Introduction to Management 2014-15 PDF

INTRODUCTION TO MANAGEMENT (As per the Revised Syllabus of B.Com. (Accounting and Finance) Programme at Semester III with Effect from the Academic Year 2014-2015) Dr. Nishikant Jha Winner of “Best Commerce Author – 2013 -14” by Maharashtra Commerc...

INTRODUCTION TO MANAGEMENT (As per the Revised Syllabus of B.Com. (Accounting and Finance) Programme at Semester III with Effect from the Academic Year 2014-2015) Dr. Nishikant Jha Winner of “Best Commerce Author – 2013 -14” by Maharashtra Commerce Association Ph.D., ICWA, PGDBM (MBA), M. Com., BEC Cambridge University International Executive MBA UBI Brussels, Belgium, Europe, Assistant Professor in Account & Coordinator for BAF Thakur College of Science & Commerce, UGC Recognised, University of Mumbai. Visiting Faculty for: M.Phil & M.Com. Hinduja College of Mumbai CFA & CFP Professional Courses of USA, CIMA Professional Courses of London, CA & M. Phil& CS Professional Courses of India, Ph.D. Guide [Research Supervisor] & Professor for Research Methodology. CFA Reshma Shaikh Deepa Jamindar M.Com. (Management), UGC NET, M.Com. (Management), B.Ed., UGC C.F.A., D.B.F. SET, UGC NET, M.Phil. Assistant Professor, Assistant Professor, Thakur College of Science & Commerce, Thakur College of Science & Commerce, Kandivali (East). Kandivali (East). MUMBAI  NEW DELHI  NAGPUR  BENGALURU  HYDERABAD  CHENNAI  PUNE  LUCKNOW  AHMEDABAD  ERNAKULAM  BHUBANESWAR  INDORE  KOLKATA  GUWAHATI © Authors No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical, photocopying, recording and/or otherwise without the prior written permission of the publishers. First Edition : 2014 Published by : Mrs. Meena Pandey for Himalaya Publishing House Pvt. Ltd., “Ramdoot”, Dr. Bhalerao Marg, Girgaon, Mumbai - 400 004. Phone: 022-23860170/23863863, Fax: 022-23877178 E-mail: [email protected]; Website: www.himpub.com Branch Offices : New Delhi : “Pooja Apartments”, 4-B, Murari Lal Street, Ansari Road, Darya Ganj, New Delhi - 110 002. 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On behalf of HPH.  Dedicated to Our Fathers Mr. Mushtaque Shaikh & Mr. Shivaji Jamindar Reshma Shaikh & Deepa Jamindar  Preface We are happy to present the first edition of “Management – Paper - II: Introduction to Management” to the students of S.Y. BAF. This book is written as per the revised syllabus introduced by the University of Mumbai for the academic year 2014-15. This book is presented in five Modules covering the various aspects of management and includes large number of illustrations in simplified language. The objective questions are properly classified to facilitate preparation for examination and are given along with solutions. This book is an unique presentation of subject matter in an orderly manner. We hope that the book will be student-friendly and we are sure that it will be a tutor at home to the students. We hope the teaching faculty and students community will find this book of great use. We are extremely grateful to Mr. Pandey of Himalaya Publishing House Pvt. Ltd., for their devoted and untiring personal attention accorded by them to this publication. We gratefully acknowledge and express our sincere thanks to the following people without whose inspiration, support and constructive suggestions, this book would not have been possible.  Mr. Jitendra Singh Thakur (Trustee, Thakur College)  Dr. Chaitaly Chakraborty (Principal, Thakur College)  Late Dr. Arvindkumar R. Parab  Mrs. Janki Nishikhant Jha  Mr. Shivaji Jamindar We welcome suggestions from students and teachers for further improvement of quality of book. Authors  Syllabus Number Sr. Modules/Units of No. Lectures 1 Introduction to Basic Management Concepts 10 Introduction to Management and Definitions of Management Nature of Management Objectives of Management Administration vs. Management Levels of Management Principles of Management 2 Planning 10 Definitions and Importance of Planning Process of Planning Limitations of Planning Features of Sound Planning Features and Process of Decision Making 3 Organising 10 Definitions, Nature and Significance Process of Organisation Principles of Organisation Formal and Informal Organisation – Features, Advantages and Disadvantages Centralisation and Decentralisation – Factors, Merits and Demerits Departmentation and Delegation 4 Staffing 10 Meaning and Importance of Staffing Recruitment and its Sources Selection Procedure Distinction between Recruitment and Selection Employment Tests and Types of Interview 5 Directing and Controlling 10 Meaning and Importance of Directing Principles of Directing Leadership Traits and Styles Motivation – Importance and Factors Coordination – Meaning, Features and Importance Meaning and Steps in Controlling Essentials of a Good Control System  Paper Pattern Credit Based Evaluation System Scheme of Examination (a) Internal of Assessment – 25% 25 Marks Sr. Particulars Marks No. 1. One periodical class test* 20 Marks 2. Active participation in routing class instructional 05 Marks deliveries and overall conduct as a responsible learner, mannerism and articulation and exhibit of leadership qualities in organizing related academic activities (b) Semester end Examinations – 75% 75 Marks 1. Question Paper Pattern for Periodical Class Test for Courses at UG Programmes written Class Test 20 Marks Sr. Particulars Marks No. 1. Match the Column/Fill in the Blanks/Multiple 05 Choice Questions Marks (1/2 Marks each) 2. Answer in one or two lines (Concept based 05 Questions) Marks (1 Mark each) 3. Answer in Brief (Attempt any two of the three) 10 (5 Marks each) Marks  Contents 1. Introduction to Basic Management 1 - 19 Concepts 2. Planning 20 - 37 3. Organising 38 - 70 4. Staffing 71 - 88 5. Directing and Controlling 89 - 125  Introduction to Basic 1 Management Concepts  Introduction to Management and Definitions of Management  Nature of Management  Objectives of Management  Administration vs. Management  Levels of Management  Principles of Management MANAGEMENT –– MEANING AND DEFINITIONS Introduction A business develops in course of time with complexities. Management is not only essential to business concerns but also essential to Banks, Schools, Colleges, Hospitals, Hotels, Religious bodies etc. Every business unit has objectives of its own. These objectives can be achieved with the cooperative efforts of several personnel. As E. Demock has rightly said “The management is not a matter of pressing a button, pulling a lever, issuing orders, scanning P & L statement, promulgating rules and regulations. Rather it is the power to determine what shall happen to the personalities and happiness of entire people, the power to shape the destiny of a nation and of all the nations which make up the world.” Meaning of Management Management is the art of getting things done by a group of people with the effective utilisation of available resources. There are 2 Introduction to Management various definitions given by various management gurus but simply management is the process consisting of the functions of planning, organising, staffing, directing and controlling the operations to achieve specified objectives. Definitions of Management  Harold Koontz defines “Management is the art of getting things done through and with people in formally organised groups.”  Mary Parker Follet wrote “Management is the art of getting things done through people.”  Henri Fayol stated “To manage is to forecast and to plan, to organise, to command, to coordinate and to control.”  Peter Drucker defines “Management is a multi-purpose organ that manage business and manages managers and manages workers and work.” From the above definitions, we can conclude that, Management is an individual or a group of individuals that accept responsibilities to run an organisation. They plan, organise, direct and control all the essential activities of the organisation. Management does not do the work themselves. They motivate others to do the work and coordinate all the work for achieving the objectives of the organisation. Management brings together all six Ms, i.e., Men, Money, Machines, Materials, Methods and Markets. They use these resources for achieving the objectives of the organisation such as high sales, maximum profits, business expansion, etc. NATURE/FEATURES/CHARACTERISTICS OF MANAGEMENT The main characteristics of management are as follows: Introduction to Basic Management Concepts 3 Features of Management 1. Continuous and Never-ending Process. 2. Art of Getting Work Done from People. 3. Is Result-oriented. 4. Multidisciplinary in Nature. 5. Group and Not an Individual Activity. 6. Follows Established Principles or Rules. 7. Aided but Not Replaced by Computers. 8. Situational in Nature. 9. Separate from Ownership. 10. Both an Art as well as a Science. 11. Is All-pervasive. 12. Intangible but its Impact is Felt. 13. Uses a Professional Approach in Work. 14. Dynamic in Nature. Now let’s briefly discuss each features of management. 1. Continuous and Never-ending Process: Management is a process. It includes four main functions –– Planning, Organising, Directing and Controlling. The manager has to plan and organise all the activities. He has to give proper directions to his subordinates. He also has to control all the activities. The manager has to perform these functions continuously. Therefore, management is a continuous and never-ending process. 4 Introduction to Management 2. Getting Things Done through People: The managers do not do the work themselves. They get the work done through the workers. To get the work done, managers need to lead the subordinates, to communicate effectively and to motivate the subordinates. A favourable work environment should be created and maintained. 3. Result-oriented: Management is result-oriented. It gives a lot of importance to result. All the activities of managers are focused on the achievement of goals or result. Management always wants to get the best results at all times. The result can be in the form of increase in market shares, increase in profits, optimum use of resources, higher efficiency etc. 4. Multidisciplinary in Nature: Management has to get the work done through people. It has to manage people. This is a very difficult job because different people have different emotions, feelings, aspirations, etc. Similarly, the same person may have different emotions at different times. So, management is a very complex job. Therefore, management uses knowledge from many different subjects such as Economics, Information Technology, Psychology, Sociology, etc. Therefore, it is multidisciplinary in nature. 