CMC Notes Unit 1 to Unit 5 PDF

UNIT- I INTRODUCTION Management- Definition-Scope- Schools of Thought in Management – Levels of Management – Role and Functions of a Manager. Introduction Management is the administration of an organization, whether it be a business, a not-for-profit organiza...

UNIT- I INTRODUCTION Management- Definition-Scope- Schools of Thought in Management – Levels of Management – Role and Functions of a Manager. Introduction Management is the administration of an organization, whether it be a business, a not-for-profit organization, or government body. Management includes the activities of setting the strategy of an organization and coordinating the efforts of its employees or volunteers to accomplish its objectives through the application of available resources, such as financial, natural, technological, and human resources. The term "management" may also refer to the people who manage an organization. Management is also an academic discipline, a social science whose objective is to study social organization and organizational leadership. Definitions on Management: According to Harold Koontz, ―Management is the art of getting things done through and with people in formally organised groups.‖- in his book ―The Management Theory Jungle‖. According to Henri Fayol, ―To manage is to forecast and to plan, to organise, to command, to co-ordinate and to control.‖- in his book ―Industrial and General Administration‖. According to Peter Drucker, ―Management is a multi-purpose organ that manages business and manages managers and manages workers and work.‖- in his book ―The Principles of Management‖. According to Mary Parker Follet, ―Management is the art of getting things done through people.‖ According to William F.Glueck, Management is the effective utilization of human and material resources to achieve the enterprise objective. 1 Nature of Management Universal process: Wherever there is human activity, there is management. Without efficient management, objectives of the company cannot 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 competition, donation to NGO‘s etc. 2  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. 3  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 inter-disciplinary 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. Salient Features of Management Following are the salient features of management 1. Continuous and never ending Process. 2. Art of getting work done from people. 3. Is Result-Oriented. 4. Multidisciplinary in nature. 4  5. Group and not an individual activity. 6. Follows established principles or rules. 7. Aided but not replaced by computers. 8. Situational in nature. 9. Separate from ownership. 10. Both an art as well as a science. 11. Is all pervasive. 12. Intangible but its impact is felt. 13. Uses a professional approach in work. 14. Dynamic in nature. Important Characteristics of Management The following characteristics of management are as follows: 1. Management is Goal-oriented Process: No goal in the hand no need of management. In other words, we need management when we have some goals to be achieved. A manager on the basis of his knowledge and experience tries to achieve the goals which are already decided. Hence, nothing is wrong to say that management is a goal-oriented process. 2. Management is All-pervasive: Management is a universal phenomenon. The use of management is not restricted to business firms only it is applicable in profit-making, non-profit-making, business or non-business organisations; even a hospital, school, club and house has to be managed properly. Anything minus management is nothing or zero. If we deduct management out of these activities, the result will be failure or zero. It means management is necessary to conduct any type of activities. Hence, it is pervasive or universal. 5 3. Management is Multidimensional: The management is a three-dimensional activity: (i) Management of Work: All organisations are set up to perform some task or goal. Management activities aim at achieving goals or tasks to be accomplished. The task or work depends upon the nature of Business for example, work to be accomplished in a school is providing education, in hospital is to treat patient, in industry to manufacture some product. Management makes sure that work is accomplished effectively and efficiently. Every organisation is established for doing some work, like a school provides education, a hospital treats patients, a factory produces, etc. Of these, no work can be completed satisfactorily without management, (ii) Management of People: People refer to Human resources and Human resources are the most important assets of an organisation. An organisation can win over competitor with efficient employees only because two organisations can have same physical, technological and financial resources but not human resources. Management has to get task accomplished through people only. Each organisation is established for doing some work and the same is conducted by people. Hence, it is necessary to manage the people so that the work can be accomplished in a better way. Managing people has two dimensions: a) Taking care of employee‘s individual needs. b) Taking care of group of people. (iii) Management of Operations: To achieve the goals of an organisation many operations or activities need to be conducted, such as, production, sale, purchase, finance, accounting, R&D, etc. 6  Again, management is needed to make sure that operations are accomplished efficiently and effectively. 4. Management is a Continuous Process: The various managerial activities cannot be performed once for all, but it is a continuous process. A manager is busy sometimes in doing one managerial activity and at other times some other activity. Operations refer to activities of production cycle such as buying inputs, converting them into semi-finished goods, finished goods. Management of operations concentrates on mixing management of work with management of people, i.e., deciding what work has to be done, how it has to be done and who will do it. 5. Management is a Group Activity: Management always refers to a group of people involved in managerial activities. The management functions cannot be performed in isolation. Each individual performs his/her role at his/her status and department, and then only management function can be executed. 6. Management is a Dynamic Function: Management is a dynamic activity as it has to adjust itself to the regularly changing environment. In this context, it can be rightly said that nothing is eternal in management. It is necessary here to clearly understand that the recognition of management in the form of group is only in reference to big organisations, because in these kinds of organisations many managers are appointed at various managerial levels. On the other hand, in small organisations only one manager is sufficient as he can himself manage all the affairs of the organisation. For these kinds of organisations it would not be right to call management a group activity. 7 7. Management is an Intangible Force: Management is that power which cannot be seen. It can only be felt. If any organisation is heading toward higher levels of achievement, it signifies the existence of good management and vice versa. In other words, achievement reflects the quality of management and its effectiveness. 8. Composite process Management consists of series of functions which must be performed in a proper sequence. These functions are not independent of each other. They are inter-dependent on each other. As the main functions of management are planning, organising, staffing, directing and controlling; organising cannot be done without doing planning, similarly, directing function cannot be executed without staffing and planning and it is difficult to control the activities of employees without knowing the plan. All the functions inter-dependent on each other that is why management is considered as a composite process of all these functions. 9. Balancing effectiveness and efficiency Effectiveness means achieving targets and objectives on time. Efficiency refers to optimum or best utilisation of resources. Managements always try to balance both and get the work done successfully. Only effectiveness and only efficiency is not enough for an organisation: a balance must be created in both. For example, if the target of an employee is to produce 100 units in one month time and achieving the target by wasting resources and mishandling the machinery, will not be in the interest of organisation. On the other hand, if the employee spends lot of time in handling the machine carefully and managing the resources carefully and fails to complete the target on time, it will also not be in the interest of organisation. Manager sees to it that this target is achieved on time-and with optimum use of resources. 8 Objectives of Management The main objectives of management are: 1. Getting Maximum Results with Minimum Efforts The main objective of management is to secure maximum outputs with minimum efforts & resources. Management is basically concerned with thinking & utilizing human, material & financial resources in such a manner that would result in best combination. This combination results in reduction of various costs. 2. Increasing the Efficiency of factors of Production Through proper utilization of various factors of production, their efficiency can be increased to a great extent which can be obtained by reducing spoilage, wastages and breakage of all kinds, this in turn leads to saving of time, effort and money which is essential for the growth & prosperity of the enterprise. 3. Maximum Prosperity for Employer & Employees Management ensures smooth and coordinated functioning of the enterprise. This in turn helps in providing maximum benefits to the employee in the shape of good working condition, suitable wage system, incentive plans on the one hand and higher profits to the employer on the other hand. 4. Human betterment & Social Justice Management serves as a tool for the upliftment as well as betterment of the society. Through increased productivity & employment, management ensures better standards of living for the society. It provides justice through its uniform policies. Importance of Management 1. It helps in Achieving Group Goals It arranges the factors of production, assembles and organizes the resources, integrates the resources in effective manner to achieve goals. It directs group efforts 9 towards achievement of pre-determined goals. By defining objective of organization clearly there would be no wastage of time, money and effort. Management converts disorganized resources of men, machines, money etc. into useful enterprise. These resources are coordinated, directed and controlled in such a manner that enterprise work towards attainment of goals. 