Introduction to Management (MGMT 2121) PDF

CHAPTER 1 FUNDAMENTALS OF MANAGEMENT Management Key Concepts  Organizations: A group of people working together in a structured and coordinated fashion to achieve a set of goals.  Goal: A desired future condition that the organization seeks to achieve.  Management: The...

CHAPTER 1 FUNDAMENTALS OF MANAGEMENT Management Key Concepts  Organizations: A group of people working together in a structured and coordinated fashion to achieve a set of goals.  Goal: A desired future condition that the organization seeks to achieve.  Management: The process of using organizational resources to achieve the organization’s goals by... Planning, Organizing, Leading, and Controlling Fig1.1 Management in Organization Meanings of management Management - A set of activities (including planning and decision making, organizing, leading, and controlling) directed at an organization’s resources (human, financial, physical, and information) with the aim of achieving organizational goals in an efficient and effective manner.  It is the process of setting and achieving organizational objectives (goal) by using the five basic managerial functions by acquiring and utilizing human, financial and other resources.  It is the process of attaining organizational goals in an effective and efficient manner through the five basic managerial functions such as planning, organizing, staffing, leading and controlling. 1  Management is the process of working with and through others. Organizational Performance Measures how efficiently and effectively managers use resources to satisfy customers and achieve goals. Efficiency: A measure of how well resources are used to achieve a goal. It is getting high out put or the same amount of output at the same amount of input or lower input, respectively.  Maximizing the organization’s productivity by wise utilization of scarce resources.  It is spending less & acquiring more by minimizing cost  it is concerned with cost reduction  it is doing things right  Usually, managers must try to minimize the input of resources to attain the same goal.  Technical efficiency = Output quality / Input quantity Effectiveness: A measure of the appropriateness of the goals chosen (are these the right goals?), and the degree to which they are achieved.  it is providing the right product for the right person or customer  it is doing the right things at reasonable cost (efficiently)  Determine the success of the organization b/c it is doing the right things  Organizations are more effective when managers choose the correct goals and then achieve them.  Effectiveness = Enterprise objectives/Input Quantity" 2 Who are managers?  Manager - someone whose primary responsibility is to carry out the management process.  Specifically, a manager is someone who plans, makes decisions, organizes, leads, and controls human, financial, physical, and information resources.  Managers are those who are responsible for achieving the organizational goals in an effective and efficient manner through proper scarce resource utilization  A good manager is the one who feel sense of responsibility, belongingness, accountability…  Who take initiative (innovator) for new things or discovery?  Who effectively & efficiently brings factors of production together Fig 1.2 Becoming a manager 3 Significance of management  management is significant because the coordination of resources is impossible with out management  It affects the establishment and re-establishment of many economic social and political goals of the country  The success or failure of the organization mostly depends on the management system  B/c it is the wise utilization of scarce resources for unlimited human wants. To accomplish Objectives, while in actuality the members might be working in opposite direction, to prevent this from occurring and to ensure coordination of work to accomplish the objectives, management is needed. As 'a brain' of an organization therefore, management gives direction for all other parts of organization. 1.3 Managerial Functions Managers create and maintain an internal environment, commonly called the organization, so that others can work efficiently in it. A manager's job consists of planning, organizing, directing, and controlling the resources of the organization. These resources include people, jobs or positions, technology, facilities and equipment, materials and supplies, information, and money. Managers work in a dynamic environment and must anticipate and adapt to challenges. The job of every manager involves what is known as the functions of management: planning, organizing, directing, and controlling. These functions are goal-directed, interrelated and interdependent. Planning involves devising a systematic process for attaining the goals of the organization. It prepares the organization for the future. Organizing involves arranging the necessary resources to carry out the plan. It is the process of creating structure, establishing relationships, and allocating resources to accomplish the goals of the organization. Directing involves the guiding, leading, and overseeing of employees to achieve organizational goals. Controlling involves verifying that actual performance matches the plan. If performance results do not match the plan, corrective action is taken. 4 Fig 1.3 Functions of Management Management Process Managers are persons who are responsible for supervising the use of organizational resources to achieve its goals, to do this manager at all levels in any organization perform five basic functions:  Planning  Organizing  Staffing  Directing/Leading  Controlling Fig 1.4 Management Process 5 1. Planning Planning is the process used by managers to identify and select appropriate goals and courses of action for an organization. 3 steps to good planning: 1. Which goals should be pursued? 2. How should the goal be attained? 3. How should resources be allocated? Is the first function that all managers engage in because it lays the ground work for all other functions. Is the process that managers use to identify and select appropriate goals and alternative ways of attaining them. The planning function determines how effective and efficient the organization is and determines the strategy of the organization. 2. Organizing Is the process of delegating and coordination tasks and recourses to achieve objectives. Includes the process of identifying tasks to be accomplished. Includes grouping of similar tasks together to create departments. Is process of delegating authority to the job holder and making the workers responsible and accountable for the results of their work. In organizing, managers create the structure of working relationships between organizational members that best allows them to work together and achieve goals. Staffing Is initially the process of recruiting potential candidates for the job, reviewing the applicant's documents and trying to match the job demand with candidates' abilities? Involves acquiring, developing and maintaining human resource which is needed to attain objectives set in planning. 3Directing/leading In leading, managers determine direction, state a clear vision for employees to follow, and help employees understand the role the play in attaining goals. Involves influencing and motivation employees in one or another ways to make them implement their job assignments willingly. Aims at getting the members of the organization to move in the direction that will achieve its objectives. 6 4. Controlling: In controlling, managers evaluate how well the organization is achieving its goals and takes corrective action to improve performance. Controlling managerial functions involves: 1. Setting of standard against which work progress is measured. 2. Comparing actual performance against the standard. 3. identifying and initially examining causes of deviations between the standard and the actual performance 4. Taking corrective actions to eliminate causes of unfavorable deviations. Generally, these five functions of management are inseparable and often performed continuously as an interactive process. However, the planning function is considered as primary function and the base for other functions by setting objectives up on which other functions depend all the above functions are performed by all types of managers but with different degree of considerations. 1.4 Levels of management and types of manager Levels are Hierarchical arrangement of managerial positions in an organization. The extent to which managers perform the functions of management - planning, organizing, directing, and controlling - varies by level in the management hierarchy. The term supervisor could be applied at all management levels of the organization to those who direct the work of others. In common usage, however, the title tends to be used only in the first level of the management hierarchy. If an organization were divided into top, middle, and lower managerial levels, the term generally applies to the lower level. The levels can be expressed by using pyramid shaped arrangement of an organizational management structure. Fig1.5 Levels of Management 7 Levels of management 1. Top level management (top Managers) Top level management consists of highest rank managers of an organization with different titles such as CEO, president, vice president; Top managers are responsible for managing the entire organization or major parts of it. They develop and define the organization's purpose, objectives, strategies and long term plans. Besides this they deal with external bodies such as government. And Responsible for the performance of all departments and have cross-departmental responsibility. They establish organizational goals and monitor middle managers. 2. Middle level management (middle Managers) Middle level management consists of managers below rank of vice president but above supervisory managers. Supervise first-line managers and they are also responsible to find the best way to use departmental resources to achieve goals. Most common example is Branch mangers. The major functions of middle level management are:  Acting as intermediary between top management and operating level management.  Translating long term plans to top management into medium range plans.  Developing specific targets in their areas of responsibility  Coordinating inputs, productivity and outputs of operating level managements.  Achieving objectives set by top level management. 3. Operating(first level)management (first line Managers) These are types of managers whose subordinates are non management workers or operating employees. They are responsible for day-to-day operation. They supervise the people performing the activities required to make the good or service the typical titles in this level are: office manager, crew leaders' supervisor etc........... The major functions of operating level management are:  Planning daily and weekly activities and accomplishment based on the monthly, quarterly, and yearly plans.  Assigning operating employees to specific tasks.  Issuing instructions at the work place, following up, motivating and evaluating workers and reporting to their superiors. 