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Principles of Management Sr. Topics No. Introduction to Management and Business Organization - Nature and Scope of Management - Importance of Management Practices in Business 1. - Levels of Management in the organization...

Principles of Management Sr. Topics No. Introduction to Management and Business Organization - Nature and Scope of Management - Importance of Management Practices in Business 1. - Levels of Management in the organization - Skills Required to be a Good Manager - Managerial Roles - Basic Functions of Management Forms of Business Organization - Sole Proprietorship form 2. - Partnership - Public and Private - Cooperative Society - Franchise Planning and Decision Making - Nature of Planning - Importance of Planning - Elements of sound Plan 3. - Role of Decision Making - Types of Decisions - Decision Making Process Organizing - Elements of Organizing : Chain of Command, Span of Control, 4. Authority, Responsibility - Organizing: Factors affecting Organization structure - Centralization – Decentralization Staffing - Managing Human Resources 5. - Recruitment and selection - Training and Development  - Performance appraisal and its importance - Motivation and its importance - Incentives and it’s types Leadership and Managing Team - Leadership and its Importance - Leadership Styles and its Suitability 6. - Leadership Vs. Management - Team Building - Levels of Conflicts and its effects - Ways to manage Conflicts - Channels and media of Communication in the organization Controlling 7 - Importance - Types of Control - Control Implications for Managers Functional Areas (Scope) of Management: 8 - Marketing Management : Nature, Scope, Functions - Financial Management : Nature, Scope, Functions - Production Management: Nature, Scope, Functions Introduction to Management and Business Organization Nature and Scope of Management Introduction to Management In the modern times one of the most important human activities is managing group of people. Ever since people began forming groups to accomplish aims they could not achieve as individuals, managing has been essential to ensure the co- ordination of individual efforts. As society has come to rely increasingly on group effort and as many organized groups have become large the task of managers has been rising in importance. Management is the process of designing and maintaining an environment in which individuals working together in groups efficiently accomplish selected aims. The basic definition of Management explain that * As managers, people carry out the managerial functions of planning organizing, staffing, leading and controlling. * Management applies to any kind of organization. * It applies to managers at all organizational levels. * The aim at all managers is the same to create a surplus. * Managing is concerned with productivity, which implies effectiveness and efficiency. Thus it may be concluded that management plays a key role in improving standard of living of the people in the society through developing an ideal organizational structure and making economic use of available resources. The knowledge of management theory and practice enables managers to take more realistic view about organizational and social problems and to find out their effective solution. Management Meaning: Management is an important factor for the success of any organized activity. Today management basically concern with changes and challenges, and it is difficult to manage. Management is an art of getting things done through others. Management is to plan, organize, direct and control the resources of the organization for obtaining common objectives or goals. It is related with resources like material, money, machinery, methods, manufacturing and marketing. Management principles are universal in nature. Management is necessary for all types of organization, such as public sector, private sector, govt. department, hotel, hospital, hostels, educational institutes, require management for several growth and expansion. Definitions of management: 1) According to Taylor:- “Management is the art of knowing what you want to do and then seeing that it is done in the best and cheapest way.” 2) According to Lawrence:- “Management is the accomplishment of results through the efforts of other people.” 3) According to Henry Fayol:- “To manage is to forecast and to plan, to organize, to co-ordinate and to control.” Concepts of management The term management has been interpreted in several ways; some of which are given below: Management as an Activity Management is an activity just like playing, studying, teaching etc. As an activity management has been defined as the art of getting things done through the efforts of other people. Management is a group activity wherein managers do to achieve the objectives of the group. The activities of management are: Interpersonal activities Decisional activities Informative activities Management as a Process Management is considered a process because it involves a series of interrelated functions. It consists of getting the objectives of an organization and taking steps to achieve objectives. The management process includes planning, organizing, staffing, directing and controlling functions. Management as a process has the following implications: (i) Social Process: Management involves interactions among people. Goals can be achieved only when relations between people are productive. Human factor is the most important part of the management. (ii) Integrated Process: Management brings human, physical and financial resources together to put into effort. Management also integrates human efforts so as to maintain harmony among them. (iii) Continuous Process: Management involves continuous identifying and solving problems. It is repeated every now and then till the goal is achieved. (iv) Interactive process: Managerial functions are contained within each other. For example, when a manager prepares plans, he is also laying down standards for control. Management as an Economic Resource Like land, labour and capital, management is an important factor of production. Management occupies the central place among productive factors as it combines and coordinates all other resources. This is shown in Figure. Figure : Management as resource Management as a Team As a group of persons, management consists of all those who have the responsibility of guiding and coordinating the efforts of other persons. These persons are called as managers who operate at different levels of authority (top, middle, operating). Some of these managers have ownership stake in their firms while others have become managers by virtue of their training and experience. Civil servants and defence personnel who manage public sector undertakings are also part of the management team. As a group managers have become an elite class in society occupying positions with enormous power and prestige. Management as an Academic Discipline Management has emerged as a specialised branch of knowledge. It comprises principles and practices for effective management of organisations. Management has become as very popular field of study as is evident from the great rush for admission into institutes of management. Management offers a very rewarding and challenging career. Management as a Group Management means the group of persons occupying managerial positions. It refers to all those individuals who perform managerial functions. All the managers, e.g., chief executive (managing director), departmental heads, supervisors and so on are collectively known as management. For example, when one remarks that the management of Reliance Industries Ltd. is good, he is referring to the persons who are manag- ing the company. There are several types of managers which are listed as under. (i) Family managers who have become managers by virtue of their being owners or relatives of the owners of a company. (ii) Professional managers who have been appointed on account of their degree or diploma in management. (iii) Civil Servants who manage public sector undertakings. Managers have become a very powerful and respected group in modern society. This is because the senior managers of companies take decisions that affect the lives of a large number of people. For example, if the managers of Reliance Industries Limited decide to expand production it will create job for thousands of people. Managers also help to improve the social life of the public and the economic progress of the country. Senior managers also enjoy a high standard of living in society. They have, therefore, become an elite group in the society. Nature and Scope of management To understand the basic nature of management, it must be analysed in terms of art and science, in relation to administration, and as a profession, in terms of managerial skills and style of managers. Management is Combination of Art and Science Management knowledge exhibits characteristics of both art and science, the two not mutually exclusive but supplementary. Every discipline of art is always backed by science which is basic knowledge of that art. Similarly, every discipline of science is complete only when it is used in practice for solving various kinds of problems faced by human beings in an organisation or in other fields of social life which is more related to an art. Art basically deals with an application of knowledge personal skill and know-how in a specific situation for efficiently achieving a given objective. It is concerned with the best way of doing things and is consequently, personalised in nature. During the primitive stages of development of management knowledge, it was considered as an art. There was a jungle of managerial knowledge. It was not codified and systemised. People used it to get things done by others, in their own way giving an impression that whosoever uses it, knows the art of using it. This kind of loose and inadequate understanding of management supported the view that it was an art. Management as a Science Science means a systematic body of knowledge pertaining to a specific field of study. It contains general principles and facts which explains a phenomenon. These principles establish cause-and-effect relationship between two or more factors. These principles and theories help to explain past events and may be used to predict the outcome of actions. Scientific methods of observations, and experiments are used to develop principles of science. The principles of science have universal application and validity. Thus, the essential features of science are as follows: (i) Basic facts or general principles capable of universal application (ii) Developed through scientific enquiry or experiments (iii) Establish cause and effect relationships between various factors. (iv) Their Validity can be verified and they serve as reliable guide for predicting future events. Let us now examine as to what extent management satisfies the above conditions: (i) Systematic body of knowledge: Management has a systematic body of knowledge consisting of general principles and techniques. These help to explain events and serve as guidelines for managers in different types of organisations. (ii) Universal principles: Scientific principles represent basic facts about a particular field enquiry. These are objective and represent best thinking on the subject. These principles may be applied in all situations and at all times. Exceptions, if any, can be logically explained. For example, the Law of Gravitation states that if you throw an object in the air it will fall on the ground due to the gravitational force of the earth. This law can be applied in all countries and at all points of time. It is as applicable to a football as it is to an apple falling from tree. Management contains sound fundamental principles which can be universally applied. For instance, the principle of unity of