2. Optimum Utilization of Resources Management utilizes all the physical & human resources productively. This leads to efficacy in management. Management provides maximum utilization of scarce resources by selecting its best possible alternate use in industry from out of various uses. It makes use of experts, professional and these services leads to use of their skills, knowledge, and proper utilization and avoids wastage. If employees and machines are producing its maximum there is no under employment of any resources. 3. Reduces Costs It gets maximum results through minimum input by proper planning and by using minimum input & getting maximum output. Management uses physical, human and financial resources in such a manner which results in best combination. This helps in cost reduction. 4. Establishes Sound Organization No overlapping of efforts (smooth and coordinated functions). To establish sound organizational structure is one of the objective of management which is in tune with objective of organization and for fulfillment of this, it establishes effective authority & responsibility relationship i.e. who is accountable to whom, who can give instructions to whom, who are superiors & who are subordinates. Management fills up various positions with right persons, having right skills, training and qualification. All jobs should be cleared to everyone. 10 5. Establishes Equilibrium - It enables the organization to survive in changing environment. It keeps in touch with the changing environment. With the change is external environment, the initial co-ordination of organization must be changed. So it adapts organization to changing demand of market / changing needs of societies. It is responsible for growth and survival of organization. 6. Essentials for Prosperity of Society - Efficient management leads to better economical production which helps in turn to increase the welfare of people. Good management makes a difficult task easier by avoiding wastage of scarce resource. It improves standard of living. It increases the profit which is beneficial to business and society will get maximum output at minimum cost by creating employment opportunities which generate income in hands. Organization comes with new products and researches beneficial for society. Levels of Management The term ―Levels of Management‘ refers to a line of demarcation between various managerial positions in an organization. The number of levels in management increases when the size of the business and work force increases and vice versa. The level of management determines a chain of command, the amount of authority & status enjoyed by any managerial position. The levels of management can be classified in three broad categories: 1. Top level / Administrative level 2. Middle level / Executory 3. Low level / Supervisory / Operative / First-line managers Managers at all these levels perform different functions. The role of managers at all the three levels is discussed below: 11 Top Level of Management It consists of board of directors, chief executive or managing director. The top management is the ultimate source of authority and it manages goals and policies for an enterprise. It devotes more time on planning and coordinating functions. The role of the top management can be summarized as follows - a. Top management lays down the objectives and broad policies of the enterprise. b. It issues necessary instructions for preparation of department budgets, procedures, schedules etc. c. It prepares strategic plans & policies for the enterprise. d. It appoints the executive for middle level i.e. departmental managers. e. It controls & coordinates the activities of all the departments. f. It is also responsible for maintaining a contact with the outside world. g. It provides guidance and direction. h. The top management is also responsible towards the shareholders for the performance of the enterprise. Middle Level of Management The branch managers and departmental managers constitute middle level. They are responsible to the top management for the functioning of their department. They devote 12 more time to organizational and directional functions. In small organization, there is only one layer of middle level of management but in big enterprises, there may be senior and junior middle level management. Their role can be emphasized as - a. They execute the plans of the organization in accordance with the policies and directives of the top management. b. They make plans for the sub-units of the organization. c. They participate in employment & training of lower level management. d. They interpret and explain policies from top level management to lower level. e. They are responsible for coordinating the activities within the division or department. f. It also sends important reports and other important data to top level management. g. They evaluate performance of junior managers. h. They are also responsible for inspiring lower level managers towards better performance. Lower Level of Management Lower level is also known as supervisory / operative level of management. It consists of supervisors, foreman, section officers, superintendent etc. According to R.C. Davis, ―Supervisory management refers to those executives whose work has to be largely with personal oversight and direction of operative employees‖. In other words, they are concerned with direction and controlling function of management. Their activities include Assigning of jobs and tasks to various workers. a. They guide and instruct workers for day to day activities. b. They are responsible for the quality as well as quantity of production. c. They are also entrusted with the responsibility of maintaining good relation in the organization. 13  d. They communicate workers problems, suggestions, and recommendatory appeals etc to the higher level and higher level goals and objectives to the workers. e. They help to solve the grievances of the workers. f. They supervise & guide the sub-ordinates. g. They are responsible for providing training to the workers. h. They arrange necessary materials, machines, tools etc for getting the things done. i. They prepare periodical reports about the performance of the workers. j. They ensure discipline in the enterprise. k. They motivate workers. l. They are the image builders of the enterprise because they are in direct contact with the workers. Role and Functions of a Manager Among the many roles and responsibilities of a manager, the most important is motivating others. A manager‘s success depends not only on the work they do, but their ability to inspire others. A successful manager uses strong leadership traits and excellent people skills to get their team working and focused. Managers need the cooperation and skills of the people who work for them. The manager ―wears many hats‖ to develop, motivate and drive their team:  Leader: The manager sets the vision and motivation for their team. They develop the plan and drive their team to achieve it. A good manager leads and delegates by earning the respect of employees and motivating them to be their best.  Project manager: A manager turns company goals into actionable project plans. They use budgets, resources and systems efficiently.  Coach: Managers train their employees properly and help them grow within the company. They help employees develop skills and their careers. 14   Resource planner: Managers hire new employees, address performance issues, and when needed, discipline or terminate employees. This is an integral part of the job, and when they use the proper hiring strategies, a manager can create a successful team of employees. Becoming a manager To become a manager, incorporate the behaviors of a manager in your current role. Show a strong sense of initiative and ownership. Learn how to delegate if your job offers the opportunity. Here are some other tips: 1. Talk to your employer: Tell your employer you‘re actively seeking opportunities to grow your management skills. This can alert your employer to your intention and progress. They may also give you start training you for the role. 2. Hone your skills: Work on strengthening your knowledge of all aspects of the business. 3. Be consistent: By improving your skills and consistently showing a healthy level of leadership, efficiency and creative thinking, you‘ll smoothly implement the roles of a manager in your daily work, You will need confidence and supportive work relationships that help you manage stress 4. Get feedback regularly: Ask for feedback on your progress. This shows that you can take constructive criticism well. 15  UNIT II PLANNING Planning – Concepts, Objectives, Nature, Limitation, Process of planning, Importance, Forms, techniques and Process of decision making. Planning (also called forethought) is the process of thinking about and organizing the activities required to achieve a desired goal. It involves the creation and maintenance of a plan, such as psychological aspects that require conceptual skills. Meaning and Concept of Planning In simple words, planning is deciding in advance what is to be done, when where, how and by whom it is to be done. Planning bridges the gap from where we are to where we want to go. It includes the selection of objectives, policies, procedures and programmes from among alternatives. A plan is a predetermined course of action to achieve a specified goal. It is an intellectual process characterized by thinking before doing. It is an attempt on the part of manager to anticipate the future in order to achieve better performance. Planning is the primary function of management. Concept of Planning Planning is based on the theory of ―thinking before acting‖. Planning is an integral part of our life. We make plans in every step of life whether it be to go to school or to buy household goods during shopping. We make plans according to the limitations of our budget and resources to get maximum satisfaction and to fulfil goals from out activities. Planning is the most basic and primary function of management. It is the pre-decided outline of the activities to be conducted in the organization. Planning is the process of deciding when, what, when where and how to do a certain activity before starting to work. 16  It is an intellectual process which needs a lot of thinking before a formation of plans. Planning is to set goals and to make certain guidelines achieve the goals. Also, Planning means to formulate policies, segregation of budget, future programs etc. These are all done to make the activity successful. Management has been described as a social process involving responsibility for careful and effective planning & regulation of the operation of an enterprise in the fulfilment of given purposes. It is a dynamic process consisting of various elements and activities. These activities are different from operative functions like marketing, finance, purchase etc. Rather these activities are common to every manger irrespective of his level or status. Different experts have classified functions of management. According to George & Jerry, ―There are four fundamental functions of management, i.e. planning, organizing, actuating and controlling‖. Definitions of Planning Different authors have given different definitions of planning from time to time. The main definitions of planning are as follows:  According to Alford and Beatt, ―Planning is the thinking process, the organized foresight, the vision based on fact and experience that is required for intelligent action.