5. Group Activity: Management is not an individual activity. It is a group activity. It uses group (employees) efforts to achieve objectives. It tries to satisfy the needs and wants of a group (consumers). Management gives importance to the team and not to individuals. The combined efforts of all the managers bring success to the organisation. 6. Follows Established Principles or Rules: Management follows established principles, such as division of work, discipline, unity of command etc. These principles help to prevent and solve the problems in the organisation. 7. Aided but not Replaced by Computers: Nowadays, all managers use computers. Computers help the managers to take accurate decisions. However, computers can only help management. Computers cannot replace management. This Introduction to Basic Management Concepts 5 is because management takes the final responsibilities. Thus, management is aided but not replaced by computers. 8. Situational in Nature: Management makes plans, policies and decisions according to the situation. It changes its style according to the situation. It uses different plans, policies, and styles for different situations. Management has to take decisions depending upon the situation. This is called Situational Management. 9. Need not be an Ownership: In small organisations, management and ownership are one and the same. However, in large organisations, management is separate from ownership. The managers are highly qualified professionals who are hired from outside. The owners are the shareholders of the company. 10. Both an Art and Science: Management is an art as well as a science. In practice, managing is an art. Management conducts continuous research. Therefore, it is a science. Management has characteristics of both art as well as science. 11. All-pervasive: Management is all-pervasive. It is applicable not only in business organisations but also in non-business organisations. Management is necessary for running all organisations. It is also essential for running non business organisations like educational institutions, charitable trusts, religious institutions etc. 12. Management is Intangible: Management is intangible, i.e., it cannot be seen and touched, but it can be felt and realised by its results. The success or failure of management can be judged only by its results. If there is good discipline, good productivity, good profits, etc., then the management is successful and vice versa. 13. Uses a Professional Approach in Work: Managers use a professional approach for getting the work done from their subordinates. They delegate (give) authority to their subordinates. They ask their subordinates to give 6 Introduction to Management suggestions for improving their work. They also encourage subordinates to take the initiative. 14. Dynamic in Nature: Management is dynamic in nature. That is, management is creative and innovative. An organisation will survive and succeed only if it is dynamic. It must continuously bring in new and creative ideas, new products, new ads, new marketing techniques etc. OBJECTIVES OF MANAGEMENT Management is result-oriented. All the activities of managers are focused on the achievement of specific objectives. Management always wants to get the best results at all times. The objectives can be in the form of increase in market shares, increase in profits, optimum use of resources, higher efficiency etc. Following are the main objectives of the management. 1. Organisational Objectives: It refers to the objectives for the whole organisation. While fixing these objectives, management keeps into consideration the benefit of all the related parties (like owner, employee, customer, government, etc.). This also fulfils organisational economic objectives which are survival, profit and growth. (i) Survival: Every business wants to survive for long. So, management by taking positive decisions with regard to different business activities should ensure that business survives for long. (ii) Profit: To earn profit is an important objective of the every organisation. Profit is required for successful running of business activities. Profit is also required to face business problems. So, it must be ensured by the management that adequate profit is earned by the business. (iii) Growth: Every business wants to grow. Management must ensure growth of business. Growth can be measured by sales, number of employees, products, capital investment, etc. If all these show an increasing trend, then it can be concluded that business is heading towards growth. Introduction to Basic Management Concepts 7 2. Social Objectives: It refers to the objectives towards society. An organisation is established in a society. It runs through the resources made available by the society. It becomes the responsibility of every organisation to contribute for social benefits. Thus, social objectives are defined as the fulfillment of responsibility of an organisation towards society. Under this objective, the manager promises to assure health, safety and price control. Main social objectives of management are included in the following list: To make available employment opportunities To save environment from getting polluted To contribute in improving standard of living To help weaker sections of the society To make optimum use of resources For example: Asian Paints has provided funds under its community development programme, which has made possible the effective utilisation of local resources by the farmers. In the same manner, Steel Authority of India regularly provides services related to agriculture, industry, education, health, etc. to the people living nearby its steel plants. 3. Personal or Individual Objectives: It refers to the objectives related to the employees of the organisation. The employees happen to be prudent and sensitive resource for the company. It is, therefore, highly essential to take care of the feelings of the employees. It is an undoubted fact that the satisfaction of the employees means rapid progress for the company. This fact of tremendous importance should never be lost sight of. Main objectives of management towards employees are as follows: To give deserving remuneration To provide good working environment 8 Introduction to Management To provide a share in profit To provide job security To provide health and safety measures To increase workers’ participation in management To facilitate career development 4. Getting Maximum Results with Minimum Efforts: The main objective of management is to secure maximum outputs with minimum efforts and resources. Management is basically concerned with thinking and utilising human, material and financial resources in such a manner that would result in best combination. This combination results in reduction of various costs. 5. Increasing the Efficiency of Factors of Production: Through proper utilisation of various factors of production, their efficiency can be increased to a great extent which can be obtained by reducing spoilage, wastages and breakage of all kinds. This in turn leads to saving of time, effort and money which is essential for the growth and prosperity of the enterprise. 6. Maximum Prosperity for Employer and Employees: Management ensures smooth and coordinated functioning of the enterprise. This in turn helps in providing maximum benefits to the employee in the shape of good working condition, suitable wage system, incentive plans on the one hand and higher profits to the employer on the other hand. 7. Human Betterment and Social Justice: Management serves as a tool for the upliftment as well as betterment of the society. Through increased productivity and employment, management ensures better standards of living for the society. It provides justice through its uniform policies. ADMINISTRATION VS. MANAGEMENT There has been a controversy on the use of these two terms – management and administration. Many experts make no distinction between administration and management and use them as synonyms. Introduction to Basic Management Concepts 9 Several American writers consider them as two distinct functions. Many writers like Henri Fayol, William Newman, Chester Barnard, George Terry, Louis A. Allen, Koontz and O’Donnell make no distinction between management and administration. There is one common science which can be applied equally well to public and private affairs. Therefore, the distinction between administration and management is superfluous or academic. In actual practice, the two terms are used interchangeably. The term administration is more popular in Government and other public organisations while the word management is more commonly used in the business world, where economic performance is of primary importance. MANAGEMENT ADMINISTRATION 1. Meaning: It is an art of getting It means to frame plans and policies things done through people. to get work done systematically. 2. Nature: It is an executive or It is a determinative or thinking doing function. function. 3. Type of work: It is concerned with It is concerned with framing of the implementation of the policies. policies. 4. Levels of management: It is It is basically function of top level basically function of middle management. level and lower level management. 5. Functions involved: Mainly Planning and controlling functions directing and organising are involved. functions are involved. 6. Skills required: Technical and Conceptual and human skills are human skills are required. required. 7. Usage: Used largely in Used largely in Government and business organisation. Public sector. 8. Skills required: Technical and Conceptual and human skills are human skills are required. required. 9. Contact with employees: The The administrators do not come into managers come into regular regular contact with employees, contact with employees. 