recruit them whenever there arise a
job vacancy.

Viii. On-the-gate recruitment (Gate hiring):

Generally, for appointing blue collar workers (semi-skilled and unskilled) for temporary
periods, companies put notices on the gate mentioning the period of vacancies and number of
people required. Workers assemble at the gate on the specified date and time. Managers select
suitable candidates out of them.

iX. Trade unions:

Trade unions have a list of workers which can be used for recruiting labour with varying
degrees of skills (skilled, semi-skilled and unskilled). Unions are usually considered a trust
worthy source of recruitment and it is believed they will recommend people who will be loyal to
the company.

X. Other organizations:
Some organizations have competent, qualified and skilled employees who may be
interested in leaving their jobs to join other organizations which offer them better compensation
packages. Organizations wanting such employees can attract them by offering suitable
incentives.

Selection:

The process of identifying the most suitable persons for the organization is called
selection. Selection is also called a negative function because at a stage the applications are
screened and shortlisted based on the selection criteria. The main purpose of selection is to
choose the right person for the right job. The job analysis, job description, and job specifications
are carried out before the position is advertised. These provide adequate insight about nature of
the job, its description, and its specification and further focus on what type of person is to be
selected for a given position. These simplify the process of selection.
Selection process involves the following stages:

● Initial screening/Short listing

● Comprehensive application/bio data screening
● Aptitude or written rests
● Group discussion
● Personal interviews
● Medical examination
● Employment offer letter

Training and development

Training​:

Training is short-term process of utilizing systematic and organized procedure by which the staff
acquires specific technical knowledge and functional skills for a definite purpose. The focus of
training is the job or task.

Training Needs​:

● - High turnover among the new recruits

● - Increase in wastage of materials
● - Increase in the number of rejected units of production
● - Increase in the number of customer complaints
● - Increase in the accident rate
● - Reduced productivity levels
● - Increase in machine breakdowns

Methods of Training​:
There are two methods of training

● On-the job training

● Off-the job training

A) On-the job training​: It is designed to make the employees immediately productive. It is

learning by physically doing the work. The focus here is to provide specific skills in a real
Situation. These methods include:

1) Job instruction training: This is a method used for such jobs which can be performed
with relatively low skill. Here, the trainees systematically acquire skills by following
routine instructions in key processes from a qualified instructor.

2) Experiential learning: This is a modern approach to the learning process. This method
is more used for training the senior executives. It is a technique, which empowers the
manager-trainee with the freedom of choice to act upon and the capacity to initiate, rather
than simply respond to circumstances.

3) Demonstration​: Here, the work procedures are demonstrated to the trainees. Each of the
trainees is asked to carry out the work, on a sample basis, based on his/her observation and
understanding of the demonstration.

4) Apprentice training​: Those who are selected to work in the shop floor are trained as
apprentices in the factory for a brief period ranging from three months to one year,
depending upon the complexity of the training. Those who show good progress in this
training are likely to be absorbed in the same organization. Those who complete apprentice
training are likely to get good jobs outside also.

B) Off-the-job training methods​: provide a relatively broad idea relating to a given job or task.
These are meant for developing an understanding of general principles, providing background
knowledge, or generating an awareness of comparative ideas and practice. These methods
include:
1) Lectures/talks and classroom instructions: These techniques are designed to
communicate specific interpersonal, technical, or problem-solving skills. Here, the trainer
can maintain a tight control over learning. However, this method restricts the trainee's
freedom to develop his/her own approaches to learning.

2) Conferences: Conferences refer to get-together of the experts from different areas of a

given topic. These experts present their views based on their work experience and research
results. When employees participate in such events they get a feel of the real world. They
may also get motivated to perform better.

3) Seminars: Seminars are held periodically by the professional organizations for the
benefit of all the practicing managers by taking into consideration the recent advances in a
specialized area. Participation in such seminars enables the executives to get exposed to the
recent developments in the area of their interest.

4) Team discussions: ​This technique develops team spirit among the executives from
different departments. It also enables them to understand and appreciate each other's
problems. It reinforces a feeling of unity among those who work towards common goals.

5) Case study: This is a predominant technique followed even in premier management

institutes. This technique helps to provide an understanding of what has gone wrong in a
particular case, such as Delhi Cloth Mills (DCM). Similarly, what are the factors
responsible for the success of organizations such as Reliance or Hindustan Lever? Case
study technique is a very good method of learning the principles and concepts. However,
this method has one weakness. The circumstances you are likely to face in your life may be
very different from the cases you have analyzed earlier! Case studies help to enhance the
analytical & decision making skills.

6) ​Role-playing: The participants are assigned roles and are asked to react to one another,
as they would do in their managerial jobs. These roles are eventually exchanged. In other
words, each participant will get a turn to play all the roles. For instance, the role-playing in
a grievance-handling situation involves two players: In the first step, the worker presents
his grievance to the personnel manager. In the second step, the worker plays the role of the
 personnel manager while the personnel manager plays the role of the worker. Role-playing
allows participants to understand problems of each other. It enhances the interpersonal
handling skills.

7) Programmed instruction: It is a system of instruction within which pre-established

subject matter is broken into small, discrete steps and carefully organized into logical
sequence in which, it can be learned by the trainee. Each step is built upon the previous
one. The programmed instruction techniques can be in the form of programmed tests and
manuals, or video displays. For instance, withdrawal of money through automatic teller
machines (ATMs) involves responding to programmed instructions; working on a personal
computer or internet involves responding to a series of programmed instructions.

8) Simulation exercises: These include interactive exercises in which trainees practice

their skills on working models or in mock situations based on real-life situations.

9) Group decision-making: Group decision-making refers to the process of making

decisions based on the opinions expressed by all the concerned — may be subordinates,
peers, or outside consultants. The manager thus ensures that more people are involved in
taking decisions. Each member of the group will accept the responsibility for the decisions
made as he is a party to it. This method facilitates to generate more alternative solutions to
a given problem because more people are involved in the thinking exercise. This facilitates
coordination among the groups also.

Development​: Development is an activity aimed at career growth rather than immediate

performance. Employee development is the process, which helps him or her to understand and
interpret knowledge rather than teaching a specific set of functional skills. Development,
therefore, focuses more on employee's personal growth in the near future.

Performance Appraisal​:

Performance appraisal is the process of measuring and evaluating the performance or

accomplishments, including behavior, of an employee on the job front for a given period. The
purpose is to assess the worth and value of a person to the organization. It is also meant for
assessing his/her potential for future development in an objective manner.
Why appraise the performance:

1. To assess the employee's present level of performance.

2. To identify the strengths or weaknesses of individual employee.

3. To provide feedback to the employee so that he can improve his/her performance.

4. To provide an objective basis for rewarding the employees for their performance.

5. To motivate those employees who perform.

6. To check and punish those employees who fail to perform.

7. To identify the gaps in performance, and thus, assess training and development needs.

8. To identify the employee's potential to perform.

9. To provide a database for evolving succession strategies

10. To provide a basis for many other decisions such as fixation of incentives or increment,
regularization or confirmation of the services of the employee, promotion, transfer or demotion.

Steps in performance Appraisal:

1. Create set up performance standards.

2. Mutually set identifiable and measurable.

3. Measure present level of performance.

4. Compare and appraise present level of performance with standard.

5. Discuss the appraisal with employee.

6. Identify and initiate the corrective action.

4. Leading and Motivation

Leadership:
Leadership is the ability of a company's management to set and achieve challenging
goals, take swift and decisive action, outperform the competition, and inspire others to perform
well.
Leadership provides direction for a company. Employees need to know the direction in
which they are headed and who to follow to reach the destination. Leadership involves showing
workers how to effectively perform their responsibilities and regularly supervising the
completion of their tasks. Leadership is also about setting a positive example for staff to follow,
by being excited about the work, being motivated to learn new things, and helping out as needed
in both individual and team activities.
Characteristics of Effective Leadership
Effective leadership includes strong character. Leaders exhibit honesty, integrity,
trustworthiness and ethics. Leaders act in line with how they speak, and earn the right to be
responsible for others’ success in the company.
Strong leadership involves clear communication skills. Leaders speak with and listen to
staff members, respond to questions and concerns, and are empathetic. Leaders use effective
communication skills for moving the company forward and achieving new levels of success.
True leadership sees where the company is headed and plans the steps needed to get
there. Visualizing what is possible, following trends in the industry, and taking risks to grow the
business are all required of leaders.
Productive leadership shows optimism and provides positive energy for staff. Leaders are
helpful by nature and truly concerned about others’ well-being. Leaders find answers to
challenges and are the first to reassure and inspire workers when things do not go according to
plan. Leaders find ways for staff to work together and achieve maximum results in an efficient
and effective manner.

Power and Authority:

 Authority is the right given to a manager to achieve the objectives of the organisation. It
is a right to get the things done through others. It is a right to take decisions. It is a right to give
orders to the subordinates and to get obedience from them. A manager cannot do his work
without authority.
A manager gets his authority from his position or post. He gets his authority from the
higher authorities. The lower and middle-level managers get their authority from the top-level
managers. The top-level managers get their authority from the shareholders. Authority always
flows downwards. It is delegated from the top to the bottom.
Power is a broader concept than authority. Power is the ability of a person or a group to
influence the beliefs and actions of other people. It is the ability to influence events. Power can
be personal power. A person gets his personal power from his personality or from his expert
knowledge. Doctors, Lawyers, Engineers, Programmers, etc. get their power from their expertise
and professional knowledge. Power can also be legitimate or official power. This power comes
from a higher authority.
In management, authority differs from power in the following ways :-
1. Nature

● Authority is the formal right given to a manager to make decisions or to command.

● Power is the personal ability to influence others or events.

2. Flow

● Authority flows downwards in the organisation. This is because it is delegated by the

superiors to the subordinates.
● Power can flow in any direction. Even subordinates have power over their superiors, if
they can influence their behaviour. So power can flow upwards, downwards or
horizontally.

3. Organisational Charts

● Authority relationships (superior-subordinate relationships) can be shown in the

organisation charts.
 ● Power relationships cannot be shown in organisation charts.

4. Level of Management

● Authority depends on the level of management. Higher the level of management, higher
will be the authority and vice-versa.
● Power does not depend on the level of management. Power can exist at any level of
management.
● Even a lower-level manager or a worker can have power to influence the behaviour of a
top-level manager.