‖  According to Theo Haimann, ―Planning is deciding in advance what is to be done. When a manager plans, he projects a course of action for further attempting to achieve a consistent co-ordinate structure of operations aimed at the desired results.  According to Billy E. Goetz, ―Planning is fundamentally choosing and a planning problem arises when an alternative course of action is discovered.‖  According to Koontz and O‘ Donnell, ―Planning is an intellectual process, conscious determination of course of action, the basing of decision on purpose, facts and considered estimates.‖ 17  According to Allen, ―A plan is a trap laid to capture the future.‖ Nature / Characteristics of Planning The main characteristics or nature of planning is given below: Planning is an Intellectual Process Planning is an intellectual process of thinking in advance. It is a process of deciding the future on the series of events to follow. Planning is a process where a number of steps are to be taken to decide the future course of action. Managers or executives have to consider various courses of action, achieve the desired goals, go in details of the pros and cons of every course of action and then finally decide what course of action may suit them best. Planning Contributes to the Objectives Planning contributes positively in attaining the objectives of the business enterprise. Since plans are there from the very first stage of operation, the management is able to handle every problem successfully. Plan tries to set everything right. A purposeful, sound and effective planning process knows how and when to tackle a problem. This leads to success. Objectives thus are easily achieved. Planning is a Primary Function of Management Planning precedes other functions in the management process. Certainly, setting of goals to be achieved and lines of action to be followed precedes the organization, direction, supervision and control. No doubt, planning precedes other functions of management. It is primary requisite before other managerial functions step in. But all functions are inter-connected. It is mixed in all managerial functions but there too it gets precedence. It thus gets primary everywhere. A continuous Process Planning is a continuous process and a never ending activity of a manager in an enterprise based upon some assumptions which may or may not come true in the future. 18 Therefore, the manager has to go on modifying revising and adjusting plans in the light of changing circumstances. According to George R. Terry, ―Planning is a continuous process and there is no end to it. It involves continuous collection, evaluation and selection of data, and scientific investigation and analysis of the possible alternative courses of action and the selection of the best alternative. Planning Pervades Managerial Activities From primary of planning follows pervasiveness of planning. It is the function of every managerial personnel. The character, nature and scope of planning may change fro personnel to personnel but the planning as an action remains intact. According to Billy E. Goetz, ―Plans cannot make an enterprise successful. Action is required, the enterprise must operate managerial planning seeks to achieve a consistent, coordinated structure of operations focused on desired trends. Without plans, action must become merely activity producing nothing but chaos.‖ Role, Significance, Importance & Advantages of Planning An organisation without planning is like a sailboat minus its rudder. Without planning, organisation, are subject to the winds of organizational change. Planning is one of the most important and crucial functions of management. According to Koontz and O‘Donnell, ―Without planning business becomes random in nature and decisions become meaningless and adhoc choices.‖ According to Geroge R. Terry, ―Planning is the foundation of most successful actions of any enterprise.‖ Planning becomes necessary due to the following reasons: Reduction of Uncertainty Future is always full of uncertainties. A business organisation has to function in these uncertainties. It can operate successfully if it is able to predict the uncertainties. Some of the uncertainties can be predicted by undertaking systematic. Some of the uncertainties can be predicted by undertaking systematic forecasting. Thus, planning 19 helps in foreseeing uncertainties which may be caused by changes in technology, fashion and taste of people, government rules and regulations, etc. Better Utilization of Resources An important advantage of planning is that it makes effective and proper utilization of enterprise resources. It identifies all such available resources and makes optimum use of these resources. Increases Organizational Effectiveness Planning ensures organizational effectiveness. Effectiveness ensures that the organisation is in a position to achieve its objective due to increased efficiency of the organisation. Reduces the Cost of Performance Planning assists in reducing the cost of performance. It includes the selection of only one course of action amongst the different courses of action that would yield the best results at minimum cost. It removes hesitancy, avoids crises and chaos, eliminates false steps and protects against improper deviations. Concentration on Objectives It is a basic characteristic of planning that it is related to the organizational objectives. All the operations are planned to achieve the organizational objectives. Planning facilitates the achievement of objectives by focusing attention on them. It requires the clear definition of objectives so that most appropriate alternative courses of action are chosen. Helps in Co-ordination Good plans unify the interdepartmental activity and clearly lay down the area of freedom in the development of various sub-plans. Various departments work in accordance with the overall plans of the organisation. Thus, there is harmony in the organisation, and duplication of efforts and conflict of jurisdiction are avoided. 20 Makes Control Effective Planning and control are inseparable in the sense that unplanned action cannot be controlled because control involves keeping activities on the predetermined course by rectifying deviations from plans. Planning helps control by furnishing standards of performance. Encouragement to Innovation Planning helps innovative and creative thinking among the managers because many new ideas come to the mind of a manager when he is planning. It creates a forward-looking attitude among the managers. Increase in Competitive Strength Effective planning gives a competitive edge to the enterprise over other enterprises that do not have planning or have ineffective planning. This is because planning may involve expansion of capacity, changes in work methods, changes in quality, anticipation of tastes and fashions of people and technological changes etc. Delegation is Facilitated A good plan always facilitates delegation of authority in a better way to subordinates. Advantages of Planning 1. Planning facilitates management by objectives. a) Planning begins with determination of objectives. b) It highlights the purposes for which various activities are to be undertaken. c) In fact, it makes objectives more clear and specific. d) Planning helps in focusing the attention of employees on the objectives or goals of enterprise. e) Without planning an organization has no guide. f) Planning compels manager to prepare a Blue-print of the courses of action to be followed for accomplishment of objectives. g) Therefore, planning brings order and rationality into the organization. 21  2. Planning minimizes uncertainties. a) Business is full of uncertainties. b) There are risks of various types due to uncertainties. c) Planning helps in reducing uncertainties of future as it involves anticipation of future events. d) Although future cannot be predicted with cent percent accuracy but planning helps management to anticipate future and prepare for risks by necessary provisions to meet unexpected turn of events. e) Therefore with the help of planning, uncertainties can be forecasted which helps in preparing standbys as a result, uncertainties are minimized to a great extent. 3. Planning facilitates co-ordination. a) Planning revolves around organizational goals. b) All activities are directed towards common goals. c) There is an integrated effort throughout the enterprise in various departments and groups. d) It avoids duplication of efforts. In other words, it leads to better co-ordination. e) It helps in finding out problems of work performance and aims at rectifying the same. 4. Planning improves employee’s moral. a. Planning creates an atmosphere of order and discipline in organization. b. Employees know in advance what is expected of them and therefore conformity can be achieved easily. c. This encourages employees to show their best and also earn reward for the same. d. Planning creates a healthy attitude towards work environment which helps in boosting employees moral and efficiency. 22 5. Planning helps in achieving economies. a. Effective planning secures economy since it leads to orderly allocation of resources to various operations. b. It also facilitates optimum utilization of resources which brings economy in operations. c. It also avoids wastage of resources by selecting most appropriate use that will contribute to the objective of enterprise. For example, raw materials can be purchased in bulk and transportation cost can be minimized. At the same time it ensures regular supply for the production department, that is, overall efficiency. 6. Planning facilitates controlling. a. Planning facilitates existence of certain planned goals and standard of performance. b. It provides basis of controlling. c. We cannot think of an effective system of controlling without existence of well thought out plans. d. Planning provides pre-determined goals against which actual performance is compared. e. In fact, planning and controlling are the two sides of a same coin. If planning is root, controlling is the fruit. 7. Planning provides competitive edge. a. Planning provides competitive edge to the enterprise over the others which do not have effective planning. This is because of the fact that planning may involve changing in work methods, quality, quantity designs, extension of work, redefining of goals, etc. 23  b. With the help of forecasting not only the enterprise secures its future but at the same time it is able to estimate the future motives of it‘s competitor which helps in facing future challenges. c. Therefore, planning leads to best utilization of possible resources, improves quality of production and thus the competitive strength of the enterprise is improved. 