8  To sum up, Supervisors are managers whose major functions emphasize directing and controlling the work of employees in order to achieve the team goals. They are the only level of management managing non-managers. Thus, most of the supervisor's time is allocated to the functions of directing and controlling. In contrast, top managers spend most of their time on the functions of planning and organizing. The top manager determines the mission and sets the goals for the organization. His or her primary function is long-range planning. Top management is accountable for the overall management of the organization. Middle management implements top management goals. Supervisors direct the actual work of the organization at the operating level 1.5 Managerial Roles and skills. A. Managerial Roles Role is an organized set of behaviors. There are about 10 roles identified that managers undertake to accomplish management functions (planning, Organizing, leading, and controlling). These ten roles are classified in to three major categories: I. Interpersonal role II. Informational role III. Decisional role To meet the many demands of performing their functions, managers assume multiple roles. A role is an organized set of behaviors. Henry Mintzberg has identified ten roles common to the work of all managers. The ten roles are divided into three groups: interpersonal, informational, and decisional. The informational roles link all managerial work together. The interpersonal roles ensure that information is provided. The decisional roles make significant use of the information. The performance of managerial roles and the requirements of these roles can be played at different times by the same manager and to different degrees depending on the level and function of management. The ten roles are described individually, but they form an integrated whole. 9 Fig 1.6 Managerial Roles I. Interpersonal role When managers play interpersonal roles, they use their human and communication management skills as they perform the necessary management function. It includes:  Figure head role  leader role  liaison role Figure head role Managers represent the organization or department in ceremonial and symbolic activities. In the figurehead role, the manager represents the organization in all matters of formality. The top level manager represents the company legally and socially to those outside of the organization. It is the most basic and the simplest of all managerial roles Leader role_ Managers are assumed as leaders when they influence, initiate and motivate the subordinates so that the subordinates achieve organizational goals. This is at the heart of the manager-subordinate relationship and managerial power and pervasive where subordinates are involved even where perhaps the relationship is not directly interpersonal. The manager  Defines the structures and environments within which sub-ordinates work and are motivated.  Oversees and questions activities to keep them alert. 10   Selects, encourages, promotes and disciplines.  Tries to balance subordinate and organizational needs for efficient operations. Liaison role- the liaison role refers to dealing with people out side the organization, such as clients, government officials, customers, and suppliers, it also refers to dealing with mangers in other departments, staff specialists, and other departments' employees in liaison role manager seeks support from people who can affect the department's and organization's success. II. Informational role When managers play informational roles they build net works of contacts for sharing information with others. It includes:  Monitor role  Disseminator role  Spokesperson role Monitor role Managers play monitor role when they read and talk to others to receive information. It involves seeking out, receiving and screening information. It also involves scanning of the environment. Disseminator role: - in this role managers share information with subordinates and other members of the organization that is managers play disseminator role when they send information to others with in the organization. - The manager brings external views into his/her organization and facilitates internal information flows between subordinates (factual or value-based). The preferences of significant people are received and assimilated. The manager interprets/disseminates information to subordinates e.g. policies, rules, regulations. Values are also disseminated via conversations laced with imperatives and signs/icons about what is regarded as important or what 'we believe in'. There is a dilemma of delegation. Only the manager has the data for many decisions and often in the wrong form (verbal/memory vs. paper). Sharing is time-consuming and difficult. He/she and staff may be already overloaded. Communication consumes time. The adage 'if you want to get things done, (it is best to do it yourself' comes to mind. Why might this be a driver of managerial behavior (reluctance or constraints on the ability to delegate)? Spokesperson role: - managers play spokesperson role when they provide information to people out side the organization. - the manager informs and lobbies others (external to his/her own organizational group). Key influencers and stakeholders are kept informed of performances, plans & policies. For outsiders, the manager is an expert in the field in which his/her organisation operates. 11 III. Decisional role When managers play decisional role they use their conceptual and decision-making management skills. It consists;  Entrepreneur role  Disturbance handler role  Resource allocator role  Negotiator role. Entrepreneur Role: - Is the role of managers which focuses on innovation and initiation of improvements by managers. It may include such activities as initiating new projects, launch survey, test new markets etc.. Disturbance handler role: - managers play this role when dealing with problems and changes beyond their immediate control and when they take corrective actions during disputes or crisis situation. And it is a generalist role i.e. taking charge when the organization hits an iceberg unexpectedly and where there is no clear programmed response. Disturbances may arise from staff, resources, threats or because others make mistakes or innovation has unexpected consequences. The role involves stepping in to calm matters, evaluate, re-allocate, support - removing the thorn -buying time. Resource allocator role:- managers play recourse allocator role when they schedule, request authorization and perform budgeting and programming activities. A manager determines who in the work unit gets what recourses money, facilities, equipment and access to manager. The manager oversees allocation of all resources (£, staff, reputation). This involves: 1. Scheduling own time 2. Programming work 3. Authorizing actions With an eye to the diary (scheduling) the manager implicitly sets organizational priorities. Time and access involve opportunity costs. What fails to reach him/her, fails to get support. The managerial task is to ensure the basic work system is in place and to program staff overloads - what to do, by whom, what processing structures will be used. Authorizing major decisions before implementation is a control over resource allocation. This enables coordinative interventions e.g. authorization within a policy or budgeting process in comparison to ad-hoc interventions. With limited time, complex issues and staff proposals that cannot be dismissed lightly, the manager may decide on the proposer rather than proposal. To help evaluation processes, managers develop models and plans in their heads (they construe the relationships and signifiers in the situation). These models/constructions encompass rules, imperatives, criteria and preferences to evaluate proposals against. Loose, flexible and implicit plans are up-dated with new information. 12 Negotiator role- is role in which managers’ work with suppliers, distributor, and labor unions to reach on agreements about the quality and price of inputs, technical and human resource, work with other organizations to establish agreements to pool recourses to work on joint projects. N.B: Negotiations are an integral part of managers' job. It takes charge over important negotiating activities with other organizations. The spokesman, figurehead and resource allocator roles demand this. B. Managerial Skills.  Skill is ability to do something expertly and well. Managerial skills are enhanced through formal training, reading, and practice. There are three principal skills that managers get through experience an education. These are:  Conceptual skills  Human skills  Technical skills. 1. Conceptual skills  Conceptual skill involves the ability to view the organization as a whole and recognize its relationships to large environment or business world.  Are ability (or mental capacity) to conceive and manipulate ideas and abstract relation-ships.  the ability to analyze and diagnose a situation and find the cause and effect  are more needed by top-level managers 2. Human skills  Human skills include the ability to understand, alter, lead, and control the behavior of other individuals or/and groups. Human skills focus on working with people.  The ability to understand, alter, lead, and control people’s behavior  Are needed uniformly at three levels of management. That is the need for human skills at three levels of management remains fairly constant. 3. Technical skills  The job-specific knowledge required to perform a task. Common examples include marketing, accounting, and manufacturing.  Are greatly needed by first line managers. A manager's level in the organization determines the relative importance of possessing technical, human, and conceptual skills. Top level managers need conceptual skills in order to view the organization as a whole. Conceptual skills are used in planning and dealing with ideas and abstractions. Supervisors need technical skills to manage their area of specialty. All levels of management need human skills in order to interact and communicate with other people successfully. All managers need technical, human and conceptual skills. However, the need for these skills varies with the level of management. Thus, technical skill deals with things, human skill concerns people, and conceptual skill has to do with ideas. 13 Fig1.7 Skill Type Needed by Management Levels Universality of management Although the problems, other organizational constraints and nature of different organizations vary widely, the functions performed by each manager are nearly the functions performed by each manager are nearly the same. This means to successfully attain the objectives of any organization, managers must plan, organize, staff, lead and control. These are the basic managerial functions. Management is said to have universal application because:  Management is important for any organization or entity regardless of objective(s) for which it is established to reach the stated goals or  objectives.  Any person who holds managerial position in an organization performs the five functions of management. That is first level, middle level, and top level managers perform the functions. Is Management an art, a science or a profession? Basically management is an art, a science as well as a profession. Management is an art as it requires the use of behavioral and judgmental skills that cannot the quantified the way scientific information in field of chemistry, biology and physics can be. Issues can be resolved using instinct and experience. Requires use of: Conceptual, Communication, Interpersonal, andTime-Management skills. 