Principles of Management PDF - Tamilnadu Textbook

MANAGEMENT PRINCIPLES (OFFICE SECRETARYSHIP) Vocational Education Higher Secondary - First Year A publication under Government of Tamilnadu Distribution of Free Textbook Programme (NOT FOR SALE) Untouchability is a sin Untouchability is a crime Untouchability is inhuman TAMILNADU TEXTBOOK CORPORATION COLLEGE ROAD, CHENNAI - 600 006 G C Government of Tamilnadu First Edition - 2010 CHAIR PERSON C. NATARAJAN PRINCIPAL State Institute of Commerce Education Tharamani Chennai-600 113. REVIEWERS Thiru. G. NALLAMUTHU PILLAI Selvi. K. SATHYA BHAMA Vocational Teacher Lecturer in Commerce Corporation Boys Hr. Sec. School State Institute of Commerce Education Saidapet Tharamani Chennai - 600 015. Chennai - 600 113. AUTHORS Tmt D. VAIJAYANTHI Tmt M. A. ZEHRAJA BEEN Vocational Teacher Vocational Teacher Presidency Girls Hr.Sec.School Govt. Girls Hr. Sec. School Egmore Ashok Nagar Chennai - 600 008. Chennai - 600 083. Tmt NIRMALA RAVINDRAN Tmt V.S. JAMES SAHAYAM Vocational Teacher Vocational Teacher K R C A R C Girls Hr. Sec. School St. Antony’s Girls Hr. Sec. School Muthiyalpet Mandaveli Chennai - 600 001. Chennai - 600 028. This book has been prepared by The Directorate of School Education on behalf of the Government of Tamilnadu. This book has been printed on 60 GSM Paper. Printed by Web Offset at : S. NO CONTENTS PAGE NO 1. INTRODCUTION TO MANAGEMENT Origin - 1 Introduction - 2 Meaning of management - 2 Definition of management - 2 Nature & Characteristics of management - 2 Scope of management - 3 Importance of Management - 4 Difference between administration & management- 5 Levels of management - 5 Functions of Management - 7 Principles of management - 9 Management by objectives - 10 Steps in management by objectives - 10 Advantages & Disadvantages of MBO - 11 Management by exception MBE - 11 2. PLANNING AND DECISION MAKING Meaning - 17 Definitions of planning - 17 Nature of planning - 18 Importance / Merits of planning - 19 Limitations of planning - 20 Process / steps of planning - 21 Elements of planning - 22 Kinds of planning - 23 Decision making - 24 Meaning of decision making - 24 Definition of decision making - 25 Characteristics of decision making - 25 Types of managerial decision - 26 III S. NO CONTENTS PAGE NO Process / steps of decision making - 27 Merits & Demerits - 28 3. ORGANISATION AND DELEGATION OF AUTHORITY Meaning - 36 Definition - 36 Nature of Organisation - 37 Principles of Organisation - 37 Advantages of Organisation - 39 Process / steps of Organisation - 40 Formal & Informal Organisation - 40 Distinction between Formal & Informal - 41 Organisational Structure (Types) - 41 Line Organisation - 42 Line & Staff Organisation - 44 Functional Organisation - 43 Committee Organisation - 45 Organisation chart - 46 Organisation manual - 48 Types of organisational manual - 48 Advantages & Drawbacks of manual - 48 Meaning & defnition of delegation - 49 Characteristics of delegation - 49 Process / steps of delegation - 50 Merits & Demerits of delegation - 50 Principles of delegation - 51 Meaning & definition of Centralisation - 52 Merits & De-merits - 53 Meaning & Definition of De-Centralisation - 53 Merits & De-merits - 54 Difference between Centralisation & De-Centralisation - 54 IV S. NO CONTENTS PAGE NO 4. CO-ORDINATION AND CONTROLLING Meaning of Co-ordination - 60 Definition of Co-ordination - 60 Nature / characteristics of Co-ordination - 61 Difference between Co-ordination & Co-operation - 62 Benefits of Co-ordination - 63 Problems in Co-ordination - 63 Types of Co-ordination - 64 Principles of Co-ordination - 65 Techniques of Co-ordination - 65 Meaning & Defintion of controlling - 66 Nature / characteristics of control function - 67 Control process - 68 Merits & De-merits - 70 5. COMMUNICATION Meaning of Communication - 76 Definition of Communication - 76 Nature / Characteristics of Communication - 77 Process of Communication - 77 Communication skills model - 78 Benefits of Communication - 79 Types of Communication - 80 Formal & Informal Communication - 81 Upward & Downward Communication - 82 Sideward Communication - 83 Oral Communication - 84 Merits & De-merits of oral Communication - 84 Written Communication - 85 Merits & De-merits of written Communication - 85 Gestural Communication - 86 Barriers in Communication - 86 Measures to overcome communication barriers - 88 V S. NO CONTENTS PAGE NO 6. LEADERSHIP AND DIRECTING Meaning & Definition of Leadership - 94 Characteristics of Leadership - 95 Functions of Managerial leader - 95 Leadership styles - 97 Autocratic Leader - 97 Merits & De-merits - 97 Democratic leader - 98 Merits & Demerits - 98 Laissez Faire leader - 99 Merits & Demerits - 99 Functional leader - 100 Merits & Demerits - 100 Institutional leader - 100 Merits & Demerits - 100 Paternalistic leader - 101 Merits & Demerits - 101 Qualities of a leader - 101 Meaning of Directing - 102 Definition of directing - 102 Characteristics of directing - 103 Role of direction - 104 Elements of direction - 104 Principles of directing - 105 VI S. NO CONTENTS PAGE NO 7. MOTIVATION Meaning of Motivation - 112 Definition of Motivation - 113 Characteristics of Motivation - 113 Steps in Motivation - 114 Merits of Motivation - 114 Types of Motivation - 115 Theories of Motivation - 117 Maslow’s Need Hierarchy Theory - 117 McGregor’s ‘X’&’Y’ Theory - 118 Distinction between ‘X’ & ‘Y’ Theory - 119 8. DEVELOPMENT OF HUMAN RESOURCES (STAFFING) Meaning & Definition of staffing - 125 Recruitment - 126 Definition of Recruitment - 126 Source of Recruitment - 126 Internal source of Recruitment - 126 Merits & Demerits - 127 External source of Recruitment - 127 Selection process - 128 Selection Test - 129 Interview - 130 Placement & Induction - 131 Training - 131 Steps of training - 132 Types of training - 133 VII PREFACE We take great pleasure in placing this book “Management Principles”, a subject for office secretaryship course, in the hands of students who opt for the study of vocational course. Though the present office atmosphere is very much influenced by computers and the changes in the techniques of human relation development, the fundamentals of management principles remain the same. At Higher Secondary level, for office secretaryship students management principles is a subject in std XI. Though fundamental principles can not be changed, the authors have taken strenuous efforts to upgrade the book to an acceptable standard. According to the new question paper pattern the students are expected to answer the Objective type questions viz., Multiple choice questions, Answer in a word or two questions, Very short answer questions, Short answer and Essay type questions. Model question paper is given at the end of every chapter. We hope this book will serve the purpose of learning the subject effectively. We once again thank the TamilNadu Govt., Director of School Education, Joint Director of Vocational Education, The Chairman, Vice Chairman & Members of High level Committee for their excellent work in creating new Vocational Education programmes keeping in mind the interests of the students, we also thank TamilNadu TextBook Corporation for sincere efforts made by them in bringing this book get published. By Chairperson and Authors. VIII 1. INTRODUCTION TO MANAGEMENT Learning objectives : After reading this chapter you will be able to understand Origin – Introduction – Meaning – Definition – Nature & Characteristics – Scope – Importance - Administration vs Management – Levels – Management is an Art or Science – Management as a Profession – Functions – Principles – Management by Objectives – Management by exceptions. Fig 1.1 MANAGEMENT ORIGIN Management has been practiced in some form or the other since the dawn of civilisation. Ever since human beings began to live and work together in groups, techniques of organisation and management were evolved. The pyramids of Egypt, the Chinese civil service, the Roman Catholic Church, and military organisation offer good examples of the application of management in ancient times. Kawtilya’s Artha shashtra, the Bhagwat Gita, the Holy bible and other epics contain references to the management of public affairs. The early contributions to management thought came from Roman Catholic Church, Military organizations and camera-lists. Thus art of management has ancient origins. However, the science of management developed largely after the industrial Revolution which established the factory system. Scientific Management movement laid the foundations of Management as a science. Modern Management thought has developed during several stages. These stages or approaches or theories to the study of Management may by classified as follows. 1. Classical theory 2. Neo-classical theory 3. Modern Theory 1 INTRODUCTION We are born in an organisation (a family). Live in organisations (society) and work in organisations (Business, Government, Army, School, College etc.). Each one of these organisations is a group of persons working together to achieve some common objectives. The organisations can be successful only when the efforts of various individuals in the groups are integrated into team work. The central agency which performs this task is known as management. It plays the same role in an organisation which brain does in human body. MEANING OF MANAGEMENT Management is basically concerned with the performance of planning, organising, directing, co-ordinating and controlling, which, in fact, are its main functions. Management is also regarded as the art of getting things done through others. It is not possible for any individual to do all the work by himself. The work is always shared with others. DEFINITIONS OF MANAGEMENT 1. Mary Parker Follet : “Management is the art of getting things done through people”. 2. Henry Fayol : “To manage is to forecast and plan, to organise, to command, to co-ordinate, and to control.” 