INTRODUCTION

All human beings, wherever they may be, require different types of goods and services to satisfy their needs. The necessity of supplying goods and services has led to certain activities being undertaken by people to produce and sell what is needed by others. Business is a major economic activity in all modern societies concerned as it is with the production and sale of goods and services required by people. The purpose behind most business activities is to earn money by meeting peoples demands for goods and services. Business is central to our lives. Although our lives are influenced by many other institutions in modern society such as schools, colleges, hospitals, political parties and religious bodies, business has the major influence on our daily lives. It, therefore, becomes important that we understand the concept, nature and purpose of business.

CONCEPT OF BUSINESS
The term business is derived from the word busy. Thus, business means being busy. However, in a specific sense, business refers to any occupation in which people regularly engage in an activity with a view to earning profit. The activity may consist of production or purchase of goods for sale, or exchange of goods or supply of services to satisfy the needs of other people. In every society people undertake various activities to satisfy their needs. These activities may be broadly classified into two groups economic and non-economic.

Economic activities : are those by which we can earn our livelihood whereas non-economic activities are those performed out of love, sympathy, sentiments, patriotism, etc. For example, a worker working in a factory, a doctor operating in his clinic, a manager working in the office and a teacher teaching in a school are doing so to earn their livelihood and are, therefore, engaged in an economic activity. On the other hand, a housewife cooking food for her family or a boy helping an old man cross the road are performing non-economic activities since they are doing so out of love or sympathy. Economic activities may be further divided into three categories, namely business, profession and employment. Business may be defined as an economic activity involving the production and sale of goods and services undertaken with a motive of earning profit by satisfying human needs in society.

COMPARISON OF BUSINESS, PROFESSION AND EMPLOYMENT

As has been mentioned earlier, economic activities may be divided into three major categories viz., (i) Business (ii) Profession (iii) Employment Business refers to those economic activities, which are connected with the production or purchase and sale of goods or supply of services with the main object of earning profit. People engaged in business earn income in the form of profit.

Profession includes those activities, which require special knowledge and skill to be applied by individuals in their occupation. Such activities are generally subject to guidelines or codes of conduct laid down by professional bodies. Those engaged in professions are known as professionals. For example, doctors are engaged in the medical profession and are subject to the regulations of the Medical Council of India, the concerned professional body. Similarly, lawyers are engaged in the legal profession, governed by the Bar Council of India and Chartered Accountants belong to the accounting profession and are subject to the regulations of the Institute of Chartered Accountants of India.

Employment refers to the occupation in which people work for others and get remunerated in return. Those who are employed by others are known as employees. Thus, people who work in factories and receive wages and salaries are in the employment of factory owners and are employees of the factory. Similarly, people who work in the offices of banks, insurance companies or government department, as managers, assistants, clerks, peons or security guards are the employees of these organisations.

CHARACTERISTICS OF BUSINESS ACTIVITIES

In order to appreciate how business activity is different from other activities in society, the nature of business or its fundamental character must be explained in terms of its distinguishing characteristics, which are as follows:

(i) An economic activity: Business is considered to be an economic activity because it is undertaken with the object of earning money or livelihood and not because of love, affection, sympathy or any other sentimental reason.

(ii) Production or procurement of goods and services: Before goods are offered to people for consumption they must be either produced or procured by business enterprises. Thus, every business enterprise either manufactures the goods it deals in or it acquires them from producers, to be further sold to consumers or users. Goods may consist of consumable items of daily use such as sugar, ghee, pen, notebook, etc. or capital goods like machinery, furniture, etc. Services may include facilities offered to consumers in the form of transportation, banking, electricity, etc.

(iii) Sale or exchange of goods and services for the satisfaction of human needs: Directly or indirectly, business involves transfer or exchange of goods and services for value. If goods are produced not for the purpose of sale but say for internal consumption, it cannot be called a business activity. Cooking food at home for the family is not business, but cooking food and selling it to others in a restaurant is business. Thus, one essential characteristic of business is that there should be sale or exchange of goods or services between the seller and the buyer.

(iv) Dealings in goods and services on a regular basis: Business involves dealings in goods or services on a regular basis. One single transaction of sale or purchase, therefore, does not constitute business. Thus, for example, if a person sells his/her domestic radio set even at a profit, it will not be considered a business activity. But if he/she sells radio sets regularly either through a shop or from his/her residence, it will be regarded as a business activity. (v) Profit earning: One of the main purpose of business is to earn income by way of profit. No business can survive for long without earning profit. That is why businessmen make all possible efforts to maximise profits, by increasing the volume of sales or reducing costs.

(vi) Uncertainty of return: Uncertainty of return refers to the lack of knowledge relating to the amount of money that the business is going to earn in a given period. Every business invests money (capital) to run its activities with the objective of earning profit. But it is not certain as to what amount of profit will be earned. Also, there is always a possibility of losses being incurred, in spite of the best efforts put into the business.

(vii) Element of risk: Risk is the uncertainty associated with an exposure to loss. It is caused by some unfavourable or undesirable event. The risks are related with certain factors like changes in consumer tastes and fashions, changes in methods of production, strike or lockout in the work place, increased competition in the market, fire, theft, accidents, natural calamities, etc. No business can altogether do away with risks.

FORMS OF BUSINESS ORGANIZATION:

SOLE PROPRIETORSHIP
Sole proprietorship is a popular form of business organization and is the most suitable form for small businesses, especially in their initial years of operation. Sole proprietorship refers to a form of business organization which is owned, managed and controlled by an individual who is the recipient of all profits and bearer of all risks. This is evident from the term itself. The word sole implies only, and proprietor refers to owner. Hence, a sole proprietor is the one who is the only owner of a business. This form of business is particularly common in areas of personalized services such as beauty parlours, hair saloons and small scale activities like running a retail shop in a locality.

Sole trader is a type of business unit where a person is solely responsible for providing the capital, for bearing the risk of the enterprise and for the management of business. - J.L. Hansen

The individual proprietorship is the form of business organization at the head of which stands an individual as one who is responsible, who directs its operations and who alone runs the risk of failure. - L.H. Haney

Features
Salient characteristics of the sole proprietorship form of organization are as follows:

(i) Formation and closure: Hardly any legal formalities are required to start a sole proprietary business, though in some cases one may require a license. There is no separate law that governs sole proprietorship. Closure of the business can also be done easily. Thus, there is ease in formation as well as closure of business.

(ii) Liability: Sole proprietors have unlimited liability. This implies that the owner is personally responsible for payment of debts in case the assets of the business are not sufficient to meet all the debts. As such the owners personal possessions such as his/her personal car and other assets could be sold for repaying the debt. Suppose the total outside liabilities of XYZ dry cleaner, a sole proprietorship firm, are Rs. 80,000 at the time of dissolution, but its assets are Rs. 60,000 only. In such a situation the proprietor will have to bring in Rs. 20,000 from her personal sources even if she has to sell her personal property to repay the firms debts.

(iii) Sole risk bearer and profit recipient: The risk of failure of business is borne all alone by the sole proprietor. However, if the business is successful, the proprietor enjoys all the benefits. He receives all the business profits which become a direct reward for his risk bearing.

(iv) Control: The right to run the business and make all decisions lies absolutely with the sole proprietor. He can carry out his plans without any interference from others.

(v) No separate entity: In the eyes of the law, no distinction is made between the sole trader and his business, as business does not have an identity separate from the owner. The owner is, therefore, held responsible for all the activities of the business.