command states that at a time one employee should be answerable to only one boss. This principle can be applied in all types of organisation-business or non business. However, principles of management are not exactly like those of physics or chemistry. They are flexible and need to be modified in different situations. (iii) Scientific enquiry and experiments: Scientific principles are derived through scientific investigation and reasoning. It means that there is an objective or unbiased assessment of the problem situation and the action chosen to solve it can be explained logically. Sci- entific principles do not reflect the opinion of an individual or of a religious guru. Rather these can be scientifically proved at any time. They are critically tested. For example, the principle that the earth revolves around the sun has been scientifically proved. Management principles are also based on scientific enquiry and investigation. These have been developed through experiments and practical experience of a large number of managers. For example, it has been observed that wherever one employee has two or more bosses simultaneously, confusion and indiscipline are likely to arise, with regard to following the instructions. (iv) Cause and effect relationship: Principles of science lay down a cause and effect relationship between related factors. For example, when water is heated up to 100ºC, it starts boiling and turns into vapour. Similarly, the principles of management establish cause and effect relationship between different vari- ables. For instance lack of balance between authority and responsibility will cause management to become ineffective. (v) Tests of validity and predictability: Validity of scientific principles can be tested at any time and any number of times. Every time the test will give the same result. Moreover, the future events can be predicted with reasonable accuracy by using scientific principles. For example, the Law of Gravitation can be tested by throwing various things in the air and every time the object will fall on the ground. Principles of management can also be tested for their validity. For example, the principle of unity of com- mand can be tested by comparing two persons, one having a single boss and other having two bosses. The performance of the first person will be higher than that of the second. Thus, management is undoubtedly a science. It contains a systematic body of knowledge in the form of general principles which enjoy universal applicability. However, management is not as exact a science—Physics, Chemistry, Biology and other Physical sciences. This is because management deals with people and it is very difficult to predict accurately the behaviour of living human beings. Management principles are universal but they cannot be expected to give exactly the same results in every situation. That is why management is known as a soft science. Management is a social science. It is still growing, with the growing needs of human organisations. Management as an Art Art implies the application of knowledge and skills to bring about the desired results. The essential elements of arts are: (i) Practical knowledge (ii) Personal skill (iii) Result oriented approach (iv) Creativity (v) Improvement through continuous practice Let us judge how far management fulfils these requirements: (i) Practical knowledge: Every art signifies practical knowledge. An artist not only learn the theory but also its application in practice. For example, a person may have adequate technical knowledge of painting but he cannot become a good painter unless he knows how to make use of the brush and colours. Similarly, a person cannot become a successful manager simply by reading the theory and getting a degree or diploma in management. He must also learn to apply his knowledge in solving managerial problems in practical life. A manager is judged not just by his technical knowledge but by his efficiency in applying this knowledge. (ii) Personal skill: Every artist has his own style and approach to his job. The success of different artists differ even when all of them possess the same technical knowledge or qualifications. This is due to the level of their personal skills. For example, there are several qualified singers but Lata Mangeshkar has achieved the highest degree of success. Similarly, management is personalised. Every manager has his individual approach and style in solving managerial problems. The success of a manager depends on his personality in addition to his technical knowledge. (iii) Result-oriented approach: Arts seeks to achieve concrete results. The process of management is also directed towards the accomplishment of desirable goals. Every manager applies certain knowledge and skills to achieve the desired results. He uses men, money, materials and machinery to promote the growth of the organisation. (iv) Creativity: Art is basically creative and an artist aims at producing something that had not existed before. Therefore, every piece of art requires imagination and intelligence to create. Like any other art, management is creative. A manager effectively com- bines and coordinates the factors of production to create goods and services. Moulding the attitudes and behaviour of people at work, towards the achievement of the desired goals is an art of the highest order. (v) Improvement through people: Practice makes one perfect. Every artist become more and more efficient through constant practice. A dancer, for example, learns to perform better by continuously practicing a dance. Similarly, manager gains experience through regular practice and becomes more effective. Thus, “management is both a science as well as an art”. It is a science because it has an organised body of knowledge consisting of certain universal facts. It is known as an art because it involves creating results through practical application of knowledge and skills. However, art and science are complementary to each other. They are not mutually exclusive. Science teaches one to know and art to do. Art without science has no guide and science without art is knowledge wasted. For example, a person cannot be a good surgeon unless he has scientific knowledge of human anatomy and the practical skill of applying that knowledge in conducting an operation. Similarly, a successful manager must know the principles of management and also acquire the skill of applying those principles for solving managerial problems in different situations. Knowledge of principles and theory is essential, but practical application is required to make this knowledge fruitful. One cannot become an effective manager simply by learning management principles by heart. Science (theory) and art (practice) are both essential for the success of management. Scope of management Clearly defined responsibilities, concepts, theories and principles related to managerial functions define the scope of management. Let’s look at the various aspects of this. Financial management Financial management seeks to ensure the right amount and type of funds to business at the right time and at reasonable cost. It comprises the following activities: (a) Estimating the volume of funds required for both long-term and short-term needs of business (b) Selecting the appropriate source of funds (c) Raising the required funds at the right time (d) Ensuring proper utilisation and allocation of raised funds so as to maintain safety and liquidity of funds and the credit- worthiness and profitability of business, and (e) Administration of earnings Thus, financial management involves the planning, organising and controlling of the financial resources. Marketing management Marketing management refers to the identification of consumers needs and supplying them the goods and services which can satisfy these wants. It involves the following activities: (a) Marketing research to determine the needs and expectation of consumers (b) Planning and developing suitable products (c) Setting appropriate prices (d) Selecting the right channel of distribution, and (e) Promotional activities like advertising and salesmanship to communicate with the customers. Personnel management Personnel management involves plan- ning, organising and controlling the procurement, development, compensation, maintenance and integration of human resources of an organisation. It consists of the following activities: (a) Manpower planning (b) Recruitments, (c) Selection, (d) Training (e) Appraisal, (f) Promotions and transfers, (g) Compensation, (h) Employee welfare services, and (i) Personnel records and research, etc. Production management This type of management refers to the process of creating utilities. When you convert raw materials to finished products and oversee the planning and regulation, you’re engaging in production management. Without production, there isn’t any finished good or service and without it, organizations can’t generate interest or profits. The final product must fulfill customer requirements. The process includes quality control, research and development, plan layout and simplification. Office management This includes controlling and coordinating all office activities to achieve an organization’s goals and targets. For example, an administration’s efficiency impacts a business significantly. The more organized the departments and responsibilities are, the more effective an organization is.  Characteristics or Importance of Management The salient features which highlight the nature of management are as follows: (i) Management is goal-oriented: Management is not an end in itself. It is a means to achieve certain goals. Management has no justification to exist without goals. Management goals are called group goals or organisational goals. The basic goal of management is to ensure efficiency and economy in the utilisation of human, physical and financial resources. The success of management is measured by the extent to which the established goals one achieved. Thus, management is purposeful. (ii) Management is universal: Management is an essential element of every organised activity irrespective of the size or type of activity. Wherever two or more persons are engaged in working for a common goal, management is necessary. All types of organisations, e.g., family, club, university, government, army, cricket team or business, require management. Thus, management is a pervasive activity. The fundamental principles of management are applicable in all areas of organised effort. Managers at all levels perform the same basic functions. (iii) Management is an Integrative Force: The essence of management lies in the coordination of individual efforts in to a team. Management reconciles the individual goals with organisational goals. As unifying force, management creates a whole that is more than the sum of individual parts. It integrates human and other resources. (iv) Management is a Social Process: Management is done by people, through people and for people. It is a social process because it is concerned with interpersonal relations. Human factor is the most important element in management. According to Appley, “Management is the development of people not the direction of things. A good manager is a leader not a boss. It is the pervasiveness of human element which gives management its special character as a social process”. (v) Management is multidisciplinary: Management has to deal with human behaviour under dynamic conditions. Therefore, it depends upon wide knowledge derived from several disciplines like engineering, sociology, psychology, economics, anthropol- ogy, etc. The vast body of knowledge in management draws heavily upon other fields of study. (vi) Management is a continuous Process: Management is a dynamic and an on-going process. The cycle of management continues to operate so long as there is organised action for the achievement of group goals. (vii) Management