3. F.W. Taylor : “The art of knowing exactly what you want men to do and seeing that they do it in the best and cheapest way”. Note on management experts F.W. Taylor - (1856 – 1915) is known as the father of Scientific Management. The objective of Management should be to secure the maximum prosperity for both the employer and the employees. Taylor’s theory came to be called ‘Scientific Management’. HENRY FAYOL – (1894 – 1952) He was one of the first writers to introduce concepts which are still forming a part of the current management thought. He is the father of modern management. NATURE AND CHARACTERISTICS OF MANAGEMENT The salient features which highlight the nature of management are as follows: 1. MANAGEMENT IS UNIVERSAL : Management is required in every form of group activity whether it is a family, a club, a government, an army or a business enterprise. The approach and style of management may differ from one organisation to another. But in each case it involves marshalling of human and physical resources towards the attainment of common objectives. 2.MANAGEMENT IS PURPOSEFUL : Management exists for the achievement of specific objectives. It is a means towards the accomplishment of pre-determined goals. All activities of management are goal-oriented. The success of management is measured by the extent to which the desired objectives are attained. Management is a creative process of achieving results. 3.MANAGEMENT IS AN INTEGRATIVE FORCE: The essence of management lies in the co- ordination of individual efforts into a team. Management reconciles the individual goals with organisational goals. It integrates human and other resources. 2 4. MANAGEMENT IS A SOCIAL PROCESS: Management is done by people, through people and for people. It is a social process because it is concerned with interpersonel relation. Human factor is the most important element in management. A good Manager is a leader not a boss. 5.MANAGEMENT IS MULTIDISCIPLINARY: Management has to deal with human behaviour under dynamic conditions. Therefore, it depends upon wide knowledge derived from several disciplines like engineering, sociology, Psychology, economics, anthropology, etc. 6. MANAGEMENT IS A CONTINUOUS PROCESS: Management is a dynamic and an on going process. The Cycle of management continues to operate so long as there is organised action for the achievement of group goals. 7. MANAGEMENT IS INTANGIBLE: Management is an unseen or invisible force. It cannot be seen but its presence can be felt everywhere in the form of results. However, the managers who perform the functions of management are very much tangible and visible. 8. MANAGEMENT IS AN ART AS WELL AS A SCIENCE: It contains a systematic body of theoretical knowledge and it also involves the practical application of such knowledge. Management is also a discipline involving specialised training and an ethical code arising out of its social obligations. SCOPE OF MANAGEMENT The field of management is very wide. The operational areas of business management may be classified into the following categories. PLANNING FINANCE CONTROLLING MARKETING PRODUCTION ORGANISING BUSINESS MANAGEMENT PERSONNEL DIRECTING Fig 1.2 SCOPE OF MANAGEMENT 1) PRODUCTION MANAGEMENT : Production management implies planning, organising, directing and controlling the production function so as to produce the right goods, in right quantity, at the right time and at the right cost. 3 2) MARKETING MANAGEMENT : Marketing management refers to the identification of consumer’s needs and supplying them the goods and services which can satisfy these wants. 3) FINANCIAL MANAGEMENT : Financial management seeks to ensure the right amount and type of funds to business at the right time and at reasonable cost. 4) PERSONNEL MANAGEMENT : Personnel Management involves planning, organising and controlling the procurement, development, compensation, maintenance and integration of human resources of an organisation. IMPORTANCE OF MANAGEMENT Management is indispensable in all organisations Some of the Importance of Management are given below: 1. Scientific Management only can meet the challenges and complexities of modern business. 2. Efficient Management can effectively utilise the available resources in the enterprise. 3. Management creates teamwork and coordination among employees. 4. Management directs and controls the organisation to achieve the deisred goal. 5. Management provides stability in organisation. 6. Management provides new ideas, imagination and vision for better and greater performance. 7. Good management serve as a friend, philosopher and guide in tackling business problems. 8. Management is a tool of personality development of the people and attempts to raise their efficiency and productivity. 9. Management is equally important at the national level. It is an agent of change and economic DISTINCTION BETWEEN ADMINISTRATION AND MANAGEMENT : Although the terms ‘Administration’ and ‘Management’ may appear to be similar, they are actually different. In our daily conversation we use the two terms interchangeably. Administration is concerned with laying down suitable policies for the whole concern whereas management will simply execute these. Board of Directors n tio Managing Directing ra t ist en in em dm Production Manager ag A an Plant Superintent M Supervisor Fig 1.3 ADMINISTRATION VS MANAGEMENT Administrators are the owners of the business. Managers, on the other hand, are the salaried employees of the concern. The basic difference between administration and management is highlighted by means of a popular diagram which is given above. 4 The differences between Administration and Management may be tabulated as shown below : S. ADM INISTRATION M ANAGEM ENT No 1. All p o lic y d e c is io ns a r e ma d e b y the It is concerned with the implementation of administration. the polices. Certain routine decisions may be made by the managers on less important matters. 2. Ad minis tr a to r s a r e the o wne r s o f the Managers are the paid employees of the concern. concern. 3. Administration is basically interested in M a n a g e r s a c t u a l l y w o r k f o r t h e re s ults , i. e. , p ro fita b ility, s a le s , future remuneratio n they get. They d irect their prospects and so on. efforts towards the attainment of the goal set by the administration. 4. Administrators do not take part in the daily T he ma na ge r s a r e r e s p o ns ib le t o t he activities of the concern. administrators on the daily work done in the concern. 5. The decisions made by the administrators The ma na ge r s a r e e mp o we r e d to ta k e are influenced by the availability of capital, decisions only on routine matters. They are Government regulations and such other us ua lly guid e d b y o p inio ns , va lue s a nd factors. beliefs in making decisions. They also act based on precedents. i.e., past happenings. 6. Ad minis tra tio n is a lmo s t a p e rma ne nt Management is not a static body. Managers body. No major change, therefore, takes may resign, retire or may even be removed place in it. from service. 7. It is a top- level function. It is a lower- level function. LEVELS OF MANAGEMENT : Top Management MiddleManagement Supervisory Management Board of Directors Production Manager Office Manager Chairman Finance Manager Foreman, Managing Director, etc. Marketing Manager, etc. Supervisors, etc. Fig 1.4 LEVELS OF MANAGEMENT Three levels of management have been recognised by management experts. They are: 1.TOP MANAGEMENT 2. MIDDLE MANAGEMENT AND 3. SUPERVISORY OR LOWER MANAGEMENT 5 1. TOP MANAGEMENT : It consists of the Board of Directors, the Chairman, the Managing Director and so on. The functions of the top management are as follows: i) To lay down the basic objectives of the business. ii) To frame major policies for the business iii) To organise the business into different departments for the efficient attainment of the enterprise goals. iv) To oppoint departmental heads and review their performance. v) To represent the business outside, particularly in discussing business problems with the Government, trade association and so on. 2. MIDDLE MANAGEMENT : It consists of the Heads of all the Departments like the Production Manager, the Finance Manager, the Marketing Manager and so on. It also includes the deputy managers in all the departments. The functions of middle management are as follows: i) Formulation of suitable policies at the departmental level. ii) Periodical review of performance. iii) Interaction with the subordinate staff. 3. SUPERVISORY OR LOWER MANAGEMENT : It consists of such individuals as the foremen, office managers, supervisors, etc. The supervisory management is concerned with the following functions: i) To plan the day-to-day work ii) To assign work to all the employees and undertake supervision iii) To monitor the performance of the employees. iv) To send periodical reports to the middle level managers. MANAGEMENT IS AN ART OR SCIENCE : A question is often arised as to whether Management is an art or science? This question has been discussed here to explain the nature of Management. MANAGEMENT IS A SCIENCE: Science is a systematised body of knowledge pertaining to a particular field of enquiry. Its principles have universal applicability. It contains underlying principles and theories developed through continuous observation, experimentation and research. Likewise principles and theories are now available in every area of management. So management can be described as a science. MANAGEMENT IS AN ART : Art involves the practical application of personal skills and knowledge to achieve concrete results. Like any other artist, a manager applies his knowledge and skills to co- ordinate the efforts of his people. So Management is also called as an art. CONCLUSION : As Management has both the characteristics of Science and Art we can conclude that Management is both an Art and a Science. MANAGEMENT AS A PROFESSION : Management has come to be recognised as a profession in the way Medical, Law and Engineering are recognised. A profession is different from an occupation. A professional need not work for salary under an employer. He can have his own clients and get his remuneration from them directly. A professional can be an employer for many. A doctor, for example, may have his own clinic and employ nursing staff, lab technicians and others. FUNCTIONS OF MANGEMENT : Generally, the managers have to perform certain functions in the organisation to get the things done by others. Different authors have given different functions. Henry Fayol has classified managerial functions as Planning, Organizing, Directing, Co-ordinating and Controlling. 