(vi)Lack of business continuity: Since the owner and business are one and the same entity, death, insanity, imprisonment, physical ailment or bankruptcy of the sole proprietor will have a direct and detrimental effect on the business and may even cause closure of the business.

Merits Sole proprietorship offers many advantages. Some of the important ones are as follows:

(i) Quick decision making: A sole proprietor enjoys considerable degree of freedom in making business decisions. Further the decision making is prompt because there is no need to capitalization of market opportunities as and when they arise.

(ii) Confidentiality of information: Sole decision making authority enables the proprietor to keep all the information related to business operations confidential and maintain secrecy. A sole trader is also not bound by law to publish firms accounts.

(iii) Direct incentive: A sole proprietor directly reaps the benefits of his/her efforts as he/she is the sole recipient of all the profit. The need to share profits does not arise as he/she is the single owner. This provides maximum incentive to the sole trader to work hard.

(iv) Sense of accomplishment: There is a personal satisfaction involved in working for oneself. The knowledge that one is responsible for the success of the business not only contributes to selfsatisfaction but also instills in the individual a sense of accomplishment and confidence in ones abilities.

(v) Ease of formation and closure: An important merit of sole proprietorship is the possibility of entering into business with minimal legal formalities. There is no separate law that governs sole proprietorship. As sole proprietorship is the least regulated form of business, it is easy to start and close the business as per the wish of the owner.

Limitations

Notwithstanding various advantages, the sole proprietorship form of organization is not free from limitations. Some of the major limitations of sole proprietorship are as follows:

(i) Limited resources: Resources of a sole proprietor are limited to his/her personal savings and borrowings from others. Banks and other lending institutions may hesitate to extend a long term loan to a sole proprietor. Lack of resources is one of the major reasons why the size of the business rarely grows much and generally remains small.

(ii) Limited life of a business concern: In the eyes of the law the proprietorship and the owner are considered one and the same. Death, insolvency or illness of a proprietor affects the business and can lead to its closure.

(iii) Unlimited liability: A major disadvantage of sole proprietorship is that the owner has unlimited liability. If the business fails, the creditors can recover their dues not merely from the business assets, but also from the personal assets of the proprietor. A poor decision or an unfavorable circumstance can create serious financial burden on the owners. That is why a sole proprietor is less inclined to take risks in the form of innovation or expansion.

(iv) Limited managerial ability: The owner has to assume the responsibility of varied managerial tasks such as purchasing, selling, financing, etc. It is rare to find an individual who excels in all these areas. Thus decision making may not be balanced in all the cases. Also, due to limited resources, sole proprietor may not be able to employ and retain talented and ambitious employees. Though sole proprietorship suffers from various shortcomings, many entrepreneurs opt for this form of organization because of its inherent advantages. It requires less amount of capital. It is best suited for businesses which are carried out on a small scale and where customers demand personalized services.

CASE: A Refreshing Start: Coca Cola Owes its Origin to a Sole Proprietor! The product that has given the world its best-known taste was born in Atlanta, Georgia, on May 8, 1886. Dr. John Stith Pemberton, a local pharmacist, produced the syrup for Coca-Cola, and

carried a jug of the new product down the street to Jacobs Pharmacy, where it was sampled, pronounced excellent and placed on sale for five cents a glass as a soda fountain drink. Dr. Pemberton never realized the potential of the beverage he created. He gradually sold portions of his business to various partners and, just prior to his death in 1888, sold his remaining interest in Coca-Cola to Asa G. Candler. An Atlantan with great business acumen, Mr. Candler proceeded to buy additional business rights and acquire complete control. On May 1, 1889, Asa Candler published a full-page advertisement in The Atlanta Journal, proclaiming his wholesale and retail drug business as sole proprietors of Coca-Cola ... Delicious. Refreshing. Exhilarating. Invigorating. Sole ownership, which Mr. Candler did not actually achieve until 1891, needed an investment of $ 2,300. It was only in 1892 that Mr. Candler formed a company called The Coca-Cola Corporation.

Hindu Undivided Family: Meaning : The Joint Hindu Family firm is a form of business organization in which the family possesses some inherited property and the Karta, the head of the family, manages its affairs. It comes into existence by the operation of Hindu Law and not out of contract between the members or coparceners. If the personal who have co-parcenary interest in the ancestral property carry on business it is a case of Joint Hindu family firm. Thus, the Joint Hindu Family Business is a business by co-parceners of a Hindu undivided estate. Following the Hindu Succession Act, 1956, a female relative of a deceased male co-parcener will have a share in the co-parcenary interest after the death of the co-parcener in question. Even a male relative claiming through such female relative (specified as Clause 1 in the Act). Is entitled to get a share of the co-parcenary interest at the time of death of co-parcener. Such relatives are not included in the list of holders of co-parcenary interest but they are allowed to have some share out of co-parcenary interest as outsiders. Three generations next to the holder in unbroken male line constitute a co-parcenary, and property inherited by a Hindu from his father, fathers father and fathers grandfather is regarded as ancestral A son, grand son and great grand son become joint owners of the property by reason of their birth in the family. The property is managed and held by the senior male member or the father as the Head of the Family, technically known as Karta. In Hindu law, a family business is taken as a part and parcel of the heritable property, and therefore, the family business becomes the subject matter of co-parcenary interest. The rights and liabilities

of co-parcener are determined by the general rules of the Hindu Law. It should be noted that joint family firm with the joint ownership of the inherited business is created by the operation of law and does not arise out of contract between the coparceners. Features of HUF: The Joint Hindu Family Firm possesses the following Characteristics or features: (i)Status: The membership of the family business is the result of status arising from birth in the family, and hence there is no question of the members being discriminated in terms of minority and majority on the basis of age. (ii)Male Members: Only male persons, and not females, can claim co-parcenary interest in the Hindu Family business firm. (iii) Karta: The right to manage the business vests in Karta alone (i.e. the Head of the Family). He has the implied authority to obtain loans through mortgage, etc. for the purpose of the business. Other members have neither any right to manage the affairs of the business nor any right to take loans on mortgage for the purpose of business. (iv)Liability: The liability of all the members of the Joint Hindu Family, except that of the Karta, is limited to the value of their individual interests in the joint property. The liability of the Karta is unlimited and as such extends to all that he owns as his separate and private property. (v) Fluctuating Share: The share of each members interest in the family property and business keeps on fluctuating. The members interest increases by death of any existing coparcener and decreases by birth of a new co-parcener. (vi)Continued Existence: The existence of the Joint Hindu Family Business is not affected by the death or insolvency of a co-parcener or even that of the Karta. (vii) Freedom of Action: The co-parceners do not have a right in the affairs of the family business which is the exclusive domain of the Karta. If the co-parceners are unhappy with the functioning of the Joint Hindu Family business, they ask for its partition along with the division of the property of the family. At the time of such partition of the ancestral property, the coparceners have no right to ask the Karta for the past profits and losses.

Merits of Joint Hindu Family:

(i) Assured of Share in Profits: Every co-parcener gets a share in the profits of the business irrespective of his contribution to the successful running of the business. In this way every coparcener is assured of a share in the profits of the business. (ii) Freedom to Karta: The Karta of the family has unrestricted freedom in the sense that he can the business without interference by other coparceners. This facilitates quick decision making in the business. (iii) Co-operative Efforts: To take advantage of the capabilities and resourcefulness of the coparceners, the duties of the business are divided among the members in accordance with their capacity and ability. (iv)Sharing of knowledge and Experience: It provides an opportunity for younger members to get the benefit of knowledge and experience by elder members of the family. This helps the younger members to develop and acquire expertise without much difficulty. (v) Inclusion of Finer Values of Life: Every member of the family gets an opportunity for participation in the business and the qualities of sacrifice, duty and discipline become embedded in them. A Joint Hindu Family Business can succeed only when such qualities are displayed by Karta and in turn they are emulated and appreciated by other members of the family. (vi)Insurance against Contingencies: It serves as an insurance cover for maintaining the children, widows, ailing or invalid members of the family. (vii) Limited Liability: It has limited liability of all the co-parceners except that of karta.