10. Illustrations: General Commissioner, Registrar, Vice- Manager, Sales Manager etc Chancellor, Governor etc. 10 Introduction to Management LEVELS OF MANAGEMENT Levels of management refer to hierarchy of management in the organisation. Levels of management are created to manage the activities of the organisation smoothly. This brings the division of work within the organisational structure. Normally, there are three levels of management namely: 1. Top level management 2. Middle level management 3. Lower level management Diagram of Levels of Management Executive coaching, change management, leadership, delegation and empowerment, etc. TOP Problem solving, team building, talent development, performance management, etc. MIDDLE Emotional intelligence and coaching for performance, etc. LOW LEVEL 1. Top Level Management It is the highest level in the managerial hierarchy. Top level management is the final authority in the organisation. It is generally occupied by the ownership group. In a joint stock company, equity shareholders are the real owners of the company. They elect their representatives known as Directors. All directors form board of directors. They manage the organisation. Besides the board, Managing Directors, General Manager, Chief Executive Officer, President and Vice-President also include in top management as they help board of directors in their work. The top level managers are answerable to the owners and responsible for overall management of the organisation. The major functions of the top level management are as under: Introduction to Basic Management Concepts 11  To frame mission statement of organisation.  To determine the business objectives.  To formulate business plan for the entire organisation.  To select departmental heads.  To decide structure of organisation.  To select executives of the organisation.  To co-ordinate various sub-system of the organisation.  To maintain relationship with outside parties like government, trade union, trade associations, etc. 2. Middle Level Management Middle level management is created to fill up the gap which exists between functional and operative level management. Middle level management consists of departmental managers, deputy managers, foremen and administrative officers etc. It is concerned with the interpretation of policies framed by top management. They act as a link between top and lower level managers. The main functions performed by these managers are as under:  To prepare departmental plan.  To establish departmental goals.  To select lower level executives.  To monitor and control the departmental performance.  To organise resources in order to undertake departmental activities. 3. Lower Level Management Lower level management is known as supervisory management, because it is concerned mainly with personal oversight and direction of operative employees. It consists of factory supervisors, superintendents, foremen, sales supervisors, accounts officers etc. They directly guide and control the performance of workers. Their authority is limited. They have to obey the decisions taken by the top and middle level management. They guide day-to-day activities. They also represent the grievances of the workers to the higher levels 12 Introduction to Management of management. Supervisory management performs the following functions:  To make plan for day-to-day work.  To supervise and guide workers.  To maintain close personal contacts with workers.  To ensure discipline and teamwork.  To evaluate performance of the workers.  To send reports and statements to higher authorities.  To communicate the grievances and suggestions of workers to higher authorities. SKILLS OF MANAGEMENT Skill is defined as the ability or capacity to do something, acquired through specific training. Skills are learned abilities. For example, in order to be an engineer, you need to acquire the engineering skills, or in order to become a chef, you need to acquire cooking skills. In modern business, to manage the job management has become very difficult. Several skills are required to manage a large organisation successfully in a dynamic environment. These skills of managers have been classified. 1. Conceptual Skills: Conceptual means hypothetical or theoretical. Conceptual skills help managers to visualise, to diagnose and to understand the various aspects of problems or situations. Conceptual skills comprise the ability to see the whole organisation and the interrelationships between its parts. These skills refer to the ability to visualise the entire situation and try to find out the solutions. Such competence is necessary for rational decision making. It deals with the ideas. The conceptual skill is particularly necessary in top level management. 2. Human Skills: It refers to interpersonal skills. It means the ability of the manager to interact with the subordinates. Human skills consist of the ability to work effectively with other people both as individual and as members of a group. Introduction to Basic Management Concepts 13 These are required to win co-operation of others and to build effective work teams. Such skills require a sense of feeling for others and capacity to look at things from other’s point of view. Human skills are reflected in the way a manager perceives his superiors, subordinates and peers. All managers at all levels need these skills because every manager deals with people. 3. Technical Skills: Technical skills refer to the ability and knowledge in using the equipment, techniques and procedures involved in performing specific tasks. These skills require specialised knowledge and proficiency in the mechanics of particular job. This skill is particularly necessary at the lower level of management. Lower level managers have to supervise the work of the employees. A supervisor is mainly directing and controlling the employees. Therefore, he needs technical skill to undertake day-to-day operations. Apart from above three skills, manager also requires few more skills. They are as follows: 4. Administrative Skills: Top level manager needs to be good administrator. As top level managers are managing the organisation, they need to have administrative skills. Administrative skills mean skills to get work done from others. In administrative skills, managers need to frame plans and policies. They need to coordinate activities and achieve goals. 5. Diagnostic Skills: Diagnostic skills means analytical skills. It includes the ability to analyse and examine the nature and circumstances of particular conditions. It is not only the ability to specify why something happened but also the ability to develop certain possible outcomes. It is the ability to cut through unimportant aspects and quickly get to the heart of the problem. Diagnostic skills are probably the most difficult ones to develop because they require the proper combination of analytic ability with commonsense and intelligence. 14 Introduction to Management 6. Leadership Skills: A manager must be good leader. He should lead and motivate his subordinates. Every manager needs to have leadership qualities. They should follow right leadership style depending upon the situations. 7. Communication Skills: Managers need to be effective communicators. They should know what to communicate, whom to communicate, when to communicate and how to communicate. Effective communication skill helps the manager to share information with subordinates and get suitable suggestions from them. 8. Decision Making Skills: All managers at all levels need to take decisions. Manager needs to develop alternative solutions of the problems and select the best one. Manager has to take quick and balance decisions. 14 FUNDAMENTAL PRINCIPLES OF MANAGEMENT GIVEN BY HENRY FAYOL Henry Fayol, a famous industrialist of France, has described fourteen principles of management in his book ‘General and Industrial Management’. The fourteen principles given by Fayol are as under: 1. Division of Work: According to this principle of Fayol as far as possible, the whole work should be divided into different parts. Each individual should be assigned only part of the work. The work should be assigned to different employees, as per their capacities, skills and interests. If a manager is turned to work on the same kind of activities for a long period of time, he will certainly be an expert in his particular job. Fayol says division of work leads to specialisation. 2. Authority and Responsibility: Authority means the power to take decisions and responsibility means the obligations for accepting authority. Fayol stressed that there should be a balance between authority and responsibility. Authority and responsibility always go hand in hand. When a person is Introduction to Basic Management Concepts 15 given the authority, he should be held responsible for the same task. If the manager is given the authority to complete a task within a given time, he should be held responsible if he does not do that in time. 3. Discipline: Discipline means obedience, respect for authority and observance of established rules. Discipline is essential for any successful work performance. Discipline needs to flow from top to lower level in the organisation. Employees must obey and respect the rules of the organisation. For effective discipline, there must be a clear understanding between the management and workers regarding the organisation’s rules. 4. Unity of Command: According to the principle of unity of command, every employee should receive orders from one superior (boss) only. This is applicable from top management to bottom. The principle of unity of command tries to avoid confusion. If an employee receives orders from more than one superior, he will be confused and will not be able to complete the work on time. 5. Unity of Direction: Unity of direction means same directions to all employees doing similar job. There should be one head for one plan. The group of employees should be directed by one manager using one plan. In other words, there should be one plan of action for a group of activities having the same objectives. 