6 Gullick and Urwick have described, the duties of an executives as POSDCORB ie. Planning, Organising, Staffing, Directing, Co-ordinating, Reporting and Budgeting. Koontz.O Donnel consider Planning. Organising, Staffing, Directing and Controlling as main functions. Fig 1.5 MANAGEMENT PROCESS The Main functions of the management are given below: 1.PLANNING : Planning is the most basic or Primary functions of management. Planning involves determining the objectives and selecting a course of action to achieve them. It implies looking ahead and deciding in advance what is to be done, when and where it is to be done, how and by whom it is to be done. It is helpful in more effective achievement of goals. Planning helps an organisation to face uncertainty and change. 2.ORGANISING : Once plans are formulated, the next step is that of organising. Organising is the process of establishing authority-responsibility relationships among the members of the enterprise. In the words of Louis Allen, “Organising is the process of identifying and grouping the work to be performed, defining and delegating responsibility and authority and establishing relationships for the purpose of enabling people to work most effectively together in accomplishing objectives.” 3.STAFFING : Staffing is the process of filling all positions in the organisation with adequate and qualified personnel. Staffing consists of manpower planning, recruitment, selection, training, compensation, integration and maintenance of employees. 4.DIRECTING : Directing is the managerial functions of guiding, supervising, motivating and leading people towards the attainment of planned targets of performance. Directing is the executive functions of management because it is concerned with the execution of plans and polices. 5.MOTIVATING : Motivating is the process of inspiring people to strive for the accomplishment of common goals by providing stimuli that satisfy their needs and motives. Motivation is an important determinant of job performance. Several types of incentives and rewards are used to motivate employees. 7 6.COMMUNICATION : Communication implies exchange of facts, ideas, opinions or emotions among two or more persons with the aim of creating mutual understanding and co-operation among them. It is a continuous process of telling,.listening and understanding. Several methods eg. Written, Oral, Visual etc. are used in communication. 7.CO-ORDINATION : Co-ordination refers to harmonising and integrating the activities and efforts of different individuals into teamwork. It requires integration of diverse and specialized activities towards the achievement of common goals. Manager integrates the efforts of different employees to ensure that they work as a team. 8.CONTROLLING : Controlling is the process of ensuring that the organisation is moving in the desired direction and that progress is being made towards the achievement of goals. The process of controlling involves the following steps: a) Establishing standards for measuring work performance; b) Measurement of actual performance and comparing it with the standards; c) Finding variances between the standard and actual performance and the reason therefore; and d) Taking corrective actions for correcting deviations so as to attain objectives. PRINCIPLES OF MANAGEMENT Management is a science consisting of certain principles. A principle is a fundamental statement of truth that provides a guide to talk and action. The Principles of Management laydown guidelines for improv- ing Management practices. There is no detailed list of Management principles. However, the list of fourteen principles of Management given by Henry Fayol is widely accepted. These principles are given below. 1. DIVISION OF WORK : Total work of an organisation is divided into small manageable units and assigned to particular individuals. It helps to increase efficiency. The principle of division of work can be applied at all levels in the organisation. 2. AUTHORITY AND RESPONSIBILITY : In an organisation the Authority and responisibility should go together. The Manager gives his order directly to the subordinate after that he should take the responsibility for the work done by them. So the person receiving the authority should be ready to bear the responsibility for the same. It is important to delegate authority, at the same time retain the respon- sibility with him. 3. DISCIPLINE : Discipline should be followed by all the employees. Obedience behaviour, disci- pline, flexibility and human consideration are together called discipline. The organisation must have Discipline, otherwise it cannot run smoothly. 4. UNITY OF COMMAND : Every subordinate should receive orders and be accouuntable to only one superior. Dual or multiple command is a perpetual source of conflict. Unity of command avoids conflicting orders and ensures order and stability in the organisation. It is also helpful in fixing responsi- bility. 8 5. UNITY OF DIRECTION : According to this principle, each group of activities having the same objective must have one head and one plan. The principle of unity of direction seeks to ensure unity of action. Unity of direction should not be confused with the unity of command. 6. SUBORDINATION OF INDIVIDUAL INTEREST TO GENERAL INTEREST : Every Employee should forget their individual interest and they should work for common purpose. when there is conflict between the two, interest of the organisation should prevail over individual interest. 7. REMUNERATION : The amount of remuneration and the methods of payment should be just and fair and should provide maximum possible satisfaction to both employees and employers. 8. CENTRALISATION : According to Fayol, The question of centralisation and decentralisation is a matter of finding optimum degree for the particular concern. The degree of concentration of authority should be based upon optimum utilisation of all faculties of the personnel. It should be determined on the basis of individual circumstances in each case. 9. SCALAR CHAIN : It refers to the chain of superiors ranging from the highest authority to the lowest level in the organisation. There should be a clear line of authority ranging from top to bottom of the organisation. All upward and downward communications should flow through each position of authority along the scalar chain. 10. ORDER : This principle is concerned with the arrangement of things and the placement of people. In material order, there should be a place for everything and everything should be in its proper place. Similarly in social order, there should be an appropriate place for everyone and everyone should be in his or her appointed place. 11. EQUITY : Equity implies that employees should be treated with justice and kindness. Managers should be fair and impartial in their dealings with subordinates. Equity helps to create cordial relations between management and workers which are essential for successful functioning or every enterprise. 12. STABILITY OF TENURE OF PERSONNEL : Employees cannot work efficiently unless job security is assured to them. An employee can not render worth while service if he is removed from the job before he gets accustomed to it. 13. INITIATIVE : Employees at all levels should be given the opportunity to take initiative and exercise judgement in the formulation and execution of plans. Initiative refers to the freedom to think for oneself and use direction in doing work. It develops the interest of employees in their jobs and provide job satisfaction to them. 14. ESPIRIT DE CORPS : This refers to harmony and mutual understanding among the members of an organisation. Union is strength and unity in the staff isthe foundation of success in any organisation. Management should not follow the policy of ‘Divide and rule’. Unity among personnel can be devel- oped through proper communication and coordination. 9 MANAGEMENT BY OBJECTIVES (MBO) Meaning : An organisation can have many objectives. The objectives of the workers may differ from that of management. The Principles of MBO aims at co-ordinating the individual goals with that of organisational goals. Through this principle, the management and workers work without any conflicts. It helps to realise the organisational goals quickly without unnecessary efforts. 1 SETTING OBJECTIVES 4 2 APPRAISING DEVELOPING ANNUAL ACTION PLANS PERFORMANCE 3 CONDUCTING PERIODIC REVIEWS Fig 1.6 MBO DEFINITIONS OF MBO : “Each and Every employee of an organisation works whole heartedly towards the attainment of the objectives of an organisation is known as Management by objectives: - Peter F. Drucker. John Humble calls it “ a dynamic System which integrates the company need to achieve its goal for profit and growth with managers need to contribute and develop himself. PRINCIPLES/STEPS IN MANAGEMENT BY OBJECTIVES : MBO comprises of the three important principles. 1. FRAMING THE OBJECTIVES : Objectives can be framed based on the following steps. a ) EACH AND EVERY OBJECTIVE HAS DIFFERENT GOALS.: Objectives attained in the lower level help in the achievement of objectives at the higher level. Each objective depends on the objective below it and helps in achievement of Upper level objectives. These steps help in the achievement of upper level objectives by directing the members and Departmental activities. b ) AIMS OF MANAGEMENT BY OBJECTIVES : Each and every activity of the organisation is directed towards satisfying the goals. This is the last stage of the organisation. Objectives may be short and clear. The objectives must be easily 10 understood by persons who are involved in the activity of achieving them. Goals must agree with the policies and procedures of the organisation. Goals must be efficiently evaluated, dependent on decision and dependable. Goals must be reachable within a given period. c ) CLEAR – CUT AIMS : The indivudaual goals and organisatinal goals must be clear. If the aims are not clear then confusion arises. Goals must be fixed clearly at all management levels. 