5. Legitimacy

● Authority is always official in nature. So it is legitimate.

● Power need not be official in nature. So it need not be legitimate.

6. Position and Person

● Authority is given to a position or post. The manager gets the authority only when he
holds that position.
● Power resides (lives) in the person who uses it.

Leadership Styles:
A leadership style refers to a leader's characteristic behaviors when directing, motivating,
guiding, and managing groups of people. Great leaders can inspire political movements and
social change. They can also motivate others to perform, create, and innovate.
As you start to consider some of the people who you think of as great leaders, you can
immediately see that there are often vast differences in how each person leads. Fortunately,
researchers have developed different theories and frameworks that allow us to better identify and
understand these different leadership styles.
Here are just a few of the most prominent leadership frameworks and styles that have
been identified.
1. Authoritarian Leadership (Autocratic)
Authoritarian leaders, also known as autocratic leaders, provide clear expectations for
what needs to be done when it should be done, and how it should be done. This style of
leadership is strongly focused on both command by the leader and control of the followers. There
is also a clear division between the leader and the members. Authoritarian leaders make
decisions independently with little or no input from the rest of the group.
Researchers found that decision-making was less creative under authoritarian leadership.
Lewin also concluded that it is harder to move from an authoritarian style to a democratic style
than vice versa. Abuse of this method is usually viewed as controlling, bossy, and dictatorial.
Authoritarian leadership is best applied to situations where there is little time for group
decision-making or where the leader is the most knowledgeable member of the group. The
autocratic approach can be a good one when the situation calls for rapid decisions and decisive
actions. However, it tends to create dysfunctional and even hostile environments, often pitting
followers against the domineering leader.
2. Participative Leadership (Democratic)
Lewin’s study found that participative leadership, also known as democratic leadership,
is typically the most effective leadership style. Democratic leaders offer guidance to group
members, but they also participate in the group and allow input from other group members. In
Lewin’s study, children in this group were less productive than the members of the authoritarian
group, but their contributions were of a higher quality.
Participative leaders encourage group members to participate but retain the final say in
the decision-making process. Group members feel engaged in the process and are more
motivated and creative. Democratic leaders tend to make followers feel like they are an
important part of the team, which helps foster commitment to the goals of the group.
3. Delegative Leadership (Laissez-Faire)
Researchers found that children under delegative leadership, also known as laissez-faire
leadership, were the least productive of all three groups. The children in this group also made
more demands on the leader, showed little cooperation, and were unable to work independently.
 Delegative leaders offer little or no guidance to group members and leave
decision-making up to group members. While this style can be useful in situations involving
highly qualified experts, it often leads to poorly defined roles and a lack of motivation.
Lewin noted that laissez-faire leadership tended to result in groups that lacked direction
where members blamed each other for mistakes, refused to accept personal responsibility, and
produced a lack of progress and work.
4. The Transformational Leadership Style
Transformational leadership is often identified as the single most effective style. This
style was first described during the late 1970s and later expanded upon by researcher Bernard M.
Bass. Some of the key characteristics of his style of leadership are the abilities to motivate and
inspire followers and to direct positive changes in groups.
Transformational leaders tend to be emotionally intelligent, energetic, and passionate.
They are not only committed to helping the organization achieve its goals, but also to helping
group members fulfill their potential.
Research has revealed that this style of leadership resulted in higher performance and
more improved group satisfaction than other leadership styles. One study also found that
transformational leadership led to improved well-being among group members.
5. The Transactional Leadership Style
The transactional leadership style views the leader-follower relationship as a transaction.
By accepting a position as a member of the group, the individual has agreed to obey the leader.
In most situations, this involves the employer-employee relationship, and the transaction focuses
on the follower completing required tasks in exchange for monetary compensation.
One of the main advantages of this leadership style is that it creates clearly defined roles.
People know what they are required to do and what they will be receiving in exchange for
completing these tasks. It also allows leaders to offer a great deal of supervision and direction if
it's needed. Group members may also be motivated to perform well to receive rewards. One of
the biggest downsides is that the transactional style tends to stifle creativity and out-of-the-box
thinking.
6. Behavioural Leadership:
The behavioural theory of leadership lays emphasis on this fact that the leadership is the
outcome of effective role of behaviour. It relies mainly on the acts of an individual rather than
his traits. Under this approach leadership is described as what leaders do instead of what they
are. This theory states that a leader to be effective should perform his function in such a way that
will enable the group to attain its goals.
7. Situational Leadership Styles
Situational theories of leadership stress the significant influence of the environment and
the situation on leadership.

1. The telling style is characterized by telling people what to do.

2. The selling style involves leaders convincing followers to buy into their ideas and
messages.
3. The participating style is marked by allowing group members to take a more active role
in the decision-making process.
4. The delegating style involves taking a hands-off approach to leadership and allowing
group members to make the majority of decisions.

Leadership Skills:
1. Communication
As a leader, you need to be able to clearly and succinctly explain to your employees
everything from organizational goals to specific tasks. Leaders must master all forms of
communication, including one-on-one, departmental, and full-staff conversations, as well as
communication via the phone, email, and social media.
A large part of communication involves listening. Therefore, leaders should establish a
steady flow of communication between themselves and their staff or team members, either
through an open-door policy or regular conversations with workers. Leaders should make
themselves regularly available to discuss issues and concerns with employees. Other skills
related to communication include:

● Active listening
● Articulating
 ● Business storytelling
● Clarity
● Concision
● Correspondence
● Editing
● Explaining
● Expression
● Facilitating group conversations
● Nonverbal communication
● Presentation
● Public speaking
● Reading body language
● Reducing ambiguity
● Verbal communication
● Written communication

2. Motivation
Leaders need to inspire their workers to go the extra mile for their organizations; just
paying a fair salary to employees is typically not enough inspiration (although it is important
too). There are a number of ways to motivate your workers: you may build employee self-esteem
through recognition and rewards, or by giving employees new responsibilities to increase their
investment in the company.
Leaders must learn what motivators work best for their employees or team members to
encourage productivity and passion. Skills related to effective motivation include:

● Allowing employee autonomy

● Asking for input
● Assessing interests of staff
● Convincing
● Mentoring
 ● Open to employee concerns
● Persuasive
● Providing productive and challenging work
● Providing rewards
● Recognizing others
● Setting effective goals
● Team-building
● Thanking staff
● Understanding employee differences

3. Delegating
Leaders who try to take on too many tasks by themselves will struggle to get anything
done. These leaders often fear that delegating tasks is a sign of weakness, when in fact it is a sign
of a strong leader.
Therefore, you need to identify the skills of each of your employees, and assign duties to
each employee based on his or her skill set. By delegating tasks to staff members, you can focus
on other important tasks. Some skills that make a good delegator include:

● Accepting feedback from employees

● Allotting resources for employees
● Assessing employee strengths and weaknesses
● Defining expectations
● Evaluating employee performance
● Identifying measurable outcomes
● Matching the task to the right employee
● Prioritising tasks
● Setting expectations
● Teamwork
● Time management
● Training
 ● Trust in employees

4. Positivity
A positive attitude can go a long way in an office. You should be able to laugh at yourself
when something doesn't go quite as planned; this helps create a happy and healthy work
environment, even during busy, stressful periods. Simple acts like asking employees about their
vacation plans will develop a positive atmosphere in the office, and raise morale among staff
members. If employees feel that they work in a positive environment, they will be more likely to
want to be at work, and will therefore be more willing to put in the long hours when needed.
Some skills that help make for a positive atmosphere in the workplace include:

● Caring
● Conflict management
● Developing rapport
● Diplomacy
● Encouraging
● Empathetic
● Friendliness
● Helping others
● Humor
● Interpersonal
● Positive reinforcement
● Respect
● Social

5. Trustworthiness
Employees need to be able to feel comfortable coming to their manager or leader with
questions and concerns. It is important for you to demonstrate your integrity – employees will
only trust leaders they respect.
By being open and honest, you will encourage the same sort of honesty in your
employees. Here are some skills and qualities that will help you convey your trustworthiness as a
leader:
 ● Ability to apologise
● Accountability
● Business ethics
● Confidentiality
● Conscientious
● Consistent in behaviour towards employees
● Credibility
● Emotional intelligence
● Empathy
● Honesty
● Integrity
● Moral compass
● Reliability
● Respectfulness
● Standing up for what is right
● Thoughtful

6. Creativity
As a leader, you have to make a number of decisions that do not have a clear answer; you
therefore need to be able to think outside of the box.
Learning to try nontraditional solutions, or approaching problems in nontraditional ways,
will help you to solve an otherwise unsolvable problem. Most employees will also be impressed
and inspired by a leader who doesn't always choose the safe, conventional path. Here are some
skills related to creative thinking:

● Analytical
● Cognitive flexibility
● Conceptualisation
● Critical thinking
● Curiosity
 ● Embracing different cultural perspectives
● Foresight
● Identifying patterns
● Imaginative
● Innovative
● Listening to others’ ideas
● Making abstract connections
● Observation
● Open-mindedness
● Problem solving
● Sound judgment
● Synthesising
● Visionary

7. Feedback
Leaders should constantly look for opportunities to deliver useful information to team
members about their performance. However, there is a fine line between offering employees
advice and assistance, and micromanaging. By teaching employees how to improve their work
and make their own decisions, you will feel more confident delegating tasks to your staff.
Employees will also respect a leader who provides feedback in a clear but empathetic
way. Some skills for giving clear feedback include:

● Being open to receiving feedback

● Building confidence in employees
● Clarity
● Clearly laying out expectations
● Coaching
● Following up
● Frequent feedback
● Listening to employees’ responses
● Mentoring
 ● Positive reinforcement
● Providing specific advice
● Respectful

8. Responsibility
A leader is responsible for both the successes and failures of his or her team. Therefore,
you need to be willing to accept blame when something does not go correctly.
If your employees see their leader pointing fingers and blaming others, they will lose
respect for you. Accept mistakes and failures, and then devise clear solutions for improvement.
Here are some skills and qualities that help leaders convey their responsibility:

● Acknowledging mistakes
● Being open to customer feedback
● Evaluating best solutions
● Forecasting
● Learning from past mistakes
● Listening to feedback from employees and managers
● Project planning
● Reflectiveness
● Resolving problems
● Transparency
● Troubleshooting

9. Commitment
It is important for leaders to follow through with what they agree to do. You should be
willing to put in the extra hours to complete an assignment; employees will see this commitment
and follow your example.
Similarly, when you promise your staff a reward, such as an office party, you should
always follow through. A leader cannot expect employees to commit to their jobs and their tasks
if he or she cannot do the same. Some skills related to commitment in the workplace include:
 ● Applying feedback
● Commitment to company objectives
● Determination
● Embracing professional development
● Following through
● Keeping promises
● Passion
● Perseverance
● Prioritization
● Professionalism
● Team player
● Work ethic

10. Flexibility
Mishaps and last-minute changes always occur at work. Leaders need to be flexible,
accepting whatever changes come their way. Employees will appreciate your ability to accept
changes in stride and creatively problem solve.
Similarly, leaders must be open to suggestions and feedback. If your staff is dissatisfied
with an aspect of the office environment, listen to their concerns and be open to making
necessary changes. Employees will appreciate a leader's ability to accept appropriate feedback.
Skills related to flexibility include:

● Ability to learn new skills

● Ability to respond to new problems or issues
● Adaptability
● Improvising
● Negotiating
● Open to feedback
● Recognising individuals’ strengths and skills
 ● Treating employees as individuals

Leader as Mentor and Coach:

MENTOR
Mentors are volunteer for the role because they acknowledge the importance of dedicate
the time to guide someone new to the task. A Mentor will openly share personal experiences that
contributed to their growth and development, invest the time to listen to the plans of the Mentee,
and develop a plan to work together during a set period of time. Mentors are rarely the Mentee’s
direct manager, although the Mentee’s manager should be a critical part of a successful Mentor
program.
Mentees benefit most from working with the Mentor’s network to gain a broader
understanding of the job and the company. A Mentor often assumes the role of Advocate for the
Mentee as Mentoring can help improve career development, simplify increased responsibility,
build confidence and help individuals learn and grow within an organization.
To grow is fundamentally the act of expanding, an unfolding into greatness. And so
expansiveness is the most important attribute of a great mentoring relationship. Mentoring
effectiveness is all about clearing an emotional path to make the learning journal as free of
boundaries as possible. Change is a door opened from the inside. But it is the mentoring
relationship that delivers the key to that door.
Mentoring typically falls into two categories: non-directive mentoring, where the mentor
acts as a sounding board, catalyst and role model, and sponsor mentoring, where a senior
executive will promote, oversee and control a protege’s career. Often, a mixture of both models
can provide the most effective support for organizational talent
COACH
In a Harvard Business Review article, Monique Valcour recommends every leader to
practice the basics of coaching.
If you have room in your head for only one nugget of leadership wisdom, make it this
one: the most powerfully motivating, conditions people experience at work is making progress at
something that is personally meaningful. If your job involves leading others, the implications are
clear: the most important thing you can do each day is to help your team members experience
progress at meaningful work.
 To do so, you must understand what drives each person, help build connections between
each person’s work and the organization’s mission and strategic objectives, provide timely
feedback, and help each person learn and grow on an ongoing basis. Regular communication
around development having coaching conversations is essential. In fact, according to recent
research, the single most important managerial competency that separates highly effective
managers from average ones is coaching.”
It is common today for a leader to have a professional Executive Coach for personal
development. It is just as important to recognize when a member of your team or a new
employee would benefit from a professional coach.
Leadership Coaches can be internal, often members of the company Human Relations
team, or external, independent contractors with the qualifications and experience most suited to
the individual to be coached. Coaching helps employees make the most of their potential and
performance capabilities by developing skills competence and addressing identified issues.
Coaching initiatives tend to have shorter timelines than mentoring programs, with more finite
and tangible learning objectives
A typical Leadership Coaching program with an external coach is six months or 20-hours
of coaching. Clear goals are identified typically following a 360 Review and professional
personality assessment. The Coachee’s manager is engaged in the process by reviewing goals
and providing feedback to the Coachee and Coach at critical points during the Coaching event.
Forbes magazine published an article William Arruda discussing Why You Need to Hire a
Coach… stating that if you don’t have a coach,
“you could be limiting your career success. That’s because coaches help you identify and
focus on what’s important, which accelerates your success.”
According to coaches.com, the work of a good coach is to:
• Create a safe environment in which people see themselves more clearly;
• Identify gaps between where the client is and where the client needs or wants to be
• Ask for more intentional thought, action and behavior changes than the client would
have asked of him or herself
• Guide the building of the structure, accountability, and support necessary to ensure
sustained commitment.
 “Innovative companies understand that coaching can help career-minded professionals
increase their performance at work. They invest in coaching for their senior leaders and high
potentials.
Coaching also has an impact on an organization’s financial performance; according to an
ICF and HCI study, 60% of respondents from organizations with strong coaching cultures report
their revenue to be above average, compared to their peer group.”
Advancement into upper management moves the emphasis of your efforts from the
technical, tactical work, to strategic initiates that often require greater teamwork. These social
skills are not part of the academic program in most engineering and high-tech programs. It is up
to the new manager who has exhibited the technical skills warranting an advancement to know
display the talent to build teams and developing staff. There is now a need for greater focus on
interpersonal skills, relationship building, delegation and collaboration.
When conducting interviews to compile a 360 Review on a newly promoted upper-level
manager I ask contributors to the Review to respond to the following question: “Does this person
stay enmeshed in the detail, in the tactics of the work, or is s/he able to present the big picture, to
inspire others to take greater responsibility and work independently by clearly explaining the
strategy and benefits of long-term goals?”
The most common response to describe someone new to the role is that the individual is
just beginning to engage in greater dialogue with team members, keeping them informed of the
overall progress, while holding them accountable for assigned work.
To be a successful leader, invest the time to learn to recognize young talent, seek
opportunities to allow new staff to test and expand their skills. You can do this by recognizing
opportunities to shine as a Role Model, to serve as a Mentor or find a suitable Mentor for key
staff, and utilize the services of a professional Coach to for yourself and those ready to assume a
greater role in the organization.
Leadership during adversity and crisis
Overcoming Adversity in Leadership: Finding Vision and Calm in the Storm
“Organizational crises” are front page news almost daily. The challenges presented can
be astounding and the ease of information sharing and “communicating” can be both a blessing
and a curse. Navigating these challenges is not easy nor is there any form “checklist” or
“playbook” that has all the answers. I had the privilege of brainstorming with four top women
in-house counsel, each of whom have faced significant legal challenges and crises throughout
their careers, about their insights, wisdom, lessons learned and how organizations today are
evolving to prepare for significant disruptions, legal risks and “unexpected” crises. Collectively,
we identified five areas that separate visionary leadership and crisis response from the pack.
1. Prepare in Advance.
“Failing to prepare is preparing to fail.” John Wooden
Nothing positions an organization or a team to effectively respond to crises better than
preparing in advance and building a foundation for success. “Have a crisis plan in advance and
train key employees in crisis response, including your top executives”, advises Jody Porter, Vice
President and Deputy General Counsel of Toyota Motor North America. “You need to take the
time to think ahead about the potential issues you could face before they happen.” Advance
planning gives the organization an important opportunity to identify key stakeholders and build
relationships in advance that will allow for close collaboration under what may be
extraordinarily stressful circumstances. Jody also noted that organizations need clear processes
and “it’s critical that your organization speak with one voice during a crisis.” Advance planning
is the foundation for success and will better equip leaders for dealing with the inevitable squalls
and bumps in the road that will occur and, at times, may magnify in the face of significant
problems and the accompanying public scrutiny. “Strong foundations lead to better
decision-making,” said Jody, “it’s worth the investment.”
2. When Faced with Challenges, Be Methodical and Keep Perspective.
“Keep Calm and Carry On.” The British Government
This phrase, originally intended to boost the morale of the British people facing major air
attacks in World War II, can be an inspiring reminder that, in a time of crisis, self-discipline,
fortitude and remaining calm as a team in the face of adversity will pay dividends. “This motto
has served me well and is a guiding principle in managing crisis issues throughout my career,”
said Anjali Chaturvedi, Assistant General Counsel Investigations of Northrop Grumman
Corporation. She added that “it is important to pause, stay composed and do some early issue
spotting so that you can put together the right team and give them the authority to take action.”
Being decisive is important in times of crisis. Of course, how facts and circumstances unfold
may require adjustments to a plan of action - but approaching each challenge calmly, ethically
and methodically is critical to achieving the best result possible. Paralysis and waiting for things
to evolve often can sometimes lead to bigger problems. At the same time, Anjali pointed out,
“leaders and their teams should not jump to conclusions or react without knowing the material
facts and thinking through the implications of any response.”
3. Communicate often. Communicate clearly. Listen.
“The single biggest problem in communication is the illusion that it has taken place.”
- George Bernard Shaw
One of the biggest challenges in any organization or relationship is “communication.”
While nothing and no one is perfect, it often is the “illusion” of communication that gets people
in trouble. Lynn Haaland, PepsiCo Deputy General Counsel, Global Chief Compliance and
Ethics Officer and Chief Counsel, Cybersecurity, believes communication is critical long before
a crisis occurs. She explained that “there needs to be lots of communication before a crisis,
including discussion about:
(i) what might be on the horizon, good and bad;
(ii) what you and others are doing to prepare.”
She also believes it is important to “make sure you are building relationships with other
key stakeholders so they understand the role you play in the organization.” The professional
relationships you build internally will serve you well when significant problems arise and you
must quickly work together in a high-stakes setting. In times like these, communication and
trusted relationships become even more essential, and one must communicate effectively early
and often – in clear and unequivocal terms. Lynn noted that “the speed at which any issue can
spread increases the pressure on companies and their counsel to respond quickly and, as
appropriate, to reassure internal and external stakeholders that they are handling the matter
appropriately.” Yet Lynn underscored that while the ease of communication (with email, for
example) can help tremendously, there can be trouble if different stakeholders interpret a risk, a
situation or even the same language differently.
These challenges underscore the importance of partnership and regular collaboration
between corporate leaders, lawyers and the communications team; as Lynn pointed out, however,
there is a greater take-away for non-crisis situations too. Don’t assume people understand the
meaning behind your message. Take the time to understand your colleagues, business partners
and customers in your day-to-day dealings so that you are even more adept at communicating
effectively when it really matters.
4. Maintain Perspective and Don’t Rush to Judgment
“Fortune truly helps those who are of good judgment.” Euripides
The need to respond quickly and the dangers of rushing to judgment without all the facts
is a delicate balancing act when faced with any significant problem. Christina Ackermann,
Executive Vice President and General Counsel of Valeant Pharmaceuticals International, Inc.
said: “you need to collect facts with rigor before making decisions and involve the right people
early without causing panic in the organization; it’s better to make decisions with facts and not
rush poor decisions.”
Leaders need to be courageous and decisive but, above all, they need to “get it right”
because the outside world has become exceedingly unforgiving if you “get it wrong.” Christina
pointed out that evaluating the facts can be difficult and you cannot always believe what you
read - stories appear in social and news media that are misleading and false at times. Therefore,
she said, “it is key to act with a calm head and don’t overreact” when faced with negative media.
She added, “only set the record straight when truly needed and critical – you don’t want a media
war on minor issues or appear overly defensive; rather, you want to build credibility with the
external and investor community.”
At the outset of any brewing crisis, focus on meticulously, quickly and objectively
assessing the facts without over-reaction or any knee jerk reaction to place blame. It is important
to have the judgment to focus on the bigger picture when facing adversity. In Christina’s
experience, the most significant challenges in overcoming multi-faceted, complex problems
often involve “defining the organization’s objectives while removing emotions from the
decision-making and designing a response strategy that resolves problems while putting a human
face on an otherwise faceless company.”
5. Embrace Adversity, Be Courageous and Use Challenges as an Opportunity to Learn
“Never give up, for that is just the place and time that the tide will turn”
-Harriet Beecher Stowe
 Based on our career experience, we all agreed that adversity is inevitable and, in times of
crisis, strong, decisive, fearless, compassionate, visionary and resilient leadership is critical. Is it
reasonable to assume that any one person will embody all these characteristics at the same time?
Perhaps not in every situation. But, we agreed that visionary leaders supported by strong teams
with empowered decision-makers can accomplish anything.
Handling Employee and Customer Complaints:
Complaint:
An expression of dissatisfaction made to an organization, related to its products or
services, or the complaints-handling process itself, where a response or resolution is explicitly or
implicitly expected”
Complaints From Employees
If you are in a position of authority, you will receive complaints from the employees that
work under you. The complaints will range from something very minor in nature, to something
very serious. It's up to a supervisor to figure out if the complaint is legitimate and how to respond
to it.
It's not that easy though. Mishandling a complaint can have future and dire consequences.
As a supervisor, there are steps you must take to protect yourself, the employee making the
complaint, and those affected by the complaint if it's about another person.
This article will cover what you need to do as a supervisor when you receive a complaint
from an employee.
Types of Employee Complaints