6. Subordination of Interest: According to this principle, the interest of the organisation is above individual interest. Every employee should work in the interest of the organisation and not for their own self-interest. For example, if a manager takes some decision which harms him personally but results in a great profit to the company, he should give priority to the interest of the company and take the decision accordingly. 7. Remuneration to Employees: This principle states that the employees must be paid a fair wages for their services. Wages and salaries must be paid on time. While paying 16 Introduction to Management remuneration, the skill, expertise, knowledge, cost of living, etc. of the employees should be considered. 8. Centralisation: Centralisation refers to the concentration of power or authority. Acording to this principle, there must be a proper balance between centralisation and decentralisation in the organisation. The superior should adopt effective centralization instead of complete centralization and complete decentralization. 9. Scalar Chain: It refers to formal line of authority which moves from top level to the lower level. It means each communication must move from top to bottom. Fayol states scalar chain must be followed in a strict manner. But scalar chain can be broken if situation so demands for the interest of the organisation. It is called as ‘Gang plank’. Gang plank means cross communication, i.e., not following the chain. It avoids delays. 10. Order: According to the principle of order, a right person should be placed at the right job and a right thing should be placed at the right place. It means there must be proper arrangement of people and material in the organisation. This principle gives importance to proper utilisation of physical and human resources. 11. Equity: Equity means social justice and not equality. This principle is about fair and equal treatment to all employees. Managers should be kind and fair to their subordinates. There should not be any discrimination between the employees. As far as possible, there should be equal division of work. This avoids conflicts in the organisation. 12. Stability of Personnel: It means job security. While appointing an employee, the manager should assure the stability of tenure or job security to the employees. This creates sense of belonging among the employees. Employees should be made permanent. But at the sometime, incompetent and inefficient employees must be removed. Introduction to Basic Management Concepts 17 13. Initiative: Initiative means taking first step. It also means thinking of new ideas. According to this principle, manager should encourage the employees to take initiative. The manager should welcome new ideas of the subordinates. This will enhance the moral of the subordinates. It also creates sense of belonging about the organisation in the mind of the employees. 14. Esprit De Corps: Esprit de corps means union is strength. The manager should create team spirit among the employees. It improves loyalty, dedication and morale among the employees. Manager should build sense of togetherness among the employees. Review Questions 1. Define Management. Explain its features. 2. What is Management? Explain its objectives. 3. Distinguish between Administration and Management. 4. Describe the various levels of management. 5. Explain the different managerial skills required by the manager. 6. Explain any eight principles of management stated by Henry Fayol. Objective Questions 1. Select proper option from the choices given below and rewrite the sentence. 1. F.W. Taylor is called as the father of _____________ management. (a) Modern (b) Scientific (c) Technical 2. 14 principles of management are developed by ___________ (a) F.W.Taylor (b) Henry Fayol (c) Peter Drucker 3. Management is a ______________ activity. (a) Group (b) individual (c) social 4. Management is a ________ science. (a) Social (b) physical (c) natural 5. Formulating the corporate plan is main function of ___________ management. 18 Introduction to Management (a) top management (b) middle management (c) lower management 6. The principle of equity refers to __________. (a) Social justice (b) equality (c) disparities 7. The top level managers require more of __________ skills. (a) Conceptual (b) Technical (c) Directing 8. The lower level managers require more of ____________ skills. (a) Conceptual (b) Technical (c) Non-technical 9. The principles of _________ states that the interest of the organisation should be primary as far as the managers are concerned. (a) Subordination of interest (b) Discipline (c) Unity of direction 10. ____________ principle states that a subordinate should receive orders only from one superior. (a) Unity of direction (b) equality (d) Subordination of interest Ans: 1. Scientific 2. Henry Fayol 3. Group 4. Social 5. Top management 6. Social justice 7. Conceptual 8. Technical 9. Subordination of interest 10. Unity of direction 2. State whether the following statements are true or false. 1. The process of management includes only planning and controlling. 2. Management must encourage labour turnover of competent employees. 3. Principles of management are rigid. 4. Principles of management improve the efficiency of employees. 5. According to Taylor, there should be scientific selection and training of employees. 6. Managers adopt multidisciplinary approach to get the work done from subordinates. 7. The principles of unity of command and the principles of unity of direction are synonymous. 8. Division of work only leads to specialisation. Introduction to Basic Management Concepts 19 9. The principles of management have only theoretical significance. 10. Management process is a one-time activity. Ans: 1. False, 2. False, 3. False, 4. True 5. True, 6. True, 7. False, 8. False, 9. False, 10. False 3. Match the columns. Group A Group B 1. Division of Work (a) Common Instruction 2. Authority (b) Orders from one superior 3. Discipline (c) Application and dedication 4. Unity of Command (d) Power to take decision 5. Unity of Direction (e) Specialisation Ans: 1. (e), 2. (d), 3. (c), 4. (b), 5. (a) Group A Group B 1. Henry Fayol (a) Universal 2. Principle of unity of command (b) Centralisation of power 3. F.W. Taylor (c) French engineer 4. Centralisation (d) One man one boss 5. Management principles (e) Father of Scientific Management Ans:1. (c), 2. (d), 3. (e), 4. (b), 5. (a) Group A Group B 1. Planning (a) Selection of staff 2. Organising (b) Corrective action 3. Staffing (c) Effective communication 4. Directing (d) Grouping of activities 5. Controlling (e) Deciding in advance Ans:1. (e), 2. (d), 3. (a), 4. (c), 5. (b)  2 Planning  Definitions and Importance of Planning  Process of Planning  Limitations of Planning  Features of Sound Planning  Features and Process of Decision Making PLANNING — MEANING AND DEFINITIONS Introduction Planning is the fundamental and important function of management. Planning is the primary function of management. It is a process of setting goals and choosing the means to achieve these goals. A plan is a predetermined course of action to achieve a specified goal. Planning is deciding in advance what is to be done, when, where, how and by whom it is to be done. Planning bridges the gap from where we are to where we want to go. Planning is the starting point of management. All other functions of management are related to and dependent on planning function. It helps to visualise the future problems and keeps the management ready with possible solutions. Planning involves selecting mission and objectives and the action to achieve them. Planning requires decision making to choose from available future course of action. Planning is necessary to ensure proper utilisation of human and non-human resources. Planning 21 Definitions of Planning  Koontz and O’Donnell defines “Planning is deciding in advance what to do, how to do it, when to do it and who is to do it.”  James Stoner wrote “Planning is the process of establishing goals and a suitable course of action for achieving those goals.”  George Terry stated “Planning is the selecting and relating of facts and the making and using of assumptions regarding the future in the visualisation and formulation of purposed activities believed necessary to achieve desired results.”  According to Billy E. Goetz, “Planning is fundamentally choosing and a planning problem arises when an alternative course of action is discovered.” NATURE/FEATURES/CHARACTERISTICS OF PLANNING The main characteristics of planning are as follows: 1. Primary Function: Planning is primary and basic function of management. Planning lays foundation for other functions of management. It acts as a base to other functions of management. It serves as a guide for organising, staffing, directing, co-coordinating, controlling, etc. All the functions of management are performed within the framework of plans laid out. 2. Intellectual Process: Planning is an intellectual process. It involves intelligence, imagination and creative thinking. Planning is a mental exercise involving creative thinking, sound judgment and imagination. It is not a mere guesswork but a rotational thinking. A manager can prepare sound plans only if he has sound judgment, foresight and imagination. Planning is always based on goals, facts and considered estimates. 22 Introduction to Management 3. Result-oriented: Planning is made to achieve desired objective of business. Planning identifies the action that would lead to desired goals quickly and economically. It provides the desired direction for achievement of goals. Planning becomes meaningless if it is not related to clearly defined objectives. 4. Future-oriented: Planning is future-oriented. It is always done by keeping in mind the future needs. A good planner needs to think about future, analyse it and predict it. Thus, planning is based on forecasting. A plan is a synthesis of forecast. It is a mental predisposition for things to happen in future. 5. Continuous Process: Planning is a never-ending function due to the dynamic business environment. Plans are also prepared for specific period of time and at the end of that period, plans are subjected to revaluation and review in the light of new requirements and changing conditions. Planning never comes into end till the enterprise exists issues, problems may keep cropping up and they have to be tackled by planning effectively. 