Principles of Management PDF

Course Name: Principles of Management Module 1: Introduction to Management Definition of Management Definition of Management by Harold Koontz "Management is the art of getting things done through and with people in formally organized groups”. It is art of creating the environment in which people can...

Course Name: Principles of Management Module 1: Introduction to Management Definition of Management Definition of Management by Harold Koontz "Management is the art of getting things done through and with people in formally organized groups”. It is art of creating the environment in which people can perform and individuals could cooperate towards attaining of groups goals. It is the art of removing blocks to such performance, a way of optimizing efficiency in reaching goals”. Henri Fayol's management theory is a simple model of how management interacts with personnel. Henri Fayol's management theory is a simple model of how management interacts with personnel. Fayol's management theory covers concepts in a broad way, so almost any business can apply his theory of management. Today the business community considers Fayol's classical management theory as a relevant guide to productively managing staff. The management theory of Henri Fayol includes 14 principles of management. From these principles, Fayol concluded that management should interact with personnel in five basic ways in order to control and plan production. 1. Planning. According to Fayol's theory, management must plan and schedule every part of industrial processes. 2. Organizing. Henri Fayol argued that in addition to planning a manufacturing process, management must also make certain all of the necessary resources (raw materials, personnel, etc.) came together at the appropriate time of production. 3. Commanding. Henri Fayol's management theory states that management must encourage and direct personnel activity. 4. Coordinating. According to the management theory of Henri Fayol, management must make certain that personnel works together in a cooperative fashion. 5. Controlling. The final management activity, according to Henri Fayol, is for the manager to evaluate and ensure that personnel follow management's commands. Definition of Management by James L. Lundy Management is principally the task of planning, coordinating, motivating and controlling the efforts of others towards a specific objective. Definition of Management by George R Terry Management is a distinct process consisting of planning, organizing, actuating and controlling, performed to determine and accomplish stated objectives by the use of human being and other resources. Need for management principles Enhance managerial efficiency: Management principles Provide guidelines to managers as to how they should operate in different situations. This leads to smooth functioning of the organization which in turn enhances managerial efficiency Comprehend the nature of management: A sound knowledge of management principles helps to identify the efficiency level of a manager’s job, cull out the scope of his duties, highlight the point to which his service could be utilized. To train managers: In the words of Henri Fayol, “Management principles are necessary to train and educate future managers.” Without this organized body of knowledge, it would not be possible to train people for managerial positions. To facilitate research: Management principles help to amplify knowledge and carry out further research in the field of management. It provides new strategies and imaginations to the organization. To coordinate material and human resources: Management principles widen the scope for optimum utilization of natural resources. They also help to coordinate the material and human resources for the accomplishment of common objectives. Management Science or Art Management as Science Cause & Effect Relationship - Principles of science lay down cause and effect relationship between various variables. E.g. when metals are heated, they are expanded. The cause is heating & result is expansion. The same is true for management; therefore it also establishes cause and effect relationship. E.g. lack of parity (balance) between authority & responsibility will lead to ineffectiveness. If you know the cause i.e. lack of balance, the effect can be ascertained easily i.e. in effectiveness. Similarly if workers are given bonuses, fair wages they will work hard but when not treated in fair and just manner, reduces productivity of organization. Test of Validity & Predictability - Validity of scientific principles can be tested at any time or any number of times i.e. they stand the test of time. Each time these tests will give same result. Moreover future events can be predicted with reasonable accuracy by using scientific principles. E.g. H2 & O2 will always give H2O.Principles of management can also be tested for validity. E.g. principle of unity of command can be tested by comparing two persons - one having single boss and one having 2 bosses. The performance of 1st person will be better than 2nd. Management as both science and art Management is both an art and a science. The management combines features of both science as well as art. It is considered as a science because it has an organized body of knowledge which contains certain universal truth. It is called an art because managing requires certain skills which are personal possessions of managers. Science provides the knowledge & art deals with the application of knowledge and skills. A manager to be successful in his profession must acquire the knowledge of science & the art of applying it. Therefore management is a judicious blend of science as well as an art because it proves the principles and the way these principles are applied is a matter of art. Science teaches to ’know’ and art teaches to ’do’. E.g. a person cannot become a good singer unless he has knowledge about various ragas & he also applies his personal skill in the art of singing. Same way it is not sufficient for manager to first know the principles, but he must also apply them in solving various managerial problems that is why, science and art are not mutually exclusive but they are complementary to each other (like tea and biscuit, bread and butter etc.). The old saying that “Manager are Born” has been rejected in favor of “Managers are Made”. It has been aptly remarked that management is the oldest of art and youngest of science. To conclude, we can say that science is the root and art is the fruit. Functions of Management Management in some form or another is an integral part of living and is essential wherever human efforts are to be undertaken to achieve desired objectives. The basic ingredients of management are always at play, whether we manage our lives or business. Management is a set of principles relating to the functions of planning, organizing, directing, and controlling, and the applications of these principles in harnessing physical, financial, human and informational resources efficiently and effectively to achieve organizational goals. Management is essential for an organized life and necessary to run all types of organizations. Managing life means getting things done to achieve life’s objectives and managing an organization means getting things done with and through other people to achieve its objectives. Planning Planning is future-oriented and determines an organization’s direction. It is a rational and systematic way of making decisions today that will affect the future of the company. It is a kind of organized foresight as well as corrective hindsight. It involves the predicting of the future as well as attempting to control the events. It involves the ability to foresee the effects of current actions in the long run in the future. Peter Drucker has defined planning as follows: “Planning is the continuous process of making present entrepreneurial decisions systematically and with best possible knowledge of their futurity, organizing systematically the efforts needed to carry out these decisions and measuring the results of these decisions against the expectations through organized and systematic feedback”. An effective planning program incorporates the effect of both external as well as internal factors. The external factors are shortages of resources; both capital and material, general economic trend as far as interest rates and inflation are concerned, dynamic technological advancements, increased governmental regulation regarding community interests, unstable international political environments, etc. The internal factors that affect planning are limited growth opportunities due to saturation requiring diversification, changing patterns of the workforce, more complex organizational structures, decentralization, etc Organizing Organizing requires a formal structure of authority and the direction and flow of such authority through which work subdivisions are defined, arranged and coordinated so that each part relates to the other part in a united and coherent manner so as to attain the prescribed objectives. According to Henry Fayol, “To organize a business is to provide it with everything useful or its functioning i.e. raw material, tools, capital and personnel’s”. Thus the function of organizing involves the determination of activities that need to be done in order to reach the company goals, assigning these activities to the proper personnel, and delegating the necessary authority to carry out these activities in a coordinated and cohesive manner. It follows, therefore, that the function of organizing is concerned with: Identifying the tasks that must be performed and grouping them whenever necessary Assigning these tasks to the personnel while defining their authority and responsibility. Delegating this authority to these employees Establishing a relationship between authority and responsibility Coordinating these activities Staffing Staffing is the function of hiring and retaining a suitable work-force for the enterprise both at managerial as well as non-managerial levels. It involves the process of recruiting, training, developing, compensating and evaluating employees and maintaining this workforce with proper incentives and motivations. Since the human element is the most vital factor in the process of management, it is important to recruit the right personnel.  According to Kootz & O’Donnell, “Managerial function of staffing involves manning the organization structure through the proper and effective selection, appraisal & development of personnel to fill the roles designed in the structure”. This function is even more critically important since people differ in their intelligence, knowledge, skills, experience, physical condition, age and attitudes, and this complicates the function. Hence, management must understand, in addition to the technical and operational competence, the sociological and psychological structure of the workforce. Directing The directing function is concerned with leadership, communication, motivation, and supervision so that the employees perform their activities in the most efficient manner possible, in order to achieve the desired goals. The leadership element involves issuing of instructions and guiding the subordinates about procedures and methods. The communication must be open both ways so that the information can be passed on to the subordinates and the feedback received from them. Motivation is very important since highly motivated people show excellent performance with less direction from superiors. Supervising subordinates would lead to continuous progress reports as well as assure the superiors that the directions are being properly carried out. Controlling The function of control consists of those activities that are undertaken to ensure that the events do not deviate from the pre-arranged plans. The activities consist of establishing standards for work performance, measuring performance and comparing it to these set standards and taking corrective actions as and when needed, to correct any deviations. According to Koontz & O’Donnell, “Controlling is the measurement & correction of performance activities of subordinates in order to make sure that the enterprise objectives and plans desired to obtain them as being accomplished”. The controlling function involves: a. Establishment of standard performance. b. Measurement of actual performance. c. Measuring actual performance with the pre-determined standard and finding out the deviations. d. Taking corrective action.  