2. IMPLEMENTATION : Managers require efficiency. Intelligence and ability inorder to attain the common objective of the organisation. They must be properly remunerated and motivated so that they will put on best efforts in management by objectives. Top level executives must not enforce their control through management by objectives, otherwise it will change into control by objectives. 3. EVALUATING THE RESULTS : The objective fixed must be evaluated with the results obtained. The managers at all levels must have a watch on the activities of the subordinates to attain the objectives and after a specified period the results achieved have to be evaluated. MBO ORGANISATION EMPLOYEES = OBJECTIVE OBJECTIVES MBE MANAGER INTERFERER ONLYWHEN THERE ISAMISTAKE Fig 1.7 MBO & MBE ADVANTAGES OF MBO (1) It promotes better communication relationship between the superior and his subordinates. (2) It gives the subordinate an opportunity to fix his own targets in consultation with his superior. (3) As the subordinates have the freedom to determine their own targets, they feel motivated. (4) The periodic review of the subordinate’s performance enables him to know whether he is proceeding in the right direction. 11 DIS ADVANTAGES OF MBO (1) The superior and his subordinate may have to meet several times for the sake of setting the objectives mutually. (2) Periodic review of the subordinate’s performance involves lot of time and also paper work. (3) MBO has not much to do with the lower levels of management. CONTROL BY EXCEPTION OR MANAGEMENT BY EXCEPTION (MBE) It is a management technique by which managers concentrate only on exceptional deviations instead of trying to correct each and every deviation. The advantage of the technique of Management by Exception is that it allows the manager to concentrate on problems that need his attention and to avoid dealing with those that can be well handled by the subordinates themselves. ADVANTAGES OF MBE (1) It allows the manager to devote more time for important issues by letting the subordinates deal with the issues of a routine nature. (2) As the manager need not bother about routine matters. (3) Since the manager devotes more time for vital issues, he will be able to make better decisions. (4) The subordinates are given authority to make decisions on certain matters without any interference by the executives. (5) The management is also able to utilize the available talent at the lower levels. LIMITATIONS OF MBE (1) There is no parameter available by which one can differentiate important deviations from the unimportant ones. (2) Only an organisation that has a perfect system of control will be able to employ the technique of MBE. (3) It may lead to dispersal of authority that has its own limitations. POINTS TO REMEMBER NATURE AND CHARACTERISTICS OF MANAGMENT 1. Management is universal 2. Management is purposeful 3. Management is an Integrative Force 4. Management is a social process 5. Management is multidisciplinary 6. Management is a continuous process 7. Management is Intangible 8. Management is an art as well as a science 12 SCOPE OF MANAGEMENT 1. Production management 2. Marketing management 3. Financial management 4. Personnel management LEVELS OF MANAGEMENT 1. Top management 2. Middle management 3. Supervisory or lower management MANAGEMENT IS AN ART OR SCIENCE MANAGEMENT AS A PROFESSION FUNCTIONS OF MANAGEMENT 1. Planning 2. Organising 3. Staffing 4. Directing 5. Motivating 6. Communication 7. Co-ordination 8. Controlling PRINCIPLES OF MANAGEMENT 1. Division of work 2. Authority and responsibility 3. Discipline 4. Unity of command 5. Unity of direction 6. Subordination of Individual interest to general interest 7. Remuneration 8. Centralisation 9. Scalar chain 10. Order 11. Equity 12. Stability of Tenure of personnel 13. Initiative 14. Espirit de corps MANAGEMENT BY OBJECTIVES (MBO) Advantages & Dis advantages of MBO MANAGEMENT BY EXCEPTION (MBE) Advantages & Dis advantages of MBE 13 QUESTIONS Objective Type PART- A (ONE MARK) I. CHOOSE THE CORRECT ANSWER : 1.Management has been practiced in some form or the other since the dawn of..... (a) Civilisation (b) Ariyan (c) Dravidian (d) None of the Above. 2) Examples of the application of Management in ancient times....... (a) Santhome Church (b) Roman Catholic Church (c) C.S.I.Church (d) None of the above 3) The Scientific management developed largely after the -------- revolution which established the factory system (a) Green (b) Russian (c) Industrial (d) None of the above. 4) ---------- is not the function of Management (a) Planning (b) Organising (c) Directing (d) Recording 5) All activities of management are..... (a) Nature Oriented (b) Work Oriented (c) Goal Oriented (d) Business Oriented. 6) Management reconciles the individual goals with..... (a) Industrial goals (b) Organisational goals (c) Departmental goals (d) none of the above 7) Marketing management refers to the identification of.... (a) Producers Needs (b) Consumer Needs (c) Workers Needs (d) Salesmen Needs 8)..... concerned with laying down suitable policies for the whole concern. (a) Administration (b) Management (c) Manager (d) Auditor 9) Top Management consists of.... (a) Foreman (b) Finance Manager (c) Board of Directors (d) Supervisor. 10) Art is a.... process (a) Personalised Process (b) Individualised Process (c) General Process (d) None of the Above. 11) Management has come to be recognised as a profession like (a) Medical (b) Law (c) Engineering (d) All the above. 12).....integrates the efforts of different employees to ensure that they work as a team (a) Manager (b) Shareholders (c) Company Secretary (d) Managing Director 13).... aims to co-ordinate the individual goals with the top organisational goals (a) M.B.O. (B)M.B.E. (c) Staffing (d) Controlling 14 ANSWERS: 1. (a) Civilisation 2. (b) Roman Catholic Church 3. (c) Industrial 4. (d) Recording 5. (c) Goal oriented 6. (b) Organisational goals 7. (b) Consumer needs 8. (b) Management 9. (c) Board of Directors 10. (b) Individualised process 11. (d)All the above 12. (a) Manager 13. (a) M.B.O. II. WRITE THE ANSWER IN ONE OR TWO WORDS: 1) Who is the author of Arthashastra? 2) What is the movement that laid the foundation of management as a science? 3) Who is the father of Scientific Management? 4) Who is the father of Modern Management ? 5) Which plays the central role in an organisation which brain does in human body? 6) “Management is the Art of getting things done through people” who said? 7) Is a good manager a leader or boss? 8) Is Management tangible or Intangible? 9) Is Management a continuing process or ending process? 10) Which seeks to ensure the right amount and type of funds to business at the right time? 11) Which is a top-level function? 12) Whether production Manager comes under Middle management or Supervisory Management? 13) Which is the primary functions of management? ANSWERS: 1. Kautilya 2. Scientific Management 3. F.W.Taylor 4. Henry Fayol 5. Management 6. Parker Follet 7. Leader 8. Intangible 9. Continuous Process 10. Financial Management 11. Administration 12. Middle Management 13. Planning 15 PART – B (FOUR MARKS) Very Short Answers : 1. What is Management? 2. Define Management? 3. What is scientific Management? 4. Write a short note on F.W.Taylor?. 5. Write a short note on Henry Fayol? 6. What are the classifications of Management? 7. Define Management by objectives? 8. What do you mean by Management by exception? 9. What is M.B.O. 10. What do you mean by Division of work? 11. What is Unity of command? 12. Explain Unity of Direction? 13. What is Scalar chain? 14. Define Motivation? 15. What is co-ordination? PART – C (TEN MARKS) Short Answers Answer in One Page: 1. Explain the importance of Management? 2.Is Management an Art or a Science – Discuss? 3. Differentiate Management from Administration? 4. What are the different levels of Management? 5. Explain the steps in Management by objectives? 6. What are the advantages & disadvantages of M.B.E.? 7. Explain the scope of Management? 8. What are the advantages and disadvantages of M.B.O ? PART – D (TWENTY MARKS) Essay type Qestions 1. Explain briefly the Principles of Management? 2. Explain the functions of Management? 3. What are the Characteristics / Nature of Management? 4. Write an essay on MBO. 16 2. PLANNING AND DECISION MAKING LEARNING OBJECTIVES: After reading this chapter you will be able to understand Planning – Meaning – Definition – Nature/Characteristics – Merits & Demerits – Steps/ Process – Elements – Kinds – Decision Making – Meaning – Definition- Characteristics – Types – Steps Process – Merits & Demerits Fig 2.1 PLANNING MEANING The first and the foremost function of management is planning. Simply stated, planning is deciding in advance what should be done. It is future oriented. To attain its goal of profit maximisation, the business has to produce and sell goods. Its yearly production and sales targets are broken into weekly and monthly targets by proper planning. This makes it possible to work systematically. DEFINITIONS OF PLANNING : According to Koontz and O’Donnell “Planning is deciding in advance What to do? (Aim) How to do? (Practice) When to do? (Time) Who is to do? (Workers) It bridges the gap from where we are to where we want to go”. 17 Planning is deciding in advance what to do, how to do it, when to do it, and who is to do it. It bridges the gap from where we are to where we want to go - Koontz and O’Donnell. Planning is a mental predisposition to do things in orderly way, to think before acting and to act in the light of facts rather than guess - Urwick. Planning is deciding the best alternative among others to perform different managerial operations in order to achieve the predetermined goal - Henry Fayol. Planning is deciding in advance what is to be done. It involves the selection of objectives, policies, procedures and programmes from among alternatives – M.E.Hurley Definition of Louis A. Allen : In the words of Louis A. Allen, “Management planning involves the development of forecasts, objectives, policies, progrmmes, procedures, schedules and budgets. NATURE OF PLANNING (BASIC CHARACTERISTICS OR FEATURES OF PLANNING) The following are the basic characteristics of planning. 