6. All-pervasive: Planning is required at all levels of management and in all departments of enterprise. Of course, the scope of planning may differ from one level to another. The top level may be more concerned about planning the organisation as a whole. The middle level may be more specific in departmental plans and the lower level plans implementation of the same. 7. Link between Past, Present and Future: Planning is always for the future period but it is based on the past experience. It acts as a link between the past, present and future. It prepares plans for the future under the present situation. 8. Involves Options and Decision Making: Planning essentially involves options among various alternatives but there can be only one suitable option among the available alternatives. A manager has to take a decision and select the Planning 23 best option depending upon requirement and available resources in the organisation. Decision making is an integral and inseparable part of planning. 9. Designed for Efficiency: Planning leads to accomplishment of objectives at the minimum possible cost. It avoids wastage of resources and ensures adequate and optimum utilisation of resources. A plan is worthless or useless if it does not value the cost incurred on it. Therefore, planning must lead to saving of time, effort and money. Planning leads to proper utilisation of men, money, materials, methods and machines. 10. Basis of Control: Planning and controlling are two sides of the same coin. Both are closely related to each other. Without the basis of planning, controlling activities become baseless and without controlling, planning becomes a meaningless exercise. Planning precedes controlling and controlling succeeds planning. IMPORTANCE OF PLANNING Planning is one of the most important and crucial functions of management. It acts as base for the achievement of organisational goals. Importance of planning are as follows: 1. Reduction of Uncertainty: Future is always full of uncertainties. A business organisation has to function in these uncertainties. It can operate successfully if it is able to predict the uncertainties. Some of the uncertainties can be predicted by undertaking systematic forecasting. Thus, planning helps in foreseeing uncertainties which may be caused by changes in technology, fashion and taste of people, government rules and regulations, etc. 2. Provides Direction: A proper plan always gives proper direction for the achievement towards the desired goals. A manager can give proper direction to his subordinates only with the help of proper planning. Clear directions can be given to the subordinates at the right time and work can be 24 Introduction to Management completed on time. Planning always helps to perform all the activities in smooth and systematic manner. 3. Better Utilisation of Resources: An important advantage of planning is that it makes effective and proper utilisation of enterprise resources. Effective planning leads to proper allocation of resources for various activities. This helps to generate higher efficiency. 4. Focus on Objectives: Planning is goal-oriented. Planning is made to achieve desired objective of business. It makes objectives more clear and specific. Planning identifies the action that would lead to desired goals quickly and economically. It provides the desired direction for achievement of goals. Planning becomes meaningless if it is not related to clearly defined objectives. 5. Encourage Innovation: Planning helps innovative and creative thinking among the managers. In planning process, manager gets opportunities to come out with new and better ideas in order to achieve objectives. It creates a forward- looking attitude among the managers. The innovative ideas give best result to the organisation. 6. Increase Efficiency: Good planning leads to proper and efficient working of the employees in an organisation. Plans are efficient if they achieve their purpose at a reasonable cost. Planning enables optimum utilisation of resources. The optimum use of resources helps the organisation to achieve highest returns at lowest cost. 7. Improve Morale of Employees: Planning brings order and discipline in an organisation. Employees know in advance as to what is expected from them and how to achieve that. This helps them to bring the best in their performance and also brings healthy attitude towards work, which in turn boost the confidence, morale and efficiency in them. 8. Facilitates Organising: Planning facilitates organising. It helps manager to organise the resources properly. Due to planning, it is possible for him to arrange resources in Planning 25 advance in order to achieve the planned target. Sometimes manager may make arrangement for additional resources. It avoids shortage of resources. 9. Facilitates Decision Making: In planning process, manager frames alternative plans. After proper analysis of all plans, manager selects the best plan. A manager has to take a decision and select the best option depending upon requirement and available resources in the organisation. Decision making is an integral and inseparable part of planning. 10. Facilitates Coordination: Planning facilitates coordination. Top management plans for whole organisation and middle level management make departmental plans. The plan of one department is coordinated with the plans of all other departments. The top level coordinates the plans of middle level and lower level. It brings unity among the activities in the organisation. 11. Facilitates Controlling: Planning and controlling are two sides of the same coin. Both are closely related to each other. Without the basis of planning, controlling activities become baseless and without controlling, planning becomes a meaningless exercise. Planning precedes controlling and controlling succeeds planning. An effective controlling is possible with effective planning. LIMITATIONS OF PLANNING Following are the limitations of planning. 1. Costly Process: Planning involves too much expenditure. Money and effort both are required in planning. Planning includes collecting information, data forecasting and evaluation of alternatives. It requires salary and allowances to the experts in the process of providing services. So, planning has been accepted as costly process by small and medium size organisations. 26 Introduction to Management 2. Time-consuming: Planning is the time-consuming process. It delays the business activity to come in action. In the process, there is a need to collect and analyse data before framing plans. There may be a need to get approval from higher authority. Planning may create problem to the organisation where immediate action has to be made. So, in such situation planning is not suitable. 3. More Paperwork: Planning involves lots of paperwork. Many times, plans are drawn and redrawn. Necessary report is also made and collected from the subordinates. Similarly, paperwork is also involved in taking approval from the top management. 4. Reduces Creativity: Under planning, all the activities are connected with the achievement of predetermined objectives of the organisation. Everybody works as they have been directed to do and as it has been made clear in the plans. They do not think about appropriate ways of discovering new alternatives. Planning strangulates the initiative of the employees. 5. Delay in Action: Planning requires some time for thinking, analysing the situation and designing the final plan. When emergency decision is required, it will take time and business will lose its opportunity. Moreover, delay in decision will further delay the action. 6. Limited Practical Value: Planning is too much theoretical and has a less practical use. Planning is more suitable when environment is suitable. But due to unsuitability of environment, business has to take various quick steps/decision. It may increase the requirement of resources and time. 7. Improper Plan: In planning, there may be problem of overtargeting or undertargeting. Overtargeting mean framing plan with higher targets and undertargeting means framing plan with lower targets. Both overtargeting and undertargeting are the situation of improper planning. Lower target will be easily achieved and manager will feel false Planning 27 sense of security. On the other hand, overplanned target beyond resources cannot be achieved even all the efforts. 8. Lack of Accuracy: There is lack of proper accuracy in planning. Planning is based on future and future is always uncertain and unpredictable. What will occur tomorrow we can’t say with certainty. Secondly, to make accurate plan, reliable data and accurate prediction is too necessary. In the absence of reliable data and accurate prediction, there is chance of business loss and failure. On the whole, it is clear that there is lack of proper accuracy in planning. 9. Difficulty in the Selection of the Best Alternative: It is one of the greatest demerits of planning. In fact, planning provides a large number of alternatives to organisation to perform its events or activities in the best form. But it is not possible for organisation to select the best alternative among the various alternatives because organisation has no clear idea about the best alternatives, due to large appearance of alternative courses. PROCESS OF PLANNING Planning is one of the great importance to an organisation. The entire process of planning should be carried out in a systematic manner. The planning process involves the following steps: 1. Determination of the Objectives: The first step in planning is to identify certain objectives. The objectives set must clearly indicate what is to be achieved, where action should take place, who should perform it and when it is to be accomplished. The objectives should be established for the entire organisation and for each and every department. Planning has no utility if it is not related to certain objectives. 