8. Planning encourages innovations. a. In the process of planning, managers have the opportunities of suggesting ways and means of improving performance. b. Planning is basically a decision making function which involves creative thinking and imagination that ultimately leads to innovation of methods and operations for growth and prosperity of the enterprise. Limitations of Planning 1. Internal Limitations There are several limitations of planning. Some of them are inherit in the process of planning like rigidity and other arise due to shortcoming of the techniques of planning and in the planners themselves. Rigidity a. Planning has tendency to make administration inflexible. b. Planning implies prior determination of policies, procedures and programmes and a strict adherence to them in all circumstances. c. There is no scope for individual freedom. d. The development of employees is highly doubted because of which management might have faced lot of difficulties in future. e. Planning therefore introduces inelasticity and discourages individual initiative and experimentation. 24 Misdirected Planning a) Planning may be used to serve individual interests rather than the interest of the enterprise. a) Attempts can be made to influence setting of objectives, formulation of plans and programmes to suit ones own requirement rather than that of whole organization. b) Machinery of planning can never be freed of bias. Every planner has his own likes, dislikes, preferences, attitudes and interests which is reflected in planning. Time consuming a) Planning is a time consuming process because it involves collection of information, it‘s analysis and interpretation thereof. This entire process takes a lot of time specially where there are a number of alternatives available. b) Therefore planning is not suitable during emergency or crisis when quick decisions are required. Probability in planning a) Planning is based on forecasts which are mere estimates about future. b) These estimates may prove to be inexact due to the uncertainty of future. c) Any change in the anticipated situation may render plans ineffective. d) Plans do not always reflect real situations inspite of the sophisticated techniques of forecasting because future is unpredictable. e) Thus, excessive reliance on plans may prove to be fatal. False sense of security a) Elaborate planning may create a false sense of security to the effect that everything is taken for granted. b) Managers assume that as long as they work as per plans, it is satisfactory. c) Therefore they fail to take up timely actions and an opportunity is lost. 25  d) Employees are more concerned about fulfillment of plan performance rather than any kind of change. Expensive a) Collection, analysis and evaluation of different information, facts and alternatives involves a lot of expense in terms of time, effort and money b) According to Koontz and O‘Donell, ‘ Expenses on planning should never exceed the estimated benefits from planning. ‘ 2. External Limitations of Planning a) Political Climate- Change of government from Congress to some other political party, etc. b) Labour Union- Strikes, lockouts, agitations. c) Technological changes- Modern techniques and equipments, computerization. d) Policies of competitors- Eg. Policies of Coca Cola and Pepsi. e) Natural Calamities- Earthquakes and floods. f) Changes in demand and prices- Change in fashion, change in tastes, change in income level, demand falls, price falls, etc. Steps involved in Planning Planning is a process which embraces a number of steps to be taken. Planning is an intellectual exercise and a conscious determination of courses of action. Therefore, it requires courses of action. The planning process is valid for one organisation and for one plan, may not be valid for other organizations or for all types of plans, because various factors that go into planning process may differ from organisation to organisation or from plan to plan. For example, planning process for a large organisation may not be the same for a small organisation. However, the major steps involved in the planning process of a major organisation or enterprise are as follows: 26 Establishing objectives The first and primary step in planning process is the establishment of planning objectives or goals. Definite objectives, in fact, speak categorically about what is to be done, where to place the initial emphasis and the things to be accomplished by the network of policies, procedures, budgets and programmes, the lack of which would invariably result in either faulty or ineffective planning. It needs mentioning in this connection that objectives must be understandable and rational to make planning effective. Because the major objective, in all enterprise, needs be translated into derivative objective, accomplishment of enterprise objective needs a concrete endeavor of all the departments. Establishment of Planning Premises Planning premises are assumptions about the future understanding of the expected situations. These are the conditions under which planning activities are to be undertaken. These premises may be internal or external. Internal premises are internal variables that affect the planning. These include organizational polices, various resources and the ability of the organisation to withstand the environmental pressure. External premises include all factors in task environment like political, social technological, competitors‘ plans and actions, government policies, market conditions. Both internal factors should be considered in formulating plans. At the top level mainly external premises are considered. As one moves downward, internal premises gain importance. Determining Alternative Courses The next logical step in planning is to determine and evaluate alternative courses of action. It may be mentioned that there can hardly be any occasion when there are no alternatives. And it is most likely that alternatives properly assessed may prove worthy and meaningful. As a matter of fact, it is imperative that alternative courses of action must be developed before deciding upon the exact plan. 27 Evaluation of Alternatives Having sought out the available alternatives along with their strong and weak points, planners are required to evaluate the alternatives giving due weight-age to various factors involved, for one alternative may appear to be most profitable involving heavy cash outlay whereas the other less profitable but involve least risk. Likewise, another course of action may be found contributing significantly to the company‘s long-range objectives although immediate expectations are likely to go unfulfilled. Evidently, evaluation of alternative is a must to arrive at a decision. Otherwise, it would be difficult to choose the best course of action in the perspective of company needs and resources as well as objectives laid down. Selecting a Course of Action The fifth step in planning is selecting a course of action from among alternatives. In fact, it is the point of decision-making-deciding upon the plan to be adopted for accomplishing the enterprise objectives. Formulating Derivative Plans To make any planning process complete the final step is to formulate derivative plans to give effect to and support the basic plan. For example, if Indian Airlines decide to run Jumbo Jets between Delhi an Patna, obliviously, a number of derivative plans have to be framed to support the decision, e.g., a staffing plan, operating plans for fuelling, maintenance, stores purchase, etc. In other words, plans do not accomplish themselves. They require to be broken down into supporting plans. Each manager and department of the organisation is to contribute to the accomplishment of the master plan on the basis of the derivative plans. Establishing Sequence of Activities Timing an sequence of activities are determined after formulating basic and derivative plans, so that plans may be put into action. Timing is an essential consideration 28 in planning. It gives practical shape and concrete form to the programmes. The starting and finishing times are fixed for each piece of work, so as to indicate when the within what time that work is to be commenced and completed. Bad timing of programmes results in their failure. To maintain a symmetry of performance and a smooth flow of work, the sequence of operation shaped be arranged carefully by giving priorities to some work in preference to others. Under sequence it should be decided as to who will don what and at what time. Feedback or Follow-up Action Formulating plans and chalking out of programmes are not sufficient, unless follow-up action is provided to see that plans so prepared and programmes chalked out are being carried out in accordance with the plan and to see whether these are not kept in cold storage. It is also required to see whether the plan is working well in the present situation. If conditions have changed, the plan current plan has become outdated or inoperative it should be replaced by another plan. A regular follow-up is necessary and desirable from effective implementation and accomplishment of tasks assigned. The plan should be communicated to all persons concerned in the organisation. Its objectives and course of action must be clearly defined leaving no ambiguity in the minds of those who are responsible for its execution. Planning is effective only when the persons involved work in a team spirit and all are committed to the objectives, policies, programmes, strategies envisaged in the plan. Decision Making The act of making up your mind about something, or a position or opinion or judgment reached after consideration. The process of selecting from several choices, products or ideas, and taking action. 29  A decision can be defined as a course of action purposely chosen from a set of alternatives to achieve organizational or managerial objectives or goals. Decision making process is continuous and indispensable component of managing any organization or business activities. Decision Making Technique The following is a list of techniques and tools a manager can use to explore different options to land upon a chosen decision: Marginal Analysis Marginal analysis helps organizations allocate resources to increase profitability and benefits and reduce costs. An example from indeed.com is if a company has the budget to hire an employee, a marginal analysis may show that hiring that person provides a net marginal benefit because the ability to produce more products outweighs the increase in labor costs. SWOT Diagram This tool helps a manager study a situation in four quadrants:  Strengths: Where does the organization excel compared to its competition? Consider the internal and external strengths.  Weaknesses: What could the organization improve?  Opportunities: How can the organization leverage its strengths to create new avenues for success? How could addressing a specific weakness provide a unique opportunity?  