14 Management is science, in that it requires the use of Technical, Diagnostic, Decision- Making skills, logics and analyses. And In addition it uses computers and quantitative formulas to problems on hand. Problems can be solved using systematic methods. Management is a profession because to say a given field is a profession it must fulfill the following criteria.  Specialized knowledge  Competent application  Community application  Social responsibility  Self control So, management is a profession because it fulfils the above criteria. 15  Chapter Two Evolution of management thought The practice of management can be dated back to thousands of years ago when human beings started civilizations and divided into tribes. Historically, there were many evidences indicating the existence of management in early human careers. Some of the evidences are: i. The Egyptian civilization was known for planning, organizing, and controlling during the construction of pyramids ii. Early Greeks were known for their management concepts such as specialization iii. The ancient Rome used to emphasis on personnel, selection and placement. iv. The existence of strong military forces in early human activities. Although management practice has a very old age, management as a systematic body of knowledge and distinct discipline is the product of 20th C. When different schools of management thought began to develop, the industrial revolution which began in 18th c and run through 20th c. was the main reason that led to development of different management theories. Industrial revolution resulted in economic growth of countries, minimized dependency on agriculture, and expansion of many and giant industries which needed many employees/workers. As a result, shortage in labor force that was to work in the factories had arisen. Consequently, practicing managers started to think about how to use the existing labor forces efficiently. In response to this Robert Owen improved working conditions in his factory by limiting working hours, and providing meal at the work place for workers. Charles Babbage was interested in division of labor and other scientific principles to have more work done by existing workers. These two individuals and other similar persons are currently considered as forerunners to scientific management. Starting from 20thc. Up to now different schools of management thought have been developed. These schools can be classified as follows: 1. Classical Management Theory  scientific management theory( F. Taylor)  Classical organization theory (H. Fayol)  Bureaucratic theory (M. Weber) 2. Neo Classical Theory  Behavioral or Human Relation movement theory (E. Mayo & Hawthorne study) 3. Modern Approaches  System approach  Contingency Approach  Management Science 16 1. Classical management theory Classical management theory is a theory that focused on finding the 'one best way' to operate (perform) and manage tasks. Efficiency and productivity became a critical concern of the Managers at the turn of the 20th century. Scientific management concentrated on lower-level managers dealing with everyday problems of the workforce. Classical organization theory concentrated on top-level managers dealing with the everyday problems of managing the entire organization. Bureaucratic focuses on a formal system of organization and administration to ensure effectiveness and efficiency. A. Scientific Management Theory (SMT) I. Frederick Winslow Taylor Scientific Management Theory was developed mainly by a person called F.W Taylor. Who was a foreman at Betheleum Midval Steel Factory in America. Taylor's primary objective was to discover the most efficient way of doing a job and then train the workers to do it that way. To do this he preferred scientific management principles or rules rather 17 than intuitions, judgments, experience generally called Rule of Thumb method. From his experience Taylor observed that workers were inefficient. The major reasons for inefficiency were as follows:  Standards of performance were not properly determined.  The existing pay system was not motivating  There was no specialization as such.  The responsibilities of management and other workers were not clearly distinguished  there were an antagonistic relationship between management and subordinates There fore, Taylor had attempted to find solutions to find for the above problems. Consequently, the basic components of scientific management were profounder (developed) by him. These include: 1. Determination of standards of performance scientifically 2. Differential and piece-rate payment system 3. Specialization of functional foreman ship 4. Identification of responsibilities of management 5. Mental revolution 1. Determination of standards of performance scientifically. Taylor argued that standard of performances should not be determined on the basis of 'rule of Thumb' method rather scientific methods should be used. To determine standard of performance scientifically, Taylor introduced his famous study known as time-motions involved in performing a particular task. Taylor, then found ways enabling workers to complete their job on time and avoiding unnecessary motions. He finally determined the best method of performing Job. 2. The differential and piece rates payment systems: Under these payment systems, there are two rates of wage payment: differential and piece rates. The piece rate is normally less than differential rate and it was applied to workers who had produced out put below the standard. The differential rate was applied for workers who had produced an out put just to the standard or above the standard. Example standard of performance = 30 Piece rate = 0.5 Birr Differential rate = 1 Birr Case 1: if the worker produced less than 30 Units, he/she would be paid on the basis of piece rate (0.5 Birr). Let say 29 units produced = 29x0.5 = 14.5 Birr Case 2: if the worker produced 30 units or more, he would be paid on the basis of piece rate (1 Birr). Let say 31 units produced= 31x1=31 Birr 3 Specialization of functional foremen ship During Taylor time workers were planning their own jobs. Taylor believed that this had led them to inefficiency. Instead, he recommended the separation of planning g from doing the jobs. He said there must be different functional specialists who would give 18 supervision for workers while they were doing their jobs. So workers could increase efficiency since they didn't spend time on planning. 4. Responsibility of management According to Taylor's Philosophy responsibility of management should be clearly separated from other non-management workers'. He determined responsibilities of management. This includes:  Studying each element of worker's job and developing scientific method of doing them.  Scientifically selecting, training and developing workers to the method developed.  Heartily cooperating with workers to make sure that workers were doing their jobs according to scientifically developed management  Management should divide and take over all the jobs that it thought could fit better than other workers and these responsibilities include planning, organizing, and directing. 5. Mental Revolution The scientific method of determining standards, the elimination of unnecessary movements in workers’ job and the use of differential wage rate payment systems could lead to increase in output and worker's payment, according to Taylor. If out put increased, management would be happy with workers and if wage payments increased, workers would be happy to management and conflict between management and workers could be solved. Principles of Scientific management Theory 1. Management should develop Scientific methods by which workers could do their jobs. 2. Management should scientifically select, train, teach and develop each worker. 3. Management should cooperate with the workers in ensuring that all of the work is done in accordance with the principles of scientific management. 4. Management should divide work responsibility between management and non- management workers with fitness assumptions. II. Frank (1868-1924) and Lillian (1878-1972) Gilbreth Frank Bunker Gilbreth Lillian Moller Gilbreth 19 Frank and Lillian Gilbreth emphasized method by focusing on identifying the elemental motions in work, the way these motions were combined to form methods of operation, and the basic time each motion took. They believed it was possible to design work methods whose times could be estimated in advance, rather than relying upon observation-based time studies. Frank Gilbreth, known as the Father of Time and Motion Studies, filmed individual physical labor movements. This enabled the manager to break down a job into its component parts and streamline the process. His wife, Lillian Gilbreth, was a psychologist and author of The Psychology of Work. In 1911 Frank Gilbreth wrote Motion Study and in 1919 the couple wrote Applied Motion Study. Frank and Lillian had 12 children. Two of their children, Frank B. Gilbreth, Jr. and Ernestine Gilbreth Careyone, wrote their story, Cheaper by the Dozen. One of Frank Gilbreth's first studies concerned bricklaying. (He had worked as an apprentice bricklayer.) He designed and patented special scaffolding to reduce the bending and reaching which increased output over 100 per cent. However, unions resisted his improvements, and most workers persisted in using the old, fatiguing methods. The Gilbreths believed that there was one best way to perform an operation. However, this "one best way" could be replaced when a better way was discovered. The Gilbreths defined motion study as dividing work into the most fundamental elements possible, studying those elements separately and in relation to one another; and from these studied elements, when timed, building methods of least waste. They defined time study as a searching scientific analysis of methods and equipment used or planned in doing a piece of work, development in practical detail of the best way of doing it, and determination of the time required. The Gilbreths drew symbols on operator charts to represent various elements of a task such as search, select, grasp, transport, hold, delay, and others. They called these graphical symbols "therbligs" (Gilbreths spelled backwards). III.Henry Gantt (1861-1919) Henry Gantt developed the Gantt chart, which is used for scheduling multiple overlapping tasks over a time period. He focused on motivational schemes, emphasizing the greater effectiveness of rewards for good work (rather than penalties for poor work). He developed a pay incentive system with a guaranteed minimum wage and bonus systems for people on fixed wages. Also, Gantt focused on the importance of the qualities of leadership and management skills in building effective industrial organizations. 20 Contributions of scientific management theory  Demonstrated the importance of compensation for better performance.  indicated the importance of personnel selection, training-etc  Developed management principles which have an application in modern management system. Limitations of scientific management theory  Assumed that workers were motivated only by monitory reward.  Concentrated only on how to increase efficiency of workers separately with out giving emphasis on how to manage the entire organization as a whole.  The fact that workers were receiving instructions from several functional foremen could confuse workers.  Considered workers as machines.  