Harassment Favoritism Overworked

Office Temperature Office Cleanliness Work Hours

Job Duties Policy Changes Micromanagement

Issues With Lack of

Pay
Co-Workers Vacation/Sick Leave
How to handle employee complaints
Resolving employee complaints occurs at the back end of a discovery and investigation
process. You need information to make a reasoned response to an employee grievance. As you
proceed, exhibit leadership by setting examples of steadiness, integrity, justice and control. As
the "Inc." magazine website cautions, your task is more about preventing or stemming injury to
your business than acting as a sounding board for complaints. Complaints can bring benefit by
alerting you to problem areas.
1. Provide your employees with a sense that you take their problems seriously. Implement a
protocol by which authorized individuals, such as supervisors or human resources personnel,
investigate every complaint.
2. Review complaints quickly. Ask a complaining employee to clarify his problem. Specify
issues violating company policy. Identify all individuals involved.
3. Follow a chain of command for employee complaints. Ask a complainant to take his
issue to an immediate supervisor for the supervisor to solve the problem at that level, advises the
Plattsburgh University of New York Procedure for Resolving Employee Workplace Complaints.
4. Require supervisors to bring complaints and resolutions to management for review.
Initiate a final management review of the effects of the supervisor’s decision and of any appeals
by the complaining employee.
5. Let a complaining employee know how long your investigation and review should take,
advises the website Prime Resources. Gather as much information and perspective as possible.
Inform the employee how you plan to proceed. Schedule a date to meet with the employee again.
6. Discuss complaint issues objectively. Use objectivity to keep emotions in check and to
provide a fertile problem-solving ground.
7. Escalate complaints about discrimination types protected by federal law. Meet with
human resources managers and with attorneys regarding complaints regarding legally protected
employee rights.
Types of Customer Complaints
Customer complaints come in all shapes and sizes. Complaints can be generated by
everything from product malfunctions to improperly trained or uncaring employees.
Understanding the main types of customer complaints is key to handling them correctly.
Product-Specific
Customers receive products or services that do not operate correctly. This common
complaint can be handled by fixing the product or replacing it with a new one. Customer service
training expert Myra Golden cautions against blaming the customer when a product is faulty.
Wait Times
Long wait times are frustrating to many customers. Whether on the phone or in a store,
lengthy queue times will generate customer complaints simply because time is precious for
customers.
Misunderstanding
Miscommunication, by the customer or the company or both, can trigger complaints.
Minimizing misunderstanding requires knowledgeable associates and accurate marketing
materials. The Small Business advice website morebusiness.com suggests that even when the
customer is clearly confused, treating him with respect helps retain business.
Delivery Error
With online shopping on the rise, delivery errors increase. Upset customers may
complain to the company, but the company may use an independent shipper, complicating
complaint resolution.
Personnel
Customers may feel slighted by employees who are rude or uncaring. Golden warns that
customer service representatives and other employees must remain caring and polite even when
dealing with angry customers.
How to Handle Customer Complaints

1. Apologize and be sorry – the first step is to apologize and be truly sorry for what
happened. You must not belittle the complaint since this humiliates the customer and
sends them a message that they’re lying.
 2. Listen – when they are speaking, attention needs to be directed towards the customer.
Stop doing what you’re doing (sends a message that nothing will distract you from
solving the problem). Let the customer finish with presenting their problem and don’t
make premature conclusions.
3. Take notes – while the customer is presenting the problem, don’t interrupt but take notes
of what they’re saying since this will later help you in responding and offering a solution
(sends a message that the problem will be dealt with seriously and systematically).
4. Repeat the problem – when the customer is finished, briefly repeat the problem to make
sure you have understood it correctly.
5. Offer a solution – if possible, offer a solution right away, two realistic options, without
giving false promises or exaggerating. If not possible, give a firm promise that everything
will be done to solve the problem in a satisfactory manner.
6. Apologize and thank the customer – the conversation must end with a repeat apology and
a thank you to the customer for warning you about the problem. This sends a message
that the customer’s opinion is appreciated.
7. Report to your superior – next step is reporting to your superior, agreeing about the
solution, making a decision and following its progress.
8. Report to the customer – as the final step, you must inform the customer about what was
done to solve the problem, instead of giving that task to a colleague. This sends a
message that you took the problem seriously and personally made sure it was solved.
This is personalized service.

If it becomes evident that the complaint is a result of a systematic inappropriate