Threats: Determine what obstacles prevent the organization from achieving its goals. Decision Matrix A decision matrix can provide clarity when dealing with different choices and variables. It is like a pros/cons list, but decision-makers can place a level of importance on each factor. According to Dashboards, to build a decision matrix: 30  List your decision alternatives as rows  List relevant factors as columns  Establish a consistent scale to assess the value of each combination of alternatives and factors  Determine how important each factor is in choosing a final decision and assign weights accordingly  Multiply your original ratings by the weighted rankings  Add up the factors under each decision alternative  The highest-scoring option wins Pareto Analysis The Pareto Principle helps identify changes that will be the most effective for an organization. It‘s based on the principle that 20 percent of factors frequently contribute to 80 percent of the organization‘s growth. For example, suppose 80 percent of an organization‘s sales came from 20 percent of its customers. A business can use the Pareto Principle by identifying the characteristics of that 20 percent customer group and finding more like them. By identifying which small changes have the most significant impact, an organization can better prioritize its decisions and energies. Decision Making Process (5 Steps) Decision making is crucial for running a business enterprise which faces a large number of problems requiring decisions. Which product to be produced, what price to be charged, what quantity of the product to be produced, what and how much advertisement expenditure to be made to promote the sales, how much investment expenditure to be incurred are some of the problems which require decisions to be made by managers. 31 The five steps involved in managerial decision making process are explained below: 1. Establishing the Objective: The first step in the decision making process is to establish the objective of the business enterprise. The important objective of a private business enterprise is to maximise profits. However, a business firm may have some other objectives such as maximisation of sales or growth of the firm. But the objective of a public enterprise is normally not of maximisation of profits but to follow benefit-cost criterion. According to this criterion, a public enterprise should evaluate all social costs and benefits when making a decision whether to build an airport, a power plant, a steel plant, etc. 2. Defining the Problem: The second step in decision making process is one of defining or identifying the problem. Defining the nature of the problem is important because decision making is after all meant for solution of the problem. For instance, a cotton textile firm may find that its profits are declining. It needs to be investigated what are the causes of the problem of decreasing profits. Whether it is the wrong pricing policy, bad labour-management relations or the use of outdated technology which is causing the problem of declining profits. Once the source or reason for falling profits has been found, the problem has been identified and defined. 3. Identifying Possible Alternative Solutions (i.e. Alternative Courses of Action): Once the problem has been identified, the next step is to find out alternative solutions to the problem. This will require considering the variables that have an impact on the problem. In this way, relationship among the variables and with the problems has to be established. 32 In regard to this, various hypotheses can be developed which will become alternative courses for the solution of the problem. For example, in case of the problem mentioned above, if it is identified that the problem of declining profits is due to be use of technologically inefficient and outdated machinery in production. 4. Evaluating Alternative Courses of Action: The next step in business decision making is to evaluate the alternative courses of action. This requires, the collection and analysis of the relevant data. Some data will be available within the various departments of the firm itself, the other may be obtained from the industry and government. The data and information so obtained can be used to evaluate the outcome or results expected from each possible course of action. Methods such as regression analysis, differential calculus, linear programming, cost- benefit analysis are used to arrive at the optimal course. The optimum solution will be one that helps to achieve the established objective of the firm. The course of action which is optimum will be actually chosen. It may be further noted that for the choice of an optimal solution to the problem, a manager works under certain constraints. The constraints may be legal such as laws regarding pollution and disposal of harmful wastes; they way be financial (i.e. limited financial resources); they may relate to the availability of physical infrastructure and raw materials, and they may be technological in nature which set limits to the possible output to be produced per unit of time. The crucial role of a business manager is to determine optimal course of action and he has to make a decision under these constraints. 5. Implementing the Decision: After the alternative courses of action have been evaluated and optimal course of action selected, the final step is to implement the decision. The implementation of the decision requires constant monitoring so that expected results from the optimal course of 33 action are obtained. Thus, if it is found that expected results are not forthcoming due to the wrong implementation of the decision, then corrective measures should be taken. However, it should be noted that once a course of action is implemented to achieve the established objective, changes in it may become necessary from time to time in response in changes in conditions or firm‘s operating environment on the basis of which decisions were taken. The five steps in the decision making process are shown in the following figure. Process and steps involved in decision making: Seven most essential steps involved in decision making process are: 1. Define the problem, 2. Analysing the problem, 3. Developing alternative solutions, 4. Selecting the best type of alternative, 5. Implementation of the decision, 6. Follow up, 7. Monitoring and feedback! Decision-making is concerned with the selection of one alternative course of action from two or more alternative courses of action. Precisely it can be stated as a choice-making activity. 34 These steps can be explained as under: 1. Define the problem: The first and the foremost step in the decision-making process are to define the real problem. A problem can be explained as a question for and appropriate solution. The manager should consider critical or strategic factors in defining the problem. These factors are, in fact, obstacles in the way of finding proper solution. These are also known as limiting factors. For example, if a machine stops working due to non-availability of screw, screw is the limiting factor in this case. Similarly fuse is a limiting or critical factor in house lighting. While selecting alternative or probable solution to the problem, the more the decision- making takes into account those factors that are limiting or critical to the alternative solutions, the easier it becomes to take the best decision. Other examples of critical or limiting factor may be materials, money, managerial skill, technical know-how, employee morale and customer demand, political situation and government regulations, etc. 2. Analysing the problem: After defining the problem, the next important step is a systematic analysis of the available data. Sound decisions are based on proper collection, classification and analysis of facts and figures. There are three principles relating to the analysis and classification as explained below: (i) The futurity of the decision. This means to what length of time, the decision will be applicable to a course of action. (ii) The impact of decision on other functions and areas of the business. (iii) The qualitative considerations which come into the picture. 35 Developing alternative solutions: After defining and analysing the problem, the next step is to develop alternative solutions. The main aim of developing alternative solutions is to have the best possible decision out of the available alternative courses of action. In developing alternative solutions the manager comes across creative or original solutions to the problems. In modern times, the techniques of operations research and computer applications are immensely helpful in the development of alternative courses of action. 4. Selecting the best type of alternative: After developing various alternatives, the manager has to select the best alternative. It is not an easy task. The following are the four important points to be kept in mind in selecting the best from various alternatives: (a) Risk element involved in each course of action against the expected gain. (b) Economy of effort involved in each alternative, i.e. securing desired results with the least efforts. (c) Proper timing of the decision and action. (d) Final selection of decision is also affected by the limited resources available at our disposal. Human resources are always limited. We must have right type of people to carry out our decisions. Their calibre, understanding, intelligence and skill will finally determine what they can and cannot do. 5. Implementation of the decision: Under this step, a manager has to put the selected decision into action. For proper and effective execution of the decision, three things are very important i.e., (a) Proper and effective communication of decisions to the subordinates. Decisions should be communicated in clear, concise and understandable manner. (b) Acceptance of decision by the subordinates is important. Group participation and involvement of the employees will facilitate the smooth execution of decisions. 36  (c) Correct timing in the execution of decision minimizes the resistance to change. Almost every decision introduces a change and people are hesitant to accept a change. Implementation of the decision at the proper time plays an important role in the execution of the decision. 6. Follow up: A follow up system ensures the achievement of the objectives. It is exercised through control. Simply stated it is concerned with the process of checking the proper implementation of decision. Follow up is indispensable so as to modify and improve upon the decisions at the earliest opportunity. 7. Monitoring and feedback: Feedback provides the means of determining the effectiveness of the implemented decision. If possible, a mechanism should be built which would give periodic reports on the success of the implementation. In addition, the mechanisms should also serve as an instrument of ―preventive maintenance‖, so that the problems can be prevented before they occur. According to Peter Drucker, the monitoring system should be such that the manager can go and look for himself for first hand information which is always better than the written reports or other second-hand sources. In many situations, however, computers are very successfully used in monitoring since the information retrieval process is very quick and accurate and in some instances the self-correcting is instantaneous. 