Demerits of Joint Hindu Family: (i) Lack of Motivation: There is no encouragement to work hard and to earn more because members who work hard do not get the direct benefits of their efforts. Further the right to share in income or profits of business irrespective of the efforts put in makes the members of the family lazy and unenterprising. (ii) Unfair to Co-parceners : Since Karta has the unchallengeable authority to manage the business, the initiative and sincerity of the younger members may not find scope and opportunity for use. (iii) Scope for Misuse: Since Karta has full freedom in carrying on the business, he may misuse this freedom for his personal benefits and gains. This is one reason why most of the Joint Hindu Family Business firms are giving way to other forms of organizations.

(iv)Limited Resources: Because of the limited capacity of the firm in terms of having members, investing capital and borrowing loans, the Joint Hindu Firm has milted resources at its disposal for investment in business. (v) Fear of Disintegration: Small family quarrels on controversial matters may lead to the disintegration of this form of business organization. (vi) Suitability : This form of organization is gradually losing grounds to other forms because of the strains on Joint Hindu Family system arising out of growing impact of industrialization and consequential preference for individual family living.

PARTNERSHIP The inherent disadvantage of the sole proprietorship in financing and managing an expanding business paved the way for partnership as a viable option. Partnership serves as an answer to the needs of greater capital investment, varied skills and sharing of risks. The Indian Partnership Act, 1932 defines partnership as the relation between persons who have agreed to share the profit of the business carried on by all or any one of them acting for all. Partnership is the relation between persons competent to make contracts who have agreed to carry on a lawful business in common with a view to private gain. - L H Haney Partnership is the relation which subsists between persons who have agreed to combine their property, labour or skill in some business and to share the profits there from between them. - The Indian Contract Act Features: the following major characteristics of the partnership form of business organization. (i) Formation: The partnership form of business organisation is governed by the Indian Partnership Act, 1932. It comes into existence through a legal agreement wherein the terms and conditions governing the relationship among the partners, sharing of profits and losses and the manner of conducting the business are specified. It may be pointed out that the business must be lawful and run with the motive of profit. Thus, two people coming together for charitable purposes will not constitute a partnership.

(ii) Liability: The partners of a firm have unlimited liability. Personal assets may be used for repaying debts in case the business assets are insufficient. Further, the partners are jointly and individually liable for payment of debts. Jointly, all the partners are responsible for the debts and

they contribute in proportion to their share in business and as such are liable to that extent. Individually too, each partner can be held responsible repaying the debts of the business. However, such a partner can later recover from other partners an amount of money equivalent to the shares in liability defined as per the partnership agreement . (iii) Risk bearing: The partners bear the risks involved in running a business as a team. The reward comes in the form of profits which are shared by the partners in an agreed ratio. However, they also share losses in the same ratio in the event of the firm incurring losses.

(iv) Decision making and control: The partners share amongst themselves the responsibility of decision making and control of day to day activities. Decisions are generally taken with mutual consent. Thus, the activities of a partnership firm are managed through the joint efforts of all the partners.

(v) Continuity: Partnership is characterised by lack of continuity of business since the death, retirement, insolvency or insanity of any partner can bring an end to the business. However, the remaining partners may if they so desire continue the business on the basis of a new agreement.

(vi)Membership: The minimum number of members needed to start a partnership firm is two, while the maximum number, in case of banking industry is ten and in case of other businesses it is twenty.

(vii) Mutual agency: The definition of partnership highlights the fact that it is a business carried on by all or any one of the partners acting for all. In other words, every partner is both an agent and a principal. He is an agent of other partners as he represents them and thereby binds them through his acts. He is a principal as he too can be bound by the acts of other partners.

Merits The following points describe the advantages of a partnership firm. (i) Ease of formation and closure: A partnership firm can be formed easily by putting an agreement between the prospective partners into place whereby they agree to carryout the

business of the firm and share risks. There is no compulsion with respect to registration of the firm. Closure of the firm too is an easy task.

(ii) Balanced decision making: The partners can oversee different functions according to their areas of expertise. Because an individual is not forced to handle different activities, this not only reduces the burden of work but also leads to fewer errors in judgments. As a consequence, decisions are likely to be more balanced.

(iii) More funds: In a partnership, the capital is contributed by a number of partners. This makes it possible to raise larger amount of funds as compared to a sole proprietor and undertake additional operations when needed. (iv) Sharing of risks: The risks involved in running a partnership firm are shared by all the partners. This reduces the anxiety, burden and stress on individual partners.

(v) Secrecy: A partnership firm is not legally required to publish its accounts and submit its reports. Hence it is able to maintain confidentiality of information relating to its operations.

Limitations A partnership firm of business organisation suffers from the following limitations: (i) Unlimited liability: Partners are liable to repay debts even from their personal resources in case the business assets are not sufficient to meet its debts. The liability of partners is both joint and several which may prove to be a drawback for those partners who have greater personal wealth. They will have to repay the entire debt in case the other partners are unable to do so.

(ii) Limited resources: There is a restriction on the number of partners, and hence contribution in terms of capital investment is usually not sufficient to support large scale business operations. As a result, partnership firms face problems in expansion beyond a certain size.

(iii) Possibility of conflicts: Partnership is run by a group of persons wherein decision making authority is shared. Difference in opinion on some issues may lead to disputes between partners.

Further, decisions of one partner are binding on other partners. Thus an unwise decision by some one may result in financial ruin for all others. In case a partner desires to leave the firm, this can result in termination of partnership as there is a restriction on transfer of ownership.

(iv) Lack of continuity: Partnership comes to an end with the death, retirement, insolvency or lunacy of any partner. It may result in lack of continuity. However, the remaining partners can enter into a fresh agreement and continue to run the business.

(v) Lack of public confidence: A partnership firm is not legally required to publish its financial reports or make other related information public. It is, therefore, difficult for any member of the public to ascertain the true financial status of a partnership firm. As a result, the confidence of the public in partnership firms is generally low.

Types of Partners A partnership firm can have different types of partners with different roles and liabilities. An understanding of these types is important for a clear understanding of their rights and responsibilities. These are described as follows: (i) Active partner: An active partner is one who contributes capital, participates in the management of the firm, shares its profits and losses, and is liable to an unlimited extent to the creditors of the firm. These partners take actual part in carrying out business of the firm on behalf of other partners.

(ii) Sleeping or dormant partner: Partners who do not take part in the day to day activities of the business are called sleeping partners. A sleeping partner, however, contributes capital to the firm, shares its profits and losses, and has unlimited liability.

(iii) Secret partner: A secret partner is one whose association with the firm is unknown to the general public. Other than this distinct feature, in all other aspects he is like the rest of the partners. He contributes to the capital of the firm, takes part in the management, shares its profits and losses, and has unlimited liability towards the creditors.

(iv) Nominal partner: A nominal partner is one who allows the use of his/her name by a firm, but does not contribute to its capital. He/she does not take active part in managing the firm, does not share its profit or losses but is liable, like other partners, to the third parties, for the repayments of the firms debts.