All these five functions of management are closely interrelated. However, these functions are highly indistinguishable and virtually unrecognizable on the job. It is necessary, though, to put each function separately into focus and deal with it. Need for levels of management A proper organization structure is required for an organization to function effectively. This structure comprises of people/staff with varied experience and exposure. For effective and efficient function of an organization, the task is divided into three levels: A. Top level management – help in formulating policies and decision making B. Middle level management – act as link between the top and lower C. Lower or operating management – focuses more on operational activities TOP LEVEL MANAGEMENT  Top level management consists of Board of Directors, Managing Directors or President.  Focuses on overall policy formulation of the organisation by doing a SWOT analysis of the organisation  Top management frames policies on different functional areas after consultation and discussion with mid-level management. MIDDLE LEVEL MANAGEMENT  Middle level management consists Vice President- Marketing/Finance/Production  Works on implementing the policies and plans formulated by top level.  Leads the group of workers to the planned targets and provide them with necessary resources in order to get the jobs done.  Plan the operations, pass on the instructions laid by the top management to appropriate divisions or staff, collect the resources required and control/regulate the work.  Responsible for leading all functions within each department. LOWER LEVEL MANAGEMENT  Lower level management consists of supervisors, foreman and executives  Assisted by group of workers who carry out the activities as per schedule or demand  Plays vital role in implementing the policies designed by the top  Comply with rules and guidelines made by the higher authorities of the organization Managerial Skills Technical Skills An imperative skill for managers at the lower levels of management Managers unless adept in technical matters, they would not be in a position to direct the operations of their subordinates in the best manner possible and thereby lead them towards optimal performance both quantitatively and qualitatively. Human Skills Human skills or interpersonal skills refer to the ability of a person to work well with other people in a group It is the ability to tactfully deal with subordinates/co-workers and mould their behavior at work in the desired manner, to help attain the common objectives of the enterprise most effectively and efficiently. It is the ability to lead, motivate and communicate with people and to accomplish set objectives Conceptual Skills Conceptual skill refers to the ability of a person to think and conceptualize abstract situations. It is ability to understand and coordinate the full range of corporate objectives and activities. These skills are most important for the top management level; as they have the greatest need to view the ‘big picture’. Managerial Roles Henry Mintzberg, a contemporary management thinker has done lot of research on the various roles performed by a manager. A role, according to him, “Is an organized set of behaviors belonging to an identifiable office or position.” Just as characters in a play have specific roles, managers also play different roles. Through his studies, Mintzberg identified ten roles that managers play at various times to varying degrees. He classified them under three broad categories;  interpersonal roles,  informational roles,   decisional roles. Interpersonal Category: The managerial roles in this category involve providing information and ideas.  Figurehead – As a manager, you have social, ceremonial and legal responsibilities. You're expected to be a source of inspiration. People look up to you as a person with authority, and as a figurehead.  Leader – This is where you provide leadership for your team, your department or perhaps your entire organization; and it's where you manage the performance and responsibilities of everyone in the group.  Liaison – Managers must communicate with internal and external contacts. You need to be able to network effectively on behalf of your organization Informational Category: The managerial roles in this category involve processing information.  Monitor – In this role, you regularly seek out information related to your organization and industry, looking for relevant changes in the environment. You also monitor your team, in terms of both their productivity, and their well- being.  Disseminator – This is where you communicate potentially useful information to your colleagues and your team.  Spokesperson – Managers represent and speak for their organization. In this role, you're responsible for transmitting information about your organization and its goals to the people outside it. Decisional Category: The managerial roles in this category involve using information.  Entrepreneur – As a manager, you create and control change within the organization. This means solving problems, generating new ideas, and implementing them.  Disturbance Handler – When an organization or team hits an unexpected roadblock, it's the manager who must take charge. You also need to help mediate disputes within it.  Resource Allocator – You'll also need to determine where organizational resources are best applied. This involves allocating funding, as well as assigning staff and other organizational resources.  Negotiator – You may be needed to take part in, and direct, important negotiations within your team, department, or organization.  Course Name: Principles of Management Module 2: Evolution of Management Thought Evolution of Management Concept The origin of Evolution management can be traced back to the days when man started living in groups. History reveals that strong men organized the masses into groups according to their intelligence, physical and mental capabilities. Evidence of the use of the well-recognized principles of management is to be found in the organization of public life in ancient Greece, the organization of the Roman Catholic Church and the organization of military forces. Thus management in some form or the other has been practiced in the various parts of the world since the dawn of civilization. With the onset of Industrial Revolution, however, the position underwent a radical change. The structure of industry became extremely complex. At this stage, the development of a formal theory of management became absolutely necessary. It was against this background that the pioneers of modern management thought laid the foundations of modern management theory and practice. Evolution of management thought may be divided into four stages 1. Pre-scientific management period. 2. Classical Theory 3. Neo-classical Theory or Behaviour Approach 4. Modern Theory or Systems Approach Pre-scientific Management Period: The advent of industrial revolution in the middle ofthe 18th century had its impact on management. Industrial revolution brought about a complete change in the methods of production, tools and equipment, organization of labour and methods of raising capital. Under this system, land and buildings, hired labour, and capital are made available to the entrepreneur, who strives to combine these factorsin the efficient achievement of a particular goal. All these changes, in turn, brought aboutchanges in the field of management. Classical Theory: It was closely associated with the industrial revolution and the rise of large-scale enterprise. Classical organization and management theory is based on contributions from a number of sources. They are scientific management, Administrative management theory, bureaucratic model, and micro-economics and public administration. Management thought focussed on job content division of labour, standardization, simplification and specialization and scientific approach towards organization. Neoclassical Theory: This theory is built on the base of classical theory. It modified, improved and extended the classical theory. Classical theory concentrated on job content and management of physical resources whereas, neoclassical theory gave greater emphasis to individual and group relationship in the workplace. The neo- classical theory pointed out the role of psychology and sociology in the understanding of individual and group behaviour in an organization. Modern Theory (System Approach): The systems approach to management indicates the fourth major theory of management thought called modern theory. Modern theory considers an organization as an adaptive system which has to adjust to changes in its environment. An organization is now defined as a structured process in which individualsinteract for attaining objectives. Early approaches to management The industrial revolution was the starting point for the development of management concepts and theories. The rapid growth in the number of factories during this period and the need to coordinate the efforts of large number of people in the production process necessitated the development of management theories and principles. The principal contributors of the development of management thought are: Robert Owen Charles Babbage Andrew Ure Charles Dupin Henry Robinson Towne Robert Owen: Human Resource Management Pioneer A successful entrepreneur in the early 19th century He was the one of the earliest management thinkers to realize the significance of human resources  He believed workers performance was influenced by the environment in which they worked He proposed legislative reform that would limit the number of working hours and restrict the use of child labour In his own factory, he introduced a standard working day of 10.5 hours a day and no child labour below 10 year old His proposal was opposed by the business partners and were considered radical He tried to improve the living conditions of his employees by ensuring basic amenities like better streets, houses etc Charles Babbage Widely known as “father of modern computing” His major contribution to the field of computing were the world’s first mechanical calculator and an analytical engine He advocate the concept of division of labour He was impressed by the idea of work specialization or the degree to which work is divided into various tasks. Each worker should be trained in one specific skill and made responsible for that part of the operation The concept of assembly line in which each worker is responsible for a different repetitive task is based on Babbage’s ideas. He devised a profit sharing plan under which bonuses were given The modern day Scanlon Plan under which workers offer suggestions to improve productivity and then share the resulting profits is based on the Babbage’s idea Andrew Ure & Charles Dupin Andrew Ure (1778–1857) and Charles Dupin (1784–1873) were early industrial educators. Ure provided academic training at Anderson's College in Glasgow for managers in the early factory system. He published a text in 1835 that dealt mainly with the technical problems of manufacturing in the textile industry, but also dealt with problems of managing.  