37  UNIT III ORGANISATIONAL LEVELS Types of Business Organisations - Structure - Span of Control – Departmentalisation – Selection, Training and Development, Performance Management, Career Planning and Management A social unit of people that is structured and managed to meet a need or to pursue collective goals. All organizations have a management structure that determines relationships between the different activities and the members, and subdivides and assigns roles, responsibilities, and authority to carry out different tasks. Organizations are open systems--they affect and are affected by their environment. Forms of Business Organization 1. Sole Proprietorship A sole proprietorship is a business owned by only one person. It is easy to set-up and is the least costly among all forms of ownership. The owner faces unlimited liability; meaning, the creditors of the business may go after the personal assets of the owner if the business cannot pay them. The sole proprietorship form is usually adopted by small business entities. 2. Partnership A partnership is a business owned by two or more persons who contribute resources into the entity. The partners divide the profits of the business among themselves. In general partnerships, all partners have unlimited liability. In limited partnerships, creditors cannot go after the personal assets of the limited partners. 3. Corporation A corporation is a business organization that has a separate legal personality from its owners. Ownership in a stock corporation is represented by shares of stock. The owners (stockholders) enjoy limited liability but have limited involvement in the 38 company's operations. The board of directors, an elected group from the stockholders, controls the activities of the corporation. In addition to those basic forms of business ownership, these are some other types of organizations that are common today: 4. Limited Liability Company Limited liability companies (LLCs) in the USA, are hybrid forms of business that have characteristics of both a corporation and a partnership. An LLC is not incorporated; hence, it is not considered a corporation. Nonetheless, the owners enjoy limited liability like in a corporation. An LLC may elect to be taxed as a sole proprietorship, a partnership, or a corporation. 5. Cooperative A cooperative is a business organization owned by a group of individuals and is operated for their mutual benefit. The persons making up the group are called members. Cooperatives may be incorporated or unincorporated. Some examples of cooperatives are: water and electricity (utility) cooperatives, cooperative banking, credit unions, and housing cooperatives. Types of Business Organization It is important that the business owner seriously considers the different forms of business organization—types such as sole proprietorship, partnership, and corporation. Which organizational form is most appropriate can be influenced by tax issues, legal issues, financial concerns, and personal concerns. For the purpose of this overview, basic information is presented to establish a general impression of business organization. Sole Proprietorship A Sole Proprietorship consists of one individual doing business. Sole Proprietorships are the most numerous form of business organization in the United States, however they account for little in the way of aggregate business receipts. 39  Advantages  Ease of formation and dissolution. Establishing a sole proprietorship can be as simple as printing up business cards or hanging a sign announcing the business. Taking work as a contract carpenter or freelance photographer, for example, can establish a sole proprietorship. Likewise, a sole proprietorship is equally easy to dissolve.  Typically, there are low start-up costs and low operational overhead.  Ownership of all profits.  Sole Proprietorships are typically subject to fewer regulations.  No corporate income taxes. Any income realized by a sole proprietorship is declared on the owner's individual income tax return. Disadvantages  Unlimited liability. Owners who organize their business as a sole proprietorship are personally responsible for the obligations of the business, including actions of any employee representing the business.  Limited life. In most cases, if a business owner dies, the business dies as well.  It may be difficult for an individual to raise capital. It's common for funding to be in the form of personal savings or personal loans.  The most daunting disadvantage of organizing as a sole proprietorship is the aspect of unlimited liability. An advantage of a sole proprietorship is filing taxes as an individual rather than paying corporate tax rates. Some hybrid forms of business organization may be employed to take advantage of limited liability and lower tax rates for those businesses that meet the requirements. These include S Corporations, and Limited Liability Companies (LLC's). Where S-Corps are a Federal Entity, LLC's are regulated by the various states. LLC's give the option for 40  profits from the business to pass through to the owner's individual income tax return. Different Forms of organization When there is one man, there is hardly any need for any organisation. When the enterprise expands, some pattern of organisation should be adopted. Generally, the following are the types of organisation. 1. Line Organization This is the simplest and oldest form of organisation. It is also referred as the 'Military' or 'Traditional' or 'Scalar' or 'Hierarchical" form of organisation. An important feature of such types of organisation is the superior- sub-ordinate relationship. In this type of organisation authority descends from the top to its bottom level through downward delegation of authority. Sub-ordinates become responsible to their immediate superiors. All decisions and orders are made by the top executives and handed down to sub-ordinates. This type of organisation is as that of military administration. The topmost management has full control over the entire enterprise. This form is suitable: (a) If the business is comparatively small. (b) If the labour management problems are easy to solve. (c) If the processes are easily directed. (d) If the work is of a routine nature. Merits of Line Organization 1. It is simple to work. 2. It is economical and effective. 3. It is easy to fix responsibility. 4. It facilitates quick decisions and prompt actions. 41  5. Quick communication is easy. 6. Discipline can easily be maintained. Demerits of Line Organization 1. The organization is rigid and inflexible. 2. It works on a dictatorial basis. 3. Departmental heads act in their own whims and desires; as such it is difficult to secure co-ordination of the activities of workers and department. 4. In big business it does not operate satisfactorily. 2. Functional Organization The limitations of line organisation have been removed under this system. All types of work of the organisation are grouped and managed by the top executive. There are separate functional departments for major functions of the enterprise, for example personnel department, sales department, purchase department, finance department, etc. Each department does its function for the entire organisation. Sales department does its function for the whole organisation. Purchase department does its function for the whole enterprise. The functional organisation works through the line organisation. Functional organisation is based on expert knowledge and makes the greatest use of division of labour resulting in high efficiency and specialisation. Features (Functional Organization) 1. The whole task of the enterprise is divided into specialized functions. 2. Each function is performed by a specialist. 3. The specialist in charge of a functional department has the authority over all other employees for his function. 42  4. Specialists operate with considerable independence. Merits of Functional Organization 1. Greatest use of division of labour is possible. 2. The system is based on expert knowledge. 3. Functional efficiency of the worker can be maintained. 4. Mass production is made by standardization and specialization. 5. Separation of mental and manual functions is possible. 6. Methods and operations can be standardized. Demerits of Functional Organization 1. Too many experts and bosses (high officials) create confusions in the minds of the worker. 2 It is difficult to fix responsibility on workers. 3. Discipline and morale of the workers are seriously affected, because of contradictory orders from different experts. 4. There are heavy overhead expenses. 3. Line and Staff Organization In this type, the organisation is based on the line organization and the functional experts advice the line officers as to the functions of the enterprise. The line officers are the executives and the staff officers are their advisors. Though the staff officers do not have the power to command the line officers, their advice is generally adhered to. The combination of line organisation with this expert staff forms the type of organisation-line and staff. The Tine' keeps the discipline and the staff provides expert information. The line gets out the production and the staff carries on research, planning, fixing standard etc. This type of organisation is suitable for large concerns. 43  The line officers give orders, decisions etc., to sub-ordinates in consultations or guidance with the staff officers. The underlying idea of this method is that specialised work is to be left to experts, who will give advice on specialised grounds- investigation, research, etc. The staff officers have no executive positions in the concern and are the thinkers, while the line officers are the doers. Merits of Line and Staff Organization 1. This type is based on specialization. 2. It brings expert knowledge upon the whole concern. 3. Increased efficiency of operations may be possible. 4. Mass production is possible. Demerits of Line and Staff Organization 1. There arises confusion unless the duties and responsibilities are clearly. Indicated by charts and office manuals. 2. Advice and expert information are given to the workers through the line officers. It is possible that the workers may misunderstand or misinterpret. 4. Committee Organization Committee organization is widely used for the purpose of discharging advisory functions of the management. Committees are found in different levels of organization. A committee is a group of people who meet by plan to discuss or make a decision on a particular subject. Because of its advantages, committee organization is preferred. Committee means a body of persons, for example, Management committee consisting of General Manager and Departmental heads. Committees have become an important instrument of management in modern organisations; they may be used for the following objectives: 44  1. To secure view-point and consultation of various persons in the organisations. 