(v) Partner by estoppel: A person is considered a partner by estoppel if, through his/her own initiative, conduct or behaviour, he/she gives an impression to others that he/she is a partner of the firm. Such partners are held liable for the debts of the firm because in the eyes of the third party they are considered partners, even though they do not contribute capital or take part in its management. Suppose Rani is a friend of Seema who is a partner in a software firm Simplex Solutions. On Seemas request, Rani accompanies her to a business meeting with Mohan Softwares and actively participates in the negotiation process for a business deal and gives the impression that she is also a partner in Simplex Solutions. If credit is extended to Simplex Solutions on the basis of these negotiations, Rani would also be liable for repayment of such debt, as if she is a partner of the firm. (vi) Partner by holding out: A partner by holding out is a person who though is not a partner in a firm but knowingly allows himself/herself to be represented as a partner in a firm. Such a person becomes liable to outside creditors for repayment of any debts which have been extended to the firm on the basis of such representation. In case he is not really a partner and wants to save himself from such a liability, he should immediately issue a denial, clarifying his position that he is not a partner in the firm. If he does not do so, he will be responsible to the third party for any such debts.

Partnership Deed A partnership is a voluntary association of people who come together for achieving common objectives. In order to enter into partnership, a clear agreement with respect to the terms, conditions and all aspects concerning the partners is essential so that there is no

misunderstanding later among the partners. Such an agreement can be oral or written. Even though it is not essential to have a written agreement, it is advisable to have a written agreement as it constitutes an evidence of the conditions agreed upon. The written agreement which specifies the terms and conditions that govern the partnership is called the partnership deed. The partnership deed generally includes the following aspects:

Name of firm Nature of business and location of business Duration of business Investment made by each partner Distribution of profits and losses Duties and obligations of the partners Salaries and withdrawals of the partners Terms governing admission, retirement and expulsion of a partner Interest on capital and interest on drawings Procedure for dissolution of the firm Preparation of accounts and their auditing Method of solving disputes Registration : Registration of a partnership firm means the entering of the firms name, along with the relevant prescribed particulars, in the Register of firms kept with the Registrar of Firms. It provides conclusive proof of the existence of a partnership firm. It is optional for a partnership firm to get registered. In case a firm does not get registered, it is deprived of many benefits. The consequences of non-registration of a firm are as follows: (a) A partner of an unregistered firm cannot file a suit against the firm or other partners, (b) The firm cannot file a suit against third parties, and (c) The firm cannot file a case against the partners.

In view of these consequences, it is therefore advisable to get the firm registered. According to the Indian Partnership Act 1932, the partners may get the firm registered with the Registrar of

firms of the state in which the firm is situated. The registration can be at the time of formation or at any time during its existence. The procedure for getting a firm registered is as follows: 1. Submission of application in the prescribed form to the Registrar of firms. The application should contain the following particulars: Name of the firm Location of the firm Names of other places where the firm carries on business The date when each partner joined the firm Names and addresses of the partners Duration of partnership this application should be signed by all the partners. 2. Deposit of required fees with the Registrar of Firms. 3. The Registrar after approval will make an entry in the register of firms and will subsequently issue a certificate of registration.

CASE: Price Waterhouse Coopers was a Partnership Firm earlier Price Waterhouse Coopers, one of the worlds top accountancy firms has been created in 1998 by the merger of two companies, Price Waterhouse and Coopers and Lybrand each with historical roots going back some 150 years to the 19th century Great Britain. In 1850, Samuel Lowell Price set up his accounting business in London. In 1865, he was joined in partnership by William H. Holyland and Edwin Waterhouse. As the firm grew, qualified members of its professional staff were admitted to the partnership. By the late 1800s, Price Waterhouse had gained significant recognition as an accounting firm. COOPERATIVE SOCIETY The word cooperative means working together and with others for a common purpose. The cooperative society is a voluntary association of persons, who join together with the motive of welfare of the members. They are driven by the need to protect their economic interests in the face of possible exploitation at the hands of middlemen obsessed with the desire to earn greater profits. The cooperative society is compulsorily required to be registered under the Cooperative Societies Act 1912. The process of setting up a cooperative society is simple enough and at the most what is required is the consent of at least ten adult persons to form a society. The capital of

a society is raised from its members through issue of shares. The society acquires a distinct legal identity after its registration.

Cooperative is a form of organization wherein persons voluntarily associate together as human beings on the basis of equality for the promotion of an economic interest for themselves. - E. H. Calvert Cooperative organization is a society which has its objectives for the promotion of economic interests of its members in accordance with cooperative principles. - The Indian Cooperative Societies Act 1912

Features - The characteristics of a cooperative society are listed below. (i) Voluntary membership: The membership of a cooperative society is voluntary. A person is free to join a cooperative society, and can also leave anytime as per his desire. There cannot be any compulsion for him to join or quit a society. Although procedurally a member is required to serve a notice before leaving the society, there is no compulsion to remain a member. Membership is open to all, irrespective of their religion, caste, and gender.

(ii) Legal status: Registration of a cooperative society is compulsory. This accords a separate identity to the society which is distinct from its members. The society can enter into contracts and hold property in its name, sue and be sued by others. As a result of being a separate legal entity, it is not affected by the entry or exit of its members. (iii) Limited liability: The liability of the members of a cooperative society is limited to the extent of the amount contributed by them as capital. This defines the maximum risk that a member can be asked to bear. (iv) Control: In a cooperative society, the power to take decisions lies in the hands of an elected managing committee. The right to vote gives the members a chance to choose the members who will constitute the managing committee and this lends the cooperative society a democratic character.

(v) Service motive: The cooperative society through its purpose lays emphasis on the values of mutual help and welfare. Hence, the motive of service dominates its working. If any surplus is generated as a result of its operations, it is distributed amongst the members as dividend in conformity with the bye-laws of the society.

Merits The cooperative society offers many benefits to its members. Some of the advantages of the cooperative form of organization are as follows. (i) Equality in voting status: The principle of one man one vote governs the cooperative society. Irrespective of the amount of capital contribution by a member, each member is entitled to equal voting rights.

(ii) Limited liability: The liability of members of a cooperative society is limited to the extent of their capital contribution. The personal assets of the members are, therefore, safe from being used to repay business debts. (iii) Stable existence: Death, bankruptcy or insanity of the members do not affect continuity of a cooperative society. A society, therefore, operates unaffected by any change in the membership.

(iv) Economy in operations: The members generally offer honorary services to the society. As the focus is on elimination of middlemen, this helps in reducing costs. The customers or producers themselves are members of the society, and hence the risk of bad debts is lower.

(v) Support from government: The cooperative society exemplifies the idea of democracy and hence finds support from the Government in the form of low taxes, subsidies, and low interest rates on loans.

(vi)Ease of formation: The cooperative society can be started with a minimum of ten members. The registration procedure is simple involving a few legal formalities. Its formation is governed by the provisions of Cooperative Societies Act 1912.

Limitations The cooperative form of organization suffers from the following limitations: (i) Limited resources: Resources of a cooperative society consists of capital contributions of the members with limited means. The low rate of dividend offered on investment also acts as a deterrent in attracting membership or more capital from the members.

(ii) Inefficiency in management: Cooperative societies are unable to attract and employ expert managers because of their inability to pay them high salaries. The members who offer honorary services on a voluntary basis are generally not professionally equipped to handle the management functions effectively.