Did not acknowledge individual difference B. Classical Organization Theory. Scientific Management Theory emphasized on how to increase productivity of individual workers and management at work. But the classical organizational theory, also called administrative management theory, was aiming at administration of entire organization. Henry fayol, marry parkers Follet and James D. Mooney were among the great contributors to the theory. 1. Fayol's Proposal Henri Fayol was a French man who had served in mining company as a president for many years. He was interested in administrative side of operations in an organization. In particular, he was concerned with the fact that different abilities were needed as one moved up the management ranks. His experience led him to conclude that there were five basic functions of administration: planning, organizing, commanding, coordinating and controlling. He also set forth a series of administrative principles which could be used as flexible guide lines for managing both people and work. 21 Fayol's 14 principles Fayol believed that these principles were essential to increase the efficiency of management process. The principles are: 1. Division of labor: work specialization could increase efficiency. 2. Authority and responsibility-Authority of a person should always be equal to his/ her responsibility. 3. Discipline- all workers and managers of a given organization should respect a discipline which governs that organization No organization could prosper without discipline. 4. Unity of command- Everyone should have one and only one boss. 5. Unity of direction- each group of activities with the same objective must have one head and one plan 6. Equity- Everyone in an organization should be treated fairly and justly. 7. Order- A place should exist for everything and every thing should be in its place. 8. General interest over individual interest: - The goals of organization and departments should take priority over the goals of individual employees 9. Remuneration of personnel- compensation should be fair both to employees and employers to motivate them to do good work. 10. Centralization- organizations tend to keep with in limits much of decision making authority to the upper levels. Instead they should seek the balance of centralization- decentralization that provides the greatest overall efficiency. 11. Scalar chain -there should be a clear-cut chain of command running from the top of the organization to the bottom. 12. Stability of tenure personnel- reducing turn over of personnel will result in more efficiency and fewer expenses. Long-term employment is important. 13. Initiative- people should be allowed the freedom to propose and execute ideas at all levels of an enterprise 14. Esprit de corps’- In unity, there is strength. Managers should promote harmony and discourage or avoid those things that disturb harmony. Share enthusiasm or devotion to the organization. 2. Mary Parker Follett His concepts included the universal goal, the universal principle, and the Law of the Situation. The universal goal of organizations is an integration of individual effort into a synergistic whole. The universal principle is a circular or reciprocal response emphasizing feedback to the sender (the concept of two-way communications). Law of the Situation emphasizes that there is no one best way to do anything, but that it all depends on the situation. Contributions of Classical Organization (administrative) Theory 22  i. Demonstrated the importance of different skills at different levels of management for managers. ii. Systematically identified functions of management, iii. Developed several important principles of management. Limitation of classical organization i. Assumed several difficult principles which are difficult to apply in management of modern organizations C. Bureaucracy theory Max Weber (1864-1920) known as the Father of Modern Sociology, analyzed bureaucracy as the most logical and rational structure for large organizations. Bureaucracies are founded on legal or rational authority which is based on law, procedures, rules, and so on. Positional authority of a superior over a subordinate stems from legal authority. Charismatic authority stems from the personal qualities of an individual. Efficiency in bureaucracies comes from: (1.) clearly defined and specialized functions; (2.) use of legal authority; (3.) hierarchical form; (4.) written rules and procedures; (5.) technically trained bureaucrats; (6.) appointment to positions based on technical expertise; (7.) promotions based on competence; (8.) clearly defined career paths. Fig 2.2 Bureaucratic Principles Neo classical theory Neo classical theory was built on the basis of classical theory. It modified, improved and extended the classical theory. A. Behavioral or Human relations approach 23 The behavioral theory of management has partly emerged because the classical theorists failed to raise productivity and work place harmony although they had made a lot of attempts. Behavioral school recognized employees as individuals with concrete human need, as a part of work groups, and as a member of large society. It focused on human dimension of organization. Elton Mayo, who was the psychologist, pioneered the human relations movement. He headed a group of researchers in conducting the Hawthrone studies. The objective of the behavioral theorists was to identify factors that will serially affect productivity of employees. But the initial purpose of Hawthrone studies was to determine the effect of illumination on outputs. Hawthorne study The study conducted at how throne works of western Electric company in Chicago, USA. The study had four phases i. Illumination Experiments ii. The relay assembly Test Room Experiment iii. The Interviewing program iv. The bank wiring observation. Phase I Illumination Experiment This initial experiment was designed to study the effect of illumination on out put. But at the end, the researchers found that there was no as such strong relation ship between levels of output and that of light. At different levels of light the out put remained unchanged and they concluded that lightening was only one factor among several factors affecting output. To understand these other factors, they had conducted a more controlled experiment and this experiment marked the 2nd phase. Phase II: the Relay Assembly Test Room Experiment To obtain control sample, the researchers decided to isolate small group of employees from the regular work force and study their behavior. Accordingly six women were selected and made to work in separate room. Different supervisors were assigned to the women and they were allowed to communicate freely with their supervisors and among each other. After they adopted new work place, changes in several physical factors had been made. The changes included rest time, lunch time number of working days, number of working weeks etc. Regardless of these changes, productivity increased. Then the researchers concluded that productivity was mainly affected by social, psychological and nature of supervisions used. To get more information whether these factors were affecting productivity the researchers decided to assess attitude of employees through interviewing program which led to third phase of the study. Phase III: The Interviewing Program During this phase more than 20,000 interviews were conducted. The employees were asked about factors that might affect levels of their productivity. Finally the interviewers had the importance of other important factor from the interview, i.e., informal groups in an organization remained significant factor that affected the workers. To understand this factor in better way they had conducted 4th phase study. 24 Phase IV: The Bank Wiring Observation Room Study. The researchers decided to study a small group at work and they chose to study the bank wiring room, where workers were wiring and soldering bank terminals. After studying behavior in the room for an extended time period, they had realized the workers' actions were affected by many behavioral norms, which include factors like- individuals with whom they were given job or to whom they offered assistance. So informal groups affected strongly the performance of individuals by creating even standards of performance which were greater than standards set by management Hawthrone effects (conclusions) From studies conducted at how throne researchers concluded:  Individual workers could not be treated in isolation, but must be seen as members of groups  Employee motivation was based not only on the satisfaction of physical needs but also social and psychological needs.  Democratic style of leadership is important for employees' satisfaction.  Informal groups were important in organizational work environment. Contributions of Behavioral/Human Relations Theory:  Demonstrated the social context of organization  Found out that the satisfaction of social and psychological needs could result in more performance of workers. Limitations of Behavioral (Human Relations Theory)  Failed of develop an integrated theory of management as it followed only the basic background laid by classical theorists.  There style was unethical as they used human beings as experimental units in laboratory. 3. Modern Approach This approach is the last approach to it consists: A. the systems approach B. The contingency approach C. The management science approach For the purpose of this course at this level, we are going to discuss only the following theories. B. The system approach During the 1940s and World War II, systems analysis emerged. This viewpoint uses systems concepts and quantitative approaches from mathematics, statistics, engineering, and other related fields to solve problems. Managers find optimal solutions to management problems by using scientific analysis which is closely associated with the systems approach to management. A system is an interrelated and interdependent set of elements functioning as a whole. It is an open system that interacts with its environment. 25 It is composed of inputs from the environment (material or human resources), transformation processes of inputs to finished goods (technological and managerial processes), outputs of those finished goods into the environment (products or services), and feedback (reactions from the environment). Subsystems are systems within a broader system. Interdependent subsystems (such as production, finance, and human resources) work toward synergy in an attempt to accomplish an organizational goal that could not otherwise be accomplished by a single subsystem. Systems develop synergy. This is a condition in which the combined and coordinated actions of the parts of a system achieve more than all the parts could have achieved acting independently. Entropy is the process that leads to decline. System- is a group of interrelated and interdependent parts working together to attain one common objective. Systems obtain input from the environment, process the inputs and provide out puts to the environment it can be shown as follows; Fig 2.3 Flow of System Characteristics of systems A system has several distinguishing features i. A system can be open or closed ii. System has boundary iii. System has subsystems iv. Failure in one subsystem can be considered as failure of the entire system A. A system can be open or closed  Open system: is a system which interacts with its external environment to survive. It is 'dependent system as it must obtain inputs from its environment to attain its objective.  