procedure or of a permanent deficiency, actions must be taken to introduce new and improved
procedures in order to keep the problem from repeating in the future.
There are customers who get even more upset when they receive an apology. In
that case, stop apologizing and talk as little as possible.
A study conducted by the University of Florida identified five types of customers and
their complaints. Each archetype has different expectations that should be considered in order to
effectively deliver customer support:
1. The Meek Customer
The Meek Customer will avoid submitting a complaint because he or she doesn't want to
be a pain or believes you don't care.
How to Respond: ​Start a conversation - perhaps during a check-in call or by sending a Net
Promoter Score (NPS) survey - to gauge customer satisfaction, start a dialog, and actively
resolve any complaints.
The Risk: The customer will leave quietly without giving you any indication as to what went
wrong. 91% of unhappy customers who are non-complainers simply leave. Do not view absence
of feedback as a sign of satisfaction.
2. The Aggressive Customer
The exact opposite of the Meek Customer, the Aggressive Customer will loudly voice
any complaints and will not accept excuses.
How to Respond: Thank the customer for sharing their concern and listen. Be polite, agree on
the definition of the problem, and explain what's being done to resolve the situation and when.
The Risk: In heated customer situations, it's easy to become confrontational. Mirroring the
customer's aggressive behavior will only make the situation worse. Thanking the customers for
sharing their concerns lets them know you are sincerely interested in hearing what they have to
say and reaching a mutually-beneficial resolution.
3. The High Roller Customer
Perhaps your enterprise customers, these individuals pay well, and expect premium
support. A High Roller Customer is likely to complain in a reasonable manner, unless he or she
is an Aggressive Customer hybrid.
How to Respond: ​This customer wants the best. Listen respectfully, acknowledge that a
problem exists, understand the details of the situation, and work to resolve the issue as quickly as
possible.
The Risk: Like The Aggressive Customer, the High Roller Customer doesn't want to hear
excuses. They want the problem resolved in a timely manner.
4. The Rip-Off Customer
Instead of looking for an answer or satisfactory support experience, the Rip-Off Customer is
looking for a handout.
How to Respond: Maintain composure and respond objectively. If the customer constantly and
repetitively says your solution isn't good enough, use accurate quantified data to backup your
response.
The Risk: If not handled correctly, this customer may take advantage of your company and end
up with something he or she doesn't deserve.
5. The Chronic Complainer Customer
The Chronic Complainer Customer is never happy and continuously reports issues.
How to Respond: Although it may be frustrating, it's still your responsibility to provide
excellent support to the Chronic Complainer. He or she wants an apology. Listen respectfully,
provide a sympathetic ear, and put forth an honest effort to correct the situation.
The Risk: ​It's very likely that the Chronic Complainer will contact support again. However,
unlike the Rip-Off Customer, this customer will accept and appreciate your efforts to fix the
situation. Despite their constant complaints, Chronic Complainers are often repeat customers and
will tell others about positive support experiences.
Team Leadership:
Team:
“A team is a work group that must rely on collaboration if each member is to experience
the optimum success and achievement”
"A team is a small number of people with complementary skills who are committed to a
common purpose, performance goals, and approach for which they are mutually accountable."
Leadership:
“Leadership is a process whereby an individual influences a group of individuals to
achieve a common goal.”
Team Leadership:
Any team member can perform the critical leadership functions to assess the current
effectiveness of the team
Team leaders place considerable emphasis on team building and then evaluates their own
performance on the basis of how well they‟ve developed the team.
Team Leadership Skills:
1. Communication
Becoming a strong leader means mastering the art of communication. To reach the level
of manager, you’ll have no doubt demonstrated some level of talent for this; but to set yourself
apart as a leader, you need to make sure truly impactful communication is at the heart of
everything you do.
Strong team leadership requires not just regular, but shrewd communication. While
transparency on developments within the company is valuable for team morale and development,
a lot can be said for possessing astute judgement about what you share to keep morale buoyed
and your team driven towards success.
2. Approachability and Availability
As an integral part of your team, you need to be an ever present member of the team, a
presence at the very heart of everything they do.Depending on the demands of your job, there
will always be instances when you're not physically around, but it's imperative your team knows
you are available and approachable so they know they can come to you when it matters. Set up
regular one-on-one’s and catch ups with your team, invest in real time in their development and
more than anything, nurture a culture of openness and approachability that fosters trust and
respect throughout the team.
3. Showing Consistency
Everyone has their bad days - days when they feel tired, unmotivated, distracted or less
than 100%. Apart from the true leader, of course.
Your team relies on you to be measured and consistent in your role. It means expressly setting a
standard that your team can trust and lean on. That includes everything from the way you address
disciplinary matters through to backing them up on internal issues. Your team needs to know that
they can trust you and know what to expect from you to get the best out of their performance.
4. Organisation
Your team will look to you to be the person who’s on the ball at all times.
From meetings to workloads and team projects, you need to know what’s going on, who’s doing
what and how to approach the next steps before anyone else does. Not only that, but if operations
run smoothly and everyone knows their responsibilities, then you also need to create solid
guidelines for others to follow. This then makes another key aspect of team leadership easier to
introduce: delegation.
5. The Art of Delegation
Delegation is one of those tasks that anyone can do. But effective and impactful
delegation is an art, and one that only the most effective team leaders can learn to master.
Delegating work doesn’t mean passing on the stuff you don't want to do - it's about lightening
your own workload, making sure the right people are on the right tasks and empowering team
members at the same time. Becoming a leader at work means you have time pressures in other
areas, so even if your natural inclination is to take on everything placed in front of you, it's just
not possible, nor beneficial to you or your team. By delegating work to others, you give them the
opportunity to expand their portfolio, gain new experiences and grow.
As you delegate, aim to lead from the front. By coaching others through new tasks and
experiences, sharing opportunities within your team and working hard yourself, you’ll enhance
your position as a true leader and help your team become more productive and effective along
the way.
6. Confident and Knowledgeable
As a team leader, you need to command an impressive level of knowledge and carry that
off with confidence.
The two properties are linked - if you know your stuff when it comes to your industry,
you'll feel confident in your performance and your expertise will influence your team. It goes
without saying that any credible leader needs to be respected by his or her team; if that respect is
missing, it can seriously hamper your chances of being a good team leader.
7. Innovate and Inspire
One of the key things that sets leaders apart from managers is the ability to innovate.
By bringing new ideas to processes and looking out for new ways to improve the way your team
works, you lead by example and encourage others to find new ways to get tasks done. You’ll
also inspire those around you to work harder and instil a practice of looking for constant
improvement and development opportunities, the driving force of success.
Leadership may be very different from management, but it’s also something that can be
learnt and developed over time. Set the foundations for an excellent future as a leader, or brush
up on your skills with the right training course. Pareto Law offer a range of leadership training
courses that can help you on your way to team management greatness.
For a more experienced manager, our Leadership and Management Training Course will
equip you with the skills and strategic approaches to motivate and mentor you team. If you’ve
got your eyes set on greatness, but are still starting off in your career, the Team Leader Level 3
Apprenticeship will build and develop on your natural attributes.
Motivation:
A motive is a reason for doing something. Motivation is concerned with the strength and
direction of behaviour and the factors that influence people to behave in certain ways. The term
‘motivation’ can refer variously to the goals individuals have, the ways in which individuals
choose their goals and the ways in which others try to change their behaviour.
Motivating other people is about getting them to move in the direction you want them to
go in order to achieve a result. Motivating yourself is about setting the direction independently
and then taking a course of action that will ensure that you get there. Motivation can be described
as goal-directed behaviour. People are motivated when they expect that a course of action is
likely to lead to the attainment of a goal and a valued reward – one that satisfies their needs and
wants.
Well-motivated people engage in discretionary behaviour – in the majority of roles there
is scope for individuals to decide how much effort to exert. Such people may be self-motivated
and as long as this means they are going in the right direction to attain what they are there to
achieve, then this is the best form of motivation. Most of us, however, need to be motivated to a
greater or lesser degree. There are two types of motivation, and a number of theories explaining
how it works as discussed below.
Types of motivation:
The two types of motivation are intrinsic motivation and extrinsic motivation.
Intrinsic motivation:
Intrinsic motivation can arise from the self-generated factors that influence people’s
behaviour. It is not created by external incentives. It can take the form of motivation by the work
itself when individuals feel that their work is important, interesting and challenging and provides
them with a reasonable degree of autonomy (freedom to act), opportunities to achieve and
advance, and scope to use and develop their skills and abilities. Deci and Ryan (1985) suggested
that intrinsic motivation is based on the needs to be competent and self-determining (that is, to
have a choice).
Intrinsic motivation can be enhanced by job or role design. According to an early writer
on the significance of the motivational impact of job design (Katz, 1964): ‘The job itself must
provide sufficient variety, sufficient complexity, sufficient challenge and sufficient skill to
engage the abilities of the worker.’ In their job characteristics model, Hackman and Oldham
(1974) emphasized the importance of the core job dimensions as motivators, namely skill
variety, task identity, task significance, autonomy and feedback.
Extrinsic motivation:
Extrinsic motivation occurs when things are done to or for people to motivate them.
These include rewards, such as incentives, increased pay, praise, or promotion; and punishments,
such as disciplinary action, withholding pay, or criticism.
Extrinsic motivators can have an immediate and powerful effect, but will not necessarily
last long. The intrinsic motivators, which are concerned with the ‘quality of working life’ (a
phrase and movement that emerged from this concept), are likely to have a deeper and
longer-term effect because they are inherent in individuals and their work and not imposed from
outside in such forms as incentive pay.
Relationship Between Motivation, Performance and Engagement:
“The relationship between engagement and motivation is a two way street; improve one
and you also improve the other. So the key to understanding how to benefit from improved levels
of engagement is firstly to understand what motivates us – why do we really do the things we
do..? To understand what really motivates us we need to strip away all the factors which might
merely influence us; in other words, we need to identify what lies at the very heart of our
motivation to do something”
Employees may be motivated on the job by many things, such as a sense of achievement,
recognition, enjoyment of the job, promotion opportunities, responsibility, and the chance for
personal growth. Employee motivation and performance are tied directly to the style of
management that is applied and to principles of positive or negative reinforcement. Employee
engagement is the level of commitment and involvement an employee has towards their
organization and its values. An engaged employee is aware of business context, and works with
colleagues to improve performance within the job for the benefit of the organization. It is a
positive attitude held by the employees towards the organization and its values. The paper
focuses on how employee engagement is an antecedent of job involvement and what should
companies do to make the employees engaged.
Motivation is the combination of a person's desire and energy directed at achieving a
goal. It is the cause of action. Influencing people's motivation means getting then to ​want to do
what you know must be done.

Motivation is the combination of a person's desire and energy directed at achieving a

goal. It is the cause of action. Motivation can be ​intrinsic​, such as satisfaction and feelings of
achievement; or ​extrinsic​, such as rewards, punishment, and goal attainment. Not all people are
motivated by the same thing and over time their motivations might changes.

Motivated employees are the need of any organization for our changing workplace.
Motivated employees are more productive so they always help organization to survive in every
field. For an effective managers it must understand what type of motivates employees within the
context of the performance in the role. Motivating employees is most complex for example
research suggested that as employees income increase money become less of a motivate also as
employees get older exciting work become more of a motivator.

Content Motivational Theories:

Needs Hierarchy Theory (Maslow’s Theory):
Maslow’s level of hierarchy about human relations and behavioral science approach, his
assumptions are based mainly on theory of ‘Human Needs’, he has defined five levels of
hierarchy of needs starting from the biological need and then coming to more intangible ones .

1. Physical needs like food, clothes and shelter

2. Safety needs freedom from fear of insecurity
3. Social needs include a sense of being accepted in the society or environment one finds
himself in.
4. Ego needs include feeling of important and recognition
 5. Self actualization needs include need or desire for personal fulfillment of individual
potential and activity.

Herzberg’s Two-Factor Theory of Motivation:

In 1959, Frederick Herzberg, a behavioural scientist proposed a two-factor theory or the
motivator-hygiene theory. According to Herzberg, there are some job factors that result in
satisfaction while there are other job factors that prevent dissatisfaction. According to Herzberg,
the opposite of “Satisfaction” is “No satisfaction” and the opposite of “Dissatisfaction” is “No
Dissatisfaction”.

Herzberg’s view of satisfaction and dissatisfaction

Herzberg classified these job factors into two categories-

Hygiene factors-

Hygiene factors are those job factors which are essential for existence of motivation at
workplace. These do not lead to positive satisfaction for long-term. But if these factors are absent
if these factors are non-existent at workplace, then they lead to dissatisfaction. In other words,
hygiene factors are those factors which when adequate/reasonable in a job, pacify the employees
and do not make them dissatisfied. These factors are extrinsic to work.