is Intangible: Management is an unseen or invisible force. It cannot be seen but its presence can be felt everywhere in the form of results. However, the managers who perform the functions of management are very much tangible and visible. (viii) Management is an Art as well as Science: It contains a systematic body of theoretical knowledge and it also involves the practical application of such knowledge. Management is also a discipline involving specialised training and an ethical code arising out of its social obligations. On the basis of these characteristics, management may be defined as a continuous social process involving the coordination of human and material resources in order to accomplish desired objectives. It involves both the determination and the accomplishment of organisational goals. Role and importance of management Management is indispensable for the successful functioning of every organisation. It is all the more important in business enterprises. No business runs in itself, even on momentum. Every business needs repeated stimulus which can only be provided by management. According to Peter Drucker,“ management is a dynamic life-giving element in an organisation, without it the resources of production remain mere resources and never become production”. The importance of management has been highlighted clearly in the following points: (i) Achievement of group goals: A human group consists of several persons, each specialising in doing a part of the total task. Each person may be working efficiently, but the group as a whole cannot realise its objectives unless there is mutual cooperation and coordination among the members of the group. Management creates team-work and coordination in the group. He reconciles the objectives of the group with those of its members so that each one of them is motivated to make his best contribution towards the accomplishment of group goals. Managers provide inspiring leadership to keep the members of the group working hard. (ii) Optimum utilisation of resources: Managers forecast the need for materials, machinery, money and manpower. They ensure that the organisation has adequate resources and at the same time does not have idle resources. They create and maintain an environment conducive to highest productivity. Managers make sure that workers know their jobs well and use the most efficient methods of work. They provide training and guidance to employeers so that they can make the best use of the available resources. (iii) Minimisation of cost: In the modern era of cut-throat competition no business can succeed unless it is able to supply the required goods and services at the lowest possible cost per unit. Management directs day-to-day operations in such a manner that all wastage and extravagance are avoided. By reducing costs and improving efficiency, managers enable an enterprise to be competent to face competitors and earn profits. (iv) Survival and growth: Modern business operates in a rapidly changing environment. An enterprise has to adapt itself to the changing demands of the market and society. Management keeps in touch with the existing business environment and draws its predictions about the trends in future. It takes steps in advance to meet the challenges of changing environment. Changes in business environment create risks as well as opportunities. Managers enable the enterprise to minimise the risks and maximise the benefits of opportunities. In this way, managers facilitate the continuity and prosperity of business. (v) Generation of employment: By setting up and expanding business enterprises, managers create jobs for the people. People earn their livelihood by working in these organisations. Managers also create such an environment that people working in enterprise can get job satisfaction and happiness. In this way managers help to satisfy the economic and social needs of the employees. (vi) Development of the nation: Efficient management is equally important at the national level. Management is the most crucial factor in economic and social development. The development of a country largely depends on the quality of the management of its resources. Capital investment and import of technical know- how cannot lead to economic growth unless wealth producing resources are managed efficiently. By producing wealth, management increases the national income and the living standards of people. That is why management is regarded as a key to the economic growth of a country. Levels of management Every business organisation, irrespective of its size, has many mana- gerial positions in its structure. These positions are created through the process of delegation of authority from top to lower levels. Each position is marked by authority, responsibility, functions, roles and relationships. The contents and nature vary, depending in the level at which the position lies. As one moves upward in the organisation, the managerial position plays an important role, larger the contribution, greater the authority and higher the responsibility. These managerial positions lying in the chain of command may be classified into various groups or levels of management. Broadly speaking, an organisation has two important levels of management, namely functional and operative. The functional level is concerned with the process of determining primary objectives, formulating basic policies, making vital decisions and controlling and coordinating activities of person- nel. The operative level of management is related to implementation of plans and decisions, and pursuit of basic policies for achieving the objectives of the organisation. Generally, the levels of management consisting of various mana- gerial positions in the structure of an organisation, differ from one organisation to another, depending on the size of business activity, philosophy of management, span of control and other related factors. But, in a joint stock company, for conducting its business efficiently, managerial personnel may be placed in three levels, that is, top, middle and lower or supervisory level. Top Level Management The top level management is generally occupied by the ownership group. In a joint stock company, equity shareholders are the real owners of the company. Thus, they elect their representatives as directors, form a board, known as board of directors, which constitutes the top level of management. Besides the board, other functionaries including managing director, general manager or Chief executive to help directors, are included in this level. It is the highest level in the managerial hierarchy and the ultimate source of authority in the organisation. The top level managers are accountable to the owners and responsible for overall management of the organisation. The major functions of the top level management are as under: (i) To make a corporate plan for the entire organisation covering all areas of operations. (ii) To decide upon the matters which are vital for the survival, profitability and growth of the organisation such as introduction of new product, shifting to new technology and opening new plant etc. (iii) To decide corporate goals. (iv) To decide structure of organisation, creating various positions there in. (v) To exercise overall managerial control through the process of reviewing over all financial and operating results. (vi) To make decisions regarding disposal and distribution of profits. (vii) To select key officials and executives for the company. (viii)To coordinate various sub-systems of the organisation. (ix) To maintain liaison with outside parties having a stake in business such as government, trade union and trade associations etc. (x) To formulate basic policies and providing direction and leader- ship to the organisation as a whole. Middle Level Management In order to fill up the gap which exists between functional and operative level, some managerial positions are created at the middle level of management. Middle level management consists of departmental man- agers, deputy managers, foreman and administrative officers etc. These executives are mainly concerned with the over all functioning of their respective departments. They act as a link between top and lower level managers. The activities of middle level managers centres around determining departmental goals and devising ways and means for accomplishing them. The main functions performed by these managers are as under: (i) To prepare departmental plan covering all activities of the department within the basic framework of the corporate plan. (ii) To establish departmental goals and to decide upon various ways and means for achieving these goals to contribute to organisational goals. (iii) To perform all other managerial functions with regard to departmental activities for securing smooth functioning of the entire department. (iv) To issue detailed orders and instructions to lower level managers and coordinate the activities of various work units at lower level. (v) Middle level managers explain and interpret policy decisions made at the top level to lower level managers. Lower Level or Supervisory Level Management Lower-level management is known as supervisory management, because it is concerned mainly with personal oversight and direction of operative employees. It consists of factory supervisors, superintendents, foremen, sales supervisors, accounts officers etc. They directly guide and control the performance of rank and file workers. They issue orders and instructions and guide day to-day activities. They also represent the grievances of the workers to the higher levels of management. Supervisory management performs the following functions: (i) Planning of day to day work (ii) Assignment of jobs and issuing orders and instructions (iii) Supervising and guiding workers (iv) Maintaining close personal contacts with workers to ensure discipline and team-work (v) Evaluating operating performance (vi) Sending reports and statements to higher authorities (vii) Communicating the grievances and suggestions of workers to higher authorities. Skills Required to be a Good Manager 1. Conceptual Skills:- Conceptual skills are the abilities to think about the creative terms understand and visualize the future, to organize and translate observation into ideas & concepts. Conceptual skills are essential to identify and diagnose the problems. This will helpful in determining the goals. 2. Analytical Skills:- [Decision making] Analytical skills mean ability to work out a complex problem or situation into component. Analytical skills are required for solving problems and decision making. This is also helpful for evaluation of performance and arriving at judgment. 3. Human relation Skills:- Human relation skills represent the ability to understand the behavior of people, their problems, their needs, working conditions and motivation to people. These skills are essential in directing the people and for better co- ordination. 4. Administrative Skills:- It involves the implementation of plan and use of available resources to get the desired output that is profit and to regularize a performance in orderly manner. It is also helpful in co-ordination of activities. 5. Technical Skills:- These skills are essential for first line managers. He requires knowledge of a job, ability to apply the methods and techniques of job. He is responsible for providing technical guidance and instructions to subordinates. 6. Computer Skills:- Computer knowledge is essential for today’s manager i.e. knowledge of hardware & software. Hardware is technical term & software is ability to adopt the system in an organization to attempt goals. In modern days computer is widely used in organization. Hence today’s’ manager should possess the knowledge of computer. This is helpful in decision making. It also helps to increase the productivity in the organization. 