(iii) Lack of secrecy: As a result of open discussions in the meetings of members as well as disclosure obligations as per the Societies Act (7), it is difficult to maintain secrecy about the operations of a cooperative society. (iv) Government control: In return of the privileges offered by the government, cooperative societies have to comply with several rules and regulations related to auditing of accounts, submission of accounts, etc. Interference in the functioning of the cooperative organisation through the control exercised by the state cooperative departments also negatively affects its freedom of operation. (v) Differences of opinion: Internal quarrels arising as a result of contrary viewpoints may lead to difficulties in decision making. Personal interests may start to dominate the welfare motive and the benefit of other members may take a backseat if personal gain is given preference by certain members.

2.5.1 Types of Cooperative Societies Various types of cooperative societies based on the nature of their operations are described below: (i) Consumers cooperative societies: The consumer cooperative societies are formed to protect the interests of consumers. The members comprise of consumers desirous of obtaining good quality products at reasonable prices. The society aims at eliminating middlemen to achieve

economy in operations. It purchases goods in bulk directly from the wholesalers and sells goods to the members, thereby eliminating the middlemen. Profits, if any, are distributed on the basis of either their capital contributions to the society or purchases made by individual members. (ii) Producers cooperative societies: These societies are set up to protect the interest of small producers. The members comprise of producers desirous of procuring inputs for production of goods to meet the demands of consumers. The society aims to fight against the big capitalists and enhance the bargaining power of the small producers. It supplies raw materials, equipment and other inputs to the members and also buys their output for sale. Profits among the members are generally distributed on the basis of their contributions to the total pool of goods produced or sold by the society.

(iii) Marketing cooperative societies: Such societies are established to help small producers in selling their products. The members consist of producers who wish to obtain reasonable prices for their output. The society aims to eliminate middlemen and improve competitive position of its members by securing a favorable market for the products. It pools the output of individual members and performs marketing functions like transportation, warehousing, packaging, etc., to sell the output at the best possible price. Profits are distributed according to each members contribution to the pool of output. (iv) Farmers cooperative societies: These societies are established to protect the interests of farmers by providing better inputs at a reasonable cost. The members comprise of farmers who wish to jointly take up farming activities. The aim is to gain the benefits of large scale farming and increase the productivity. Such societies provide better quality seeds, fertilizers, machinery and other modern techniques for use in the cultivation of crops. This helps not only in improving the yield and returns to the farmers, but also solves the problems associated with the farming on fragmented land holdings.

(v) Credit cooperative societies: Credit cooperative societies are established for providing easy credit on reasonable terms to the members. The members comprise of persons who seek financial

help in the form of loans. The aim of such societies is to protect the members from the exploitation of lenders who charge high rates of interest on loans. Such societies provide loans to members out of the amounts collected as capital and deposits from the members and charge low rates of interest.

(vi) Cooperative housing societies: Cooperative housing societies are established to help people with limited income to construct houses at reasonable costs. The members of these societies consist of people who are desirous of procuring residential accommodation at lower costs. The aim is to solve the housing problems of the members by constructing houses and giving the option of paying in installments. These societies construct flats or provide plots to members on which the members themselves can construct the houses as per their choice. CASE: Amuls amazing Cooperative ventures! Every day Amul collects 4, 47,000 liters of milk from 2.12 million farmers (many illiterate), converts the milk into branded, packaged products, and delivers goods worth Rs. 6 crore (Rs. 60 million) to over 5,00,000 retail outlets across the country. It all started in December 1946 with a group of farmers keen to free themselves from intermediaries, gain access to markets and thereby ensure maximum returns for their efforts. Based in the village of Anand, the Khera District Milk Cooperative Union (better known as Amul) expanded exponentially. It joined hands with other milk cooperatives, and the Gujarat network now covers 2.12 million farmers, 10,411 village level milk collection centres and fourteen district level plants (unions). Amul is the common brand for most product categories produced by various unions: liquid milk, milk powder, butter, ghee, cheese, cocoa products, sweets, ice-cream and condensed milk. Amuls sub-brands include variants such as Amulspray, Amulspree, Amulya and Nutramul. The edible oil products are grouped around Dhara and Lokdhara, mineral water is sold under the Jal Dhara brand while fruit drinks bear the name Safal.

JOINT STOCK COMPANY A company is an association of persons formed for carrying out business activities and has a legal status independent of its members. The company form of organization is governed by The

Companies Act, 1956. A company can be described as an artificial person having a separate legal entity, perpetual succession and a common seal. The shareholders are the owners of the company while the Board of Directors is the chief managing body elected by the shareholders. Usually, the owners exercise an indirect control over the business. The capital of the company is divided into smaller parts called shares which can be transferred freely from one shareholder to another person (except in a private company).

Features The definition of a joint stock company highlights the following features of a company.

(i) Artificial person: A company is a creation of law and exists independent of its members. Like natural persons, a company can own property, incur debts, borrow money, enter into contracts, sue and be sued but unlike them it cannot breathe, eat, run, talk and so on. It is, therefore, called an artificial person.

(ii) Separate legal entity: From the day of its incorporation, a company acquires an identity, distinct from its members. Its assets and liabilities are separate from those of its owners. The law does not recognize the business and owners to be one and the same.

(iii) Formation: The formation of a company is a time consuming, expensive and complicated process. It involves the preparation of several documents and compliance with several legal requirements before it can start functioning. Registration of a company is compulsory as provided under the Indian Companies Act, 1956.

(iv) Perpetual succession: A company being a creation of the law can be brought to an end only by law. It will only cease to exist when a specific procedure for its closure, called winding up, is completed. Members may come and members may go, but the company continues to exist.

(v) Control: The management and control of the affairs of the company is undertaken by the Board of Directors, which appoints the top management officials for running the business. The directors hold a position of immense significance as they are directly accountable to the

shareholders for the working of the company. The shareholders, however, do not have the right to be involved in the day-to-day running of the business.

(vi) Liability: The liability of the members is limited to the extent of the capital contributed by them in a company. The creditors can use only the assets of the company to settle their claims since it is the company and not the members that owes the debt. The members can be asked to contribute to the loss only to the extent of the unpaid amount of share held by them. Suppose Akshay is a shareholder in a company holding 2,000 shares of Rs.10 each on which he has already paid Rs. 7 per share. His liability in the event of losses or companys failure to pay debts can be only up to Rs. 6,000 the unpaid amount of his share capital (Rs. 3 per share on 2,000 shares held in the company). Beyond this, he is not liable to pay anything towards the debts or losses of the company.

(vii) Common seal: the Company being an artificial person acts through its Board of Directors. The Board of Directors enters into an agreement with others by indicating the companys approval through a common seal. The common seal is the engraved equivalent of an official signature. Any agreement which does not have the company seal put on it is not legally binding on the company.

(viii) Risk bearing: The risk of losses in a company is borne by all the share holders. This is unlike the case of sole proprietorship or partnership firm where one or few persons respectively bear the losses. In the face of financial difficulties, all shareholders in a company have to contribute to the debts to the extent of their shares in the companys capital. The risk of loss thus gets spread over a large number of shareholders.

Merits The company form of organization offers a multitude of advantages, some of which are discussed below. (i) Limited liability: The shareholders are liable to the extent of the amount unpaid on the shares held by them. Also, only the assets of the company can be used to settle the debts, leaving the

owners personal property free from any charge. This reduces the degree of risk borne by an investor.

(ii) Transfer of interest: The ease of transfer of ownership adds to the advantage of investing in a company as the share of a public limited company can be sold in the market and as such can be easily converted into cash in case the need arises. This avoids blockage of investment and presents the company as a favorable avenue for investment purposes.

(iii) Perpetual existence: Existence of a company is not affected by the death, retirement, resignation, insolvency or insanity of its members as it has a separate entity from its members. A company will continue to exist even if all the members die. It can be liquidated only as per the provisions of the Companies Act.