Closed system: is a system which is self-contained and thus not affected by changes that occur in its external environment. It doesn't interact with external environment or interacts much less thus it is 'independent. C. A system has boundary 26 System's boundary is a set of activates with which the system is distinguished from other system. It is not related with the physical landmark, A boundary of open system is permeable and flexible compared with boundary of closed system (rigid). D. A system has subsystems Subsystem refers to set of related parts that make-up the whole system. A subsystem can be system and a system can also be system and a system can also be subsystem. E. Failure in one subsystem can be considered as the failure of entire system. As the subsystems of a system are highly interdependent failure in one may cause failure in other subsystems which can result in total system failure. a. Entropy-Is system' principle which says that systems will die out unless they interact with their environment. b. Synergy_ Is principle which can be stated as the whole is greater than the sum of its parts. In organization context, it means that organizational elements will be more productive if they work together rather than working separately (or individually). Responsibility of management, according to system theory, is to keep a balanced relationship between different parts of relationship and make its organization have smooth relationship with the environment. C. Contingency Theory In the mid-1960s, the contingency view of management or situational approach emerged. This view emphasizes the fit between organization processes and the characteristics of the situation. It calls for fitting the structure of the organization to various possible or chance events. It questions the use of universal management practices and advocates using traditional, behavioral, and systems viewpoints independently or in combination to deal with various circumstances. The contingency approach assumes that managerial behavior is dependent on a wide variety of elements. Thus, it provides a framework for integrating the knowledge of management thought. It was built on the main premises of systems theory which says that organization is an open and organic system. According to contingency theory, since organization is an open system, it interacts with several external environment factors. Because these factors in environment change rapidly, it is not right to insist on only one way of managing an organization. Therefore it rejected the idea of one best way of managing. Instead, it supported situational management style. contingency theory is also known as situational approach because it focused on the idea that supports all methods of management could be good based on the situations in external environment and there is no one method of management which is always right. Generally, it is more flexible, and needs management to identify different techniques to be applied in different circumstances, at different time. 27 Management Science It uses rigorous quantitative techniques to maximize resources.  Quantitative management: utilizes linear programming, modeling, simulation systems.  Operations management: techniques to analyze all aspects of the production system.  Total Quality Management (TQM): focuses on improved quality.  Management Information Systems (MIS): provides information about the organization. Organization-Environment Theory It considers relationships inside and outside the organization.  The environment consists of forces, conditions, and influences outside the organization. Systems theory considers the impact of stages: Input: acquire external resources. Conversion: inputs are processed into goods and services. Output: finished goods are released into the environment. 28  PART-II MANAGERIAL FUNCTION CHAPTER THREE Planning Function 3.1. Concepts and need for planning 3.1.1. concepts of planning Planning is the management of the organization's future in an uncertain environment.  Planning - is the process of setting objectives and determining the steps needed to attain them.  Is systematic preparation for tomorrow, today  Is an orderly process that allows managers to determine what they want and how they get it.  Deals with ends (what is to be done).  Planning answers six basic questions in regard to any intended activity (objective). what ,when, where, who, how and how much  in planning managers:  Assess the future  Determine objectives of the organization and develop the overall strategies.  Determine resources needed to achieve the objectives Leaders are proactive. They make change happen instead of reacting to change. The future requires corporate leadership with the skills to integrate many unexpected and seemingly diverse events into its planning. Every organization must plan for change in order to reach its ultimate goal. Effective planning helps an organization adapt to change by identifying opportunities and avoiding problems. It sets the direction for the other functions of management and for teamwork. Planning improves decision-making. All levels of management engage in planning. 3.1.2 Need for planning Planning is important for every organization irrespective of its size, objectives, and location. Because decisions without planning would become random this may lead to failure of entire organization. Planning is important for several reasons: 1. It provides direction for an organization by specifying objectives 2. It reduces risk and uncertain of the future 3. It allows organizational members to concentrate on common organization's objective 4. It provides criteria for decision making 5. It provides basis for control or it facilitates control 29 3.2 Types of Plans Plan can be classified in to different types based on various criteria (basis): repetitiveness, time dimension and scope or breadth dimension. A. Classification of plans based on repetitiveness On the basis of repetitiveness plans can be classified in to three: i. Single use plans ii. Standing plans i. Single use plans Single use plans are those plans which have no more use after objective is accomplished. Once activity for which they have been made is over, single use plans have little or no use at all. They include: programs, projects, and Budgets. Program- is set of goals, policies, procedures, rules, job assignments, resources to be employed, and other elements necessary to carry out a given course of action.  Is set of activities used to accomplish objectives or used to solve some problem. Project- is specific action plan formulated to complete various aspects of a program which can be distinctly identified as a clear-cut grouping of activities with definite objectives and completion time. Budget - is a statement of expected results expressed in numerical terms. Budget is a plan that shows how money will be spent over a certain period of time. Even if budget is often thought as control technique, it is also a plan since it sets forth objective to attain. Budget sometimes called as 'numerical plan' as they are quantitative in nature. ii. STANDING PLANS Standing plans are type of plans which can be used again and again once they made. They remain useful for long period in dealing with repetitive situations. They include: policies, procedure, and rules. Policy- is a general statement designed to guide employees' actions in recurring situations. It establishes broad limits, provides direction, but permits some initiative and discretion on the part of the supervisor. Thus, policies are guidelines.  Policies are guidelines to decision making. Policies establish abroad framework within which managers at different levels make decisions.  are general guide to thinking and action Policies are important for an organization as they:  provide guidance to decision making  Channels all decisions toward the attainment of objectives. 30   Ensure consistency and uniformity in decision making. Procedures _ are sequences of steps or activities involved in making decisions or performing other tasks. A procedure is a sequence of steps or operations describing how to carry out an activity and usually involves a group. It is more specific than a policy and establishes a customary way of handling a recurring activity. Thus, less discretion on the part of the supervisor is permissible in its application. An example of a procedure is the sequence of steps in routing of parts. Procedures aim at laying down a mechanism for orderly performance and coordination of various organizational activities so as to avoid random actions and operations. Like policies, procedures also contribute in consistency of organizational activities by providing steps. Rules; are on-going specific plans influencing human behavior or conducts at work place. A rule is an established guide for conduct. Rules include definite things to do and not to do. There are no exceptions to the rules.  Rules are fixed plans and define what should and what should not be done. (Guide to action).  Unlike polices, rules don't allow for interpretation or decisions. Decisions are needed only in making the rules.. An example of a rule is "No Smoking B. Classification of plans based on time dimension Taking time in consideration a plan can be categorized in to three. Basically planning deals with future and the future is measured in time. Hence it is convenient and acceptable to think of different kinds of planning in terms of the time periods for which the planning is intended. I. Long range plans Long range plans are those plans which have longer time horizon; they are concerned with distant future than immediate future. The time may range from 5 to 10 years based on the size and the type of organizations. II Intermediate plans Intermediate range plans are those plans with a time horizon between one and five years. They range between long and short-term plans. III. Short range plans Short range plans are those plans with time dimension it is not possible to have aright time horizon guide line. For a plan to be short range or long range, it depends on the size of an organization and nature of business of an organization. So short range plan for one organization may be an intermediate or long range plan for the other organization. C. Classification of plans based on scope (Breadth) Based on their scope or breadth plans can be classified in to three types: strategic plans, tactical plans, and operational plans. 