Hygiene factors are also called as ​dissatisfiers or maintenance factors​ as they are
required to avoid dissatisfaction. These factors describe the job environment/scenario. The
hygiene factors symbolized the physiological needs which the individuals wanted and expected
to be fulfilled. Hygiene factors include:

● Pay​ - The pay or salary structure should be appropriate and reasonable. It must be equal
and competitive to those in the same industry in the same domain.
● Company Policies and administrative policies -​ The company policies should not be
too rigid. They should be fair and clear. It should include flexible working hours, dress
code, breaks, vacation, etc.
● Fringe benefits -​ The employees should be offered health care plans (mediclaim),
benefits for the family members, employee help programmes, etc.
 ● Physical Working conditions -​ The working conditions should be safe, clean and
hygienic. The work equipment should be updated and well-maintained.
● Status - ​The employees’ status within the organization should be familiar and retained.
● Interpersonal relations -​ The relationship of the employees with his peers, superiors and
subordinates should be appropriate and acceptable. There should be no conflict or
humiliation element present.
● Job Security -​ The organization must provide job security to the employees.

Motivational factors-

According to Herzberg, hygiene factors cannot be regarded as motivators. The

motivational factors yield positive satisfaction. These factors are inherent to work. These factors
motivate the employees for a superior performance. These factors are called satisfiers. These are
factors involved in performing the job. Employees find these factors intrinsically rewarding. The
motivators symbolized the psychological needs that were perceived as an additional benefit.
Motivational factors include:

● Recognition - ​The employees should be praised and recognized for their

accomplishments by the managers.
● Sense of achievement - ​The employees must have a sense of achievement. This depends
on the job. There must be a fruit of some sort in the job.
● Growth and promotional opportunities -​ There must be growth and advancement
opportunities in an organization to motivate the employees to perform well.
● Responsibility - ​The employees must hold themselves responsible for the work. The
managers should give them ownership of the work. They should minimize control but
retain accountability.
● Meaningfulness of the work -​ The work itself should be meaningful, interesting and
challenging for the employee to perform and to get motivated.

Limitations of Two-Factor Theory

1. The two-factor theory overlooks situational variables.

 2. Herzberg assumed a correlation between satisfaction and productivity. But the research
conducted by Herzberg stressed upon satisfaction and ignored productivity.
3. The theory’s reliability is uncertain. Analysis has to be made by the raters. The raters
may spoil the findings by analyzing the same response in different manner.
4. No comprehensive measure of satisfaction was used. An employee may find his job
acceptable despite the fact that he may hate/object part of his job.
5. The two factor theory is not free from bias as it is based on the natural reaction of
employees when they are enquired the sources of satisfaction and dissatisfaction at work.
They will blame dissatisfaction on external factors such as salary structure, company
policies and peer relationship. Also, the employees will give credit to themselves for the
satisfaction factor at work.
6. The theory ignores blue-collar workers. Despite these limitations, Herzberg’s Two-Factor
theory is acceptable broadly.

Theory X and Theory Y (Douglas McGregor Theory):

He divides leadership is two styles labeled theory “X” and theory “Y”. The traditional
styles of leadership and controls stated in theory ‘X’ by McGregor, is exercised to managers on
the basis of his assumptions about human beings. These assumptions as laid down or observed
by McGregor for theory ‘X’ are
Theory “X”:

1. An average human being does not like to work and he tries to avoid it as much as
possible.
2. He avoids accepting responsible and challenging tasks, has no ambition but wants
security above all.
3. Because of this, the employees are to be forced, concerned and threatened with
punishments to make them put their best efforts.

These people would not work sincerely and honestly under democratic conditions.
However, the above assumptions are not based on research findings. The autocratic style
basically presumes that workers are generally lazy, avoid work and shrink responsibilities. It is
believed that workers are more interested in money and security based on these assumptions the
leadership styles developed, insists on tighter control and supervision.

Theory of “Y”:

It focuses a totally different set of assumptions about the employees

1. Some employees consider work as natural as play or rest.

2. These employees are capable of directing and controlling performance on their own
3. They are much committed to the objectives of the organization
4. Higher rewards make these employees more committed to the organization.
5. Given an opportunity they not only accept responsibility but also look for opportunities to
outperform others.
6. Most of them highly imaginative, creative and display ingenuity in handling
organizational issues.
 5. Controlling
Control:
“Managerial control implies the measurement of accomplishment against the standard
and the correction of deviations to assure attainment of objectives according to plans”.
Koontz And O’Donnell
Controlling function is performed in all types of organizations whether commercial or
non commercial and at all levels i.e. top, middle and supervisory levels of management. Thus, it
is a pervasive function. Controlling should not be considered as the last function of the
management.
The controlling function compares the actual performance with predetermined standards,
finds out deviation and attempts to take corrective measures. Eventually, this process helps in
formulation of future plans too. Thus, controlling function helps in bringing the management
cycle back to planning.
Types and Strategies for Control:
Types of control
There are three types of control viz.,

1. Feedback Control: ​This process involves collecting information about a finished task,
assessing that information and improvising the same type of tasks in the future.
2. Concurrent control:​ It is also called real-time control. It checks any problem and
examines it to take action before any loss is incurred. Example: control chart.
3. Predictive/ feedforward control:​ This type of control helps to foresee problems ahead
of occurrence. Therefore action can be taken before such a circumstance arises.

In an ever-changing and complex environment, controlling forms an integral part of the

organization.
Advantages of controlling

● Saves time and energy

 ● Allows managers to concentrate on important tasks. This allows better utilization of the
managerial resource.
● Helps in timely corrective action to be taken by the manager.
● Managers can delegate tasks so routinely chores can be completed by subordinates.

Strategies for control

The type of business strategy you pursue is a key to whether or not your company will
have long-term growth and success. The challenge, however, is that it’s difficult to assess if the
strategy you’ve chosen is the right one or if you need to make adjustments. That process is made
easier if you use the four common types of strategic control to analyze the strategy you’ve put in
place to determine its effectiveness, and to find areas of strength and weakness. Without strategic
control, your company will fail to adapt to any external changes in your industry that require
immediate and corrective action.
Premise Control
The business strategy you’ve chosen was likely based on some assumptions you made
about what you believed would happen several years in the future. Whether those assumptions
are about your target audience, your competitors, or product development, premise control lets
you test those assumptions to see if they’re still valid. For example, if you own a skateboard
company, you may have assumed that your ideal buyers were Millennials, but you may discover
that premise was flawed after premise control measures reveal that the fastest-growing
skateboard consumers are actually an entire generation younger.
Strategic Surveillance Control
It’s impossible for you to anticipate every external threat that could impact the success of
your business, which is why strategic surveillance control lets you identify information sources
that monitor these external forces. Examples of these information sources are financial journals,
trade magazines, newspapers, economic forums, and industry conferences. These sources are
often the first to identify the potential challenges that businesses in your industry will face, and
may even offer potential responses to these challenges.
Special Alert Control
At some point in time, your company will go through a rough patch that’s triggered by
some kind of unexpected occurrence that impacts your business in a negative way. This could
include a sudden crash in the U.S. stock market, a domestic terrorist attack, or even a natural
disaster that affects your customers’ buying habits. Special alert control helps your business
respond to these events without having to change your entire strategy to deal with this new event.
For example, after the September 11, 2001, terrorist attacks in the U.S., many commercial
airlines were forced to adopt stricter safety protocols to account for the intense fears that
passengers had about flying on a plane.
Implementation Control
As you begin to implement a business strategy, you must use implementation control
measures to assess whether or not your plan needs adjustment. Common types of implementation
control include setting performance standards, measuring actual performance, analyzing the
reasons your staff failed to meet specific performance standards, and developing a plan to correct
performance deviations. Implementation control also includes things such as budgets, schedules,
and milestones that the company is trying to achieve.
Steps in Control Process:
Control process involves the following steps as shown in the figure:

● Establishing standards:​ This means setting up of the target which needs to be achieved
to meet organisational goals eventually. Standards indicate the criteria of performance.
Control standards are categorized as quantitative and qualitative standards. Quantitative
standards are expressed in terms of money. Qualitative standards, on the other hand,
includes intangible items.
● Measurement of actual performance:​ The actual performance of the employee is
measured against the target. With the increasing levels of management, the measurement
of performance becomes difficult.
● Comparison of actual performance with the standard: ​This compares the degree of
difference between the actual performance and the standard.
● Taking corrective actions: ​It is initiated by the manager who corrects any defects in
actual performance.
 Controlling process thus regulates companies’ activities so that actual performance
conforms to the standard plan. An effective control system enables managers to avoid
circumstances which cause the company’s loss.