Obviously pro-management, Ure advocated an "automatic plan" to provide harmony and to keep any individual worker from stopping production. He was a defender of the factory system and believed workers must recognize the benefits of mechanization and not resist its introduction. Dupin was a French engineer and professor who pioneered industrial education in France. He is credited with having a great influence on the writings of Henri Fayol. Dupin published Discours sur le Sort Des Ouvriers, translated Discourse on the Condition of the Workers, in 1831. This manuscript included concepts such as time study and the need to balance workloads after introducing division of labor. He wrote of the need for workers to receive concise instructions and the need to discover and publish the best way to perform work with the least amount of worker energy. Henry Robinson Towne Henry Towne, president of the Yale and Towne Manufacturing Company, began applying systematic management practices as early as 1870. In 1866 he wrote a paper, The Engineer as an Economist that suggested that ASME become a clearinghouse for information on managerial practices, since there was no management association. Towne also published several papers and a book, Evolution of Industrial Management, on the use of "gain sharing" to increase worker productivity. In his last book Towne contrasted the status of scientific management in 1886 and in 1921, noting the establishment of industrial management courses, and crediting Frederick Taylor as the apostle of the scientific movement. Classical Approach It was closely associated with the industrial revolution and the rise of large-scale enterprise. Classical organization and management theory is based on contributions from a number of sources. They are scientific management, Administrative management theory, bureaucratic model, and micro-economics and public administration. Management thought focussed on job content division of labour, standardization, simplification and specialization and scientific approach towards organization. Classical Theory divided into three separate schools:  Scientific Management of Taylor Administrative Management of Fayol Bureaucratic Model of Max Weber Scientific Management 4 steps in scientific management The two major managerial practices that emerged from Taylor’s approach to management are Piece-rate incentive system Time-and-motion study Piece-rate-incentive system aim was to reward the worker who produced the maximum output. Under this system, a worker who met the established standards of performance would earn the basic wage rate set by management. If the worker’s output exceeded the set target, his wages would increase proportionately. Time-and-motion study, the jobs are broken down into various small tasks or motions and unnecessary motions are removed to find out the best way of doing a job. Then each part of the job is studied to find out the expected amounts of goods that can be produced each day. The objective of this analysis is to ascertain a simpler, easier and better way of performing a work or job. Taylor’s Approach to Management Frederick Winslow Taylor well-known as the founder of scientific management was the first to recognize and emphasis the need for adopting a scientific approach to the task of managing an enterprise. He tried to diagnose the causes of low efficiency in industry and came to the conclusion that much of waste and inefficiency is due to the lack of order and system in the methods of management. He found that the management was usually ignorant of the amount of work that could be done by a worker in a day as also the best method of doing the job. As a result, it remained largely at the mercy of the workers whodeliberately shirked work. He therefore, suggested that those responsible for management should adopt a scientific approach in their work, and make use of "scientific method" for achieving higher efficiency. The scientific method consists essentially of  Observation  Measurement  Experimentation and  Inference. He advocated a thorough planning of the job by the management and emphasized the necessity of perfect understanding and co-operation between the management and the workers both for the enlargement of profits and the use of scientific investigation and knowledge in industrial work. He summed up his approach in these words:  Science, not rule of thumb  Harmony, not discord  Co-operation, not individualism  Maximum output, in place of restricted output  The development of each man to his greatest efficiency and prosperity. Elements of Scientific Management: The techniques which Taylor regarded as its essential elements or features may be classified as under: 1. Scientific Task and Rate-Setting (work study): Work study may be defined as the systematic, objective and critical examination of all the factors governing the operational efficiency of any specified activity in order to effect improvement. Work study includes. o Methods Study: The management should try to ensure that the plant is laid out in the best manner and is equipped with the best tools and machinery. The possibilities of eliminating or combining certain operations may be studied. o Motion Study: It is a study of the movement, of an operator (or even of a machine) in performing an operation with the purpose of eliminating uselessmotions. o Time Study (work measurement): The basic purpose of time study is to determine the proper time for performing the operation. Such study may be conducted after the motion study. Both time study and motion study help in determining the best method of doing a job and the standard time allowed for it. o Fatigue Study: If, a standard task is set without providing for measures to  eliminate fatigue, it may either be beyond the workers or the workers may over strain themselves to attain it. It is necessary, therefore, to regulate the working hours and provide for rest pauses at scientifically determined intervals. o Rate-setting: Taylor recommended the differential piece wage system, under which workers performing the standard task within prescribed time are paid a much higher rate per unit than inefficient workers who are not able to comeup to the standard set. 2. Planning the Task: Having set the task which an average worker must strive toperform to get wages at the higher piece-rate, necessary steps have to be takentop lan the production thoroughly so that there is no bottlenecks and the work goes on systematically. 3. Vocational selection and Training: Scientific Management requires a radical change in the methods and procedures of selecting workers. It is therefore necessary to entrust the task of selection to a central personnel department. The procedure of selection will also have to be systematised. Proper attention has also to be devoted to the training of the workers in the correct methods of work. 4. Standardization: Standardization may be introduced in respect of the following. o Tools and equipment: By standardization is meant the process of bringing about uniformity. The management must select and store standard tools andimplements which will be nearly the best or the best of their kind. o Speed: There is usually an optimum speed for every machine. If it is exceeded,it is likely to result in damage to machinery. o Conditions of Work: To attain standard performance, the maintenance of standard conditions of ventilation, heating, cooling, humidity, floor space, safety etc., is very essential. o Materials: The efficiency of a worker depends on the quality of materials andthe method of handling materials. 5. Specialization: Scientific management will not be complete without the introduction of specialization. Under this plan, the two functions of 'planning' and 'doing' are separated in the organization of the plant. The `functional foremen' are specialists who join their heads to give thought to the planning of the performance of operations in the workshop. Taylor suggested eight functional foremen under his scheme of functional foremanship. o The Route Clerk: To lay down the sequence of operations and instruct theworkers concerned about it. o The Instruction Card Clerk: To prepare detailed instructions regarding different aspects of work. o The Time and Cost Clerk: To send all information relating to their pay to theworkers and to secure proper returns of work from them.  o The Shop Disciplinarian: To deal with cases of breach of discipline and absenteeism. o The Gang Boss: To assemble and set up tools and machines and to teach theworkers to make all their personal motions in the quickest and best way. o The Speed Boss: To ensure that machines are run at their best speeds andproper tools are used by the workers. o The Repair Boss: To ensure that each worker keeps his machine in goodorder and maintains cleanliness around him and his machines. o The Inspector: To show to the worker how to do the work. 6. Mental Revolution: At present, industry is divided into two groups – management and labour. The major problem between these two groups is the division of surplus. The management wants the maximum possible share of the surplus as profit; the workers want, as large share in the form of wages. Taylor has in mind the enormous gain that arises from higher productivity. Such gains can be shared both by the management and workers in the form of increased profits and increased wages. Limitation of Scientific Management  The principles of scientific management revolve round problems at the operational level and do not focus on the management of an organization from manager’s point of view. These principles focus on the solution of problems from an engineering point of view  The proponents of scientific management were of the opinion that people were rational and were motivated primarily by the desire for material gain. Taylor and followers overlooked the social needs of the workers and overemphasized their economic and physical needs  Scientific management theorists also ignored the human desire for job satisfaction. Since workers are more likely to go on strike over factory like working conditions and job content rather than salary. The principles of scientific management, which were based on the ‘rational worker’ model, became increasingly ineffective. Administrative Theory Henry Fayol is considered the father of modern theory of general and industrial management. He divided general and industrial management into six groups:  1. Technical activities - Production, manufacture, adaptation. 2. Commercial activities - buying, selling and exchange. 3. Financial activities - search for and optimum use of capital. 4. Security activities - protection of property and persons. 5. Accounting activities - stock-taking, balance sheet, cost, and statistics. 6. Managerial activities - planning, organization, command, co- ordination and control. These six functions had to be performed to operate successfully any kind of business. He, however, pointed out that the last function i.e., ability to manage, was the most important for upper levels of managers. The process of management as an ongoing managerial cycle involving planning, organizing, directing, co-ordination, and controlling, is actually based on the analysis of general management by Fayol. Hence, itis said that Fayol established the pattern of management thought and practice. Even today, management process has general recognition. Fayol Outlined 14 Principles of Management Fayol's Principles of Management: The principles of management are given below:  Division of work: Division of work or specialization alone can give maximum productivity and efficiency. Both technical and managerial activities can be performed in the best manner only through division of labour and specialization.  Authority and Responsibility: The right to give order is called authority. The obligation to accomplish is called responsibility. Authority and Responsibility are the two sides of the management coin. They exist together. They are complementary and mutually interdependent.  