31  (i) Strategic plans Strategic planning produces fundamental decisions and actions that shape and guide what an organization is, what it does, and why it does it. It requires broad-scale information gathering, an exploration of alternatives, and an emphasis on the future implications of present decisions. Top level managers engage chiefly in strategic planning or long range planning. They answer such questions as "What is the purpose of this organization?" "What does this organization have to do in the future to remain competitive?" Top level managers clarify the mission of the organization and set its goals. The output needed by top management for long range planning is summary reports about finances, operations, and the external environment. Strategic planning is the process of developing and analyzing the organization's mission, overall goals, general strategies, and allocating resources. A strategy is a course of action created to achieve a long-term goal. The time length for strategies is arbitrary, but is probably two, three, or perhaps as many as five years. It is generally determined by how far in the future the organization is committing its resources. Goals focus on desired changes. They are the ends that the organization strives to attain. Traditionally strategic planning has been done annually. However, many companies are doing away with annual business plans altogether and moving to a system of continuous planning, to permit quicker response to changing conditions. Thus, the strategic plan involves adapting the organization to take advantage of opportunities in its constantly changing environment. Generally, Strategic plans _ Performed by top-level management  Mostly long range in its time frame  Expressed in relatively general terms  Type of planning that provides general future based direction to organization. (ii) Tactical plans Top level managers set very general, long-term goals that require more than one year to achieve. Examples of long-term goals include long-term growth, improved customer service, and increased profitability. Middle managers interpret these goals and develop tactical plans for their departments that can be accomplished within one year or less. In order to develop tactical plans, middle management needs detail reports (financial, operational, market, external environment). Tactical plans have shorter time frames and narrower scopes than strategic plans. Tactical planning provides the specific ideas for implementing the strategic plan. It is the process of making detailed decisions about what to do, who will do it, and how to do it. Tactical planning is the process of developing action plans through which strategies are executed. Tactical plan- is a plan used to develop means needed to activate and implement strategy. Generally, Tactical plans:  performed by middle level managers 32   Have shorter time frame, more detail and narrower scope than strategic plans  Guide submits of an organization (iii) Operational plans Supervisors implement operational plans that are short-term and deal with the day-to- day work of their team. Short-term goals are aligned with the long-term goals and can be achieved within one year. Supervisors set standards, form schedules, secure resources, and report progress. They need very detailed reports about operations, personnel, materials, and equipment. The supervisor interprets higher management plans as they apply to his or her unit. Thus, operational plans support tactical plans. They are the supervisor's tools for executing daily, weekly, and monthly activities. Operational planning is the process of setting short-ran objectives and determining in advance how they will be accomplished. To sum up, Operational plans:  Are first line managers' tools for exciting daily, weekly, and monthly activities.  Performed by operational level managers.  Are Specific and more detail than others. 3.3 Planning process Planning is not something which is made all once at a time. The planning process is rational and amenable to the scientific approach to problem solving. It consists of a logical and orderly series of steps. A person involved in planning pass through number of steps to make effective plans. Process of planning indicates the major steps taken place in planning. The steps generally involved in planning are: Step-1 Establishing objectives The first step in planning is to establish objectives for the enterprise and then for each subordinate work unit. Objectives are the driver of planning processes. Objectives are established at all levels of the structure, beginning at the top level and running down to first line managers. Strategic goals and objectives are developed to bridge the gap between current capability and the mission. They are aligned with the mission and form the basis for the action plans. Objectives are sometimes referred to as performance goals. Generally, organizations have long-term objectives for such factors as return on investment, earnings per share, or size. Furthermore, they set minimum acceptable standards or common-sense minimums. In addition, certain limitations, either explicit or implicit, such as "must provide jobs for existing employees" may exist. Objectives elaborate on the mission statement and constitute a specific set of policy, programmatic, or management objectives for the programs and operations covered in the strategic plan. They are expressed in a manner that allows a future assessment of whether an objective has been achieved. Step 2. Environmental Analysis and Forecasting 33 The next point for planning is an awareness of environment, both internally and externally. Organization should maintain a continual assessment of the environment to determine its own weaknesses and strengths internally and to be aware of opportunities and threats in external environment.. Based on this analysis of internal and external environment forecasting (predicting) of different environmental factors such as economics, technological, political etc can be made to assist real planning. Conduct a situation or SWOT analysis by assessing strengths and weaknesses and identifying opportunities and threats. A situation or SWOT (Strengths, Weaknesses, Opportunities, and Threats) analysis is critical to the creation of any strategic plan. The SWOT analysis begins with a scan of the external environment. Organizations must examine their situation in order to seek opportunities and monitor threats. Sources of information include customers (internal and external), suppliers, governments (local, state, federal, international), professional or trade associations (conventions and exhibitions), journals and reports (scientific, professional, and trade). SWOT is the assumptions and facts on which a plan will be based. Analyzing strengths and weaknesses comprises the internal assessment of the organization. Assess the strengths of the organization. What makes the organization distinctive? (How efficient is our manufacturing? How skilled is our workforce? What is our market share? What financing is available? Do we have a superior reputation?) Assess the weaknesses of the organization. What are the vulnerable areas of the organization that could be exploited? (Are our facilities outdated? Is research and development adequate? Are our technologies obsolete?) What does the competition do well? Analyzing opportunities and threats comprises the external assessment of the environment. Identify opportunities. In which areas is the competition not meeting customer needs? (What are the possible new markets? What is the strength of the economy? Are our rivals weak? What are the emerging technologies? Is there a possibility of growth of existing market?) Identify threats. In which areas does the competition meet customer needs more effectively? (Are there new competitors? Is there a shortage of resources? Are market tastes changing? What are the new regulations? What substitute products exist?) The best strategy is one that fits the organization's strengths to opportunities in the environment. The SWOT analysis is used as a baseline for future improvement, as well as gap analysis. Comparing the organization to external benchmarks (the best practices) is used to assess current capabilities. Benchmarking systematically compares performance measures such as efficiency, effectiveness, or outcomes of an organization against similar measures from other internal or external organizations. This analysis helps uncover best practices that can be adopted for improvement. (See Camp, R. C. Benchmarking: The search for industry best practices that lead to superior performance. Norcross, GA: Industrial Engineering and Management Press, 1993.) Benchmarking with other organizations can help identify a gap. Gap analysis identifies the progress required to move the organization from its current capabilities to its desired future state. In this way, the organization can adapt to the best practices to improve organizational performance. 34 Step 3. Determining Alternative course of Action Once objectives are set, the management must identify alternative ways for reaching them. When developing alternatives. A manager should try to create as many roads to each objective as possible. In fact, in most cases the challenging is not to find alternative ways but to decide which ones are best. To decide on best ones it requires evaluation. Step 4. Evaluating the alternatives Each alternative needs to be evaluated to determine which one best achieves the objectives. In evaluating managers should assess cost (disadvantages) and benefits (advantages) of all alternatives. The assessment may include both financial and non financial considerations. Step 5. Select the best alternatives After evaluating all possible alternatives, managers will select alternative that remains better than others. It may be an alternative with least disadvantages and most advantages. Step 6. Implementing the plan After the alternative course of action selected, it is important to develop an action plan to execute the plan. In this step method for implementation will be suggested. Step 7. Controlling and evaluating the results Once the plan is implemented it needs monitoring. Managers should monitor the progress being made, evaluate the reports made based on results, and make any necessary modifications, because factors in environment are constantly changing, plans must be modified to cope up with changes. 3.4 Value, Mission, Vision, Goals, Objectives, and Targets These words are often the most confusing words in management field. They are some what similar but not exactly the same in their meanings. Operating Guidelines Successful organizations continually innovate and change based upon customer needs and feedback. Values, mission, and vision form the foundation for the execution of the functions of management. They are an organization's guidelines that affect how it will operate. They work only if visible and used in everyday activities and decisions. An organization's values are its beliefs or those qualities that have intrinsic worth and will not be compromised. Its mission is its purpose for existing. The vision is the image of itself in the future. 