1) Planning is the primary function of management 2) It is goal-oriented 3) It is all-pervasive 4) It is an intellectual activity 5) It is future oriented 6) It requires an integrated approach 7) It is a continuous process 8) It involves decision making 1) Planning is the primary function of management Planning is the starting point of management. It is only planning which gives meaning to all other managerial functions, namely, organising, staffing, co-ordinating and controlling. Without planning the other functions cannot be effectively performed. 2) It is goal-oriented The goal of every business is to make profits. Planning helps to attain the goal in the most effective and efficient manner. 3) It is all-pervasive By this we mean that planning is done by everyone at every level of management, namely top, middle and lower levels. 4) It is an intellectual activity Planning is a mental activity. It involves application of mind and intelligence to attain, in a systematic manner, the organisational objective. 18 5) It is future –oriented Planning is required to attain the future goals of an organisation. However, past happenings provide the basis for plans. As future is uncertain, a plan must make suitable provisions to meet any crisis. 6) It requires an integrated approach There must be a link between the plans of different departments. The production plan of a business must be in tune with its financial plan. The marketing plan,likewise must be in tune with the production plan and vice versa. 7) It is a continuous process It means that a stage will never come when the need for planning will not be felt at all. Planning is required as long as we live in this world. As far as business is concerned, planning is needed as long as there are business activities. 8) It involves decision making Planning involves making choice out of certain alternative courses i.e., decision-making. When there is only one way of doing something, there is no need for planning at all. Importance of planning (Merits or advantages of planning) As the primary function of management, planning is considered vital in every sphere of activity. The importance of planning may be stated as follows: 1. It focuses on objective Once the objective of the business has been fixed, the next step is to prepare a plan for its effective accomplishment. The enterprise objective cannot be realised overnignt. It has to be achieved gradually over a certain period. 2. It helps to avoid wastage of resources Planning makes it possible to make optimum use of the available resources, namely, time, money, materials and machines. This is possible as the employees and the executives know beforehand what they have to do. 3. It ensures efficiency as well as effectiveness Efficiency is ensured by doing right things and effectiveness is achieved by doing things right. Planning helps to do not only right things but also things right. Each department knows what it is supposed to do well in advance as a result of planning. 4. It reduces risk and uncertainty Planning is for future use and future is uncertain. While planning, future uncertainties are anticipated and adequate provisions are made to meet or overcome the same. 19 5. It provides for co-ordination The work done in any organisation is a team-work. Different departments participate in the process of goal attainment. Planning makes the responsibilities of each individual and department very clear. Thus, planning by explaining the responsibilities of each individual and department provides scope for co-operation and co-ordination. 6. It facilitates control If planning is the first function of management, Control is the last function. Planning without control is useless and control without planning is meaningless. Control helps the enterprise to know whether the plan has been successfully implemented and the objective has been achieved. 7. Planning also provides scope for decentralisation Dispersal of authority throughout the organisation is what is known as decentralisation. Once the basic and derivative plans of the enterprise have been prepared, the next step is to explain the same to all the subordinates who are going to perform the various tasks. Limitations of planning (Drawbacks or Demerits of Planning) Planning suffers from the following limitations: 1.Un certain Nature The element of uncertainty cannot be totally eliminated in planning. Plans are meant for future use but future happenings cannot be accurately foreseen. e.g. A sudden change in the policy of the Government, loss due to natural calamities like earthquake, floods, etc., can destroy even carefully prepared plans. 2. Expensive Preparation and implementation of any plan is expensive not only in terms of time but also in terms of efforts and money required. 3. Rigidity It is always necessary to strictly adhere to the plan in so far as the daily work routine in an enterprise is concerned. Lack of flexibility in plans leads to monotony and boredom. 4. Loss of initiative The staff in an enterprise shall perform their duties in the way they are expected to do in the plans. As a result, they are reduced to machines. There is no scope for the display of skills by individuals and this leads to loss of initiative. 5.I gnorance of subordinates’ interests Plans are prepared to attain the organisational goal in the most effective manner. In doing so, often, the interests, preferences, capabilities and attitudes of the employees are ignored. As a result, the subordinates do not give their wholehearted support to the implementation of the plans. 6. Complacent attitude There is always a feeling that once the plan is prepared, the target of the enterprise can easily be attained. The success of every plan depends much on the effectiveness with which it is implemented. A plan is only a means to an end and not an end itself. 20 Process of Planning (Steps involved in Planning/Stages in the planning process) The following are the various stages involved in the process of planning: 1.Identifying business opportunities It is necessary to make an analysis of both the internal and external environment to know the trends in the near future. Business activities are influenced by internal as well as external factors. Government regulations, technological changes, availability of material and labour and the extent of competition are some of the important factors affecting business prospects. 2. Establishment of objectives The second step in the planning process is to establish the organisational objectives in tune with the opportunities identified, taking into account the resources available. DETERMINING THE OBJECTIVES DEVELOPING IMPLEMENTATION PLANNING OF PLANS PREMISES PLANNING PROCESS DETERMINATION AND FORMULATING EVALUATION OF DERIVATIVE ALTERNATIVE COURSES PLANS SELECTING THE BEST COURSE Fig 2.2 PROCESS OF PLANNING 3. Determination of Planning Premises Planning Premises are the assumptions made about the future happenings. As planning is for future and future is uncertain, certain assumptions about the future become necessary. Employee attitudes, technology used, managerial decision-making process, etc., are some of the factors influencing the internal environment of the business. The external environment, on the other hand, is influenced by factors such as demand, buyer behaviour, competitors’ actions, Government regulations, suppliers’ actions, technological changes and so on. 21 4. Identifying the alternative courses of action There are always alternative ways of carrying out any task just as there are different routes to reach a destination point. To attain the objective of a business, different courses of action may be available. For example, to maximise profits, any of the following approaches may be used: a) Large scale production b) Curtailing the cost of production and distribution c) Maximising sales d) Increasing the market share and so on. 5. Evaluating the alternative courses of action Once the alternative courses of action are identified, the next step is to evaluate the same. By evaluation we mean studying the merits and demerits of each. Each alternative should be examined carefully to decide on its suitability. For example, manual method of production and mechanical production are two alternatives. 6. Selecting the best course of action Once the alternative courses of action have been evaluated, the next step is to select the best. The finally selected course of action should help the organisation in making an optimum use of the available resources and help to attain the objectives set in the most effective manner. 7. Formulation of derivative plans After the basic plan of the enterprise has been determined, the next step is to prepare the subsidiary or derivative plans to support the basic plan. For example, once the production plan of a manufacturer is ready, a number of supportive plans concerning the purchase of raw-materials, tools and equipment, engaging workers, etc., will have to be formulated. 8. Periodic evaluation and review Once the implementation of the plan starts, it becomes necessary to evaluate performance at periodic intervals to ensure that the activities of the enterprise proceed in the right direction and as laid down in the plan. This will help to identify shortcomings, if any, in the plan and to take corrective action at the right time. Elements of Planning: The various elements of planning are given below: 1. Objectives: Objectives are the end towards which the activities of an organisation are directed. Objectives are known by different names, such as goals, aims, purposes, targets etc. Setting up of objectives is the first step in planning. 2. Strategies: A strategy may be defined as relationship or an administrative course of action designed to achieve success in the face of difficulties. Strategy is the basic plan chosen to achieve objectives. 3. Policies: A policy is a general guide to thinking and action rather than a specific course of action. It defines the area or limits within which decisions can be made to achieve organisational objectives. According to Koontz and O’ Donnell policies are general statements of understanding which guide or channel thinking in decision making of subordinates. 