Discipline: The objectives, rules and regulations, the policies and procedures must be honoured by each member of an organization. There must be clear and fair agreement on the rules and objectives, on the policies and procedures. There must be penalties (punishment) for non-obedience or indiscipline. No organization can work smoothly without discipline - preferably voluntary discipline.  Unity of Command: In order to avoid any possible confusion and conflict,  each member of an organization must receive orders and instructions only from one superior (boss).  Unity of Direction: All members of an organization must work together to accomplish common objectives.  Emphasis on Subordination of Personal Interest to General or Common Interest: This is also called principle of co-operation. Each shall work for all and all for each. General or common interest must be supreme in any joint enterprise.  Remuneration: Fair pay with non-financial rewards can act as the best incentive or motivator for good performance. Exploitation of employees in any manner must be eliminated. Sound scheme of remuneration includes adequate financialand nonfinancial incentives.  Centralization: There must be a good balance between centralization and decentralization of authority and power. Extreme centralization and decentralization must be avoided.  Scalar Chain: The unity of command brings about a chain or hierarchy of command linking all members of the organization from the top to the bottom. Scalar denotes steps.  Order: Fayol suggested that there is a place for everything. Order or system alone can create a sound organization and efficient management.  Equity: An organization consists of a group of people involved in joint effort. Hence, equity (i.e., justice) must be there. Without equity, we cannot have sustained and adequate joint collaboration.  Stability of Tenure: A person needs time to adjust himself with the new work and demonstrate efficiency in due course. Hence, employees and managers must have job security. Security of income and employment is a pre- requisite of soundorganization and management.  Esprit of Co-operation: Esprit de corps is the foundation of a sound organization. Union is strength. But unity demands co-operation. Pride, loyalty and sense of belonging are responsible for good performance.  Initiative: Creative thinking and capacity to take initiative can give us sound managerial planning and execution of predetermined plans.  Bureaucratic Management Max Weber, a German Sociologist developed the bureaucratic model. His model of bureaucracy includes Hierarchy of authority. Division of labour based upon functional specialization. A system of rules. Impersonality of interpersonal relationships. A system of work procedures. Placement of employees based upon technical competence. Legal authority and power. Bureaucracy provides a rigid model of an organization. It doesnot account for Important human elements. The features of bureaucracy are:  Rigidity, impersonality and higher cost of controls.  Anxiety due to pressure of conformity to rules and procedure.  Dependence on superior.  Tendency to forget ultimate goals of the organization. Bureaucratic Model is preferred where change is not anticipated or where rate of change can be predicated. It is followed in government departments and in large business organizations. Mary Parker Follet: Focusing on Group Influences She argued that organisational participants were influenced by the groups within which they worked She recognised the critical role managers play in bringing about the kind of constructive change that enables organisations to function She argued that power should not be based on hierarchy; instead, it should be based on cooperation and should involve both superiors and subordinates. Inother words she advocated ‘power sharing’. She also advocated the concept of integration which involves finding a solution acceptable to all group members. She believed that managers should be responsible for keeping a group together and ensuring that organisational objectives are achieved through group  interaction. Her humanistic ideas have influenced the way we look at motivation, leadership, teamwork, power and authority. Elton Mayo: Focusing on Human Relations The ‘Father of the Human Relations Approach”, led the team which conducted a study at Western Electric’s Hawthrone Plant between 1927 and 1933 to evaluate the attitudes and psychological reactions of workers in on-the-job situations. The experiments were conducted in four phases  Illumination experiments  Relay assembly test room experiments  Interview phase  Bank wiring observation room experiments Four Parts of Hawthorne Studies / Experiments Illumination Experiments (1924-27) These experiments were performed to find out the effect of different levels of illumination (lighting) on productivity of labour. The brightness of the light was increased and decreased to find out the effect on the productivity of the test group. Surprisingly, the productivity increased even when the level of illumination was decreased. It was concluded that factors other than light were also important. Relay Assembly Test Room Study (1927-1929) Under these test two small groups of six female telephone relay assemblers were selected. Each group was kept in separate rooms. From time to time, changes were made in working hours, rest periods, lunch breaks, etc. They were allowed to choose their own rest periods and to give suggestions. Output increased in both the control rooms. It was concluded that social relationship among workers, participation in decision-making, etc. had a greater effect on productivity than working conditions. Mass Interviewing Programme (1928-1930) 21,000 employees were interviewed over a period of three years to find out  reasons for increased productivity. It was concluded that productivity can be increased if workers are allowed to talk freely about matters that are important to them. Bank Wiring Observation Room Experiment (1932) A group of 14 male workers in the bank wiring room were placed under observation for six months. A worker's pay depended on the performance of the group as a whole. The researchers thought that the efficient workers would put pressure on the less efficient workers to complete the work. However, it was found that the group established its own standards of output, and social pressure was used to achieve the standards of output. Conclusions of Hawthorne Studies / Experiments Mass Interviewing Programme (1928-1930) The social and psychological factors are responsible for workers' productivity and job satisfaction. Only good physical working conditions are not enough to increase productivity. The informal relations among workers influence the workers' behaviour and performance more than the formal relations in the organisation. Employees will perform better if they are allowed to participate in decision- making affecting their interests. Employees will also work more efficiently, when they believe that the management is interested in their welfare. When employees are treated with respect and dignity, their performance will improve. Financial incentives alone cannot increase the performance. Social and Psychological needs must also be satisfied in order to increase productivity. Good communication between the superiors and subordinates can improve the relations and the productivity of the subordinates. Special attention and freedom to express their views will improve the performance of the workers. Criticism of Hawthorne Studies / Experiments Lacks Validity: The Hawthorne experiments were conducted under controlled  situations. These findings will not work in real setting. The workers under observation knew about the experiments. Therefore, they may have improved their performance only for the experiments. More Importance to Human Aspects: The Hawthorne experiment gives too much importance to human aspects. Human aspects alone cannot improve production. Production also depends on technological and other factors. More Emphasis on Group Decision-making: The Hawthorne experiments placed too much emphasis on group decision-making. In real situation, individual decision- making cannot be totally neglected especially when quick decisions are required and there is no time to consult others. Over Importance to Freedom of Workers: The Hawthorne experiment gives a lot of importance to freedom of the workers. It does not give importance to the constructive role of the supervisors. In reality too much of freedom to the workers can lower down their performance or productivity. Abraham Maslow: Focusing on Human Needs Maslow's hierarchy of needs is a motivational theory in psychology comprising a five-tier model of human needs, often depicted as hierarchical levels within a pyramid. Needs lower down in the hierarchy must be satisfied before individuals can attend to needs higher up. From the bottom of the hierarchy upwards, the needs are  Physiological needs,  safety,  love and belonging,  esteem,  self-actualization. Physiological needs- These are the basic needs of air, water, food, clothing and shelter. In other words, physiological needs are the needs for basic amenities of life. Safety needs- Safety needs include physical, environmental and emotional  safety and protection. For instance- Job security, financial security, protection from animals, family security, health security, etc. Social needs- Social needs include the need for love, affection, care, belongingness, and friendship. Esteem needs- Esteem needs are of two types: internal esteem needs (self- respect, confidence, competence, achievement and freedom) and external esteem needs (recognition, power, status, attention and admiration). Self-actualization need- This include the urge to become what you are capable of becoming / what you have the potential to become. It includes the need for growth and self-contentment. It also includes desire for gaining more knowledge, social- service, creativity and being aesthetic. The self- actualization needs are never fully satiable. As an individual grows psychologically, opportunities keep cropping up to continue growing. Douglas McGregor Developed two assumptions about human behavior- Theory X & Theory Y Theory X presents essentially negative view of people , the managers assume that workers are lazy, have little ambition, dislike work, want to avoid responsibility and need to be closely directed to make them work effectively Theory Y is more positive and presumes that workers can be creative and innovative, are willing to take responsibility, can exercise self-control and can enjoy their work. They generally have higher-level needs which have not been satisfied by the job A comparison of Theory X and Theory Y characteristics Chris Argyris  Made significant contributions to the behavioral school of management thought The major contributions of the behavioral scientist are the maturity – immaturity theory, the integration of individual and organizational goals and Model I and Model II organization analysis Maturity –immaturity theory According to this theory, a persons’ development is processed along a continuous break of an immaturity situation to a maturity situation. A mature person is characterised for being active, independent, self-confident and self-controlled. On the contrary, an immature person is passive, dependent, has lack of confidence and feels need of control by others. Agryis believed that managers who treat people positively, and are responsible adults, will achieve the highest productivity. He thought that common problems of employee avoiding work, lack of interest, alienation and low morale may be signs of mismatch between management practice and mature adult personality. His solution to the problem is to expand job responsibilities; allow more task variety and adjust supervisory styles to allow more participation and promote better human relations. Model I and Model II Organisation Argyris classifies organization as Model I and Model II organisations on the basis of the employees’ set of values The employees in Model I organization are manipulative and pitted against each other. They are not willing to take risks Workers in Model II organization are open to learning and less manipulative. Their access to information gives them freedom to make informed choices which in turn increases their willingness to take risks. Hence, according to Argyris, managers should strive to create a Model II environment Quantitative Approach After World War II, analytical methods developed by the military during the war effort began to be used in business decision making. The quantitative approach to management incorporates many analytical and numeric techniques into management methods. The goal is to have specific formulas that information can be plugged into to provide the best answer to common management questions. The three main branches of the quantitative approach are 1. Management science 2. Operations management 3. Management information systems The relevance of quantitative approach today is that it has contributed most directly to Managerial decision making, particularly in planning and controlling. The availability of sophisticated computer software programs has made the use of quantitative techniques more feasible for managers. Management Science Mathematics has made inroads into all disciplines. It has been universally recognised as an important tool of analysis and a language for precise expression of concept and relationship. Evolving from the Decision Theory School, the Mathematical School gives a quantitative basis for decision-making and considers management as a system of mathematical models and processes. This school is also sometimes called, ‘Operations Research” or “Management Science School’. The main feature of this school is the use of mixed teams of scientists from several disciplines. It uses scientific techniques for providing quantitative base for managerial decisions. The exponents of this school view management as a system of logical process. It can be expressed in terms of mathematical symbols and relationships or models. Different mathematical and quantitative techniques or tools, such as linear programming, simulation and queuing, are being increasingly used in almost all the areas of management for studying a wide range of problems. The exponents of this school believe that all the phases of management can be expressed in quantitative terms for analysis. However, it is to be noted that mathematical models do help in the systematic analysis of problems, but models are no substitute for sound judgement. Moreover, mathematics quantitative techniques provide tools for analysis but they cannot be treated an independent system of management thought. A lot of mathematics is used in the field of physical sciences and engineering but mathematics has never been considered as separate school even in these fields. The contributions of mathematicians in the field of management are significant. This has contributed impressively in developing orderly thinking amongst managers. It has given exactness to the management discipline. Its contributions and usefulness could hardly be over-emphasized. However, it can only be treated as a tool in managerial practice. Operations Management It deals with the effective management of the production process and the timely delivery of an organization’s product and services Operations management is concerned with 1. Inventory management 2. Working scheduling 3. Production planning 4. Facilities location and design 5. Quality assurance Management Information Systems (MIS) A computer based information system that is designed to quickly produce relevant data or information needed by managers mainly at the middle and first-line levels Modern approaches to management Systems Theory The Systems Approach: An organization as a system has five basic parts -Input, Process, Output, Feedback and Environment. It draws upon the environment for inputs to produce certain desirable outputs. The success of these outputs can be judged by means of feedback. If necessary, we have to modify out mix of inputs to produce as per changing demands. Systems approach points out complex multilevel and multi-dimensional character. We have both a micro and macro approach. A company is micro within a business system. It is macro with respect to its own internal units. Within a company as a system we have:  Production subsystem   Finance subsystem  Marketing subsystem  Personnel subsystem. All parts or components are interrelated. Both parts as well as the whole are equally important. At all levels, organizations interact in many ways. Contingency Theory Systems approach emphasizes that all sub- systems of an organization along with the super system of environment are interconnected and interrelated. Contingency approach analysis and understands these inter relationship so that managerial actions can be adjusted to demands of specific situations or circumstances. Thus the contingency approach enables us to evolve practical answers to problems demanding solutions. Organization design and managerial actions most appropriate to specific situations will have to be adopted to achieve the best possible result under the given situation. There is no one best way (as advocated by Taylor) to organize and manage. Thus, Contingency Approach to management emphasizes the fact that management is a highly practice-oriented discipline. It is the basic function of managers to analyse and understand the environments in which they function before adopting their techniques, processes and practices. The application of management principles and practices should therefore be contingent upon the existing circumstances. Contingency approach guides the manager to be adaptive to environment. It tells the manager to be pragmatic and open minded. The contingency approach is an improvement over the systems approach. It not only examines the relationships between sub-systems of the organization, but also the relationship between the organization and its environment. However, the contingency approach suffers from two limitations: 1. It does not recognize the influence of management concepts and techniques on environment. 2. Literature on contingency management is yet not adequate. Course Name: Principles of Management Module 3: Social and Ethical Responsibilities of Management Social responsibilities of management To be truly effective, organizations should interact with their external environment. The external environment can be divided into the general or mega environment and the specific task environment. Social responsibility refers to the obligation of a business firm to enhance the condition of society along with its own interests. Business firms are accountable to six major stakeholder groups: shareholders, employees, customers, creditors and suppliers, society and the government. Social responsiveness refers to the ability of a firm to implement policies and take part in activities that would benefit both society and the firm. The following categories are generally considered when measuring social responsiveness: contributions, fund-raising, volunteerism, recycling, diversity policies, direct corporate investment, quality of work life, attention to consumers and pollution control. The need to measure social responsiveness led to the development of social audits. Social audits are of two types - audits required by the government and voluntary audits. Although social audits are not legally mandatory, many organizations make social involvement disclosures in their annual reports. This shows the growing concern among major firms about their social responsibility. The ethical conduct of an organization depends on the ethical standards of its managers. Three types of management have been identified, depending on the ethical or moral nature of their decisions. These are moral, amoral and immoral management. Moral management is in the best interests of the organization in the long run. However, most companies follow the principles of amoral management. To conduct business in an ethical manner, managers should be aware of the factors that affect ethical behavior. Through mechanisms such as top management commitment, code of ethics, ethics committees, ethics audits, ethics training and ethics hotlines, managers can inculcate ethical behavior in the employees. ARGUMENTS FOR SOCIAL RESPONSIBILITY There are several core ideas about social responsibility of business. Over the period of time, the things have changed too much giving new thoughts and replacing the classical economic view of profit maximization in the business. Based on this feature in the present context, arguments for social responsibility are as follows: 1. Business is a part of society Business is a part of society. Society is a system and business is one of its subsystems. Every subsystem of a system functions for the betterment of the whole system and not for its own betterment only. This version applies to business too. Therefore, business is responsible for the society as a whole and profit motive of the business cannot have precedence over other motives of the society. 2. Long-term Self-interest of Business Social responsibility is in the long-term self-interest of the business. Existence of any business is because of existence of various social organs like financiers, employees, customers, society as a whole, etc., and not otherwise. Therefore, business should provide satisfaction to all these organs on continuous basis for its continued existence. By discharging social responsibility, the business may provide this satisfaction. 3. Moral Justification Social responsibility has moral justification. This moral justification emerges from the fact that if any one takes something from others, he must give something to them in return. On moral ground, this equation must be based on equity so that it continues. A business takes various inputs (money, materials, people, information, etc.) from the society and gives outputs (goods and services) to the society by using various inputs. System of taking inputs and giving outputs works well only if it fulfills social requirements. 4. Creating Better Public Image Any business which involves in fulfilling the aspirations of the society creates better image in the public. Creation of this type of image is a source of satisfaction itself for those who operate business. This also helps in increasing the business volume, both in terms of taking inputs and giving outputs. 5. Avoidance of Government Regulations Government aims at maintaining equilibrium in the society on long-term basis. For this purpose, it tries to ensure that every organ of society meets social requirements. If any organ fails to do so, government has power to take actions against it. Since business is an organ of the society, government may take actions against those business organizations which involve in activities not meeting social requirements. In order to avoid such actions having long-term negative impact, it is preferable to adopt social responsibility. 6. Maintenance of Society For maintaining society, there are legal provisions but these provisions cannot be comprehensive because of social changes on continuous basis. Therefore, the business has to be socially responsible in order to avoid anti-social activities so that society is maintained on continuous basis. ARGUMENTS AGAINST SOCIAL RESPONSIBILITY There are various arguments against social responsibility though most of these are based on classical economics. These arguments are as follows: 1. Contrary to Basic Function of Business The basic function of a business is to provide a product to its customers at a price which is lower than the level of satisfaction provided by the use of the product or, at the most, equal to that. If this relationship is reversed, the product becomes meaningless. Generally, cost of production is a significant factor in determining the product price. Discharge of social responsibility adds to cost, hence product price which may reverse the above equation and business may not remain viable in the long term. Because of this phenomenon, Milton Friedman, a noted economist, has observed, 2. Conflict with Profit Motive Social responsibility is in conflict with profit motive of business. Undertaking business involves assuming risk. Earning profit is the reward for this risk. If social responsibility is added as an objective of business, it reduces profit margin which is against the concept of profit optimization even if not profit maximization. Thus, social responsibility and profit motive do not proceed in the same direction. 