7. Communication Skills:- Communication is systematic process of telling, listing and understanding. This skill requires the ability of listening and speaking in an effective manner. The manager is responsible for getting the things done by others. He should be expert in oral and written communication. Communication skill is essential for getting success. It is depend upon the manager who achieves the results with efforts of others. Co-ordination can be attained with the help of proper communication. Success is depends upon proper communication. Managerial Roles  Basic Functions of Management The major functions of management are discussed below: Planning : It includes forecasting, formation of objectives, policies, programmes, producer and budget. It is a function of determining the methods or path of obtaining there objectives. It determines in advance what should be done, why should be done, when, where, how should be done. This is done not only for organization as a whole but also for every division, section and department. Planning is thinking before doing. Organizing:- It includes departmentation, delegation of authority, fixing of responsibility and establishment of relationship. It is a function of providing every thing useful to the business organization. There are certain resources which are mobilize i.e. man, machine, material, money, but still there are certain limitations on these resources. A manager has to design and develop a structure of various relations. This structure, results from identification and grouping work, delegation of authority and responsibility and establishing relationship. Staffing:- It includes man power planning, recruitment, selection, placement and training. People are basically responsible for the progress of the organization. Right man should be employed for right job. It also involved training of personnel and proper remuneration. Directing:- It includes decision making, supervising, guidance etc. It reflects providing dynamic leadership. When the manager performs these functions, he issues orders and instructions to supervisors. It also implies the creation of a favorable work, environment motivation, managing managers, managing workers and managing work environment. Communication:- Communication provides the vital link in any organization. Every successful manager has to develop an effective system of communication. Communication means exchange of facts, ideas and information between two or more person. It helps in building up high moral. Controlling:- It is a process of checking actual performance against standard performance. If there is any difference or deviation then these differences should be detected and necessary steps should be taken. It involves three elements: 1. Establishing standard of performance. 2. Measuring actual performance with establishment. 3. Finding out reasons for deviation. Management includes planning, organizing, staffing and decision making, motivation, communication, co-ordination and so on. The other functions of management are as follows: Motivation :- In a well organization unforeseen problems are created. It becomes necessary for the workers to have a leader, to whom they can consult for the guidance. One must help the worker to solve their problems. The manager is the leader for them. So he should accept the problems, should appreciate the workers for the work done by them. He has to act as a well motivation source for he workers. Decision Making :- It is the process in which a lot of actions are involved and lot of alternatives are available. A manager has to choose right alternative for attainment of his goals. There are many decisions which include marketing decision, cost price decision and capital investment decision. Forecasting :- Correct sales forecasting is essential for manufacturing organization. This helps in production, by making available right workers and right material at right place and at right time. It also helps manager for purchasing of raw materials, equipments and labours. Many times production is made in advance to meet future demands and forecasting is essential because of short supply of raw material, lack of proper control, to fix up sales targets and to meet future financial needs. It also helps to give ideas about expansion of business; and for giving training to the personnel of the organization. Forms of Business Organization Starting a business involves making many important decisions, especially in terms of selecting the right form of business. Taking time to research your options and understand how different organizations work may help you make the best choice for your situation. Here, we will discuss the various forms of business structures, including the advantages and disadvantages of each, and how to choose the right structure for your needs. Sole Proprietorship form ‘Sole Proprietorship’ form of business organisation refers to a business enterprise exclusively owned, managed and controlled by a single person with all authority, responsibility and risk. Definition of Sole Proprietorship: According to J. L. Hanson – “A type of business unit where one person is solely responsible for providing the capital and bearing the risk of the enterprise, and for the management of the business.” Characteristics of Sole Proprietorship: i. Single Ownership – The sole proprietorship form of business organisation has a single owner who himself/herself starts the business by bringing together all the resources. ii. No Separation of Ownership and Management – The owner himself/herself manages the business as per his/her own skill and intelligence. iii. Less Legal Formalities – The formation and operation of a sole proprietorship form of business organisation does not involve any legal formalities. iv. No Separate Entity – The businessman and the business enterprise are one and the same, and the businessman is responsible for everything that happens in his business unit. v. No Sharing of Profit and Loss – The sole proprietor enjoys the profits and losses alone. vi. Unlimited Liability – The liability of sole proprietor is unlimited. vii. One-man control- The owner has complete control of operations. Advantages of Sole Proprietorship: i. Easy to form and wind up – It is very easy and simple to form a sole proprietorship form of business organisation. No legal formalities are required to be observed. Similarly, the business can be wound up any time if the proprietor so decides. ii. Quick Decision and Prompt Action – Nobody interferes in the affairs of the sole proprietary organisation. So he/she can take quick decisions on the various issues relating to business and accordingly prompt action can be taken. iii. Direct Motivation – In sole proprietorship form of business organisations entire profit of the business goes to the owner. This motivates the proprietor to work hard and run the business efficiently. iv. Flexibility in Operations – It is very easy to effect changes as per the requirements of the business. The expansion or curtailment of business activities does not require many formalities as in the case of other forms of business organisation. v. Maintenance of Business Secrets – The business secrets are known only to the proprietor. He is not required to disclose any information to others unless and until he himself so decides. He is also not bound to publish his business accounts. vi. Personal Touch – Since the proprietor himself handles everything relating to business, it is easy to maintain a good personal contact with customers and employees. Limitations of Sole Proprietorship: i. Limited Resources – The resources of a sole proprietor are always limited. It is not always possible to arrange sufficient funds from personal sources. ii. Lack of Continuity – The continuity of the business is linked with the life of the proprietor. Illness, death or insolvency of the proprietor can lead to closure of the business. Thus, the continuity of business is uncertain. iii. Unlimited Liability – In the eyes of law, the proprietor and the business are one and the same. So personal properties of the owner can also be used to meet the business obligations and debts. iv. Unsuitable for Large Scale Operations – As the resources and the managerial ability are limited, sole proprietorship form of business organisation is not suitable for large- scale business. v. Limited Managerial Expertise – A sole proprietorship form of business organisation always suffers from lack of managerial expertise. A single person may not be an expert in all fields like, purchasing, selling, financing etc. Suitability of Sole Proprietorship: In short, this is a simple one person firm where, one can use his brand name, apply for payment gateways and be able to issue invoice on his brand name to customers. It is best form for the testing of ideas in the starting stage whether it’s an e-commerce or tech startup, on later stage, one can easily set up another elaborate forms like private limited company or public limited company.  Partnership ‘Partnership’ is an association of two or more persons who pool their financial and managerial resources and agree to carry on a business, and share its profit. The persons who form a partnership are individually known as partners and collectively a firm or partnership. Definition of Partnership: Indian Partnership Act, 1932 defines partnership as “the relation between persons who have agreed to share the profits of the business carried on by all or any of them acting for all”. Partnership form of business organisation in India is governed by the Indian Partnership Act 1932. The agreement between the partners may be in oral, written or implied. When the agreement is in writing, it is termed as partnership deed. However, in the absence of an agreement, the provisions of the Indian Partnership Act 1932 shall apply. Partnership Deed contains the terms and conditions for starting and continuing the partnership firm. It is always better to insist on a written agreement in order to avoid future legal hurdles. Characteristics of Partnership: i. Two or More Persons – To form a partnership firm at least two persons are required. ii. Contractual Relationship – Minors, lunatics and insolvent persons are not eligible to become the partners. However, a minor can be admitted to the benefits of partnership firm i.e., he can have share in the profits without any obligation for losses. iii. Sharing Profits and Business – There must be an agreement among the partners to share the profits and losses of the business of the partnership firm. If two or more persons share the income of jointly owned property, it is not regarded as partnership. iv. Existence of Lawful Business – The business of to be carried on by partners, must be lawful. Any agreement to indulge in smuggling, black marketing or any other lawful activity cannot be called a partnership firm in the eyes of law. v. Principal Agent Relationship – There must be an agency relationship between the partners. Every partner is the principal as well as the agent of the firm. When a partner deals with other parties he/she acts as an agent of other partners, and at the same time the other partners become the principal. vi. Unlimited Liability – The partners of the firm have unlimited liability. They are jointly as well as individually liable for the debts and obligations of the firms. If the assets of the firm are insufficient to meet the firm’s liabilities, the personal properties of the partners can also be utilized for this purpose vii. Voluntary Registration – The registration of partnership firm is not compulsory. But an unregistered firm suffers from some limitations which make it virtually compulsory to be registered. Merits of Partnership: 1. Ease of Formation: A partnership is easy to form as no cumbersome legal formalities are involved. An agreement is necessary and the procedure for registration is very simple. Similarly, a partnership can be dissolved easily at any time without undergoing legal formalities. Registration of the firm is not essential and the partnership agreement need not essentially be in writing. 