22 4. Procedures: A procedure is a chronological sequence of steps to be undertaken to enforce a policy and to attain an objective. It lays down the specific manner in which a particular activity is to be performed. It is a planned sequence of operations for performing repetitive activities uniformly and consistently. 5. Rules: Rules are rigid and definite plans that specify what is to be done or not done in given situations. It is a prescribed guide to conduct or action. No deviation is expected from the rule. 6. Programmes: A programme is a concrete scheme of action designed to accomplish given tasks. It specifies the steps to be taken, resources to be used, time limits for each step and assignments of tasks. Programmes help to ensure economy and uniformity in day-to-day operations. 7. Budgets: A budget is a financial statement of expected results expressed in numerical terms for a definite period of time in the future. It expresses a plan in premise terms. Budgets serve as means of coordination and control. 8. Schedules: A schedule specifies time limits within which activities are to be completed. Scheduling is the process of establishing a time sequence for the work to be done. Schedules are essential for avoiding delays and for ensuring continuity of operations. 9. Project: A project is defined in terms of capital investment, specific objective, inter dependence of tasks. It is designed and executed as a distinct plan. Kinds of Planning: On the basis of time period planning may be of three types: Long-term planning Medium-term planning Kinds of planning Short-term planning Corporate planning Divisional planning Departmental or unit planning Fig 2.3 KINDS OF PLANNING 1. Long-term planning: Long-term planning covers a long period in future. Eg. 5,10 or 15 years. It takes into account all long-term economic, social and technological factors as well as their influence on the long-term objectives of the organisation, eg. Development of new product. 23 2. Medium – term planning : Also known as intermediate Planning It focuses on a period between 2 to 5 years, such planning is more detailed and specific than long term planning eg., plans for purchase of materials, sales etc. 3. Short-term planning: Such planning covers a short period usually one year. It contains a detailed outline of certain specific activities to be completed with a specific time limit, e.g planning for annual production, sales etc. It may be called activity planning. According to the scope, planning may be classified as follows: 4. Corporate Planning: Corporate planning or organisational planning is concerned with the organisation as a whole. It is usually long term and is done by the top level of Management. 5. Divisional Planning: Divisional planning determines the scope and activities of each division, eg., production, sales, finance, personnel etc..., This plan focus on specific functional areas of business. 6. Departmental or unit planning: It involves development of specific plans for each department or a division so as to accomplish divisional objectives. Decision –Making Meaning Decision-making is the process of selecting one alternative from among a number of alternatives available. Fig 2.4 DECISION MAKING The need for decision-making will arise only when there are options. If there is only one way of doing a task, there is nothing to decide. For example, a business enterprise that wants to buy a 24 machinery may find several models of the machinery. As it can buy only one model, it has to decide which model to buy. It will select the best model by examining the merits and demerits of all the alternative models and will select the one that offers maximum benefits. The process of selecting the best model among the available alternative models is called decision making. Definition of Decision-Making According to Haynes and Massie, ’Decision-making is a process of selection from a set of alternative courses of action which is thought to fulfill the objective of the decision-problem more satisfactorily than others’. In the words of George Terry, ‘Decision-making is selecting an alternative, from two or more alternatives, to determine an opinion or a course of action’. Characteristics of Decision –Making The important characteristics or features of decision-making are given below: 1. It is a goal-oriented activity The objective of decision-making is always to attain a specific goal. For example, a student, whose goal is to become a Commerce graduate, has to be admitted in a college. He may be admitted either in the Day college or in the Evening College depending upon his credentials. It is also possible that he may study by correspondence. There again, he can choose the University from among the various Universities that offer correspondence courses. Thus, a series of decisions needs to be taken by the student. 2. Existence of alternative courses of action As mentioned earlier, the need for decision-making would arise only when there are alternative ways of performing a task. If there is only one course of action available there is nothing to decide. For example, an outdated product, which cannot be updated, has to be abandoned by a business enterprise and there are no alternatives. Similarly, a worker, who is inefficient and without, commitment has to be sent out of the organisation. In both these cases, there is no scope for decision-making at all. On the other hand, a product, that offers scope for alteration or modification, may be altered and thereby updated. Likewise, a worker, who is showing commitment for work, but is not picking up things fast, may be given additional training to enable him to do better. 3. It may be positive or negative Another interesting feature of decision-making is that the decision made may be either positive or negative. For example, if the employees in an organisation want their pay scales revised and decide to go on strike if their demand is not conceded, the decision of the management may either be positive or negative. It is positive, if it decides to consider or concede the demands. It is negative, if the management is not prepared to concede the demands or decides to take disciplinary action against the employees for resorting to strike. 4. It may also be a decision not to decide It is always difficult to take a quick decision on a sensitive issue. An immediate ‘yes’ or ‘no’ is not always possible in all matters. In such a case, the tendency will be to defer the decision to the extent possible. The decision, therefore, is ‘no decision’. 25 5. Decision-making is both a science and an art As a science, decision-making requires knowledge of method, rule or principle concerning the problem. As an art, it requires skill for making the decision a success. For example, a revision of pay scales of employees in an organisation has to be done by evolving or following a suitable method, formula or principle. But it requires skill to make the employees accept the revised pay scales. 6. It is situational It means that the decision-maker may make different decisions for the same problem under different situations. For example, a teacher may permit a student coming late to enter the class on a particular day but may not allow him on another day. Likewise, a worker may be sanctioned leave on a particular day but may be refused leave on another day. 7. It may be voluntary or induced When the decision-maker makes the decision himself and is not pressurised by anyone, such a decision is known as a voluntary decision. He makes the decision spontaneously and with an open mind. On the other hand, when he is pressurised either by individuals or by the situation to evolve a decision to solve a problem, the decision becomes induced. For example, if a manufacturer, whose production activity pollutes the environment, comes forward to install a pollution control device on his own, such a decision is a voluntary one. If he is careless about the adverse effect his production process has on the environment, he may be required by the Pollution Control Authority to install a pollution control device. The decision then becomes an induced one. 8. It is a complex mental exercise Decision-making involves careful consideration of the alternative courses of action, evaluation of the same and selection of the best course of action. The entire process of decision-making requires application of mind and intelligence. Then only, he can take best decision. 9. It is an ongoing activity Decision-making is a continuous process. Decisions are to be taken in everyone’s life right from cradle to grave. In a business organisation too several decisions need to be taken right from its inception to dissolution. Types of managerial decision: Managerial decisions may be classified into the following categories: Organisational and personal Decisions Routine and strategic decisions Types of managerial Programmed and Non-programmed Policy and operating decisions Individual and group decisions FFig 2.5 TYPES OF MANAGERIAL DECISION 1. Organisational and personal Decisions Organisational decisions are those which an executive takes in his official capacity and on 26 behalf of the organisation. On the otherhand personal decisions are those which an executive takes in his individual capacity and not as a member of the organisation. 2. Routine and strategic decisions Routine or tactical decisions are of a repetitive or recurring nature. They cover shorterm period and affect only a small segment of the organisation. Strategic or basic decisions involve long term commitments, large investment of funds and are of permanent nature. 3. Programmed and Non-programmed decisions According to simon, programmed decisions are of routine and repetitive nature for which systematic procedures already exist in the organisation. Non-programmed decisions are of unstructured nature. Such decision are generally made at higher level of management. 4. Policy and operating decisions Policy decisions are of fundamental nature as they affect the whole organisation. Operating decisions are made for executing policy decisions. 