2. SWOT Analysis: SWOT analysis means to study Strengths, Weaknesses, Opportunities and Threats in the business. Before making plan, SWOT analysis has to be done. Internal environment and external environment must study properly. The internal environment consists of manpower, materials, 28 Introduction to Management management-labour relations etc. External environment consists of government policies, competitions, consumer’s preferences etc. 3. Development of Planning Premises: The next step is the establishment of planning premises. Planning premises are the assumptions and predictions about the future. The assumptions are the basis of planning. Forecasting is important in premising. It helps in making realistic assumptions about sales, costs, prices, products etc. in future. This requires a collection of data on present trends and future possibilities. 4. Framing Alternative Plans: The next logical step in planning is to determine and evaluate alternative courses of action. There are alternate plans available for the achievement of the objectives. The manager should try to find out all the possible alternatives. At the time of developing alternatives, he should screen out most viable alternatives. So, he has to analyse in detail a limited number of alternatives. 5. Evaluation of Alternatives: Next step is to evaluate available alternatives. Alternatives are to be evaluated in terms of costs, benefits, risks, etc. One alternative may appear profitable but require heavy cash outlay whereas the other alternative is less profitable but involve more risk. Many quantitative techniques are available to evaluate alternatives. Evaluation of alternatives helps the planner to select suitable plan of action. 6. Selecting Best Alternative: The sixth step in planning is selecting a course of action from among alternatives. In fact, it is the point of decision making. After evaluating the various alternatives, the best alternative which gives more benefits should be selected for implementation. 7. Formulating Derivative Plans: To make any planning process complete, the final step is to formulate derivative plans to give effect to and support the basic plan. For example, if Indian Airlines decide to run Jumbo Jets between Planning 29 Delhi and Patna, obliviously, a number of derivative plans have to be framed to support the decision, e.g., a staffing plan, operating plans for fuelling, maintenance, stores purchase, etc. Each manager and department of the organisation is to contribute to the accomplishment of the master plan on the basis of the derivative plans. 8. Establishing Sequence of Activities: Timing and sequence of activities are determined after formulating basic and derivative plans, so that plans may be put into action. The starting and finishing times are fixed for each piece of work, so as to indicate when and within what time that work is to be commenced and completed. To maintain a smooth flow of work, the sequence of operation must be decided. 9. Implementation: The plan should be communicated to all persons concerned in the organisation. Its objectives and course of action must be clearly defined leaving no ambiguity in the minds of those who are responsible for its execution. Planning is effective only when the persons involved work in a team spirit and all are committed to the objectives, policies, programmes and strategies envisaged in the plan. 10. Follow-up: It is also required to see whether the plan is working well in the present situation. If conditions have changed, the current plan has become outdated or inoperative, it should be replaced by another plan. A regular follow-up is necessary and desirable from effective implementation and accomplishment of objectives. FEATURES OF SOUND PLANNING Planning is one of great importance to an organisation. The entire process of planning should be carried out in a systematic manner. The planning process involves the following steps: 1. Goal-oriented: Planning should be goal-oriented. Planning should be based on clearly defined objectives. Plan must be made to achieve desired objective of business. Planner tries to make business objectives more clear and specific. 30 Introduction to Management Planning identifies the action that would lead to desired goals quickly and economically. It provides the desired direction for achievement of goals. Planning becomes meaningless if it is not related to clearly defined objectives. 2. Simplicity: Planning must be simple and easily understandable. Facts, figures and other data must be well presented. A plan must be simple so that it is easy for middle and lower level managers to implement. Similarly, the top management must have no difficulty to understand and to approve it. 3. Flexible: Planning should be flexible or adaptable to changing conditions. Plans must not be rigid. There should be scope to make changes as per the changing situation. 4. Balanced: Planning must be balanced in all respects and should be reasonably comprehensive. There should not be overtargeting or undertargeting. 5. Suitability: A plan must be suitable to an organisation and its departments. Depending upon the available resources and capabilities, the targets must be set. 6. Provides Standards: Planning and controlling are two sides of the same coin. Planning is essential to measure actual performance and to compare actual performance with targeted ones. Planning should provide standards for the evaluation of performance and actions. 7. Economical: Planning should be economical i.e., permit optimum use of available resources before creating new authorities and new resources. Planning must facilitate optimum use of resources. 8. Integrated: Different plans must be properly integrated and harmonised with one another so as to ensure unity or consistency in plans. For example, the plan of marketing department must be coordinated with that of the production department. Both these departments will work in close harmony with each other. Planning 31 9. Provide Direction: A good plan acts as a work map. It should provide proper direction so that the activities can be conducted smoothly. Plan must help manager to give proper direction to his subordinates. DECISION MAKING — MEANING AND DEFINITIONS Introduction Decision making is an essential aspect of modern management. It is a primary function of management. A manager’s major job is sound/rational decision making. He takes hundreds of decisions consciously and subconsciously. Decision making is the key part of manager's activities. Decisions are important as they determine both managerial and organisational actions. It represents a well-balanced judgment and a commitment to action. It is rightly said that the first important function of management is to take decisions on problems and situations. Decision making pervades all managerial actions. It is a continuous process. Decision making is an indispensable component of the management process itself. Definitions of Decision Making  Haynes and Massie defines “A decision is a course of action which is consciously chosen for achieving a desired result.”  The Oxford Dictionary defines the term decision making as “the action of carrying out or carrying into effect.”  According to James Stoner, “Decision making is the process of identifying and selecting a course of action to solve a specific problem.”  Trewartha and Newport defines, “Decision making involves the selection of a course of action from among two or more possible alternatives in order to arrive at a solution for a given problem.” 32 Introduction to Management NATURE/FEATURES/CHARACTERISTICS OF DECISION MAKING The main characteristics of decision making are as follows: 1. Selective Process: Decision making is fundamentally choosing between the alternatives. It is the process of selecting a course of action from among many alternatives to solve problems. Managers have to consider the various factors before selecting a course of action. These factors involve nature of organisation, existing working environment, objectives of the organisation, time factors and so on. 2. Mental/Intellectual Activity: Decision making is a mental as well as intellectual activity/process and requires knowledge, skills, experience and maturity on the part of decision maker. It is essentially a human activity. 3. Goal-oriented Process: Decision making focuses on the organisational objectives. In course of functioning, many problems may arise in the organization. The management has to solve all the problems in proper time and also in a systematic manner by considering organisational goals. Thus, right decision at the right time contributes to achieve predetermined objectives within the defined time and standard. 4. Continuous Process: Decision making is a continuous process. It existence is till the end of the organisation. In the course of regular performance, many problems may arise in different time and situation. Managers have to solve those problems in proper time. It is a never-ending activity in business management. 5. All-pervasive: Decision making process is all-pervasive. This means managers working at all levels have to take decisions on matters within their authority. This function is performed by managers at all levels though the nature of decisions may differ from one level to another. Planning 33 6. Dynamic Process: Decision making is a dynamic process. Decision making is always related to the situation or the environment. It is essential to consider time factor and existing environment, whenever any course of action is taken for implementation. A manager may take one decision in a particular situation and an opposite decision in a different situation. Managers have to consider future environments, which may affect future activities. 7. Positive or Negative Impact: A course of action may either have positive or negative impact on organisational performance. Managers have to consider, as far as possible, the positive impact of the action before coming to a decision. 8. Time-consuming Activity: Decision making is a time- consuming activity as various aspects need careful consideration before taking final decision. For decision makers, various steps are required to be completed. This makes decision making a time-consuming activity. 