2. Larger Financial Resources: As a number of persons or partners contribute to the capital of the firm, it is possible to collect larger financial resources than is possible in sole proprietorship. Creditworthiness of the firm is also higher because every partner is personally and jointly liable for the debts of the business. There is greater scope for expansion or growth of business. 3. Specialisation and Balanced Approach: The partnership form enables the pooling of abilities and judgment of several persons. Combined abilities and judgment result in more efficient management of the business. Partners with complementary skills may be chosen to avail of the benefits of specialisation. Judicious choice of partners with diversified skills ensures balanced decisions. Partners meet and discuss the problems of business frequently so that decisions can be taken quickly. 4. Flexibility of Operations: Though not as versatile as proprietorship, a partnership firm enjoys sufficient flexibility in its day-to-day operations. The nature and place of business can be changed whenever the partners desire. The agreement can be altered and new partners can be admitted whenever necessary. Partnership is free from statutory control by the Government except the general law of the land. 5. Keen Interest – Since partners share the profit and bear the losses, they take keen interest in the affairs of the business. 6. Benefits of Specialization – Partnership firm enjoys benefits of individual partners, specialisation, for instance, in a partnership firm, providing legal consultancy to people, one partner may deal with civil cases, one in criminal cases, and another in labour cases and so on as per their area of specialization. 7. Protection of Interest – In partnership form of business organisation, the rights of each partner and his/her interests are fully protected. If a partner is dissatisfied with any decision, he can ask for dissolution of the firm or can withdraw from the partnership. 8. Secrecy – Business secrets of the firm are only known to the partners. 9. Sharing of Risks – The losses of the firm are shared by all the partners equally or as per the agreed ratio as decided in the partnership agreement. Limitations of Partnership: A partnership firm also suffers from certain limitations: i. Unlimited Liability – Partners in partnership firm suffer from the problem of unlimited liability. Resultantly, members may end up using personal assets to meet the liabilities of business. ii. Instability – Every partnership firm has uncertain life. The death, insolvency, incapacity or the retirement of any partner bring the firm to an end. Not only that any dissenting partner can give notice at any time for dissolution of partnership. iii. Limited Capital – A partnership firm suffers due to limited personal capacity of partners. iv. Non-transferability of share – The share of interest of any partner cannot be transferred to other partners or to the outsiders. v. Possibility of Conflicts – At times there is a strong possibility of conflict among partners due to divergent views and interest. Suitability of Partnership: Usually persons having different abilities, skill or expertise can join hands to form a partnership firm to carry on the business. Business activities like construction, providing legal services, accounting and financial services etc. can successfully run under this form of business organization. It is also considered suitable where capital requirement is of a medium size. Thus, businesses like a wholesale trade, professional services, mercantile houses and small manufacturing units can be successfully organized as partnership firms. Private Company: Section 2 (68) of Companies Amendment Act, 2013 defines a Private Company as follows: “Private company” means a company having a minimum paid-up share capital of one lakh rupees or such higher paid-up share capital as may be prescribed, and which by its articles— i. Restricts the right to transfer its shares; ii. Except in case of One Person Company, limits the number of its members to two hundred- Provided that where two or more persons hold one or more shares in a company jointly, they shall, for the purposes of this clause, be treated as a single member- Provided further that: a. Persons who are in the employment of the company; and b. Persons who, having been formerly in the employment of the company, were members of the company while in that employment and have continued to be members after the employment ceased, shall not be included in the number of members; and iii. Prohibits any invitation to the public to subscribe for any securities of the company. Benefits of a Private Company: A private company offers the following benefits: i. Stability – being a separate legal entity, the existence of a private company is independent of the existence of its members. ii. Limited liability – the liability of members is limited only to the extent of the unpaid capital on the shares held by them. iii. Comparative flexibility of operations – a private company enjoys lesser compliance and more privileges as compared with a public company, making it a suitable choice for entrepreneurs. iv. Improved credibility – due to incorporation, a private company enjoys an improved credibility in doing transactions with various stakeholders. v. Team building – private company offers stock ownership and ESOP schemes to attract talented pool of workforce for the company. vi. Expansion – In private companies, scope of expansion is large as fund raising can easily be done by receiving funds from its members, directors. Bank also give high value to private companies and sanction loans accordingly. Limitation of Private Company: i. Process and Formalities: As the registration of the company requires many formalities, one needs assistance from professionals like C.As or C.S, w.r.t. registration and other compliances with the relevant laws. ii. Limited Availability of Funds: Due to restrictions on seeking public funding, the prospects of growth and expansion are limited to the personal financing capacities of members of a private company. iii. Exit Strategy: Though it is easy for a shareholder to exit from a company, the procedures to wind up a private limited company is complicated and involves cumbersome procedures and substantial liquidation cost. Public Limited Company: Public company is a separate legal entity incorporated under companies act, allowing the members to transfer their shares, while having a larger number of shareholder base. Definition of Public Company: u/s2 (71) of Companies Act Amendment 2013, public company means a company which: i. Is not a private company; ii. Has a minimum paid-up share capital of five lakh rupees or such higher paid-up capital, as may be prescribed – Provided that a company which is a subsidiary of a company, not being a private company, shall be deemed to be public company for the purposes of this Act even where such subsidiary company continues to be a private company in its articles. Public companies are able to attract large funding through issue of equity, debt and other forms of financing domestically as well as internationally. Due to too much legal constraints and compliances, a public company is not a very suitable form of business especially for small scale businesses and small entrepreneurs. However once a business is well established in the industry, then riding on the prestige and credibility of the business, at a later stage, a business can unravel the option of being formed as a public company. Advantages of a Public Limited Company (PLC): Following are the prominent advantages of having a public limited company: i. Limited Liability of shareholders – The business is viewed as a separate legal entity. This means that even if a shareholder leaves the PLC or dies, the business can continue. ii. Ability to raise large amount of capital – Public limited companies are able to raise large sums of money because there is no limit on the maximum number of members. iii. Transferability of shares – the shares of a PLC can be freely transferable. This provides liquidity for shareholders. iv. Exit strategy – due to transferability of shares and being widely recognizable in the public domain, a public company magnifies its chances of easily seeking future suitors for the company. v. Limited liability of shareholders – The liability of shareholders is limited to the extent of unpaid capital on the shares held by them. vi. Separate legal entity – The public company due to incorporation is distinct legal person different from its shareholders. Disadvantages of a Public Limited Company: Despite having several benefits, a public limited company suffers from the following disadvantages: i. There are many legal formalities and regulatory compliances to be adhered to by a company during the stage of formation as well as carrying of day to day operations. ii. Ownership and control woes – due to larger shareholder base, at times it’s difficult to take speedy and timely business decisions especially if the shareholders are geographically scattered. iii. Vulnerable to takeovers – With shares being freely transferable, a potential bidder can secretly stock up the shareholding of the company even from open market, to stage a hostile takeover bid. iv. Larger possibility of conflicts between management and owners v. Lack of secrecy – due to open access of books of accounts to public, as well as inspection by the relevant authorities, it is difficult to maintain secrets of business within the confined walls of business. vi. In order to protect the interest of investors, a public company is required to follow many controls and regulations. vii. There is a possibility that the original owners can lose control of the public limited company in the issue of a dispute or violation. viii. Some public limited companies can grow very large. As a result, many can suffer from mismanagement and slow decision making. ix. Owing to higher degree of transparency and accountability, public companies suffer from slow decision making woes.  