5.Individual and group decisions Decisions taken by a single individual are individual decisions. Group decisions are those taken by a group of persons. The process of Decision-making: The steps involved in decision-making process are given below: EVALUATING SELECTING IMPLE FEEDBACK DEFINING ANALYSING DEVELOPING ALTERNATIVE THE THE BEST MENTING AND THE THE ALTERNA- SOLUTIONS ALTERNA- THE CONROL PROBLEM PROBLEM TIVES TIVE DECISION Fig 2.6 PROCESS OF DECISION MAKING 1. Defining the Problem The first step in decision-making is that of recognising and identifying the problem. The problem may arise due to unfulfilled goals or due to deviation from the desired state of affairs. The real problem may be inappropriate product, unsuitable price policy, faulty distribution or lack of sales promotion. Clear understanding of the problem is necessary. 2. Analysing the problem Analysis of the problem involves determining its causes and scope. The quality of decision will depend upon the quality of information used. Therefore, collection of accurate and appropriate data is very important in decision making. 27 3. Developing Alternative solutions After defining and analysing the problem with the help of relevant information, the decision maker has to develop alternative solutions for the problem. 4. Evaluating the Alternatives The various developed alternatives are compared and scrutinised to identify the pros and cons of each alternatives. Before evaluation, the criteria for evaluation should be specified. Peter Drucker has suggested the following factors for evaluating alternative courses of action. (a) Risk (b) Economy of effort (c) Timing (d) Limitation of resources 5. Selecting the Best Solution Choosing the best alternative is the most critical part of the decision-making process. Koontz and O’ Donnel have suggested the following basis for selection among alternatives. (a) Experience (b) Experimentation (c) Research and Analysis 6. Implementing the Decision Once a decision is taken, it needs to be put into practice. Implementation involves several steps. First the decision should be communicated to all concerned employees. Secondly, responsibility for carrying out the decision is assigned to specific individuals. Thirdly, any resistance to the decision has to be overcome. 7. Feedback and control Once the decision has been put into practice, actual results of action should be compared with the expected results. If there is any deviation the same should be analysed to identify the causes. Merits : 1. Decision making helps to adopt best course of action. Decision making makes it possible to adopt the best course of action in carrying out a given task. When there are different ways of performing a task, it becomes necessary to find out the best way and that is what decision-making is all about. The course of action finally selected should produce the best results. 2. Optimum use of resources. By choosing the best method of doing any work, decision making ensures optimum use of the enterprise resources, namely, men machines, materials and money. Resources are always scarce and therefore, it is necessary to make a proper use of the same. 3. It helps to find a solution. Decision-making helps to find a solution to any problem in a work place. The actual cause of the problem must be identified after which corrective action may be taken. The management may have to decide on the right course of action to be adopted. Thus decision making helps management in finding solution. 28 4. It helps to promote efficiency. Identification of best course of action in each given situation promotes the efficiency of the organisation. Then the course of action is acceptable to both the workers and management. It results in higher output which is followed by a share in gain to the workers. Thus there is an improvement in the overall efficiency of the organisation. 5. It helps to resolve conflicts. The management has to resolve the conflicts between the workers on their views regarding better pay and improved working conditions. If the management avoids taking a decision on this matter the workers will not be satisfied. Here the decision should not be a one-sided one. So the management has to evolve a formulae that is acceptable to the workers as well. De-merits : 1. Decision maker is unaware of the alternatives available. Often the decision maker is oblivious of the alternatives available. So he selects the option according to his intuition. Best decisions can be made only if all the alternatives are properly evaluated. As the decision maker is unaware of the alternatives available, the decisions made by him will not give the expected results. 2. Indecisiveness. It may not be possible for some managers to arrive at a decision easily. This may result in loss of business opportunities. Sometimes they may take hasty decisions at the last minute and such a decision may not produce the desired results. 3. Failure to make correct diagnosis. A person suffering from headache may take a tablet to get rid of it. It may give him relief sometimes but not always. If he gets headache often, the same tablet may not give him relief.Proper diagnosis, in such case, is necessary. Likewise, in a work place, lack of employee motivation cannot always be attributed to lack of tangible benefits. The actual cause of problem therefore, has to be identified and only then remedy can be provided. 4. Quick decision. The decision-maker cannot always take his own time for making decisions.Certain problems may be so urgent that a quick decision may be necessary. A stitch in time saves nine. But only some managers are capable of making correct quick decisions. If the decision is not made at the right moment, the enterprise may have to suffer. 5. Unavailability of necessary information. The information needed for the purpose of decision may not be easily available. In such a situatuon, the correct decision cannot be made. There may also be delay in arriving at a decision. For example, if a business wants to consider giving credit to an old customer who has approached after a long time, the decision can be made only if information on his credit worthiness is readily available. 29 6. Resistance In certian organisations, there may always be reisstance by the subordinate staff to any decision. They think that the decisions are made in the interest of the organisation and be detrimental to their personal interest. Overcoming this resistance to any decision also poses problems. 7. Making decision by itself cannot solve any problem. Implementation of the decision and periodical review alone can produce the expected results. Implementation of decision will not solve the problem. Periodical review about the process and follow- ups will only produce the expected results. POINTS TO REMEMBER FEATURES OF PLANNING 1. Planning is the primary function of management 2. It is goal oriented 3. It is all-pervasive 4. It is an intellectual activity 5. It is future-oriented 6. It requires an integrated approach 7. It is a continuous process 8. It involves decision making ADVANTAGES OF PLANNING 1. It focuses on objective 2. It helps to avoid wastage of resources 3. It ensures efficiency as well as effectiveness 4. It reduces risk and uncertainty 5. It provides for co-ordination 6. It facilitates control 7. Planning also provides scope for decentralisation DRAWBACKS OF PLANNING 1. Uncertain Nature 2. Expensive 3. Rigidity 4. Loss of initiative 5. Ignorance of subordinates interests 6. Complacent attitude KINDS OF PLANNING 1. Long-term planning 2. Medium-term planning 3. Short-term planning 4. Corporate planning 5. Divisional planning 6. Departmental or unit planning PROCESS OF PLANNING 1. Identifying business opportunities 2. Establishment of objectives 3. Determination of planning premises 4. Identifying the alternative courses of action 5. Evaluating the alternative courses of action 6. Selecting the best course of action 7. Formulation of derivative plans 8. Periodic evaluation and review CHARACTERISTICS OF DECISION MAKING 1. It is a goal-oriented activity 2. Existence of alternative courses of action 3. It may be positive or negative 4. It may also be a decision not to decide 5. Decision-making is both a science and an art 6. It is situational 7. It may be voluntary or induced 8. It is a complex mental exerci se 9. It is an ongoing activity 30 TYPES OF MANAGERIAL DECISION 1. Organisational & personal decisions 2. Routine and strategic decisions 3. Programmed & nonrammed decisions 4. Policy and operating decisions 5. Individual and group decisions THE PROCESS OF DECISION MAKING 1. Defining the problem 2. Analysing the problem 3. Developing alternative solutions 4. Evaluating the alternatives 5. Selecting the best solution 6. Implementing the decision 7. Feedback and control MERITS OF DECISION MAKING 1. Decision making helps to adopt best course of action 2. Optimum use of resources 3. It helps to find a solution 4.It helps to promote efficiency 5. It helps to resolve conflicts DE-MERITS OF DECISION MAKING 1. Decision maker is unaware of the alternatives available 2. Indecisiveness 3. Failure to make correct diagnosis 4. Quick decision 5. Unavailability of necessary information 6. Resistance 7. Making decision by itself cannot solve any problem. 31 Project Try to solve the management problems given below A Car manufacturing Ltd. is facing a problem of declining market share due to increased competition from other new and existing players in the market. Its competitors are introducing lower priced models for mass consumers who are price sensitive. For quality conscious consumers, the company is introducing new models with added features and new technological advancements. Questions 1. Prepare a model business plan for the company to meet the existing challenge. You need not be very specific about quantitative parameters. You may specify which type of plan you are preparing. Hints : Set the objective of the plan i. What are the different alternatives available? ii. Pros and cons of the alternatives iii. Select the best alternative iv. Implementation of the chosen alternative v. What are the follow up actions to be taken? 2. Identify the limitations of such plans. i. Is it flexible in all situations ii. Is it futuristic? iii. Is it time bound and rigid? iv. Will it involve Huge cost and is it time consuming? 3. How will you seek to remove these limitations? 