Characteristics of an Effective Control

Controls at every level focus on inputs, processes and outputs. It is very important to
have effective controls at each of these three stages.
Effective control systems tend to have certain common characteristics. The importance of
these characteristics varies with the situation, but in general effective control systems have the
following characteristics.
1. Accuracy:
Effective controls generate accurate data and information. Accurate information is
essential for effective managerial decisions. Inaccurate controls would divert management efforts
and energies on problems that do not exist or have a low priority and would fail to alert managers
to serious problems that require attention.
2. Timeliness:
There are many problems that require immediate attention. If information about such
problems does not reach management in a timely manner, then such information may become
useless and damage may occur. Accordingly controls must ensure that information reaches the
decision makers when they need it so that a meaningful response can follow.
3. Flexibility:
The business and economic environment is highly dynamic in nature. Technological
changes occur very fast. A rigid control system would not be suitable for a changing
environment. These changes highlight the need for flexibility in planning as well as in control.
Strategic planning must allow for adjustments for unanticipated threats and opportunities.
Similarly, managers must make modifications in controlling methods, techniques and systems as
they become necessary. An effective control system is one that can be updated quickly as the
need arises.
4. Acceptability:
Controls should be such that all people who are affected by it are able to understand them
fully and accept them. A control system that is difficult to understand can cause unnecessary
mistakes and frustration and may be resented by workers.
Accordingly, employees must agree that such controls are necessary and appropriate and
will not have any negative effects on their efforts to achieve their personal as well as
organizational goals.
5. Integration:
When the controls are consistent with corporate values and culture, they work in harmony
with organizational policies and hence are easier to enforce. These controls become an integrated
part of the organizational environment and thus become effective.
6. Economic feasibility:
The cost of a control system must be balanced against its benefits. The system must be
economically feasible and reasonable to operate. For example, a high security system to
safeguard nuclear secrets may be justified but the same system to safeguard office supplies in a
store would not be economically justified. Accordingly the benefits received must outweigh the
cost of implementing a control system.
7. Strategic placement:
Effective controls should be placed and emphasized at such a critical and strategic control
points where failures cannot be tolerated and where time and money costs of failures are greatest.
The objective is to apply controls to the essential aspect of a business where a deviation
from the expected standards will do the greatest harm. These control areas include production,
sales, finance and customer service.
8. Corrective action:
An effective control system not only checks for and identifies deviation but also is
programmed to suggest solutions to correct such a deviation. For example, a computer keeping a
record of inventories can be programmed to establish “if-then” guidelines. For example, if
inventory of a particular item drops below five percent of maximum inventory at hand, then the
computer will signal for replenishment for such items.
9. Emphasis on exception:
A good system of control should work on the exception principle, so that only important
deviations are brought to the attention of management, In other words, management does not
have to bother with activities that are running smoothly. This will ensure that managerial
attention is directed towards error and not towards conformity. This would eliminate unnecessary
and uneconomic supervision, marginally beneficial reporting and a waste of managerial time.
Budgetary control
Meaning:
Budgetary control is the process of determining various actual results with budgeted
figures for the enterprise for the future period and standards set then comparing the budgeted
figures with the actual performance for calculating variances, if any. First of all, budgets are
prepared and then actual results are recorded.
The comparison of budgeted and actual figures will enable the management to find out
discrepancies and take remedial measures at a proper time. The budgetary control is a continuous
process which helps in planning and coordination. It provides a method of control too. A budget
is a means and budgetary control is the end-result.
Definitions:
“According to Brown and Howard, “Budgetary control is a system of controlling costs
which includes the preparation of budgets, coordinating the departments and establishing
responsibilities, comparing actual performance with the budgeted and acting upon results to
achieve maximum profitability.”
From the above given definitions it is clear that budgetary control involves the follows:
(a) The objects are set by preparing budgets.
(b) The business is divided into various responsibility centres for preparing various budgets.
(c) The actual figures are recorded.
(d) The budgeted and actual figures are compared for studying the performance of different cost
centres.
(e) If actual performance is less than the budgeted norms, a remedial action is taken immediately.
Objectives of Budgetary Control:
Budgetary control is essential for policy planning and control. It also acts as an
instrument of coordination.
The main objectives of budgetary control are the following:
1. To ensure planning for the future by setting up various budgets, the requirements and expected
performance of the enterprise are anticipated.
2. To operate various cost centres and departments with efficiency and economy.
3. Elimination of wastes and increase in profitability.
4. To anticipate capital expenditure for future.
5. To centralise the control system.
6. Correction of deviations from the established standards.
7. Fixation of responsibility of various individuals in the organization.
Essentials of Budgetary Control:
There are certain steps which are necessary for the successful implementation of
budgetary control system.
These are as follows:
1. Organisation for Budgetary Control
2. Budget Centres
3. Budget Mammal
4. Budget Officer
5. Budget Committee
6. Budget Period
7. Determination of Key Factor.
1. Organization for Budgetary Control:
The proper organization is essential for the successful preparation, maintenance and
administration of budgets. A Budgetary Committee is formed, which comprises the departmental
heads of various departments. All the functional heads are entrusted with the responsibility of
ensuring proper implementation of their respective departmental budgets.
The Chief Executive is the overall in-charge of budgetary system. He constitutes a budget
committee for preparing realistic budgets A budget officer is the convener of the budget
committee who coordinates the budgets of different departments. The managers of different
departments are made responsible for their departmental budgets.
2. Budget Centres:
A budget centre is that part of the organization for which the budget is prepared. A
budget centre may be a department, section of a department or any other part of the department.
The establishment of budget centres is essential for covering all parts of the organization. The
budget centres are also necessary for cost control purposes. The appraisal performance of
different parts of the organization becomes easy when different centres are established.
3. Budget Manual:
A budget manual is a document which spells out the duties and the responsibilities of
various executives concerned with the budgets. It specifies the relations amongst various
functionaries.
4. Budget Officer:
The Chief Executive, who is at the top of the organization, appoints some person as
Budget Officer. The budget officer is empowered to scrutinize the budgets prepared by different
functional heads and to make changes in them, if the situation so demands. The actual
performance of different departments is communicated to the Budget Officer. He determines the
deviations in the budgets and the actual performance and takes necessary steps to rectify the
deficiencies, if any.
He works as a coordinator among different departments and monitors the relevant
information. He also informs the top management about the performance of different
departments. The budget officer will be able to carry out his work fully well only if he is
conversant with the working of all the departments.
5. Budget Committee:
In small-scale concerns the accountant is made responsible for preparation and
implementation of budgets. In large-scale concerns a committee known as Budget Committee is
formed. The heads of all the important departments are made members of this committee. The
Committee is responsible for preparation and execution of budgets. The members of this
committee put up the case of their respective departments and help the committee to take
collective decisions if necessary. The Budget Officer acts as convener of this committee.
6. Budget Period:
A budget period is the length of time for which a budget is prepared and employed. The
budget period depends upon a number of factors. It may be different for different industries or
even it may be different in the same industry or business.
The budget period depends upon the following considerations:
(a) The type of budget i.e., sales budget, production budget, raw materials purchase budget,
capital expenditure budget. A capital expenditure budget may be for a longer period i.e. 3 to 5
years purchase, sale budgets may be for one year.
(b) The nature of demand for the products.
(c) The timings for the availability of the finances.
(d) The economic situation of the country.
(e) The length of trade cycles.
All the above-mentioned factors are taken into account while fixing period of budgets
7. Determination of Key Factor:
The budgets are prepared for all functional areas. These budgets are interdependent and
inter-related. A proper coordination among different budgets is necessary for making the
budgetary control a success. The constraints on some budgets may have an effect on other
budgets too. A factor which influences all other budgets is known as Key Factor or Principal
Factor.
There may be a limitation on the quantity of goods a concern may sell. In this case, sales
will be a key factor and all other budgets will be prepared by keeping in view the amount of
goods the concern will be able to sell. The raw material supply may be limited, production, sales
and cash budgets will be decided according to raw materials budget. Similarly, plant capacity
may be a key factor if the supply of other factors is easily available.
The key factor may not necessarily remain the same. The raw materials supply may be
limited at one time but it may be easily available at another time. The sales may be increased by
adding more sales staff, etc. Similarly, other factors may also improve at different times. The key
factor also highlights the limitations of the enterprise. This will enable the management to
improve the working of those departments where scope for improvement exists.
Advantages of Budgetary Control:
The budgetary control system help in fixing the goals for the organization as whole and
concerted efforts are made for its achievements. It enables ‘economies in the enterprise.
Some of the advantages of budgetary control are:
1. Maximization of Profits:
The budgetary control aims at the maximization of profits of the enterprise. To achieve
this aim, a proper planning and coordination of different functions is undertaken. There is a
proper control over various capital and revenue expenditures. The resources are put to the best
possible use.
2. Coordination:
The working of different departments and sectors is properly coordinated. The budgets of
different departments have a bearing on one another. The co-ordination of various executives and
subordinates is necessary for achieving budgeted targets.
3. Specific Aims:
The plans, policies and goals are decided by the top management. All efforts are put
together to reach the common goal of the organization. Every department is given a target to be
achieved. The efforts are directed towards achieving some specific aims. If there is no definite
aim then the efforts will be wasted in pursuing different aims.
4. Tool for Measuring Performance:
By providing targets to various departments, budgetary control provides a tool for
measuring managerial performance. The budgeted targets are compared to actual results and
deviations are determined. The performance of each department is reported to the top
management. This system enables the introduction of management by exception.
5. Economy:
The planning of expenditure will be systematic and there will be economy in spending.
The finances will be put to optimum use. The benefits derived for the concern will ultimately
extend to industry and then to the national economy. The national resources will be used
economically and wastage will be eliminated.
6. Determining Weaknesses:
The deviations in budgeted and actual performance will enable the determination of weak
spots. Efforts are concentrated on those aspects where performance is less than the stipulated.
7. Corrective Action:
The management will be able to take corrective measures whenever there is a
discrepancy in performance. The deviations will be regularly reported so that necessary action is
taken at the earliest. In the absence of a budgetary control system the deviations can be
determined only at the end of the financial period.
8. Consciousness:
It creates budget consciousness among the employees. By fixing targets for the
employees, they are made conscious of their responsibility. Everybody knows what he is
expected to do and he continues with his work uninterrupted.
9. Reduces Costs:
In the present day competitive world budgetary control has a significant role to play.
Every businessman tries to reduce the cost of production for increasing sales. He tries to have
those combinations of products where profitability is more.
10. Introduction of Incentive Schemes:
Budgetary control system also enables the introduction of incentive schemes of
remuneration. The comparison of budgeted and actual performance will enable the use of such
schemes.
Limitations of Budgetary Control:
Despite of many good points of budgetary control there are some limitations of this
system.
Some of the limitations are discussed as follows:
1. Uncertain Future:
The budgets are prepared for the future period. Despite best estimates made for the
future, the predictions may not always come true. The future is always uncertain and the
situation which is presumed to prevail in future may change. The change in future conditions
upsets the budgets which have to be prepared on the basis of certain assumptions. The future
uncertainties reduce the utility of budgetary control system.
2. Budgetary Revision Required:
Budgets are prepared on the assumptions that certain conditions will prevail. Because of
future uncertainties, assumed conditions may not prevail necessitating the revision of budgetary
targets. The frequent revision of targets will reduce the value of budgets and revisions involve
huge expenditures too.
3. Discourage Efficient Persons:
Under budgetary control system the targets are given to every person in the organization.
The common tendency of people is to achieve the targets only. There may be some efficient
people who can exceed the targets but they will also feel contented by reaching the targets. So
budgets may serve as constraints on managerial initiatives.
4. Problem of Coordination:
The success of budgetary control depends upon the coordination among different
departments. The performance of one department affects the results of other departments. To
overcome the problem of coordination a Budgetary Officer is needed. Every concern cannot
afford to appoint a Budgetary Officer. The lack of coordination among different departments
results in poor performance.
5. Conflict Among Different Departments:
Budgetary control may lead to conflicts among functional departments. Every
departmental head worries for his department goals without thinking of business goal. Every
department tries to get maximum allocation of funds and this raises a conflict among different
departments.
6. Depends Upon the Support of Top Management:
Budgetary control system depends upon the support of top management. The
management should be enthusiastic for the success of this system and should give full support
for it. If at any time there is a lack of support from top management then this system will
collapse.
Non budgetary control:
Budgeting is the process of preparing budgets whereas budgetary control is a device or
technique of managerial control through budgets. Thus, budgetary control is planning in advance
of the various aspects of business can be controlled.
 Non-Budgetary control is laying control on your non-budgeted expenses i.e those
expenses which are not defined in normal budgeted expenses. The techniques for these
non-budgetary control are :
1. Statistical data:
Statistical analyses of innumerable aspects of a business operation and the
clear presentation of statistical data, whether of a historical or forecast nature are, of course,
important to control. Some managers can readily interpret tabular statistical data, but most
managers prefer presentation of the data on charts.
2. Break-even analysis
This analysis shows the impact of changes in costs, volume of production and sales on
profit. Also, it shows how much minimum volume is to be produced to cover the expenses and
prevent losses. This is also called profit planning and control tool.