35  Values Each supervisor's approach to management will reflect his or her values, as well as those of the organization. Building trust starts with creating culture based on shared values. Values are traits or qualities having intrinsic worth, such as courage, respect, responsibility, caring, truthfulness, self-discipline, and fairness. Values serve as a baseline for actions and decision-making and guide employees in the organization's intentions and interests. The values driving behavior define the organizational culture. A strong value system or clearly defined culture turns beliefs into standards such as best quality, best performance, most reliable, most durable, safest, fastest, best value for the money, least expensive, most prestigious, best designed or styled, easiest to use. If asked, "What do we believe in?" or "List our organization's values" all employees in the organization should write down the same values. For example, McDonald's values were captured in its motto of "Q.S.C. & V." which stands for quality, service, cleanliness, and value. Supervisors need to appreciate the significance of values and value systems. Values affect how a supervisor views other people and groups, thus influencing interpersonal relationships. Values affect how a supervisor perceives situations and solves problems. Values affect how a supervisor determines what is and is not ethical behavior. Values affect how a supervisor leads and controls employees. Since employees often base behavior on perceived values it is critical to ensure their perceptions reflect organizational values. Supervisors must communicate, encourage and reinforce the desired values and related behaviors to integrate them into the organizational culture. Geert Hofstede identified a work-related value framework that has four dimensions: power distance, uncertainty avoidance, individualism, and polarization. Power distance is the attitude to human inequality and relationships to superiors and inferiors in any hierarchy. Uncertainty avoidance is the tolerance for uncertainty that determines choices and rituals to cope with it in social structures and belief systems. Individualism is the relationship between the individual and the collectivity, especially in the way individuals choose to live and work together. Polarization is the extent to which differences such as masculinity or femininity have implications for social organization and the organizations of beliefs. Every person has a different mental program, based on patterns of thinking, feeling, and acting, which are learned throughout a lifetime. The effects of these differences have many practical implications for those who work or are managers in multinational business and for those involved in international negotiations. Mission A mission is a broad definition of a business that differentiates it from all other organizations. It is the justification for the organization's existence. The mission statement is the "touchstone" by which all offerings are judged. In addition to the organization's purpose other key elements of the mission statement should 36 include whom it serves, how, and why. The most effective mission statements are easily recalled and provide direction and motivation for the organization. Since an organization exists to accomplish something in the larger environment, its specific mission or purpose provides employees with a shared sense of opportunity, direction, significance, and achievement. An explicit mission guides employees to work independently and yet collectively toward the realization of the organization's potential. Thus, a good mission statement gets the emotional bonding and commitment needed. It allows the individual employee to say; "I know how I should do my job differently." Vision Erich Fromm pointed out; "The best way to predict your future is to create it." A vision might be a picture, image, or description of the preferred future. A visionary has the ability to foresee something and sees the need for change first. He or she challenges the status quo and forces honest assessments of where the industry is headed and how the company can best get there. A visionary is ready with solutions before the problems arise. Managers require more vision than ever because change is coming faster than ever. Leaders have the ability to make their vision real by engaging the minds, as well as the hearts of others. Microsoft's early vision statement was "A Computer on Every Desk and In Every Home." Microsoft's vision has evolved [1998 the "Connected PC and the Connected TV"- the idea of integrating the intelligence and interactivity of PCs with the video and sound of TV] to 2002 "to enable people and businesses throughout the world to realize their full potential." Mission, Vision, Goals, Objectives, and Targets These words are often the kmost confusing words in management field. They are some what similar but not exactly the same in their meanings. Mission _ refers to the main reason why the organization is established. or it indicates purpose for existence of an organization  Relates organization to external environment. Goal _ is expected (desired) performance to be accomplished but it is not set specifically- is desired future outcome that an organization strives to achieve generally. Goal is an end that the organization strives to attain. However, the supervisor cannot "do" a goal. Supervisors break down processes, analyze them, set objectives and then drive hard to achieve them. Doing the same thing and expecting different results doesn't work. E.g.to increase profit. Target _ is expected performance set for specific individual in an organization.  is more specific in nature than objectives. 37 Objective An objective is simply a statement of what is to done and should be stated in terms of results. A mnemonic aid to write objectives is SMART (Specific, Measurable, Attainable, Result-oriented, kTime-limited). Characteristics of good (effective) objective (SMART) There are some characteristics of effective objectives, so effective objectives are mostly: Specific; Objectives should state the exact level of performance expected specifically. An objective must be specific with a single key result. If more than one result is to be accomplished, more than one objective should be written. Just knowing what is to be accomplished is a big step toward achieving it. What is important to you? Once you clarify what you want to achieve, your attention will be focused on the objective that you deliberately set. You will be doing something important to you. Measurable- as much as possible objectives should be expressed quantitatively, therefore, it is possible to easily determine whether or not goals have been achieved. An objective must be measurable. Only an objective that affects behavior in a measurable way can be optimally effective. If possible, state the objective as a quantity. Some objectives are more difficult to measure than others are. However, difficulty does not mean that they cannot be measured. Treatment of salespeople might be measured by looking at the absenteeism and turnover rates among the sales force. Also, salespeople could be asked to fill out a behavioral questionnaire anonymously giving their observations of the supervision they receive. Customer service could be measured by such indices as the number of complaints received, by the number of customers lost, and by customer interviews or responses to questionnaires. Development of subordinates could be measured by determining the number of tasks the subordinate has mastered. Cooperation with other functions could be measured by length of delay in providing requested information, or by peer ratings of degree of cooperation. Avoid statements of objectives in generalities. Infinitives to avoid include to know, to understand, to enjoy, and to believe. Action verbs are observable and better communicate the intent of what is to be attempted. They include to write, to apply, to recite, to revise, to contrast, to install, to select, to assemble, to compare, to investigate, and to develop. How will you know you've progressed? Appropriate- objectives should be prepared in suitable, acceptable. And achievable manner. Realistic and challenging- objectives should be attainable or real rather than fantasy. An objective must be attainable with the resources that are available. It must be realistic. Many objectives are realistic. Yet, the time it takes to achieve them may be unrealistic. For example, it is realistic to want to lose ten pounds. However, it is unrealistic to want to 38 lose ten pounds in one week. What barriers stand between you and your objective? How will each barrier be overcome and within what time frame? It is also better to have challenging objectives as far as they could motivate workers if attained. Time bound _ objectives should be set with in specific time limits or target dates for their attainment. The objective should be traceable. Specific objectives enable time priorities to be set and time to be used on objectives that really matter. Are the time lines you have established realistic? Will other competing demands cause delay? Will you be able to overcome those demands to accomplish the objective you've set in the time frame you've established? Write Meaningful Objectives Although the rules are difficult to establish, the following may be useful when writing an objective. 1. Start with an action or accomplishment verb. (Use the infinitive form of the verb. This means to start the with "to.") 2. Identify a single key result for each objective. 3. Give the date of the estimated completion. 4. Be sure the objective is one you can control. 5. To test for validity of SMART objectives, ask yourself the following questions. » S = Exactly what is my objective? » M = What would a good job look like? » A = Is my objective feasible? » R = Is my objective meaningful? » T = Is my objective traceable? 3.5 PLANNING TECHNIQUE Managers Can Improve the Quality of their planning by applying variety of Planning tools and techniques.The important fanciful of planning is management by objectives (MBO). Management By Objective (MBO) MBO is a system in which specific performance objectives are jointly determined by subordinates and their superiors, progress toward objectives is periodically reviewed, and 39 rewards are allocated on the basis of this progress. An effective planning tool to help the supervisor set objectives is Management by Objectives (MBO). MBO gained recognition in 1954 with the publication of Peter Drucker's book The Practice of Management. MBO is a collaborative process whereby the manager and each subordinate jointly determine objectives for that subordinate. To be successful MBO programs should include commitment and participation in the MBO process at all levels, from top management to the lowest position in the organization. MBO begins when the supervisor explains the goals for the department in a meeting. The subordinate takes the goals and proposes objectives for his or her particular job. The supervisor meets with the subordinate to approve and, if necessary, modify the individual objectives. Modification of the individual's objectives is accomplished through negotiation since the supervisor has resources to help the subordinate commit to the achievement of the objective. Thus, a set of verifiable objectives for each individual are jointly determined, prioritized, and formalized. The supervisor and the subordinate meet periodically to review the latter's progress. Communication is the key factor in determining MBO's success or failure. The supervisor gives feedback and may authorize modifications to the objectives or their timetables as circumstances dictate. Finally, the employee's performance is measured against his or her objectives, and he or she is rewarded accordingly. Elements of MBO 1. Top level goal setting effective MBO begins with the objective being set by top managers which is open for discussion by managers and subordinates to reach up on the common objectives. 2. Individual targets- in an effective MBO each manager and subordinate has clearly defined responsibilities or expected results 3. Participation- both managers and subordinates are participating in objective setting. 4. Autonomous of individuals- Once the objective is set, subordinates have a right to select methods of attaining the objectives. 5. Performance review- managers and subordinates periodically meet to review progress toward the objectives 6. Reward- those individuals who meet the objectives in performance review are rewarded. The rewords may be recognition, praise, pay increase etc------- Shortly MBO Principles Cascading of organizational goals and objectives Specific objectives for each member Participative decision making Explicit time period Performance evaluation and feedback. Steps in MBO Effective MBO passes through different steps: 40  1. Setting individual objectives and plans with each subordinate the manager jointly set objectives the participation of subordinates in the objective setting process is away of strengthen their commitment to achieve their goals. 