2. To give participation and representation to different groups or interests; 3. To co-ordinate the activities of different departments; 4. To review the performance of certain units; 5. To facilitate communication and co-operation among diverse groups. Merits of committee organisation 1. It facilitates co-ordination of activity of various departments. 2. Pooled knowledge and judgment become available to the business thus its efficiency increases. 3. It is a good media of training and educating employees. 4. It helps to improve the motivation and morale of employees. 5. It promotes mutual understanding, teamwork and co-operation among employees. Demerits of Committee Organisation 1. It is not only costly in terms of time it consumes, but also in terms of money involved. 2. Difficulty in reaching agreement results in indecision. 3. Compromise at the cost of efficiency is often affected. 4. Indecision may lead to a breakdown of group action. 5. Committee management is slower in reaching decisions than a one-man rule. Structure of business Organisations: By establishing transparent relationships between departments, organizational structures provide clarity, focus and efficiency to employees so that they know who they report to and their goals. 45 There are 10 types of organizational structures commonly used by businesses with pros and cons for each: 1. Hierarchical structure In a hierarchical organizational structure, employees are grouped and assigned a supervisor. It is the most common type of organizational structure. Employees may be grouped by their role or function, geography or type of products or services they provide. This structure is often depicted as a pyramid because there are multiple levels or authority with the highest level of leadership at the top, their direct employees below them and so forth. Benefits of this type of structure include:  Establishing clearly defined levels of authority  Promoting teamwork and department loyalty  Fostering employee development and promotion opportunities Potential disadvantages include:  Limiting collaboration  Restricting innovation  Creating bureaucracy that must be managed 2. Functional structure In a functional structure, the organization is divided into groups by roles, responsibilities or specialties. For example, an organization may have marketing, finance and sales departments that are each overseen by a manager who also has a supervisor that oversees multiple departments. A functional structure can be beneficial because departments can trust that their employees have the skills and expertise to support their goals. Benefits of this type of structure include:  Establishing clearly defined roles and expectations 46   Facilitating improved performance and productivity  Allowing for skill development and specialization Potential disadvantages include:  Creating barriers, or silos, between functions  Limiting employees' communication and knowledge with other departments  Inhibiting collaboration and innovation 3. Matrix structure The matrix organizational structure resembles a grid in which employees with similar skills are grouped and report to more than one manager. This often includes a functional manager who oversees projects and their progress and a product manager who is responsible for the company's strategy and success regarding product offerings. The matrix structure is typically used by large, multinational organizations and promotes sharing skills and knowledge across departments to complete goals. Benefits of this type of structure include:  Enabling a flexible work environment  Fostering a balanced decision-making process  Promoting open communication and shared resources across the business Potential disadvantages include:  Creating confusion about authority  Tracking budgets and resources can be difficult  Limiting efficiency of key performance indicators (KPIs) 4. Flat structure In a flat organizational structure, most middle-management levels are removed so there is little separating staff-level employees from upper management. Employees are given more responsibility and decision-making power without the usual hierarchical pressures 47 or supervision and can often be more productive. Small companies and early-stage start- ups mostly use this type of structure because they often have fewer employees and projects to manage. It may also be referred to as a "horizontal structure." Benefits of this type of structure include:  Reducing budget costs due to lack of middle management  Building relationships between staff and superiors  Facilitating a quicker, more straightforward decision-making process Potential disadvantages include:  Requiring extensive planning to be effective  Causing confusion over who makes decisions  Requiring contingency plans to resolve conflicts 5. Divisional structure In a divisional structure, organizations are split into divisions based on specific products, services or geographies. For this reason, this structure is typically used by large companies that operate in broad geographic areas or own separate, smaller companies. Each division has its executive leadership, departments and resources. For example, a large software company may separate its organization based on product type, so there's a cloud software division, a corporate software division and a personal computing software division. Benefits of this structure include:  Allowing divisions to work independently  Meeting individual divisions' needs more quickly and specifically  Promoting focus on specific products or services Potential disadvantages include:  Scaling limitations 48   Duplicating resources or activities  Decentralizing decision-making 6. Network structure In a network structure, managers at an organization will coordinate relationships with internal and external entities to deliver their products or services. For example, a retail company will focus on selling clothing items but will outsource the design and production of these items in a partnership with other companies. This structure focuses more on open communication and relationships than hierarchy. Benefits of this type of structure include:  Giving the organization more agility and flexibility  Allowing the core company to focus on what it's best at  Helping lower costs through outsourcing Potential disadvantages include:  Duplicating services and resources  Creating confusion about specific roles and job functions  Growing too complex and challenging to manage 7. Line structure In a line structure, authority within the organization flows from top to bottom and there are no specialized or supportive services. It is one of the simplest types of organizational structure. The organization is typically divided into departments overseen and controlled by a general manager, and each department has its manager with authority over its staff. The departments work independently to support the organization's primary goal. Benefits of this type of structure include:  Fostering effective communication and a stable environment  Providing clearly defined responsibilities and lines of authority 49   Adapting quickly to changing conditions or situations Potential disadvantages include:  Limiting specialization  Becoming rigid and inflexible  Giving too much power to a manager 8. Team-based structure In a team-based organizational structure, employees are grouped into skills-based teams to work on specific tasks while working toward a common goal. Often, this is a flexible structure that allows employees to move from team to team as they complete projects. This structure focuses on problem-solving and employee cooperation. Benefits of this type of structure include:  Helping streamline an organization's processes by breaking down silos  Enabling more decision-making power with minimal management  Increasing flexibility by focusing on experience instead of seniority Potential disadvantages include:  Decreasing organization consistency  Limiting contact with other functions  Increasing potential for conflict 9. Circular structure A circular organizational structure relies on a hierarchy to depict higher-level employees within the inner rings of a circle and the lower-level employees on the outer rings. Seated at the center of the organization, leaders do not send orders down the chain of command but rather outward. While many other structure types contain different departments that work independently with individual goals, this structure removes that strict separation. It looks at the bigger picture with all departments being part of the same whole. 50 Benefits of this type of structure include:  Encouraging communication across all levels of staff  Promoting the free flow of information across the business  Collaborating amongst departments, rather than separation Potential disadvantages include:  Causing confusion over who to report to  Requiring more resources and training  Causing a slowdown in decision-making 10. Process-based structure In a process-based structure, the organization is designed around the flow of its processes and how the duties performed by its employees interact with one another. Instead of flowing from top to bottom, this structure outline services from left to right. An executive at the top of the structure oversees the departments below, representing the different processes, but each process cannot start until the one before it has finished. And each department will have its own management and team working to fulfill its duties so that the business can move on to the next task and eventually reaches its ultimate goal, such as selling a product to consumers. Benefits of this type of structure include:  Improving the company's efficiency and speed  Encouraging teamwork between departments  Adapting quickly to meet industry changes Potential disadvantages include:  Erecting barriers, or silos, between groups  Limiting communication  Requiring more resources to achieve process optimization 51 Span of Control The span of control or span of management is the number of employees each manager in an organization is responsible for managing. Typically, the modern model of control span's average employees per manager is about 15 to 20 individuals, while the traditional model states about five to six employees for each manager. Modern companies may adhere to a wider control span to help manage costs, employees, and company tasks and goals more effectively and efficiently. Here are common factors affecting the control span:  Organization size: An organization's size can affect the control span because it determines how many employees a manager handles. For example, a large company may have a wider control span compared to a smaller one because it's based on the number of professionals working in an organization.  