9. Needs Effective Communication: Decision taken needs to be communicated to all concerned parties for suitable follow-up actions. Decisions taken will remain on paper if they are not communicated to concerned persons. Following actions will not be possible in the absence of effective communication. PROCESS OF DECISION MAKING Decision making involves a number of steps which need to be taken in a logical manner. This is treated as a rational or scientific ‘decision making process’ which is lengthy and time-consuming. Following are the important steps of decision making. 1. Identification of Problem: Identification of the problem is the first step in the process of decision making. It is rightly said that a problem well-defined is a problem half-solved. Information relevant to the problem should be gathered so that critical analysis of the problem is possible. This is how the problem can be diagnosed. Clear distinction should be 34 Introduction to Management made between the problem and the symptoms which may cloud the real issue. 2. Analysing the Problem: After defining the problem, the next step in the decision making process is to analyse the problem in depth. In this step, the problem is thoroughly analysed. This is necessary to classify the problem in order to know who must take the decision and who must be informed about the decision taken. Various factors have to be considered like impact of decision, practical implementation, uniqueness of decision etc. 3. Colleting Relevant Data: After defining the problem and analysing its nature, the next step is to obtain the relevant information/data about it. Due to new development in the field of information technology, lots of information is available in the business world. All available information should be utilised fully for analysis of the problem. This brings clarity to all aspects of the problem. 4. Framing Alternative Solutions: After the problem has been defined and analysed on the basis of relevant information, the manager has to develop alternative solutions that could be used to solve the problem. Only realistic alternatives should be considered. If necessary, group participation techniques may be used while developing alternative solutions. 5. Evaluation of Alternatives: Next step is to evaluate available alternatives. Alternatives are to be evaluated in terms of costs, benefits, risks, etc. One alternative may appear profitable but require heavy cash outlay whereas the other alternative is less profitable but involve more risk. Many quantitative techniques are available to evaluate alternatives. Evaluation of alternatives helps the manager to select decision. 6. Selecting Best Alternative: The sixth step in decision making is selecting the best decision among available alternatives. After evaluating the various alternatives, the Planning 35 best alternative which gives more benefits should be selected for implementation. 7. Implementation: After the selection of the best decision, the next step is to convert the selected decision into an effective action. Without such action, the decision will remain merely a declaration of good intentions. Here, the manager has to convert ‘his decision’ into ‘their decision’ through his leadership. For this, the subordinates should be taken in confidence and they should be convinced about the correctness of the decision. 8. Follow-up: Feedback is the last step in the decision making process. It is also required to see whether the decision implemented is solving the problem or not. Feedback is possible in the form of organised information, reports and personal observations. Feedback is necessary to decide whether the decision already taken should be continued or be modified in the light of changed conditions. Review Questions 1. Define planning. Explain its features. 2. What is planning? Explain its importance. 3. Explain the essential characteristics of a good plan. 4. Explain the main steps in planning process. 5. What are the constraints (limitations) that restrict the effectiveness of planning? 6. Define decision making. Explain the importance of decision making. 7. Explain the steps in Decision making process. Objective Questions 1. Select proper option from the choices given below and rewrite the sentence. 1. Planning is ________________ (a) Advanced Function (b) Basic Function (c) End Function 36 Introduction to Management 2. Deciding in advance as what is to be done, when it is to be done and who is to do it is _______________ function of management. (a) Planning (b) Organising (c) Controlling 3. ____________ involves deciding in advance in respect of future activities. (a) Planning (b) Organising (c) Controlling 4. Planning helps to ____________ risks. (a) minimise (b) eliminate (c) enhance 5. The SWOT analysis is an important element of ________________ (a) Planning (b) Organising (c) Controlling 6. Generally professional managers frame _________ plans. (a) Alternative (b) Single (c) General 7. Plans need to be ________________. (a) Complicated (b) rigid (c) flexible 8. ____________ refers to fixing lower targets. (a) Balanced Targeting (b) Overtargeting (c) Undertargeting 9. Planning is _____ related activity. (a) present (b) future (c) past 10. ______________ is a statement that reflects the vision, the basic purpose and philosophy of the organisation. (a) Objectives (b) Goals (c) Mission 11. ____________ refers to the process of identifying alternatives and selecting a course of action to solve specific problem. (a) Departmentation (b) Directing (c) Decision making Ans: 1. Basic Function, 2. Planning, 3. Planning, 4. Minimise, 5. Planning, 6. Alternative, 7. Flexible, 8. Undertargeting, 9. Future, 10. Mission, 11. Decision making 2. State whether the following statements are true or false. 1. Planning is an intellectual process. 2. Planning function alone can help to achieve organisation objectives. 3. Planning is of vital importance in the management process. Planning 37 4. Planning and controlling are interdependent and interlinked activities. 5. Planning helps in controlling. 6. Planning helps to overcome all the risks in the organisation. 7. Plans need to be rigid. 8. The standing plans are used for a specific activity. Ans: 1. True, 2. False, 3. True, 4. True, 5. True, 6. True, 7. False, 8. False 3. Match the columns. Group A Group B 1. Planning (a) Selecting course of action 2. Overtargeting (b) Approval of plans 3. SWOT analysis (c) Study internal and external environment 4. Top Management (d) Fixing high goals 5. Decision Making (e) Primary function Ans: 1. (e), 2. (d), 3. (c), 4. (b), 5. (a)  3 Organising  Definitions, Nature and Significance  Process of Organisation  Principles of Organisation  Formal and Informal Organisation – Features, Advantages and Disadvantages  Centralisation and Decentralisation – Factors, Merits and Demerits  Departmentation and Delegation ORGANISING –– MEANING AND DEFINITIONS Introduction Organising is the function of management which follows planning. It is a function in which the synchronisation and combination of human, physical and financial resources takes place. All the three resources are important to get results. Organising is the process of defining and grouping activities and establishing authority relationships among them to attain organisational objectives. Organising is assembling required resources to attain organizational objectives. The word organising is derived from the word ‘organism’, which means that all sub-units of a main unit have a definite relationship with the main unit. Organising is the harmonius adjustment of special parts for accomplishing common purposes. Therefore, organisational function helps in achievement of results Organising 39 which in fact is important for the functioning of a concern. Hence, a manager always has to organise in order to get results. Planning involves selecting mission and objectives and the action to achieve them. Planning requires decision making to choose from available future course of action. Planning is necessary to ensure proper utilisation of human and non-human resources. Definitions of Organising  Theo Haiman defines “Organising is the process of defining and grouping the activities of the enterprise and establishing the authority relationship among them.”  Mc Farland wrote “Organisation is an identifiable group of people contributing their efforts towards the attainment of goals.”  According to 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.” From the above definitions, we can conclude that, organising involves the following aspects: 1. Identification and classification of activities 2. Grouping of the activities 3. Assigning duties and responsibilities to subordinates 4. Delegating authority 5. Establishing superior-subordinate relationship NATURE/FEATURES/CHARACTERISTICS OF ORGANISING The main characteristics of organising are as follows: 1. Process: Organising is a step-by-step process. It consists of the following steps:  Defining goals  Identifying and grouping of activities 40 Introduction to Management  Defining and delegating authority and responsibilities  Establishing relationship in the organisation  Coordinating activities 2. Goal-oriented: Every organisation has its own objectives and goals. Organising is the function employed to achieve the individual goals of the employees with overall objectives of the firm. 3. Division of Work: In every organisation, there should be division of work. The total work is divided into individuals and departments. Division of work leads specialisation. It improves efficiency and reduces human and non-human wastages. 4. Coordination: Organisation is a means of creating coordination among different departments. It creates good relationship among employees and ensures mutual cooperation among individuals. Coordination increases success rate and desired goals can be achieved. 5. Rules and Regulations: An organisation represents an orderly system where rules and regulations allow or disallow certain activities. Such rules and regulations may be either in writing or are being followed due to traditions and customs. These rules bring discipline in the organisation. 