(iv) Scope for expansion: As compared to the sole proprietorship and partnership forms of organization, a company has large financial resources. Further, capital can be attracted from the public as well as through loans from banks and financial institutions. Thus there is greater scope for expansion. The investors are inclined to invest in shares because of the limited liability, transferable ownership and possibility of high returns in a company.

(v) Professional management: A company can afford to pay higher salaries to specialists and professionals. It can, therefore, employ people who are experts in their area of specializations. The scale of operations in a company leads to division of work. Each department deals with a particular activity and is headed by an expert. This leads to balanced decision making as well as greater efficiency in the companys operations.

Limitations The major limitations of a company form of organization are as follows: (i) Complexity in formation: The formation of a company requires greater time, effort and extensive knowledge of legal requirements and the procedures involved. As compared to sole proprietorship and partnership form of organizations, formation of a company is more complex.

(ii) Lack of secrecy: The Companies Act requires each public company to provide from time-totime a lot of information to the office of the registrar of companies. Such information is available to the general public also. It is, therefore, difficult to maintain complete secrecy about the operations of company.

(iii) Impersonal work environment: Separation of ownership and management leads to situations in which there is lack of effort as well as personal involvement on the part of the officers of a company. The large size of a company further makes it difficult for the owners and top management to maintain personal contact with the employees, customers and creditors.

(iv) Numerous regulations: The functioning of a company is subject to many legal provisions and compulsions. A company is burdened with numerous restrictions in respect of aspects including audit, voting, filing of reports and preparation of documents, and is required to obtain various certificates from different agencies, viz., registrar, SEBI, etc. This reduces the freedom of operations of a company and takes away a lot of time, effort and money.

(v) Delay in decision making: Companies are democratically managed through the Board of Directors which is followed by the top management, middle management and lower level management. Communication as well as approval of various proposals may cause delays not only in taking decisions but also in acting upon them.

(vi) Oligarchic management: In theory, a company is a democratic institution wherein the Board of Directors is representatives of the shareholders who are the owners. In practice, however, in most large sized organizations having a multitude of shareholders; the owners have minimal influence in terms of controlling or running the business. It is so because the shareholders are spread all over the country and a very small percentage attend the general meetings. The Board of Directors as such enjoys considerable freedom in exercising their power which they sometimes use even contrary to the interests of the shareholders. Dissatisfied shareholders in such a situation have no option but to sell their shares and exit the company. As the directors virtually enjoy the rights to take all major decisions, it leads to rule by a few.

(vii) Conflict in interests: There may be conflict of interest amongst various stakeholders of a company. The employees, for example, may be interested in higher salaries, consumers desire higher quality products at lower prices and the shareholders want higher returns in the form of dividends and increase in the intrinsic value of their shares. These demands pose problems in managing the company as it often becomes difficult to satisfy such diverse interests.

Types of Companies A company can be either a private or a public company. These two types of companies are discussed in detail in the following paragraphs.

Private Company A private company means a company which: (a) restricts the right of members to transfer its shares; (b) Has a minimum of 2 and a maximum of 50 members, excluding the present and past employees; (c) does not invite public to subscribe to its share capital; and (d) must have a minimum paid up capital of Rs.1 lakh or such higher amount which may be prescribed from time-to-time. It is necessary for a private company to use the word private limited after its name. If a private company contravenes any of the aforesaid provisions, it ceases to be a private company and loses all the exemptions and privileges to which it is entitled.

The following are some of the privileges of a private limited company as against a public limited company: 1. A private company can be formed by only two members whereas seven people are needed to form a public company. 2. There is no need to issue a prospectus as public is not invited to subscribe to the shares of a private company. 3. Allotment of shares can be done without receiving the minimum subscription. 4. A private company can start business as soon as it receives the certificate of incorporation. The public company, on the other hand, has to wait for the receipt of certificate of commencement before it can start a business.

5. A private company needs to have only two directors as against the minimum of three directors in the case of a public company. 6. A private company is not required to keep an index of members while the same is necessary in the case of a public company. 7. There is no restriction on the amount of loans to directors in a private company. Therefore, there is no need to take permission from the government for granting the same, as is required in the case of a public company.

Public Company A public company means a company which is not a private company. As per the Indian Companies Act, a public company is one which:

(a) has a minimum paid-up capital of Rs. 5 lakhs or a higher amount which may be prescribed from time-to-time; (b) Has a minimum of 7 members and no limit on maximum members; (c) Has no restriction on transfer of shares; and (d) Is not prohibited from inviting the public to subscribe to its share capital or public deposits. A private company which is a subsidiary of a public company is also treated as a public company. CASE: From Strength to Strength Tata Group of Companies The Tata Group comprises 91 operating companies in seven business sectors: information systems and communications, engineering, materials, services, energy, consumer products, and chemicals. The Group was founded by Jamsetji Tata in the last quarter of the 19th centurya period when India had just set out on the road to gaining independence from British rule. Consequently, Jamsetji Tata and those who followed him aligned business opportunities with the objective of nation building. This approach remains enshrined in the Groups ethos to this day. The Tata Group is one of Indias largest and most respected business conglomerates, with revenues to the tune of $ 17.6 billion (Rs. 769, 296 million) in the year 2004 05, the equivalent of about 2.9 per cent of the countrys GDP. Tata companies together employ some 2,20,000

people. The Tata Group has operations in more than 40 countries across six continents, and its companies export products and services to 140 nations.

Five core values The Tata Group has always sought to be a value-driven organisation. These values continue to direct the Groups growth and businesses. The five core Tata values underpinning the way we do business are: Integrity: We must conduct our business fairly, with honesty and transparency. Everything we do must stand the test of public scrutiny. Understanding: We must be caring, show respect, compassion and humanity towards our colleagues and customers around the world, and always work for the benefit of the communities we serve. Excellence: We must constantly strive to achieve the highest possible standards in our day-today work and in the quality of the goods and services we provide. Unity: We must work cohesively with our colleagues across the Group and with our customers and partners around the world, building strong relationships based on tolerance, understanding and mutual cooperation. Responsibility: We must continue to be responsible, sensitive to the countries, communities and environments in which we work, always ensuring that what comes from the people goes back to the people many times over. The Tata Groups business activities are conducted through 91 companies operating in seven business sectors. It has a presence in six continents and holds leadership positions in many industry segments, among them tea, software, automobiles, energy and hospitality. The Tata Group is headed by Group chairman Ratan Tata.