3. Distortion in Resource Allocation Social responsibility leads to distortion of resource allocation. Resources in an economic system are allocated on the principle that every resource finds its most optimum utilization. This utilization is best possible without social responsibility and not with it. Thus, social resources may go in waste if the concept of social responsibility is added to business operations. 4. Imposition of Business Values Discharging social responsibility involves lot of influence of the business on the society. Therefore, by undertaking social responsibility, a business is likely to impose its own values on the society, thereby replacing the social values with business values. This phenomenon has taken place in many cases. This is highly undesirable from social point of view. 5. Inefficiency in the System Social responsibility brings inefficiency in the system. There is no substitute for the power of self-interest to get people to act. Any replacement of self-interest will, therefore, be fatal to the efficiency of the system. Social responsibility tends to replace self-interest of business defined in terms of profit motive to a great extent, thus, making the business as a system inefficient. 6. Operational Problems There are certain operational problems in implementing social responsibility. Conceptually as well as operationally, social responsibility is a confusing term. Therefore, managers involved in managing business affairs are not very clear about what they are expected to do under social responsibility. As a result, actions ranging from mere showing lip sympathy to undertaking multi-crore concrete programmes are included in social responsibility. CONCLUSIONS The arguments of those who argue that business organizations have nothing to do with social responsibility except the maximization of shareholders’ wealth are weak on two points. 1. First, they overstate the trend and ultimate magnitude of business’s voluntary assumption of social responsibility. 2. Second, they want business organizations to do something they cannot do and that is to ignore societal demands on them. In fact, no business can survive for long in total disregard to its social concern. Many forces will come in its way to destroy it. Therefore, even if business is involved in making profit, it is done through the creation of utility to the social needs. Better these social needs served, better will be the prospect of its survival and progress. Even in Western countries, where economic activities are comparatively free from controls, it has been accepted that profit is not the sole criterion for measuring the success of a business organization. Usually, people misinterpret the concept of business objective and view the social responsibility as a focus which detracts from or is counter to the profit making. This is not the case at all. Economic concerns and social concerns need not be viewed as opposite ends of a continuum as shown in the image Mistaken view of Social Responsibility. The correct position is according to Realistic view of business responsibility. What this figure shows is that although there may be some clearly distinct economic versus social concerns, there is a rather broad area in which economic and social concerns are consistent with one another. It is corporate activities that fall into this overlapped area that provide the more realistic view of social responsibility. Therefore, the issue is not whether business has social responsibility; it has. The fundamental issue is to identify this responsibility in general and for individual companies in particular. Social Stakeholders Business enterprises are primarily accountable to 6 major interest groups 1. Share holders 2. Employees 3. Customers 4. Creditors and suppliers 5. Society 6. Government These groups are also known as social stakeholders Shareholders: They provide the core resource – the capital – that enables an organisation to operate and grow. They expect the management to use the capital in judiciously and operate the business in a way that ensures a good return on their investment. They should be provided with adequate and timely information about the functioning of the organisation. Employees: They are the biggest asset of the organisation. It is mandatory for business firms to protect the interests of their employees.  Customers: In recent years, customers have received great attention. Firms have begun to realize the importance of keeping customer happy. Moreover the growth of consumerism has made firms more aware of their duties towards consumers. Creditors and suppliers: They are responsible for providing inputs of production process in the form of raw materials and capital. Management is responsible for fulfilling its obligations to its creditors and suppliers. Society: Organisations function within a social system and draw their resources from this system. Therefore, they have certain obligations towards society. The management of business organisation can fulfil their obligations toward society by preserving and enhancing the well-being of the members of society. Government: The government of a country provides the basic facilities required for the survival and growth of businesses. The government monitors and to a certain extent, controls the business systems of the country. Most of the controls imposed by the government are in the best interests of businesses. Measuring social responsiveness It refers to the development of organisational decision processes that enable managers to anticipate, respond to and manage the areas of social responsibility. What should be measured? Many attempts have been made to measure social responsiveness. Some companies establish special committees to evaluate their social responsiveness. Following are the various categories for measuring the social responsiveness of organizations:  Contributions: Companies makes direct financial contributions to charitable and civic projects. Many companies made financial contributions towards relief and rehabilitation work like relief to earthquake victims.  Fund-raising: This involves fund-raising for a social cause either by the organisation itself or by assisting voluntary social organisations in fund- raising.  Volunteerism: It refers to the involvement of employees in civic activities.  Recycling: To conserve the environment materials like plastic paper etc can and should be recycled into useful products. Like Nike programme “Reuse-a- shoe”. The recycling efforts of these companies reduce the accumulation of waste.  Valuing Diversity: It is to take measures to promote equal employment opportunities irrespective of gender, race or religion. Affirmative action’s like to set of policies and initiatives designed to eliminate pas and present discriminations based on race, colour, religion, sex or natural origin.  Direct Corporate Investment: It is to provide facilities for a locality or a community.  Quality of work life: Apart from ensuring fair pay, the fair treatment of employees and safe working conditions, many companies respond to specific employee needs. The company organises outdoor expeditions for its employees  on a regular basis. It has also set up interest clubs such as music forum, a performing arts club etc.  Attention to consumers: Consumers prefer to buy products that are of good quality and are safe to use.  Pollution control: Increasing public awareness and government pressure have made corporations more environments conscious. GVK industries’ first power plant observes stringent pollution control standards. Social Audits Social audits arose from the need to measure the social responsiveness of organisation. Social audits enable management to identify the direct financial benefits as well as the intangible benefits to the organisation from socially responsible behaviour. It is broadly distinguished into two types: 1. Those required by the government 2. Voluntary social programs The audits imposed by the government involves the audit of pollution control measures, audit of product performance and audit of equal employment standards. The second type includes voluntary audits made by companies to identify the extent of their social responsiveness. Managerial Ethics The term “ethics” is generally used to refer to the rules or principles that define right and wrong conduct. The types of managerial ethics Factors that influence ethical behavior Complex interactions between the manager’s stage of moral development and various moderating variables determine whether he will act in an ethical or unethical manner. Stages of Moral Development There are 3 levels of moral development: Ethical guidelines for managers Obeying the law: Managers must ensure that laws are not broken to achieve organisational objectives Tell the truth: In order to build and main long-term relationships with relevant stakeholders, it is essential to state the facts clearly and honestly Uphold human dignity: People should be treated with respect irrespective of their race, ethnic group, religion, sex or creed Adhere to the golden rule: “Do unto others as you would have others do unto you”, is often applied when monitoring the ethical dimensions of business decisions. It involves treating individuals fairly and with empathy Primum non-nocere (above all, do no harm): When pursuing profits organisations should ensure that they do not harm society Allow room for participation: This principle advocates the participation of stakeholders in the functioning of an organisation. It emphasizes the significance  of knowing the needs of stakeholders, rather than deciding what is best for them Always act when you have responsibility: Managers should utilize the capacity and resources to take appropriate action when there is need for it Mechanisms for ethical management: There is no specific method for making employees behave in an ethical manner. But the number of mechanisms to create ethical climate like codes of ethics committees, ethics audits, ethics training and ethics hot lines  Course Name: Principles of Management Module 4: Span of Control Meaning of Span of Control Span of control refers to the maximum numbers effectively supervised by a single individual. The number of members may be increased or decreased according to the nature of work done by the subordinate or the ability of the supervision. In the administration area, under one executive, nearly four of five subordinates may work. The span of control enables the smooth functioning of the organization. The term ‘span’ literally means the space the between two supports of a structure, e.g. the space between two pillars of a bridge. The space between two pillars should be neither too large nor too small. If it is too large, the bridge may collapse and if is too small, it will enhance its cost. When this word is applied to management, it refers to the number of subordinates a manager or a supervisor can supervise, manage or control effectively and effectively. Therefore, span of supervision refers to the optimum number of subordinates that a manager or supervisor can manage or control effectively. Accordingly to Mr. Spriegal “Span of control means the number of people reporting directly to an authority. The principle of span of control impulse that no single executive should have more people looking to him for guidance and leadership than he can reasonably be exacted to serve.’’ An organization is characterized by the presence of a number of levels and departments. But more the levels are created more will be the administrative cost due to additional staff required and more will be the difficulty to be encountered in communication and controlling. This is basically the problem of deciding the number of subordinates to report directly to each manager. According to this principle there is a limit of the number of subordinates that each manager can effectively supervise. What is Span of Control and Organizational Structure? It is very important to understand span of control and organizational structure when describing an organization. Simply, span of control refers to the number of subordinates under the manager’s direct control. As an example, a manager with five direct reports has a span of control of five. To many or too few direct reports is a good way to view how efficient an organization is as long as it looked at in the context of the companys organizational structure. Expanding On the Concept of Span of Control While we are addressing span of control, let’s also broaden our understanding to see it in the context of the organizational structure levels of hierarchy. Width: Organization structures can be described as wide (with larger span of control) or narrow (with smaller span of control.)  Height: As there are levels of management, or hierarchy, an organization may be tall (with many levels) or flat (with fewer levels.) Flat organizations have a ‘wide’ span of control and Tall organizations have a ‘narrow’ span of control. While there are pros and cons with both tall and flat structures, a company’s structure must be designed to suit the business (the customer and markets) and in a way that fits with the workforce’s capability. Factors Determining Span of Control: Two variables directly influence limit on the span of control: (1) Capacity of the higher executive to manage his work. (2) Capacities of subordinate executives. Apart from these two basic factors, there are many other factors which can determine the actual optimum spanof control. 1. The Type of Organisation and Management: Clear and comprehensive plans and policies at all levels reduce the volumeof personal decision making of a manager. Therefore, his span of control and supervision can easily increase. Clarity of plan and definiteness of responsibility and use of standing plans (policies, procedures and rules) reduce the problems of decision making. Clear-cut and precise authority-responsibility, planned performance standards, standing operating procedures, standard methods, good budgets,etc., are some of the means to reduce the number of decisions a manager hasto make. Hence, span of control will increase. 2. Nature and Importance of Work to be Supervised: If the work is routine, highly standardised and uniform, we can establish standing plans because problems follow a set pattern. Few emergency or complex decisions are required. We have usually programmed decisions. Hence, the span of control can increase. Variety and complexity of problems, volatile and changing work, higher uncertainty and risk in decision making are usually found at the top management level of big organisations. Hence, at higher level of management we have limited span of control. 3. Facility of Staff Help: If a manager gets staff help in performing his reserved responsibilities (planning, organising, motivating, etc.) he can bear a greater work load and can have a larger span of control. With adequate specialised staff and also personal staff services, a manager even at a higher level can handle many subordinates. Of course, it is presumed that a manager is skilled and able to delegate his authority to many subordinates. Capable staff help and superior- subordinate working relationship based on mutual faith and confidence areboth essential to widen the span of control. If the boss has quick grasp and ability to command and go along with people, i.e., leadership qualities, he can control a large number of subordinates. But if the boss is hesitant, tactless and does not have leadership qualities, he will have limited span of control. 4. Ability and Capacity of Subordinates: In addition to the best staff help and ability to delegate, we require competent and qualified line subordinates to take up responsibility and shoulder accountability for work performance without detailed supervisionof the boss. If subordinates are trained, developed and experienced men with self- confidence and self- control, they will need minimum supervision or attention of the boss. Thus, the quality of line subordinates can influence thespan of control as a limiting factor. 5. Other Factors Governing the Span of Control in Practice are: Time available for supervision, degree of decentralisation and delegation (higher degree, greater span) and control practices. For instance, under personal observation, we have limited span and under a system of written progress reports, we have wider span of control. 1. The Ability of Officers The very first and most important factor in determining the span of control is the ability of officers who have to manage. If they are very efficient and capable. They can control a large number of subordinates on the contrary. If the officers are less efficient they would not be able to control that much number of subordinates. 2. Availability of time for supervision The second factor which determines the span of control is the availability of time with the managers of higher cadre for supervision. If they have less time for supervision, they would not be able to control a large number of subordinates. 3. Nature of work The span of management is affected by the nature of work also. If the work is of a simple and routine nature, managers can control a large number of persons. On the contrary, If the work is more complicated, Managers cannot have effective control over a small number of employees only.  4. Plans for the Enterprise If the plans of the enterprise are clear and stable, the managers feel it easy to control the activities of their subordinates. On the contrary, If the plans of the enterprise are not stable, it becomes very difficult for the managers to control the activities of a large number of subordinates. 5. Ability and efficiency of subordinates A very important factor affecting the span of management is the ability, efficiency, and willingness of subordinates. Importance of Span of Control The problem of span of control is a natural extension of the principle of hierarchy or scalar system. The hierarchical organization involves a number of tiers or steps one above the other in an organization, each step being headed by a single person. How many such levels an organization have depends upon the total number of employees at the bottom to be supervised and the number of subordinates each superior officer can effectively supervise. This shows that there is a close relationship between hierarchy arid span of control. Hence, the levels or tiers in hierarchy should be established after taking into account the span of control of a superior officer. If a superior officer is expected to control a large number of persons than the can actually control, the result is delay and inefficiency. The quality of the work of an organization depends upon effective control and supervision. Hence, there is a strong need for the principle of span of control. No organization can ignore it. If the exceeds the capacity of on individual, the breakdown of the organization. Factors Affecting Span of Control Generally, it is believed that the number of subordinates under the supervision and control of one person must be limited, So that he may Easily, Effectively and Successfully control their activities. Thus, It is called the span of control, the span of supervision and span of responsibilities, etc. Factors Affecting Span of Control Following are the factors affecting span of control: 1. The Ability of Officers The very first and most important factor in determining the span of control is the ability of officers who have to manage. If they are very efficient and capable. They can control a large number of subordinates on the contrary. If the officers are less efficient they would not be able to control that much number of subordinates. 2. Availability of time for supervision The second factor which determines the span of control is the availability of time with the managers of higher cadre for supervision. If they have less time for supervision, they would not be able to control a large number of subordinates. 3. Nature of work The span of management is affected by the nature of work also. If the work is of a simple and routine nature, managers can control a large number of persons. On the contrary, If the work is more complicated, Managers cannot have effective control over a small number of employees only. 4. Plans for the Enterprise If the plans of the enterprise are clear and stable, the managers feel it easy to control the activities of their subordinates. On the contrary, If the plans of the enterprise are not stable, it becomes very difficult for the managers to control the activities of a large number of subordinates. 5. Ability and efficiency of subordinates A very important factor affecting the span of management is the ability, efficiency, and willingness of subordinates. If the subordinates are able and efficient and they are willing to coordinate with their higher officers, Managers can control a large number of subordinates. 6. Techniques of control The span of control depends upon the techniques of control also. If the techniques of control effective the managers can control a large number of subordinates. On the contrary, It is the technique of individual supervision is used, the managers will not be able to maintain effective control of all the employees. 7. Degree of decentralization If there is an adequate decentralization of power in the enterprise, The managers can control a large number of subordinates because their burdenof work will be light. On the company, if the centralization is not so much adopted, Managers will be able to have effective control over as a small number of subordinates only. Service of Experts If the service of experts is available in an enterprise, The number of subordinates under the control of one official may be more and if the services of experts not available in the enterprise. The number of subordinates under the control of one officer will be Limited. Graicuna’s Formula Graicuna develops a formula to calculate the number of relationships to enable the executives to examine the complexity of span of control. Whether the principle enunciated by Graicuna is valid or not, whether the formulae has empirical validity or not, the problem that any increase in the number of subordinates would lead to complexity in the relationships between individual and groups has aptly been aptly been brought out by Graicunas. It is this factor that needs to be carefully considered in any discussion on how many subordinates an executives can effectively control. Course Name: Principles of Management Module 5: Managerial Decision Making Introduction Decision making describes the process by which a course of action is selected as the way to deal with a specific problem. The quality of managers’ decisions is the yardstick of their effectiveness and value to the organization. The managers are usually evaluated and rewarded on the basis of the importance and results of their decisions. This indicates that managers necessarily develop decision making skills Managerial skills are important in an organization and in leadership, especially managerial decision making. These help achieve the goals of the organization and harness the potential of everyone inside the organization. One