6. Chain of Command: Organisation is a chain of relationships of superior and subordinate. Orders flow from top to bottom. Superior commands authority and is competent to get the work done. 7. Group of Individuals: Individuals form a group and the groups form an organisation. Thus, organisation is the composition of individuals and group. Individuals are grouped into departments and their work is coordinated and directed towards achievement of organisational goals. 8. Authority and Responsibility: Authority is the power to take decision. Responsibility means the obligations for accepting authority. When a particular activity or group of activities is assigned to an individual, he becomes Organising 41 responsible for those activities. A manager can discharge his responsibility properly only when he has been given proper authority to take right decisions. 9. Effective Communication: Effective communication keeps employees informed about the internal and external activities of the organisation. It helps the employees to understand the instructions of their superior. SIGNIFICANCE OR IMPORTANCE OF THE ORGANISING A sound organising facilitates administration, promotes specialisation, encourages growth, and stimulates creativity. It can contribute to the success of an organisation. Hence, the significance of organising may be discussed as below: 1. Efficient Administration: Organising is an important and the only tool to achieve organisational goals. Organising defines various activities and their authority relationships in the organisational structure. It can avoid confusion and delays in activities. It also avoids duplication of work and overlapping of effort. It is the mechanism by which management directs, controls, and coordinates the various activities in the enterprise. 2. Benefit of Specialisation: In organising, all activities are subdivided into individuals and departments. The work is divided among groups of workers by division of labour. This helps in the completion of maximum work in minimum time. Thus, it gives benefit of specialisation. 3. Effective Administration: The process of organising clearly specifies the duties and tasks of every manager and also their extent of authority. Everybody knows to whom he is accountable, thereby making effective administration possible. 4. Development of Personnel: Organising facilitates delegation of authority. It provides opportunities to take decisions and delegate assignments to subordinate officers 42 Introduction to Management and employees. Consequently, it helps them to develop better personnel by helping them grow with experience at work. 5. Clarifies Authority: Organisational structure aids in helping the manager to understand each person’s role. This can be achieved in the manager being able to understand clearly how he has to use his powers. This aids in an increase in production as jobs and responsibilities that are well-defined make the manager’s jobs much more efficient. 6. Coordination: Organisation is a means of creating coordination among different departments of the enterprise. It creates clear-cut relationships among positions and ensures mutual cooperation among individuals. Harmony of work is brought by higher level managers exercising their authority over interconnected activities of lower level managers. 7. Growth and Diversification: A company’s growth is totally dependent on how efficiently and smoothly a concern works. Efficiency can be brought about by clarifying the role positions to the managers, coordination between authority and responsibility and concentrating on specialisation. In addition to this, a company can diversify if its potential grows. Company’s diversification is possible only when the organisational structure is well-defined. This is possible through a set of formal structure. 8. Training and Development: A sound organising provides a good scope for the development of managerial ability through proper delegation of authority and decentralisation. It provides responsibility, sufficient freedom to the supervision and creative thinking in different levels. By this practice, managers are trained, developed and tested for assuming greater responsibilities in the future. 9. Productivity and Job Satisfaction: A sound organising is based on democratic and participative management. Hence, the entire organisational environment is favourable for productivity and job satisfaction. Organising 43 PROCESS OF ORGANISING Organising is a step-by-step process. At each step, an important task is performed by the administrators working at the top level of management. 1. Determine Objectives: First step in the organsing process is to determine organisational objective. Every organisation must have specific and realistic objectives. Top management frames overall organisational goals. The middle level management frames departmental objectives. The lower level managers frame day-to-day activities. 2. Identification of Activities: All the activities which have to be performed in a concern have to be identified first. Number of activities depends upon the objectives of the organisation. For example, preparation of accounts, making sales, record keeping, quality control, inventory control, etc. It should be done effectively. Activities which are not important are omitted. 3. Grouping of Activities: Once all the activities are identified, the next step is grouping of the related jobs. This leads to set up of the departments and divisions in the organisation like production department, finance department, marketing department, and personnel department. 4. Assigning Work: When activities are divided among departments, the next step would be to appoint suitable persons for the various tasks. Work is assigned to the employees on the basis of their skills and capabilities. 5. Delegation of Authority: When some work is assigned to someone, then he must be given some authority to do that work effectively. Assigning work and delegation goes parallel to each other. Assigning work without proper authority is meaningless. 6. Establishing Relationship: Relationships are established among various groups to enable smooth interaction toward the achievement of the organisational goal. Each individual is made aware of his authority and he/she knows whom they 44 Introduction to Management have to take orders from and to whom they are accountable and to whom they have to report. A clear organisational structure is drawn and all the employees are made aware of it. 7. Coordination: As all activities in organisation are distinct but they are interdependent, so there must be coordination among the departments. In absence of coordination, ultimate goal of the organization will not be achieved. Success of the organisation is fully dependent on better coordination between the different divisions and managers. PRINCIPLES OF ORGANISING The organising process can be done efficiently if the managers have certain guidelines so that they can take decisions and can act. To organise in an effective manner, the following principles of organisation can be used by a manager. 1. Principle of Specialisation: According to this principle, the whole work of a concern should be divided amongst the subordinates on the basis of qualifications, abilities and skills. It is through division of work specialisation can be achieved which results in effective organisation. 2. Principle of Functional Definition: According to this principle, all the functions in a concern should be completely and clearly defined to the managers and subordinates. This can be done by clearly defining the duties, responsibilities, authority and relationships of people towards each other. Clarifications in authority-responsibility relationships help in achieving coordination and thereby organisation can take place effectively. 3. Principle of Unity of Command: It implies one subordinate-one superior relationship. Every subordinate is answerable and accountable to one boss at one time. This helps in avoiding communication gaps and feedback and response is prompt. Unity of command also helps in effective combination of resources, that is, physical, Organising 45 financial resources which help in easy coordination and, therefore, effective organisation. 4. Principle of Scalar Chain: Scalar chain is a chain of command or authority which flows from top to bottom. With a chain of authority available, wastages of resources are minimised, communication is affected, overlapping of work is avoided and easy organisation takes place. A scalar chain of command facilitates work flow in an organisation which helps in achievement of effective results. As the authority flows from top to bottom, it clarifies the authority positions to managers at all levels and that facilitates effective organisation. 5. Principle of Span of Control/Supervision: According to this principle, span of control is a span of supervision which depicts the number of employees that can be handled and controlled effectively by single manager. According to this principle, a manager should be able to handle what number of employees under him should be decided. As far as possible, there should be a limit on span of control. 6. Principles of Flexibility: Organisational structure must be flexible. Organisational structure must be flexible to adopt changes as per changes in business environment both internal and external. If organisational structure is inflexible, it may create problem of too complicated procedures, resistance to change, delay in work etc. Inflexible organisational structure is unable to meet the challenges of economic, technical, biological, political and social change. 7. Principle of Balance: According to this principle, there should be a balance between centralisation and decentralisation, between authority and responsibility etc. There should be balance between standardisation of procedures and flexibility. 8. Principle of Rules and Regulations: Every organisation must have clear rules and regulations. Rules and regulations bring discipline and ensure smooth flow of activities in organisation. 46 Introduction to Management 9. Principle of Coordination: Coordination means interlinking various organisational activities at all levels. It creates clear- cut relationships among positions and ensures mutual cooperation among individuals. Harmony of work is brought by higher level managers exercising their authority over i