PUBLIC ENTERPRISES Introduction: The concept of laissez faire which reigned supreme up to the end of the last century has lost its meaning and also popular support. The state today, far from being merely a passive observer of the economic process, which once it was, has emerged as an active participant, taking upon itself the role of protector, of controller, of guardian of the citizens, and

of entrepreneur. In fact, there is badly any sphere of human activity to day which is not in some way or other controlled and regulated by the modern state. Meaning: According to A.H. Hansen, Public Enterprise means state ownership and operations of industrial, agricultural, financial and commercial undertakings, public sector enterprise is owned and managed by the government. Need: The need for state entry in the business arises because of the following factors: (i) Need for Planned Economy: The modern economy has inevitably to be a planned economy. In a planned economy, the national responsibility of planning is something that cannot be assumed or discharged by any authority finally other than the government which the people have elected to office to took after the affairs of the country. Hence, the responsibility for planning must be assumed by the government. In order to take the economy towards planned direction, the direct participation of the state in industrial and commercial enterprises is a necessary concomitant. (ii) Need for Sound Industrial Base: Immediately after independence in 1947, the industrial base of our country had not been sufficiently built up and as such intervention became imperative to build the industrial base. The Government had to set up a number of enterprises in various fields like manufacturing, mining, banking, development finance, etc. The government had to step in because private enterprises were hesitant, unwilling, timid and unable to provide the necessary entrepreneurship. The public enterprise was the only way to get over all these hurdles. (iii) Establishment of Socialistic Pattern of Society: The government of our country having been committed to the objective of establishing a socialist pattern of society is increasingly compelled to enter directly into industrial and commercial activity. The creation of a socialistic pattern of society calls for state participation in industrial and commercial enterprises. (iv)Creation of Developmental Demands: In the planning process, the government has not only to think of how much a product is needed but also to go ahead with the plans to meet demands for such products. But, instead, it has also to create and influence certain kinds of demands which are instrumental and helpful in promoting the process of economic development. It is with this end in view that the government in our country decided to set up a number of public enterprise which are engaged in the production of such commodities for which, to begin with there was a substantial dement in the country but the same got created since public enterprise

started producing them. In this category, we include the production of into and steel, fertilizers, pesticides, heavy engineering machine tools, chemicals, etc. (v) Generation of Surplus for Economic Growth: The state in order to fulfill its economic and social commitment towards the people could no longer depend only on the revenue derived mainly through taxation. Public enterprise have come to be regarded as an important instrument for generating surpluses ( what are also known as profits in the case of private enterprises) which in turn are ploughed back in the from of investment for the purpose of economic development. (vi)Need to Serve as Model Employer: One of the constitutional obligations of the state in our country is to encourage and promote labour welfare. In this regard, we may recall the old saying that practice is always better than precept, it is with this motto that the government has set up a number of public enterprise in which its employees are given reasonably good wages, housing accommodation and other welfare recreational, etc. thus, the public enterprise act as model employers and the by, stimulate the private enterprise to do likewise. (vii) Provision of Infrastructural Facilities: The growth of public enterprise is undertaken, to being with and mostly, on those areas which are extremely important and useful to usher in and later on support the process of industrializations and economic growth. That is why most of the state investments take place into such enterprise which is extremely helpful to the private enterprises in enabling them o set up their own industries. The development of railway networking, road net-work, telephones and telegraph net-work, generation of river valley projects, canals, dams, setting up of term-lending institutions, etc., are examples in point. (viii) Balanced Regional Development: A public enterprise may be set up not so much from the point of view of the considerations listed above but just to provide an industry in a region where may be none or very few. This is done with a view to offer employment opportunities in economically backward regions and to ensure all round balanced regional development of the different parts of the country. (ix) Generation of Employment: public enterprises at times are also set up with a view to offer employment to people because private enterprises may not be forthcoming for the purpose. (x) Equal Distribution of National Income: Large scale participation by government in industrial and commercial enterprise is bound to increase the national income which goes into the common pool and is available for redistribution and reinvestment. This helps in achieving equitable division of national income and thereby reducing the economic disparities.

Features of Public Enterprises: A close look at the above definitions of public enterprises would reveal the following characteristics of the public enterprises. (i) State Ownership: The public enterprises should either be wholly owned by the central government or state government (s) or local authority or jointly owned by two or more of them . For instance, the Indian Airlines and Air-India are owned by the central government and Punjab state and financial corporation limited is owned by the government of Punjab. State ownership means that more than 50% of the out-standing equity is being held by a public authority. If the enterprise is owned both by the government and private persons, the state must have the predominant share (at least 51%)in the ownership of such enterprise. (ii) State Control: The state retains the ultimate management and control of public enterprise in so for as the appointment of personnel such as members of the board of Directors, Chairman, Managing Director, etc. are concerned. (iii) Service Motive: public enterprises are generally run with a service motive. Though, in modern times, public enterprise strives to earn surplus, but its primary emphasis is always to render service to the public at large. Even it may have to incur losses in the process of serving the society. (iv) Government Financing: The bulk of the financial needs of the public enterprise is met by the government through appropriation from the budget. But in course of time, when the public enterprises attains maturity, it may cease to draw from government funds, instead may actually be contributing to the government revenues. (v) Public Ability: Since the public enterprises are owned and managed by the government, they are able in terms of their results to the elected representatives of the people who constitute parliament and state legislature. That is why; the working of the public enterprise is subjected to close scrutiny by the committees of parliament or state legislature, as the case may be. Objectives of Public Enterprise: The points discussed earlier under the heading of rationale of public enterprise may also be regarded as the objectives of public enterprises. However, there are certain other focal points which may be interpreted as objectives of public enterprise. These are as follows: (i) Stimulate Economic Growth: The driving motive, which attracts government in business, is to speed up the tempo of economic development. It is with this end in view that the government enters into various sectors of economic activities such as machine building, electricity

generation, road and rail net work, communication net work, fertilizers, pesticides, chemicals, etc. (ii) Provide Employment Opportunities: The state having assumed the responsibility of a welfare state has to do all that whereby the avenues of employment get created and multiplied. This is all the more important in a country like ours which is plagued by rising population. In fact, the entire strategy of the present day economic policy is in favor of creation of larger employment opportunities through the process of economic planning. Public sector can play a great role in this direction. (iii) Channelize Public Saving : The process of economic growth needs step up in the rate of saving and its proper channelization into productive avenues. The government undertakes this task by nationalizing the existing financial institutions like banks and insurance companies and by setting up a number of term-lending institutions. That is why, we find the major commercial banks and both life and general insurance nationalized I our country. Further, the government has set up a number of financial assistance to large, medium, and small sized enterprises both in public and private sectors. (iv)Diffusion of Economic Power: In an economic system which is characterized by private enterprise, the emergence and growth of private monopolies is a natural process. There are several ways of tacking the problem of growth of private monopolies. One of the most important strategies of meeting this problem is by setting up enterprise in the public sector. There are certain sectors which are exclusively earmarked for the public enterprise, and in other, public enterprise enter to offer competition to private enterprise and thereby prevent the emergence ad growth of private monopolies. (v) Egalitarian Society: One of the basic purposes of state entry into economic area is to reduce disparities in the distribution of income and wealth in the country and thereby promote a social order wherein a more egalitarian distribution of national income and wealth is brought about. (vi)Strengthen Research and Development: The base as well as quality of economic development of a country depends to a large extent on the technological inventions. This requires substantial investment of funds and retention of scientific and technological talent. It is public enterprise alone which can afford both of these. That is why most of the research and development activity in our country is being organized by the institutions which are owned and controlled by the Government.

Problems and shortcomings of public sector Enterprise: All these data are no doubt impressive. However, in view of the crucial role of, and the quantum of investment proposed in the public sector in the ensuing years, it is better to examine some of its short coming: No Systematic Criteria Investment Decision: the Governments investments decisions relating to public sector enterprise are often not preceded by a detailed evaluation of the nature of potential are cost benefit analysis. The result is that wrong investment decisions are often taken mainly because of political pressure from different quarters. For example, investment is made in low priority units; there is non-availability of technical personnel, and so on. Unduly Long Gestation period: Many projects took a longer time for completion than they should have. This resulted in rising costs and longer delays in the supply of the goods needed by the economy. For example, the Tomboy Fertilizer project took twice the time and cost, Rs.13 cores more than the original estimate. These delays were mainly due to faulty or inadequate planning and project reports. Over- Capitalization: Because money was available from the government just for asking, many projects (e.g., Tomboy Fertilizer project, Heavy Engineering Corporation) were over-capitalized, making capital output ratio. Unduly unfavorable .this locking-up of precious capital was a waste of valuable resources from the communitys point of view, and of incurring avoidable expenditures on the installation of surplus machines and capacity. Employment of Excess Manpower: No scientific personnel policy was worked out. Nor was there scientific and accurate estimate of manpower requirements. As a result, excess labour was often employed. There was often no policy regarding the wage structure, and the promotion and training of personnel. While there was excess labour, the chief executives posts were often unfilled for months because the required personnel were not available. Large Overhead Expenditure: Heavy expenditure was often incurred on social overheads, such as building of townships, schools, hospitals and theatres. While these were necessary, the question is whether the expenditure on such items could afford such expenditure. For example, on a of Hindustan steel alone, the outlay on the total expenditure on a project was incurred on social overheads.