2. Interview a local Entrepreneur about how their objectives are set and the time taken to achieve them. How do their answers compare with what you have learnt in the chapter? Hints : What are the long term and short term objective? What are the factors he has taken into consideration while setting the objectives? What are the parameters under consideration for setting theses objectives? 32 QUESTIONS Objective Type Part –A (One Mark) I. Choose the correct answer: 1. Planning is.....oriented (a) Past (b) Future (c) Present (d) none of the above 2. Planning is.... activity (a) intellectual (b) mental (c) intelligence (d) all the above 3. Planning makes it possible to make optimum use of the available resources of....... (a) Money (b) Materials (c) Machines (d) all the above. 4. Planning provides for (a) Co-ordination (b) Co-operation (c) Motivation (d) Organisation. 5......... helps the enterprise to know whether the plan has been successfully implemented (a) Control (b) Motivation (c) Decision-making (d) None of the Above. 6. Planning is necessary to make an analysis of....... (a) Internal Environment (b) External Environment (c) Internal & External environment (d) None of the Above. 7...... are the factors influencing the internal environment of the business (a) Employees Attitudes (b) Technology Used (c) Managerial Decision Making process (d) All the Above. 8. The various elements of planning are....... (a) Policy (b) Procedures (c) Rules (d) All the Above. 9...... specifies time limits within which activities are to be completed. (a) Schedule (b) Budgets (c) Projects (d) None of the Above. 10...... is a process of selection from a set of alternative courses of action (a) Communication (b) Decision-Making (c) Planning (d) Staffing 11...... decisions are those which an executive takes in his official capacity (a) Organisational (b) Personal (c) Routine (d) None of the Above. 12. Decisions taken by single individual is known as.... (a) Individual Decision (b) Group Decision (c) Policy Decision (d) Operating Decision. 13...... has suggested the factors for evaluating alternative courses of action (a) Peter Drucker (b) F.W. Taylor (c) Henry Fayol (d) None of the Above. 33 14. Koontz & O.Donnel have suggested ---- is / are the basis for selections among alternatives (a) Experience (b) Experimentation (c) Research & Analysis (d) All the Above. 15. Decision-making ensures optimum use of the enterprise resources of....... (a) Men (b) Material (c) Machinery (d) All the Above. Answers: 1. (c) Future 2. (d) All the Above 3. (d) All the Above 4. (a) Co-Ordination 5. (a) Control 6. (c) Internal & External Environment 7. (d) All the Above 8. (d) All the Above 9. (a) Schedule 10. (b) Decision Making 11. (a) Organisational 12. (a) Individual Decision 13. (a) Peter Drucker 14. (d) All the Above 15 (d) All the Above II. Write the Answer in One or Two Words: 1. Which one is deciding in advance? 2....... is done by every one at every level of Management? 3. What type of approach is required for planning? 4. What can be reduced with the help of planning? 5.What is known as Decentralisation ? 6. Why do plans lead to monotony & boredom ? 7. Mention anyone of the assumptions made about the future happenings ? 8. Which is the first step in planning ? 9. What is a financial statement of expected results expressed in numerical terms ? 10. Mention the number of kinds of planning? 11.What is the process of selecting one alternative from among a number of alternatives? 12. Who can install a pollution control device ? 13. Who defined programmed decisions? 14. Who can take group decisions? 15. What is the first step in decision-making process? Answers: 1. Planning 2. Planning 3. Integrated approach 4. Risk and uncertainty 5. Dispersal of authority 6. Lack of flexibility 7. Employee attitudes / Technology used / Managerial decision making process 34 8.Objectives 9. Budget 10. Six 11. Decision-making 12. Pollution control authority 13. Simon 14. Group of persons 15. Defining the problem PART – B (Four Marks) 1. What is planning? 2. Define Planning? 3. What is Decision-making? 4. Define the term Decision-making? 5. Write short notes on budget? 6. What is long term planning? 7. What is organisational decisions? 8. What is programmed decisions? 9. What are policies? 10. What are Rules? 11. What do you mean by routine and strategic decisions? 12. What do you mean by Individual and group decisions. PART – C (Ten Marks) 1. What are the features of planning ? 2. What are the process of planning ? 3. Explain the kinds of planning. 4. What are the types of managerial decisions ? 5. What are the demerits of decision making ? PART – D (Twenty Marks) 1. What are the merits and de-merits of planning ? 2. What are the elements of planning ? 3. Explain the characteristics of decision-making. 4. Explain the decision making process. 5. Explain the merits and demerits of decision making. 35 3. ORGANISATION AND DELEGATION OF AUTHORITY Learning objectives: After reading this chapter you will be able to understand Organisation – Meaning – Definition- Nature / Characteristics – Principles - Advantages – Steps/Process – Formal – Informal – Differences – Organisation Structure – Organisation Charts & Manuals – Delegation of Authority – Meaning – Definition – Characteristics – Steps/Process – Merits & Demerits – Principles – Meaning, Definition of Centralisation & De-centralisation- Merits & Demerits of Centralisation – Difference between Centralisation & De-centralisation Fig 3.1 ORGANISATION Meaning: The word ‘organisation’ has come from the word ‘organism’ which means a structure of interreleated and interdependent parts. The parts or components of organisation consists of men, machines, materials, methods, money, functions, authority and responsibility. The task of organisation is to unite or integrate these components effectively for the purpose of attaining the common goal. Definitions: 1. ‘Organising is the process of identifying and grouping the work to be performed, defining and delegating responsibility and authority, and establishing relationships for the purpose of enabling people to work most effectively together in accomplishing objectives’ – Louis A Allen 2.Organisation is the structural frame work within which the various efforts are co-ordinated and related to each other- Theo Haimann 36 Nature (Characteristics) of organisation: The main characteristics of an organisation are given below: 1.Common Purpose : Every organisation exists to accomplish some common goals. 2.Division of Labour : The total work of an organisation is divided into functions and sub-functions and assigned to particular individual. It ensures specialisation. 3.Authority Structure : There is an arrangement of positions into a graded series. The authority of every position is defined. The chain of superior – subordinate relationship is known as chain of command. 4.People : An organisation is basically a group of persons. People constitute the dynamic human element of an organisation. 5.Communication : Every organisation has its own channels of Communication. It is necessary for mutual understanding and co-operation among the members of an organisation. 6.Coordination : Coordinating different activities and parts of organisation is essential to achieve its common goal. Co-operative effort is a basic feature of organisation. 7.Environment : An organisation function is an environment comprising economic, social, political and legal factors. 8.Rules and Regulations : Every organisation has some rules and regulations for orderly functioning of people. Principles of Organisation The following principles are helpful in developing a sound organisation structure. 1. Unity of Objectives Every part of the organisation should be designed to facilitate the achievement of common objectives. Therefore, the objectives must be stated in clear and concise terms. 2. Division of work The total work should be divided in such a way that as far as possible every individual performs a single function. 37 3. Span of control No executive in the organisation should be required to supervise more subordinates than he can effectively manage. 4. Scalar principle The line of authority (called the chain of command) from the top executive to the lowest level should be clear and unbroken. 5. Principle of Exception Every manager should take routine decision himself. Only exceptional matters beyond the scope of authority should be refered to higher authorities. 6. Unity of command Each individual should receive orders from and be accountable to only one boss. 7. Functional definition The authority and responsibility of every individual should be clearly defined. The relation- ships between different jobs should be clearly specified. 8. Unity of Direction There must be one head and one plan for a group of activities directed towards the same objectives. 9. Delegation Authority delegated to an individual should be adequate to enable him to accomplish the results expected of him. 10. Correspondence Authority and responsibility must be equal. Authority delegated to a position should be commensurate with responsibility of that position and vice-versa. 11. Absoluteness of Responsibility No superior should be allowed to avoid his responsibility by delegating authority to his subordinates. He must be held accountable for the acts of his subordinates. 12. Simplicity The organisation structure should be kept simple with minimum numbers of levels. 13. Flexibility The organisation structure should be adoptable to changing circumstances. There should be scope for expansion without disrupting the basic design. 38 14. Efficiency The organisation structure should enable the enterprise to function efficiently and to achieve its objectives with minimum cost and effort. 15. Continuity The organisation structure should be continued for a long period of time. ADVANTAGES OF ORGANISATION: Sound organisation is essential for the continuity and success of every enterprise. The main advantages of sound organisation are given below: 1. Aid to Management: Organisation is the mechanism through which management coordinates and controls the busi

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