2. Giving feedback and evaluating performance Employees must know how much they are progressing toward their objectives. Thus, managers and subordinates should meet frequently to review progress and evaluate performance communication is key factor in determining success of failure of MBO 3. Rewarding according to performance employees' performance should be measured against their objectives. Employees who meet their objectives should be rewarded through recognitions, praises. Pay rises and so on. Fig 3.1 Management By Objective Research has demonstrated that when top management is committed and personally involved in implementing MBO programs, they significantly improve performance. This finding is not surprising when one considers that during the MBO process employees determine what they will accomplish. After all, who knows what a person is capable of doing better than the person does him or herself? Benefits and limitations of MBO Benefits 1. MBO uplifts workers motivation 2. MBO allows managers and subordinates share experience Limitation 1. It consumes much time 41  CHAPTER FOUR THE ORGANIZING FUNCTION AND ORGANIZATION Organizing is the process of identifying and grouping tasks to be performed, assigning responsibilities and delegating authority and establishing relationships for the purpose of enabling workers to work most effectively together in the accomplishments of objectives. The organizing function involves the following sub functions: 1. Identification of activities required for the achievement of objectives and implementation of plans. 2. Grouping of activities based on similarity of jobs so as to create self-contained jobs. 4. Assignment of jobs to employees. 5. Delegation of authority so as to enable them to perform their jobs and to command the resources needed for their performance. 6. Establishment of a net-work of coordinating relationships. Fig 4.1 steps in organizing process 42 1. Reviewing of objectives to be accomplished Objectives are the most important things in organizing and organization as they affect the results of organization so it is necessary to review objectives to be accomplished. 2. Determining tasks necessary to accomplish objectives After objectives are reviewed the next activity is to list down activities necessary to accomplish the objectives e.g. advertising, training, sales, budgeting, assembling 3. Grouping of activities according to their similarities to form department In this step management classifies and group activities using the guide lines of homogeneity or similarity of activities. Work that is similar in nature is placed together to achieve organizational objectives.k E.g. Sales, Accounting, Advertisement, Budget, Hiring workers, Training etc. 4. Assigning work and delegating authorities Managers have to assign individuals different tasks and make them authorize of their activates to enable them perform their job assignments 5. Hierarchical relationship development This step requires the determination of both vertical and horizontal operating relation ships of organization as a whole The result of organizing process is organization is predetermined manner to achieve common goal. 4.2 Classification of Organization Formal and Informal Organizations A. Formal organization is the official organizational structure created by management. It is organization formed purpose fully to achieve well defined and formal objectives. B. Informal organization is the network of personnel and social relation ships that arises spontaneously as people associate with one another in a work environment. It is natural 43 grouping of people in the work situation based on their behavioral patterns, interests, beliefs, objective etc. The organization can be classified on the basis of authority and responsibility assigned to the personnel and the relationship with each other. In this way, an organization can be either formal or informal. Formal organization The formal organization represents the classification of activities within the enterprise, indicates who reports to whom and explains the vertical journal of communication which connects the chief executive to the ordinary workers. In other words, an organizational structure clearly defines the duties, responsibilities, authority and relationships as prescribed by the top management. In an organization, each and every person is assigned the duties tend given the required amount of authority and responsibility to carry out this job. It creates the co-ordination of activities of every person to achieve the common objectives. It indirectly induces the worker to work most efficiently. The inter-relationship of staff members can be shown in the organization chart and manuals under formal organization. Characteristics of formal organization The important characteristics of a formal organization are given below 1. it is properly planned 2. It is based on delegated authority. 3. it is deliberately impersonal 4. The responsibility and accountability at all levels of organization should be clearly defined. 5. organizational charts are usually drawn 6. unity of command is normally maintained 7. It provides for division of labor. 44 Advantages of formal organization 1. The definite boundaries of each worker are clearly fixed. it automatically reduces conflict among the workers. The entire building is kept under control 2. Overlapping of responsibility is easily avoided. The gaps between the responsibilities of the employees are filled up. 3. Buck passing is very difficult under the formal organization normally exact standards of performance are established under formal organization. It results in the motivating of employees. 4. A sense of security arises from classification of the task. 5. There is no chance for favoritism in evaluation and placement of the employee. 6. It makes the origination less dependent on one man Keith Davis observes that formal organization is and should be our paramount organization type as a general rule. It is the pinnacle of man's achievement in a disorganized society. It is man's orderly, conscious and intelligent creation for human benefit. Arguments Against formal organization 1. In certain cases, the formal organization may reduce the spirit of imitative. 2. Sometimes authority is used for the sake of convenience of the employee without considering the need for using the authority. 3. it does not consider the sentiments and values of the employees in the social organization 4. the formal organization may reduce the speed of informal communication 5. It creates the problems of coordination. Informal organization Informal organization is an organizational structure which establishes the relationship on the basis of the likes and dislikes of officers without considering the rules, regulations and procedures. These types of relationships are not recognized by officers but only felt, the friendship. Mutual understanding and confidence are some of the reasons for existing informal organization, for example, a salesman receives orders or instructions directly from the sales manager instead of this supervisor. The informal organization relationship 45 exists under the formal organization also. The informal organization relationship or informal relations give a greater job satisfaction and result in maximum production. According to C.J Bernard, "informal organization brings cohesiveness to formal organization. It brings to the members of a formal organization a feeling of belonging, status of self respect and gregarious satisfaction. Informal organizations are important means of maintain the personality of the individual gains certain effects of formal origination which tend to disintegrate personality." of the individual against certain effects of formal organization which tend to disintegrate personality." Characteristics of Informal organization 1. Informal organization arises without any external cause i.e. voluntarily. 2. It is a social structure formed to meet personal needs. 3. Informal organization has no place in the organization chart 4. It acts as an agency of social control. 5. Informal organization can be found on all levels of organization within the managerial hierarchy. 6. The rules and traditions of informal organization are not written but are commonly followed. 7. Informal organization develops from habits, conduct, customers and behavior of social groups. 8. informal organization is one of the parts of total organization 9. There is no structure and definiteness to the informal organization. Advantages of informal organization The advantages of informal organizations are briefly explained below 1. it fills up the gaps and deficiency of the formal organization 2. Informal organization gives satisfaction to the workers and maintains the stability of the work. 3. it is a useful channel of communication 4. The presence of informal organization encourages the executives to plan the work correctly and act accou7rdingly. 46  5. The informal organization also fills up the gaps among the abilities of the managers. Disadvantages of informal organization The disadvantages of informal organization are summarized below: 1. It has the nature of upsetting the morality of the workers. 2. It acts according to mob psychology. 3. Informal organization indirectly reduces the efforts of management to promote greater productivity. 4. It spreads rumor among the workers regarding the functioning of the organization unnecessarily. formal organization informal organization 1. it arises due to delegation of authority it arises due to social interaction of people 2. It gives importance to terms of authority and It gives importance to people and their functions. relationships. 3. It is created deliberately. it is spontaneous and natural 4. the formal authority is attached to a position The informal authority is attached to a person. 5. rules, duties and responsibilities of workers are No such written rules and duties followed in given in writing informal organization 6. Formal organization comes from outsiders who Informal organization comes from those persons are superior in the line of organization. who are objects of its control. 7. Formal authority flows from upwards to Informal authority flows upwards to downwards or downwards. horizontally. 8. formal organization may grow to maximum size Informal organization tends to remain smaller. 9. It is created for technological purposes. it arises from man's quest for social satisfaction 10. Formal organization is permanent and stable. there is no such permanent nature and stability Even though informal organization is not established officially it exists and it is there always in the formal organization. It may affect the formal organization positively or 47 negatively and management should recognize that informal organization exist in the formal organization; for the benefit of the formal organization. Informal organizations have some characteristics i. Group norms-are unwritten laws that govern the behavior of members of the informal organization ii. group cohesiveness:- the members of informal organization are stick together iii. group leader ship:- informal organization has a leader , i.e., the informal leader, this person is the most active one from among the others iv. Communication net worked. The organization has communicated net work called grapevine. v. Don't hav