Co-Operatives (Common Ownership): Co-operatives provide a structure for starting up business in which all the members of the cooperative jointly own, control, and work for the business. They share responsibility equally, make collective decisions on the basis of one person one vote and, in most co- operatives receive equal pay. The concept of a co-operative enterprise is not a political concept but the idea of co- operative working is supported by the Government. Co-operative or common ownership enterprise can be divided basically into a society or a company. Franchise Franchise is a form of business organization in which a firm which already has a successful product or service (the franchisor) enters into a continuing contractual relationship with other businesses (franchisees) operating under the franchisor’s trade name and usually with the franchisor’s guidance, in exchange for a fee. Why Franchising? i. Boom in real estate prices ii. Less Legal formalities iii. Growing Disposable income iv. Mushrooming of Malls v. Fostering the spirit of entrepreneurship skills. The franchisee has the rights to market the product or service using the operating methods of the franchisor. The franchisee has the obligation to pay the franchisor certain fees and royalties in exchange for these rights. The franchisor has the obligation to provide these rights and generally support the franchisee. In this sense, franchising is not a business or an industry, but a method used by businesses for the marketing and distribution of their products or services. Both the franchisor and franchisee have a strong vested interest in the success of the brand and keeping their customers happy. Typically, there are two types of franchise methods. There is “business format franchising” and “product and trade name franchising.” The salient features of the franchising system are given below: (i) Two Parties – In a franchise there are at least two sides – the franchiser and the franchisee. There can be more than one franchisee. (ii) Written Agreement – There is an agreement in writing between the franchiser and the franchisee. (iii) Exclusive Right – The franchiser owns a brand or trade mark and allows the franchisee to use it in a specific area under a license. (iv) Payment – The franchisee makes an initial payment for the license and becomes a part of the franchiser’s network. He also pays a regular license fee which may be an agreed percentage of sales or profits. (v) Support – The franchiser provides assistance to the franchisee in marketing, equipment and systems, staff training, record keeping. The franchiser initially sets up the business to be run by the franchisee. (vi) Restrictions – The franchisee is required to operate the business in accordance with the policies and procedures specified by the franchiser. He gives an undertaking not to carry on any competing business and not to disclose confidential information regarding the franchise. The franchiser cannot terminate the agreement before its expiry except for ‘good cause’. (vii) Specified Period – The agreement is for a specific period e.g., five years. On the expiry of this period, the agreement may be renewed with the mutual consent of both the parties. Planning and Decision Making Planning means deciding in advance what to do, why to do it, and when to do it. It is one of the foremost managerial functions. Before initiating a task, the manager must formulate an idea of how to perform a particular task. Hence, this function of management is closely related to creativity and innovation. A manager can only know where he has to go if he first sets an objective as planning bridges a gap between where we stand today and where we want to reach. Planning is all about what managers at all levels perform. It requires adopting a decision as it involves making a choice from an alternative course of action. Thus, planning involves setting the target and developing an appropriate method or strategy to attain the desired objective. Planning provides an intellectual approach for attaining the organization’s predetermined goals. Hence, all members need to work together toward achieving organizational goals. These goals set the target which needs to be achieved and against which actual performance is measured. Therefore, planning means setting objectives and targets and developing an action plan to attain them. The planning that is formulated has a given time frame but time is a limited resource. It needs to be used intelligently. If the timing is not considered, the conditions in the environment may change and all the business plans may go unproductive. Planning may go in vain if it is not implemented. Planning Definition Planning is defined as setting an objective for a given time period, developing various strategies or methods to attain them, and then selecting the best possible alternatives from the various methods available. Feature/ Nature/ Characteristics of Planning Planning Contributes to the Objective Planning helps in achieving the objective. We cannot think of achieving any objective without any kind of planning. Planning is one of the primary functions of management that contributes immensely to the achievement of predetermined objectives. Planning is The Primary Function of Management- Planning is the first step that any manager or anyone adapts to use to move towards any goal. Pervasive Planning is universal. Planning is there in every organization, whether it is a small size, mid- size or large size or at whatever level it is, every manager, every individual employee plans on at his/her level. Planning is Futuristic We do planning for the future. Hence it is called a futuristic process. We always stay in the present and plan for the future. Planning is never done in the past. Planning is Continuous We plan to achieve any goal. Planning is done for a specific period of time. It may be for a month, a quarter, or a year. There is always a need for a new plan after the expiry of that period. Hence it is called a continuous process. The continuation of planning is related to the business cycle. It implies that once the plan is framed and implemented, it is followed by another plan and so on. Planning Involves Decision Making In planning, function managers evaluate various alternatives and select the most appropriate way to manage things. Planning is a Mental Exercise- In planning, assumptions and predictions regarding the future are made by scanning the environment properly. This activity requires a higher level of intelligence. Importance of Planning 1) Planning Provides Direction- Planning provides us with direction. How to work in the future includes planning. By stating in advance, how work has to be done, planning provides direction for action. 2) Planning Reduces the Risk of Uncertainties- Uncertainty means any events in the future that change our course of action. Planning helps the manager to face uncertainty. We cannot remove such uncertainty from our life. However, due to planning, we can work on such uncertainty. Just like an unforeseen event is going to come in which we are going in loss. So, if we are already ready, we have made funds for it, then we will be able to use it to fight that unforeseen situation. 3) Planning Reduces Overlapping and Wasteful Activity- Overlapping means the working relationship has not been allocated specifically. If we plan, our time will not be wasted. 4) Planning Promotes Innovative Ideas- If you are planning, then you get feedback from your senior managers or juniors, from there you can get innovative ideas. Besides, if you make your employees part of the decision-making, then you can get new creative ideas from there too. 5) Planning Facilitates Decision- Planning helps in decision-making. The more efficient you plan, the more right you will be in the decision. With good planning, our decision-making gets accurate, it becomes feasible and it also gets improved. 6) Planning Establishes a Standard for Controlling- Controlling is incomplete without planning and planning is incomplete without controlling. If you have done the planning but you do not know if the thing is happening or not, then the planning is useless. In case, there is no planned output then the controlling manager will have no base to compare whether the actual output is adequate or not. 7) Focuses Attention on Objectives of that Company- Through planning, efforts of all the employees are directed towards the achievement of organizational goals and objectives. Elements of a Sound Plan Plans are formulated with a view to achieve organizational goals. A good plan will be one that enables the management to achieve its goals. A good plan should have the following essentials: 1. It should be simple and clear. 2. It should be easily understandable to the followers. 3. It should be prepared on the basis of clearly defined objectives. 4. It should cover all aspects that are needed for the fulfillment of the objectives. 5. It should be flexible to changing situations. 6. It should be as economical as possible. 7. It should be adaptable. 8. It should provide standards for the evaluation of actual performance. 9. It should provide a basis for decentralization of its various activities. 10. It should guide decision-making. Decision Making Decision-making is an integral part of modern management. Essentially, Rational or sound decision making is taken as primary function of management. Every manager takes hundreds and hundreds of decisions subconsciously or consciously making it as the key component in the role of a manager. Decisions play important roles as they determine both organizational and managerial activities. 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. Decisions are made to sustain the activities of all business activities and organizational functioning. Decisions are made at every level of management to ensure organizational or business goals are achieved. Further, the decisions make up one of core functional values that every organization adopts and implements to ensure optimum growth and drivability in terms of services and or products offered. As such, decision making process can be further exemplified in the backdrop of the following definitions. Definition of Decision Making According to the Oxford Advanced Learner’s Dictionary the term decision making means - the process of deciding about something important, especially in a group of people or in an organization. Trewatha & Newport defines decision making process as follows:, “Decision-making involves the selection of a course of action from among two or more possible alternatives in order to arrive at a solution for a given problem”. As evidenced by the foregone definitions, decision making process is a consultative affair done by a comity of professionals to drive better functioning of any organization. Thereby, it is a continuous and dynamic activity that pervades all other activities pertaining to the organization. Since it is an ongoing activity, decision making process plays vital importance in the functioning of an organization. Since intellectual minds are involved in the process of decision making, it requires solid scientific knowledge coupled with skills and experience in addition to mental maturity. Further, decision making process can be regarded as check and balance system that keeps the organisation growing both in vertical and linear directions. It means that decision making process seeks a goal. The goals are pre-set business objectives, company missions and its vision. To achieve these goals, company may face lot of obstacles in administrative, operational, marketing wings and operational domains. Such problems are sorted out through comprehensive decision making process. No decision comes as end in itself, since in may evolve new problems to solve. When one problem is solved another arises and so on, such that decision making process, as said earlier, is a continuous and dynamic. A lot of time is consumed while decisions are taken. In a management setting, decision cannot be taken abruptly. It should follow the steps such as 1) Defining the problem 2) Gathering information and collecting data 3) Developing and weighing the options 4) Choosing best possible option 5) Plan and execute 6) Take follow up action Since decision making process follows the above sequential steps, a lot of time is spent in this process. This is the case with every decision taken to solve management and administrative problems in a business setting. Though the whole process is time consuming, the result of such process in a professional organization is magnanimous. Role and importance of Decision Making Management is essentially a bundle of decision-making process. The managers of an enterprise are responsible for making decisions and ascertaining that the decisions made are carried out in accordance with defined objectives or goals. Decision-making plays a vital role in management. Decision-making is perhaps the most important component of a manager’s activities. It plays the most important role in the planning process. When the managers plan, they decide on many matters as what goals their organisation will pursue, what resources they will use, and who will perform each required task. When plans go wrong or out of track, the managers have to decide what to do to correct the deviation. In fact, the whole planning process involves the managers constantly in a series of decision- making situations. The quality of managerial decisions largely affects the effectiveness of the plans made by them. In organising