3. Internal auditing

The purpose of Internal audit is to verify whether the financial transactions are properly
reported, accounted for and reflected in the financial statements or not. Internal auditing is
carried out by company's internal auditors to assess whether the accounts are properly
maintained by the company. The purpose of internal audit is to keep all accounts ready for
external audit. Any type of irregularity or violation of accounting norms and standards are
reported internally and these are addressed before the external audit commences. In other words,
internal audit sets the tone and context for external audit.

4. Time-event network analysis

To ensure that the projects are completed without any cost or time over runs, network
analysis is deployed. Network analysis has two parts: Programme Evaluation and Review
Technique (PERT) and Critical Path Method. Here the projects are analysed in terms of activities
and events identification of critical path, probability of completing the project within scheduled
time, determination of cost slope and crashing the project so that the projects are completed
within the schedules with optimum expenditure.
 5. Standard costing and variance analysis

Standard costing is a process of formulating material standards, labour standards and

overheads standards and verifying whether the actual expenses are within the given standard are
not. Where there is difference between the actual and standard expenses, it is called variance.
The manager's job is to ensure that the variances are reduced to minimum.

6. Ratio analysis

Ratio analysis shows the relationship between two factors. Ratio analysis is a financial
analysis tool used to examine whether the liquidity, solvency and profitability of the enterprise
are within the acceptable standards or not.

7. Personal observation

Managers need to spend time by going around the departments, speaking to the
employees so that they can get first-hand information about what is happening around. By going
around the departments, senior managers may come across many issues which cannot be put on
paper but critical nature can be sorted out on time.

Establishing Control Systems

Establishing control systems require a holistic perspective about the entire organisation.
Senior managers are given the task of establishing the control systems for every department. The
nature and purpose of each division or department should be carefully analysed and understood
before control systems are established.

Illustration I: Establishing Internal Control System

The following are the steps in establishing an internal control system for a manufacturing
company:

1. Define the objectives of an Internal Control System (ICS)

2. Identify the people responsible for the implementation of ICS

3. Carry out a risk assessment

 4. Develop the internal standard

5. Plan the steps to certification

6. Provide information/ awareness and training

7. Develop the ICS documents

8. Carry out the internal and self-inspection

9. Decide on producer compliance

10. Ensure traceability and transparent management of payments and premia

Illustration lI: Establishing an Efficient Inventory Control System

1. Classify and codify the inventory items

2. Maintain the inventory records such as bin card, stores ledger account, etc.

3. Control the cycle flow of materials

4. Control of tools

5. Store room management

Illustration IIl: How to establish a Budgetary Control System

Steps in establishing budgetary control system:

1. Define the objectives of budgeting

2. Create an organisation structure for the budget department
3. Identify the budget centres
4. Prepare a budget manual
5. Appoint budget controller
6. Appoint the budget committee members
7. Define the budget period

Illustration IV: Establishing Quality Control System

1. Upper control limit

 2. Lower control limit
3. Mean control
4. Quality control chart
5. Statistical quality control
6. Acceptance Quality Level (AQL)
7. Lot Tolerance Percentage Defective (LTPD)
8. Acceptance sampling
9. Single sampling plan
10. Double sampling plan
11. Sequential sampling plan
12. Multiple sampling plan
13. Quality circles

For every department, control systems are established considering its basic requirements.
In other words control System is a scoreboard that comprises performance evaluation metrics
which can be expressed in terms of financial measures [such as Return on Investment (ROI) or
Return on Capital Employed (ROCE), component purchasing costs, selling and administration
costs] and non-financial measures [component-wise inventory stock outs, finished goods
inventory, account receivables (in days) and accounts payable(in days) cash cycle (in days)
working capital cycle (in days), flat organisation structure, etc.].

Once this control systems are established, the business operations can be expedited faster
with high degree of probability of success.

CONTROL FREQUENCY AND METHODS

Control frequency refers to how frequently the controls need to be exercised within a
given period of time. Here the question is: will the measures be taken to control the performance
periodically, say from time to time, continuously or occasionally? The control frequency depends
on several factors, namely:

(a) The quality expectations

(b) Process speed

(c) Scope for repair or correction

(d) Project Cost

(e) Urgency

(f) Reputation associated with

(g) Degree of accuracy required

(h) Discretionary powers

(i) Situation/context demands

(G) Public attention

(k) Regulatory compliances, and

(I) Any other factor affecting the cost, quality, time and service

The above list may not be exhaustive. While frequent controls are good for maintaining
quality of the product and services, they also become prohibitively costly. So, there is a need for
trade-off between the control requirements and the costs associated with. If it is a live TV
proceedings, any disruption or technical failure may result in loss of TV audience and hence it is
under constant supervision and control of a qualified engineer. Similarly, in case of an operation
theatre, we know how closely the vital readings of the patient are monitored on line because any
slight degree of omission may cost the human life. These are the cases where one cannot
compromise. Even if it is costly, it is worth spending so high to maintain uninterrupted services
with quality

The quality expectations of the customers and other stakeholders force companies to go
for highly frequent controls. If the process speed is high and the scope for repair or correction is
low, it is worth creating a system where the controls are exercised more frequently, In cases
where the project cost is high and implementation of the project costs without cost/time over
runs, the only way is to have continuous reports on progress of the project and it is worth
spending to appoint a team of full time project managers who will continuously monitor the
project progress, Six sigma companies which are known of attaining high quality (these
companies are known of less than 3.4 defects per one million cases of not meeting the required
specifications) give top priority for high degree of control to be nearly flawless in executing their
key processes.

Take the case of a materials manager, he spends closer control over the high cost
products/spares of his inventory, medium control on medium cost products and spares and low
control over less costly products and spares.

Legal compliances

Every legal requirement is a compliance to ensure that the organisation is progressing in

the right direction.

A publisher of textbooks need to pay more attention to every error because they are
supposed to produce error-free reading materials and the controls need to be very frequent at
each critical point such as pre-press proofs and printing. Relatively speaking, not controls at the
later stages such as binding, sales and marketing and distribution need not be so frequent.

Line manager

Line manager in shop floor needs to be very alert about the functioning of every machine
in line production. Any breakdown in the shop floor will delay the subsequent processes and this
calls for frequent controls.

Quality control managers

QC managers use control charts to assess the robustness of every manufacturing process
using process control and acceptance sampling methods. Here the controls are less frequent.

Banks

Earlier, banks used to have financial statements prepared for every quarter to project its
progress from quarter to quarter. Today with technology around, the banks close their accounts
on day to day basis and where require they prepare financial statements more frequently
 During pushkarms and Kumbhmela

During such events which are held on the banks of prominent rivers in India once in
every 12 years, large congregations of humans assemble to offer their prayers to the river Gods.
This type of events require continuous vigilance to prevent stampede, loss of human life, loss of
property. Leaders and officials including chief ministers personally sit in the locations to monitor
the conduct of the events.

The only decisive factor that can contribute to happy completion of such grand events is
the different types of control you exercise at different locations involving both government
machinery and public participation with continuous monitoring. There are cases of loss of human
life because of stampede and the reasons that were identified for such lapses were lack of
frequent controls.

During disasters

Natural calamities such as tsunami, earthquakes, floods, temple stampedes, the losses are
minimized only through preventive controls such as alerting the general public, cautioning and
even physically preventing the fishermen to go into the deep seas for fishing, closing down the
schools and colleges and assessing the situation using latest technology. It is only such controls
that can minimise the loss of human and physical resources.

In cases where the controls are less frequent particularly in providing public services such
as electricity or transportation, the problems could be very complex and intrigue. Some of the
examples include failures of Electricity department in control of transformers, failures of
railways in maintaining level crossings, failures of police dept in maintaining traffic and road
management, failures of municipalities in sewerage controls and food adulteration controls and
so on.

The traffic management and control systems

Traffic management and control systems in the modern context started levying large fines
for violation of every traffic rule. The fear of huge fine is the trigger to generate control among
the general public on roads. The police are empowered with latest gadgets such as digital
cameras to shoot every traffic violation such as wrong parking etc. The technology is leveraged
to record every over speed drive and bring it to book the case. Infact, all these controls brought a
little discipline on the road and reduced the accidents.

The E-chalans, body worn cameras and registering cases against those involved in Drunk
and drive in the presence of media-all these brought facelift for the police functioning. These
reduced the interface between the offenders and the police officials and this directly reduced the
cases of corruption and complaints of misbehavior.

On the success side of controls, example of corporate Hospitals and corporate colleges
for which Hyderabad is famous. Infact, in these two sectors namely Hospitals and Education,
control is really not a big necessity but here it changed the total game plan and gave them super
success. The controls are exercised in an imaginative and proactive way. These are the cases of
toning up the performance through systematic and periodic controls

Organisations can definitely move to next level of excellence by just focusing on

controls. Most of the organisations collapse only because they do not observe controls both at the
personal and organisational level. For instance, in many a case, corporate founders lose sight of
organisational goals when they start seeing big money and this is the critical stage when they
observe self-control and become role models so that their employees can emulate their leaders.
Not depositing company money into personal account is a big control leaders observe to
maintain difference between personal account and business account.

Adhere to ethics and human values in both personal and business transaction; never
compromise for short term gains or profits; look for long term sustainability and these act as
controls for organisations for toning up their performance. Also in all these cases, control
frequency should be of very high order.