important skill is managerial decision making. Leaders should be decision makers and they become successful based on the decisions they make. It is therefore necessary for a leader to know how and when to decide properly. However, not everyone has the guts to decide for fear of failing. Some people would rather take orders from their bosses so that if something goes wrong with the decisions they make, they cannot be blamed. Research and analysis should be done prior to decision making. When everything is thought of properly, the goals of the organization will not be a remote possibility. Anything is possible with a careful and meticulous planning, willingness, communication, time management and decision making. Managerial Decision Making Before a manager makes a decision, there should be a comprehensible strategy identified containing the rules, regulations and directions. These rules will help everyone decide on a matter quickly and rightfully. Decisions made are then reliable and unfailing all throughout. Even the person occupying the smallest position in the organization will comprehend the choices and judgments made by those belonging in top management. They will be inspired to contribute to the process and development of the group. With a given strategy, managers will no longer have any fears or qualms in making decisions. A guide is all they need and with it, they will be confident in dealing with issues of the company. They will no longer feel any discomfort in taking risks as they can always say that the guide was wrong should their decision give a negative turnout. Management courses that teach skills such as managerial decision making can make or break an organization. Importance of Managerial Decision Making Managerial decision making is also critical for managers because a false move can ruin the organization and the people in it in any time at all. It is therefore necessary for them to not decide at a time when they cannot think straight or are emotionally stressed. As much as possible, they should refrain from making impulsive decisions as these may be wrong and mistakes will follow. Wrong decisions mean failure to achieve company goals. Failure to achieve company goals means wasted resources such as money, company bills, manpower and time. No amount of proper time management strategies can save wasted time. Wrong decisions can be avoided if the facts are complete, analysis has been made and more people get involved to give their opinions on the matter. Strategies for Managerial Decision Making Managers should also familiarize themselves with the two decision making strategies recognized in the field of management. These are the “Plus-Minus-Interesting” and the cost-benefit methods. These strategies involve weighing the advantages and disadvantages and they have measurable data in their hands before coming up with a decision. With such guide, it will be easy for managers to make a choice. Decision making is one of the most vital managerial skills because it involves the final execution of a well- thought of plan. With managerial skills such as sound managerial decision making, a manager will assist the company in achieving its goals and objectives. Significance of Rational Decision Making Managers who use a rational, intelligent and systematic approach are more likely to come up with high quality solutions to the problems they face than the ones who do not use this approach Rational decisions makers have a clear understanding of alternative courses of action to accomplish a goal under a particular set of circumstances Rational decision making is based on the information available with the decision makers and their ability to evaluate alternatives Rational decision making aims at deciding the best solution by selecting the alternative that most effectively facilitates goal achievement. Limitations of Rational Decision Making It is very difficult for mangers to be completely rational in their decision making since decisions are taken keeping the future in mind, and the future is very uncertain. It is very difficult to determine all the alternative courses of action that might be followed to accomplish a goal. Rational decision making becomes almost an impossible task when one has to explore areas which have been ventured into before In most cases, all possible alternatives generated cannot be thoroughly analyzed, even with sophisticated analytical techniques and computers Even though the decision maker strives to be completely rational, sometimes limitations of information, time and certainty, curb rationality Sometimes, managers allow their risk-avoiding tendency to disrupt their rational decision making process. Managers as Decision Makers The Rational Model Rational decision making is a multi-step and linear process, designed for problem-solving start from problem identification through solution, for making logically sound decisions. The rational decision making model is a good model to make good decisions because it depends on rational way used for problems solving. Rational decision making is a precise, analytical process that companies use to come up with a fact-based decision. Rational models follow deterministic approach to problem-solving. They believe there exists the optimum situation for decision-making. Such a situation is hypothetical in nature. Rational models presume managers can make optimum decisions. They are based on complete information of environment (internal and external) and knowledge of various alternatives that help in arriving at the best alternative. Non Rational Models Non-Rational models are descriptive. They are practical or realistic in nature. Non-Rational models follow probabilistic approach to problem solving. Non-Rational models believe there exists a real situation for decision-making. Such a situation is realistic in nature. They presume managers can make satisfying decisions. They are based on incomplete information of environmental factors and limited knowledge of alternatives that help in arriving at the best alternative. Non-Rational models believe in incomplete knowledge about outcomes of various alternatives. Non-Rational models are based on managerial judgment, intuition and personal biases. They advocate bounded rationality in decision-making. Decision Making Process Step 1: Identify the decision You realize that you need to make a decision. Try to clearly define the nature of The decision you must make. This first step is very important. Step 2: Gather relevant information Collect some pertinent information before you make your decision: what information is needed, the best sources of information, and how to get it. This step involves both internal and external “work.” Some information is internal: you’ll seek it through a process of self- assessment. Other information is external: you’ll find it online, in books, from other people, and from other sources. Step 3: Identify the alternatives As you collect information, you will probably identify several possible paths of action, or alternatives. You can also use your imagination and additional information to construct new alternatives. In this step, you will list all possible and desirable alternatives. Step 4: Weigh the evidence Draw on your information and emotions to imagine what it would be like if you carried out each of the alternatives to the end. Evaluate whether the need identified in Step 1 would be met or resolved through the use of each alternative. As you go through this difficult internal process, you’ll begin to favor certain alternatives: those that seem to have a higher potential for reaching your goal. Finally, place the alternatives in a priority order, based upon your own value system. Step 5: Choose among alternatives Once you have weighed all the evidence, you are ready to select the alternative that seems to be best one for you. You may even choose a combination of alternatives. Your choice in Step 5 may very likely be the same or similar to the alternative you placed at the top of your list at the end of Step 4. Step 6: Take action You’re now ready to take some positive action by beginning to implement the alternative you chose in Step 5. Step 7: Review your decision & its consequences In this final step, consider the results of your decision and evaluate whether or not it has resolved the need you identified in Step 1. If the decision has not met the identified need, you may want to repeat certain steps of the process to make a new decision. For example, you might want to gather more detailed or somewhat different information or explore additional alternatives. Types of Managerial Decisions Programmed decisions are those that deal with simple, common, frequently occurring problems that have well-established and understood solutions. These decisions are made in routine, repetitive, well-structured situations, using predetermined decision rules that may be based on habit, established policies and procedures, or computational techniques. For instance, if a manager of a distribution center knows from experience that he needs to keep a thirty-day supply of a particular item on hand, he can establish a system whereby the appropriate quantity is automatically reordered whenever the inventory drops below the thirty-day requirement. The most programmed decisions are made by lower-level managers. This is because problems at the lower level of the organization are often routine and well-structured, and require less decision-making and discretion on the part of the manager. Programmed decisions can be made in less time, and are consistent and inexpensive in nature. For example, the presence of policies, procedures, and rules in organizations eliminates the need to identify and evaluate alternatives, and select a new alternative, each time a decision is to be made. Non-programmed decisions are those that deal with unusual or exceptional problems. Since non- programmed decisions involve situations that are novel and/or ill-structured, predetermined decision rules are impractical for such decisions. Most of the important decisions that managers make fall into the non- programmed category. Decisions that involve strategies to deal with mergers, acquisitions, takeovers and organization design, are non-programmed by nature. So also are decisions pertaining to new facilities, new products, labor contracts, and legal issues. The most non- programmed decisions are made by upper-level managers, because these are the managers who have to deal with unstructured problems. The non-programmed decisions usually involve a lot of uncertainty, a condition where the decision-maker has to choose a course of action without having complete knowledge of the consequences that will follow its implementation. Managers taking non-programmed decisions must treat each situation as unique and distinct from others. They need to invest enormous amounts of time, energy and resources to explore the situation from all perspectives. Intuition and experience are major factors in non-programmed decisions. Managers should strive to convert as many decisions as possible into programmed ones. Decision Making Under Certainty A condition of certainty exists when the decision-maker knows with reasonable certainty what the alternatives are, what conditions are associated with each alternative, and the outcome of each alternative. Under conditions of certainty, accurate, measurable, and reliable information on which to base decisions is available. The cause and effect relationships are known and the future is highly predictable under conditions of certainty. Such conditions exist in case of routine and repetitive decisions concerning the day-to-day operations of the business. Decision Making Under Risk When a manager lacks perfect information or whenever an information asymmetry exists, risk arises. Under a state of risk, the decision maker has incomplete information about available alternatives but has a good idea