process, the manager is to decide upon the structure, division of work, nature of responsibility and relationships, the procedure of establishing such responsibility and relationship and so on. In co-ordination, decision-making is essential for providing unity of action. In control, it will have to decide how the standard is to be laid down, how the deviations from the standard are to be rectified, how the principles are to be established how instructions are to be issued, and so on. The ability to make good decisions is the key to successful managerial performance. The managers of most profit-seeking firms are always required to take a wide range of important decision in the areas of pricing, product choice, cost control, advertising, capital investments, dividend policy, personnel matters, etc. Similarly, the managers of non-profit seeking concerns and public enterprises also face the challenge of taking vital decisions on many important matters. Decision-making is also a criterion to determine whether a person is in management or not. If he participates in decision-making, he is regarded as belonging to management staff. In the words of George Terry: “If there is one universal mark of a manager, it is decision- making.” Types of Decisions Strategic Decisions and Routine Decisions As the name suggests, routine decisions are those that the manager makes in the daily functioning of the organization, i.e. they are routine. Such decisions do not require a lot of evaluation, analysis or in-depth study. In fact, high- level managers usually delegate these decisions to their subordinates. On the other hand, strategic decisions are the important decisions of the firm. These are usually taken by upper and middle-level management. They usually relate to the policies of the firm or the strategic plan for the future. Hence such decisions require analysis and careful study. Because strategic decisions taken at this level will affect the routine decisions taken daily. Programmed Decisions and Non-Programmed Decisions Programmed decisions relate to those functions that are repetitive in nature. These decisions are dealt with by following a specific standard procedure. These decisions are usually taken by lower management. For example, granting leave to employees, purchasing spare parts etc are programmed decisions where a specific procedure is followed. Non-programmed decisions arise out of unstructured problems, i.e. these are not routine or daily occurrences. So there is no standard procedure or process to deal with such issues. Usually, these decisions are important to the organization. Such decisions are left to upper management. For example, opening a new branch office will be a non-programmed decision. Policy Decisions and Operating Decisions Tactical decisions pertaining to the policy and planning of the firm are known as policy decisions. Such decisions are usually reserved for the firm’s top management officials. They have a long term impact on the firm and require a great deal of analysis. Operating decisions are the decisions necessary to put the policy decisions into action. These decisions help implement the plans and policies taken by the high-level managers. Such decisions are usually taken by middle and lower management. Say the company announces a bonus issue. This is a policy decision. However, the calculation and implementation of such bonus issue is an operating decision. Organizational Decisions and Personal Decisions When an executive takes a decision in an official capacity, on behalf of the organization, this is an organizational decision. Such decisions can be delegated to subordinates. However, if the executive takes a decision in a personal capacity, that does not relate to the organization in any way this is a personal decision. Obviously, these decisions cannot be delegated. Individual Decisions and Group Decisions When talking about types of decisions, let us see individual and group decisions. Any decision taken by an individual in an official capacity it is an individual decision. Organizations that are smaller and have an autocratic style of management rely on such decisions. Group decisions are taken by a group or a collective of the firm’s employees and management. For example, decisions taken by the board of directors are a group decision. Decision Making Process Decision making is the process of making choices by identifying a decision, gathering information, and assessing alternative resolutions. Using a step-by-step decision-making process can help you make more deliberate, thoughtful decisions by organizing relevant information and defining alternatives. This approach increases the chances that you will choose the most satisfying alternative possible. Step 1: Identify the decision You realize that you need to make a decision. Try to clearly define the nature of the decision you must make. This first step is very important. Step 2: Gather relevant information Collect some pertinent information before you make your decision: what information is needed, the best sources of information, and how to get it. This step involves both internal and external “work.” Some information is internal: you’ll seek it through a process of self- assessment. Other information is external: you’ll find it online, in books, from other people, and from other sources. Step 3: Identify the alternatives As you collect information, you will probably identify several possible paths of action, or alternatives. You can also use your imagination and additional information to construct new alternatives. In this step, you will list all possible and desirable alternatives. Step 4: Weigh the evidence Draw on your information and emotions to imagine what it would be like if you carried out each of the alternatives to the end. Evaluate whether the need identified in Step 1 would be met or resolved through the use of each alternative. As you go through this difficult internal process, you’ll begin to favor certain alternatives: those that seem to have a higher potential for reaching your goal. Finally, place the alternatives in a priority order, based upon your own value system. Step 5: Choose among alternatives Once you have weighed all the evidence, you are ready to select the alternative that seems to be best one for you. You may even choose a combination of alternatives. Your choice in Step 5 may very likely be the same or similar to the alternative you placed at the top of your list at the end of Step 4. Step 6: Take action You’re now ready to take some positive action by beginning to implement the alternative you chose in Step 5. Step 7: Review your decision & its consequences In this final step, consider the results of your decision and evaluate whether or not it has resolved the need you identified in Step 1. If the decision has not met the identified need, you may want to repeat certain steps of the process to make a new decision. For example, you might want to gather more detailed or somewhat different information or explore additional alternatives.  Organizing Organising refers to the process of the identification, classification and coordination of work to be performed by establishing reporting relationships between the people, setting up their responsibilities and authorities so as to collectively integrate the human efforts for the successful achievement of organisational objectives. Hence, Organising is responsible for:  Implementation of plans into action.  It decides by whom, how and where a particular task will be performed. Chain of Command In an organizational structure, “chain of command” refers to a company's hierarchy of reporting relationships – from the bottom to the top of an organization, who must answer to whom. The chain of command not only establishes accountability, it lays out a company’s lines of authority and decision-making power. A proper chain of command ensures that every task, job position and department has one person assuming responsibility for performance. Span of Control A manager may be linked to many or few subordinates. The number of people reporting to a manager is called a manager’s span of control. Managers with wide spans of control have many subordinates, and it’s not possible for a manager to closely examine activity. Consequently, employees under such managers have more authority to perform their jobs and even make decisions than do employees reporting to managers with narrow spans of control. Delegation Delegation refers to the downward transfer of authority from a superior to a subordinate to enable subordinates to perform their responsibilities effectively and efficiently. Elements of Delegation Delegation means assigning responsibility and authority to subordinates and creation of accountability for work. Authority: It refers to the right of an individual to command his or her subordinate and take action within the scope of his or her position. Authority flows in a downward direction, that is top to bottom, as the superior has authority over his subordinate. Also the level of authority increases as one moves higher in the management hierarchy. Responsibility: Responsibility is the obligation of a subordinate to properly perform the duties assigned by the superior. It always flows in upward direction, as the subordinate is responsible for his superior. Accountability: Accountability means being answerable for the outcome of the assigned work. It flows from bottom to top, that is in upward direction, as a subordinate is accountable for his work and performance to his superior. Difference between Authority, Responsibility and Accountability Types of Organisational Structure These are divided into two types: 1. Functional structure:  Organisational structure where business is managed in the form of a separate department created on the basis of function each department performs. Suitability  Functional structure is suitable for large scale businesses providing specialised services or performing diversified activities. Advantages  Specialisation: Employees perform similar tasks within a department and are able to improve performance which leads to occupational specialisation.  Coordination: Similarity in the task being performed remote control and coordination.  Operational efficiency: The managerial and operational efficiency reduces cost and results in higher profits. Division of work into smaller tasks leads to minimal duplication and lowers cost.  Makes training easier: The range of skills are focused which makes training of employees easier.  Higher Focus: Individuals performing similar and smaller tasks can focus better on the activities they are responsible for. Disadvantages  Deviation in interests: Department interest may be pursued at the cost of organisational interest to create a functional empire.  Conflicts: Departmental interests may lead to conflicts of interest among departments and hinder interaction between them.  Lack of Coordination: Conflicts of interest among departments may lead to problems in coordination.  Rigidity: Employees performing similar tasks may not be open to ideas or newer methods resulting in lack of flexibility. 2. Divisional Structure:  Divisional structure is a type of organisational structure which works as separate units or divisions.  There are many units and divisions that deal with various products.  Each division is accountable for its own job and must consider its own profit and loss.  Each division has its own divisional manager who oversees and has power over the entire unit. Suitability  Divisional structure is suitable for organisations producing a variety of products for performing diversified activities.  Advantages:  Product Specialisation: Product specialisation contributes to the development of diverse abilities in a divisional head, preparing him for higher roles. This is due to the fact that he obtains experience in all functions relating to a specific product.  