Organization culture: An organization with a flexible culture may indicate the control span is wider compared to a hierarchal company that may have a narrow control span. To determine a company's control span, it's helpful to determine the type of culture of a company.  Work type: The type of work a company produces can help you determine the control span. For example, a company with more routine work and less complexity in tasks can have a wider control span, while companies with more complex tasks and frequent decisions can have a narrow control span.  Manager's skills and competencies: A manager's skills and competencies, especially experience level, can determine the control span. For example, an experienced manager may have a wider control span compared to a manager starting their career who may have a more narrow control span. 52   Employee's skills and competencies: An employee's skills and competencies can determine the type of supervisor they may require. For example, an inexperienced employee may require more training and supervision, which is a narrow control span, while supervisors with more experienced employees can delegate more and train less for a wider control span.  Interaction type: The interaction type between managers and employees can determine the company's control span. For example, more frequent interactions between the parties is a more narrow control span, while fewer interactions between the professionals which comprise asking and answering questions is a wider control span. Departmentalisation Departmentalisation is an organizational structure that separates people into groups, or departments, based on a particular set of criteria. These departments have their own leadership and work together to complete tasks. With large or complicated projects, multiple departments may work together. Meaning of Departmentalisation: ‗Departmentation‘ or ‗Departmentalisation‘ is the process of grouping the activities of an enterprise into several units for the purpose of administration at all levels. The administrative units so created may be designated as departments, divisions, units, branches, sections, etc. The process of organising consists of dividing and grouping of the works to be done in an enterprise and assigning different duties and responsibilities to different people. Dividing the work naturally means the identification of individual activities which have to be undertaken for the attainment of the organisational objectives. But once the various 53 activities have been identified, it is necessary to group them together on some logical basis so that a team can be organised. Departmentation can provide a necessary degree of specialisation of executive activity for efficient performance. It can simplify the tasks of management within a workable span. It also provides a basis on which the top managers can co-ordinate and control the activities of the departmental units. Need for and Importance of Departmentation: The basic need for departmentation is to make the size of each departmental unit man- ageable and secure the advantages of specialisation. Grouping of activities and, consequently, of personnel, into departments makes it possible to expand an enterprise to any extent. Departmentation is necessary on account of the following reasons: 1. Advantages of Specialisation: Departmentation enables an enterprise to avail of the benefits of specialisation. When every department looks after one major function, the enterprise is developed and efficiency of operations is increased. 2. Feeling of Autonomy: Normally departments are created in the enterprise with certain degree of autonomy and freedom. The manager in charge of a department can take independent decisions within the overall framework of the organisation. The feeling of autonomy provides job satisfaction and motivation which lead to higher efficiency of operations. 3. Expansion: One manager can supervise and direct only a few subordinates. Grouping of activities and personnel into departmentation makes it possible for the enterprise to expand and grow. 54 4. Fixation of Responsibility: Departmentation enables each person to know the specific role he is to play in the total organisation. The responsibility for results can be defined more clearly, precisely and accurately and an individual can be held accountable for the performance of his responsibility. 5. Upliftment of Managerial Skill: Departmentation helps in the development of managerial skill. Development is possible due to two factors. Firstly, the managers focus their attention on some specific problems which provide them effective on-the-job training. Secondly, managerial need for further training can be identified easily because the managers‘ role is prescribed and training can provide them opportunity to work better in their area of specialisation. 6. Facility in Appraisal: Appraisal of managerial performance becomes easier when specific tasks are assigned to departmental personnel. Managerial performance can be measured when the areas of activities are specified and the standards of performance are fixed. Departmentation provides help in both these areas. When a broader function is divided into small segments and a particular segment is assigned to each manager, the area to be appraised is clearly known; and the factors affecting the performance can be pointed out more easily. Similarly, the standards for performance can be fixed easily because the factors influencing the work performance can be known clearly. Thus, performance appraisal becomes more effective. 7. Administrative Control: Departmentation is a means of dividing the large and complex organisation into small administrative units. Grouping of activities and personnel into manageable units 55 facilitates administrative control. Standards of performance for each and every department can be precisely determined. Types of Departmentation: There are several bases of Departmentation. The more commonly used bases are— function, product, territory, process, customer, time etc. These are explained below: (A) Departmentation by Functions: The enterprise may be divided into departments on the basis of functions like production, purchasing, sales, financing, personnel etc. This is the most popular basis of departmentation. If necessary, a major function may be divided into sub-functions. For example, the activities in the production department may be classified into quality control, processing of materials, and repairs and maintenance. Advantages: The advantages of functional departmentation include the following: (a) It is the most logical and natural form of departmentation. 56 (b) It ensures the performance of all activities necessary for achieving the organisational objectives. (c) It provides occupational specialisation which makes optimum utilization of man- power. (d) It facilitates delegation of authority. (e) It enables the top managers to exercise effective control over a limited number of functions. (f) It eliminates duplication of activities. (g) It simplifies training because the managers are to be experts only in a narrow range of skills. Disadvantages: There are some problems associated with functional departmentation. These are mentioned below: (a) There may be conflicts between departments. (b) The scope for management development is limited. Functional managers do not get training for top management positions. The responsibility for results cannot be fixed on any one functional head. (c) There is too much emphasis on specialisation. (d) There may be difficulties in coordinating the activities of different departments. (e) There may be inflexibility and complexity of operations. (B) Departmentation by Products: In product departmentation, every major product is organised as a separate department. Each department looks after the production, sales and financing of one product. Product departmentation is useful when the expansion, diversification, manufacturing and marketing characteristics of each product are primarily significant. 57 It is generally used when the production line is complex and diverse requiring specialised knowledge and huge capital is required for plant, equipment and other facilities such as in automobile and electronic industries. In fact, many large companies are diversifying in different fields and they prefer product departmentation. For example, a big company with a diversified product line may have three product divisions, one each for plastics, chemicals, and metals. Each division may be sub-divided into production, sales, financing, and personnel activities. (C) Departmentation by Territory: Territorial or geographical departmentation is specially useful to large-scale enterprises whose activities are widely dispersed. Banks, insurance companies, transport companies, distribution agencies etc. are some examples of such enterprises, where all the activities of a given area of operations are grouped into zones, branches, divisions etc. It is obviously not possible for one functional manager to manage efficiently such widely spread activities. This makes it necessary to appoint regional managers for different regions. (D) Departmentation by Customers: In such method of departmentation, the activities are grouped according to the type of customers. For example, a large cloth store may be divided into wholesale, retail, and export divisions. This type of departmentation is useful for the enterprises which sell a product or service to a number of clearly defined customer groups. For instance, a large readymade garment store may have a separate department each for men, women, and children. A bank may have separate loan departments for large-scale and small- scale businessmen. 58 (E) Departmentation by Process or Equipment: In such type or departmentation the activities are grouped on the basis of production processes involved or equipment used. This is generally used in manufacturing and distribution enterprises and at lower levels of organisation. For instance, a textile mill may be organised into ginning, spinning, weaving, dyeing and finishing departments. Similarly, a printing press may have composing, proof reading, printing and binding departments. Such departmentation may also be employed in engineering and oil industries. SELECTION Human resources planning and recruiting precede the actual selection of people for positions in an organisation. Recruitment is the process of inviting qualified applicants by way of issuing notification in the newspapers, television media, online and on social networking media so as to fill up job vacancies. Recruitment of employees is administered by two major sources, which are recruitment of employees through internal sources and recruitment of employees through external sources. Internal recruitment is the process of inviting or giving chance to people relating to concern organization or giving chance to the existing employees. After the recruitment, employee selection process begins for identifying righ