Accountability: Divisional heads are held accountable for profits since revenues and costs associated with various departments are clearly identifiable and attributed to them. This gives a solid foundation for measuring performance. It also aids in the assignment of blame in times of poor division performance, allowing appropriate corrective action to be performed.  Flexibility: It encourages flexibility and initiative because each division operates as an autonomous unit, resulting in faster decision making.  Expansion: It allows for expansion and growth by allowing for the addition of new divisions without disrupting present operations by simply adding another divisional head and personnel for the new product line.  Prepare for future positions: Experience in a variety of operations prepares managers for higher positions.  Better Initiatives: Dependent and independent functioning of divisions encourages managers to take initiatives to find better means and ways to perform the best. Disadvantages  Conflicts: Conflicts may emerge between different divisions on the allocation of cash, and a specific division may aim to maximize its profits at the expense of other divisions.  Duplication of efforts: It may result in cost increases due to duplication of efforts across products. Providing each division with its own set of equivalent functions raises costs. Misuse of power: It gives managers the authority to oversee all activities relating to a specific division. Over time, such a manager may develop influence and, in an attempt to establish his independence, may disregard organizational interests.  Difference between Functional Structure and Divisional Structure: Basis of Functional Structure Divisional Structure Difference These are created based on These are built on the basis of Creation functions. product lines as well as functions. It is expensive because there is a It is cost-effective because higher rate of duplication of work Cost duplication of effort is avoided. and resources between departments. Because each product department Duplication of Work overlapping is reduced as a performs the same functions, work work result of functional specialization. overlapping is increased. More appropriate for multiproduct More appropriate for businesses that Suitability companies with a focus on focus on 'operational specialisation.' 'differentiated products.' When departments are created on The departments are divided into Functional the basis of product-line categories, horizontal functional hierarchies Hierarchy a vertical functional hierarchy is based on key operations. formed. Decisions for various departments Decisions are decentralized because Decision are made by the coordinating head, each division of the product line has making which centralises decision making. its own decision-making authority. Management is difficult because Management is simplified because each task must report to a Management each product has its own coordinating head at the highest department. level of management.  Factors Affecting Organisation Structure. As a business owner, you have multiple structural choices for your company. These choices are made easier by the number of organizational design principle examples from successful companies that you can adopt. Common organizational design principle examples include maximizing the talents and skills of your staff, encouraging accountability, and focusing on the things you can control. However, choosing the appropriate business structure requires you to take into account several factors that can determine the success or failure of your company. For example, a business that has a large number of employees who work on many different projects, may benefit from a structure in which you authorize project leaders to make important decisions without needing upper-management approval. Understanding which factors influence organizational structure is the key to choosing a structure aligned with your long-term goals Size of an Organization The Small Business Administration defines the average small business in the U.S. as a company that generates $750,000 to $35 million per year, and has 100 to 1,500 employees. This is a broad range, which is why the size of your organization plays a significant role in the structural choices you make. For example, a business that has only 10 employees, may best be served by a simple structure, in which you create and implement all strategies and processes, with little-to-no middle management involvement. However, if you own a business that has 1,000 employees, you may opt for a top-down structure, which includes senior management, middle management, lower management, as well as your employees, to ensure that your vision is properly implemented. Business Development Stage Organizational structural choices are also dictated by the life-cycle stage of your business. In many instances, companies that are in the beginning stage of their development tend to concentrate power and authority in the hands of the founder, and on a small group of trusted advisors. Many companies at this stage don’t have a formal design, because business owners haven’t mastered which factors influence organizational structure. However, as companies move into a growth phase, control often shifts from the upper tier of management to a more pyramid-like structure, in which authority is granted throughout the various levels. Type of Business Strategy When trying to understand which factors influence organizational structure, you must take into account the way you’re positioning your company in the market. For example, if you’re pursuing a differentiation strategy to be the first company in your industry to release the best products or services, you will need to have an agile structure that can respond quickly to change. A flat structure would be ideal in this scenario, because employees are empowered to make quick decisions without supervisory approval. On the other hand, if your business is pursuing a strategy of innovating existing products and services, then efficiency is the key to success, which likely calls for a tall or a top-down structure in which there is a clearly defined chain of command. By aligning your strategy with the most important organizational design principles examples, you will maximize your chances for sustained success. Centralisation All powers and authority of decision-making is retained with the top level management in this concept. All the decisions are taken by the higher level management in a centralised firm. Though an organisation cannot be completely centralised, as it may disrupt the production efficiency as well as discourage departments and employees to perform to the best of their abilities. Hence for this a balance between centralisation and decentralization is needed. Decentralisation The power and decision-making authority are delegated or shared among all the levels of management and all departments. Difference between Centralisation and Decentralisation Basis of Centralisation Decentralisation Difference Authority At the highest levels of management, Lower levels of management are authority is still concentrated in a few given authority. hands. Creativity Middle and lower-level managers' Encourages creativity and creativity is hampered. innovation at all levels Work load Increased workload for top-level Workload is reduced as authority executives. and responsibility are shared. Scope of Delegation has a limited scope because Delegation has a broader scope delegation power is concentrated in a few hands. now that authority can be transferred. Subordinate Limits the scope of subordinate initiatives Encourages subordinates to initiative because workers must follow a come forward and take initiative predetermined path. by providing them with the necessary working freedom. Decision Decision making is slowed because power Because the authority is close to making is concentrated only in the hands of the the action, decisions are made top management. Before any action can quickly. be taken, the problem must pass through several levels. Staffing - Managing Human Resources Selection Process Definition The selection process can be defined as shortlisting the right candidates with the required qualifications to fill the vacancies in an organization. The process varies from company to company hence need to be understood what type of process suits accordingly. The Selection Process is quite a lengthy and complex process as it involves a series of steps before making a final decision. Selection Process Meaning The selection process refers to selecting the right candidate with the required qualifications and capabilities to fill the vacancy in the organization. The selection process is quite a lengthy one and also complex. It involves a series of steps before the final selection. The procedure of selecting the employees may vary from industry to industry according to their own needs. Every organization designs their selection process while keeping in mind the urgency of hiring the people and the requisites for the vacancy of the job. Recruitment and Selection Recruitment is the process where the potential applicants are searched for and are encouraged to apply for a vacancy. While the selection is the process of hiring the employees from the shortlisted candidates and providing them with a job in the organization. The success of any organization depends on its employees because when an employee is well suited for their job the entire company can enjoy the benefits of their success. Recruitment and selection help organizations to choose the right candidates for the right positions in the business. Steps in Selection Process Popularly there are seven stages in the process of selection : 1. Application – After the job opening has been announced, the candidates apply for the respective jobs which suit them. 2. Screening and Pre-selection – The goal of this second phase is to reduce the number of candidates from a large group to a manageable group of between 3-10 people that can be interviewed in person. The selection is based on their selection technique and according to the company’s needs. 3. Interview – The interview gives insight into a person’s verbal accuracy and how sociable they are. This also provides the opportunity to ask the candidate job-related queries.  4. Assessment-The full assessment usually is more accurate as this helps the organization to check the candidate well. Assessments include work sample tests, integrity tests, and related job knowledge tests. 5. Reference And Background Check- An essential step is the reference check, which is to confirm about the candidate. The candidates are asked to give references and he follows up on these. 6. Decision- The next step is to decide to choose the correct candidate who promises the greatest future potentiality for the organization. 7. Job Offer and Contract – After the decision-making process, the candidate needs to accept the offer which is known as the contract. Types of Selection Process Selection types differ according to different types of organizations. The types of the selection process are - 1. Application forms and CVs 2. Online screening and shortlisting 3. Interviews 4. Psychometric testing 5. Ability and aptitude tests 6. Personality profiling 7. Presentations 8. Group exercises 9. Assessment centers 10. References Importance of Selection Selection is an important facet for the organization, it’s importance can further be summed up as below- 1. It identifies the right candidates for the company. 2. Recruiting talented employees can help increase the overall performance of the organization. 3. Helps in avoiding false negatives and false positives of the candidates. Above all, the process selection has all the way become more complicated. As the organizations want to hire talented and effective employees, this can create a difference in