Under Utilization of Installed Productive Capacity: Low capacity utilization has been a serious defect in many public sector undertakings. As show in Table 3, only 55% of the units (i.e.90) reported more than 75% capacity utilization, 19% of the units (i.e.31) reported less than 50% capacity utilization and non-utilization of installed capacity. Which amounts to locking up of scarce resources, is due to a wrong estimate of future demand various bottlenecks in production following the non-availability of power or of an important, or labour trouble.

Absence of a Proper Price Policy: Public sector undertakings are expected to attain various socio-economic objectives; they are not supposed to be obsessed with the profit motive. The Government did not spell out any clear guidelines for the price policy to be followed by different units, not did it indicate how much each unit should earn on the amount invested in it. The consequence is that, even today, there is no clear-cut price policy for different public sector units.

Inefficient Management : Many public sector undertakings are characterized by inefficient management because of non-availability of top executive personnel; the appointment of civil servants who, for want of proper training , run the units in a bureaucratic manner, ministerial interference in the day to day, affairs of the units; no proper delegation of authority so essential for quick decisions; labour troubles which have plagued the management (these labour troubles have stemmed form a hampering of labour )the absence of scientific inventory control and so on. The numbers of management employed in public sector undertakings was 50,000 in 1976. This rose to nearly 70,000 at the end of the fifth plan. As the public sector grows in size and complexity, professional managers of a very high caliber would be required to cope the challenges of economic development.

Lock of Incentives: One of the mot vital problems of the growing public sector in India. Is the inefficiency of its operation? Here, incentives which lead to additional efforts have special significance. The problem of incentives has tow faces. Incentives are to work and incentives are to management. It is well know that in the private sector the rule universally followed is a big carrot; and a; tough stick salary is commensurate with a persons initiative and efficiency. But in the public sector neither the carrot nor the stick has been effectively applied. The enterprise, unlike is the matter of pay scales. It is

therefore, in national interest that initiative be kindled with the offer of appropriate incentives. Lack of Co-ordination among Various Public Sector Units: The need for coordination among various public sector units is vital for the attainment of greater efficiency and for maximizing returns on investment. As the output of one unit is the input of another the operations of same enterprise have an important bearing on the efficient functioning of other public undertakings. For instance, the performance of power houses and steel plants depends on coal production itself is dependent on supplies of heavy equipment, machinery and power. A co-ordination in the production programmers of public undertakings at various stages would help reduce excess stocks and shortages of vital input and this co-ordination can also be worked out in such areas as personnel management, inventory control fianc, research, welfare and industrial relations. This aspect of the national convention on public enterprise held in New Delhi in 1976. Lack of Research and Development: Yet another aspect that needs attention is research. Research and development efforts in the public sector need pepping up to achieve better production costs all with a view to attaining international comediennes. In this connection, it is worthwhile noting that the production of offshore drilling rigs and many other highly technical products has been taken by public sector units.

Management and Administration Management is like investment. Managers have resources to invest their own time and skill as well as human and financial resources. The goal or function of management is maximum utilization of those resources by getting things done efficiently. This does not entail being mechanical. The manager's style is not rigid, it is dynamic and situational. With highly skilled, self-motivated and experienced workers, the manager can be very empowering. Where the workforce is less skilled or motivated, the manager may need to monitor output more meticulously. Management simply makes the best use of all resources even when only an individual is in charge. Hence, management does not necessarily entail a dictatorial, controlling supervisor. Skilled managers know how to coach and motivate diverse employees. Getting things done through the right people is what they do.

The aim of management is to deliver results cost effectively as per the customer expectations and profitably, in the case of commercial organisations. Inspiring leaders move us to change direction, while inspiring managers motivate us to work harder. Management is a vital function due to the complexity of modern organizational life. The need to coordinate the input of so many diverse stakeholders, experts and customers requires enormous patience as well as highly developed facilitative skills. Excellent managers know how to bring the right people together and by asking the right questions, draw the best solutions out of them. Efficient facilitation requires managers to work very closely with all relevant stakeholders.

Management as Art and Science The stream of management reveals characteristics of art and science, the two not mutually elite but complementary. Every discipline of science is complete only when it is applied for solving various kinds of problems faced by human beings in an organization or in other fields. Management is the art of making people work more effectively to maximize their output. By the use of effective management skills people in an organization work more efficiently as they are guided by the scientific principles and practices laid down by various researchers of management.

Management as Profession A profession is a vocation founded upon specialized educational training, the purpose of which is to supply unbiased counsel and service to others for a direct and definite compensation, wholly apart from expectation of other business gain. The essentials of a profession are that it provides specialized knowledge, formal education and training; it creates sense of social desire to serve society and teaches code of conduct etc. Over the last few decades, factors such as growing size of business unit, separation of ownership from management, growing competition etc have led to an increased demand for professionally qualified managers. The task of manager has been quite definite and calls for people trained in handling such situations. Management fulfils several essentials of a profession; even then it is not a full fledged profession because of the following reasons: It does not restrict the entry in managerial jobs for account of one standard or other.

 No minimum qualifications have been prescribed for managers. No management association has the authority to grant a certificate of practice to various managers. All managers are supposed to abide by the code formulated by AIMA. Managers are responsible to many groups such as shareholders, employees and society. A regulatory code is necessary to keep a check and create boundaries, which cannot be flouted. Managers are known by their performance and not just their educational qualifications or university degrees. The ultimate goal of business is to maximize profit and not just social welfare. That is why Haymes has rightly remarked The slogan for management is becoming 'He who serves best, also profits most'.

Management as Process Management as a process refers to a series of inter-related functions, such as planning, organizing staffing, leading and controlling. In actuality, managers are known by the work they do. A manager lays down the objectives of an organization. He provides an environment that is helpful to team work and development. He offers incentives to those who perform better than others do and thus helps the organization realize its goals. According to James Lundy, Management is what management does. Management process suggests that all managers perform certain functions in order to realize certain goals. Management as a process is described as 1. Social process: The primary function of management is to deal with the human element in the business. The human factor is the most sensitive factor of production. It stimulates and influences other factors of production in the business. Therefore, it is essential that the management deal with human factor with care and skill. 2. Integrating process: Every business requires the accurate amalgamation of human, physical and financial resources. Management integrates the elements of men, machines, materials, methods and money to achieve organizational goals. 3. Continuous process: Since business is a ceaseless and dynamic process, the management is also an incessant process. It is the continuous process of leading business activities in the predetermined course. It involves verifying results at every stage with the objective set.

Management always identifies the potential areas of difficulty and implements remedial measures before they become crisis in business. 4. Universal process: Management functions are not restricted to business alone. They are important in every form of organization, whether it is social, religious or cultural organization. When there is an activity to be performed by a group, all managerial functions such as planning organizing, directing and controlling become essential to make that group activity successful. Differences between Management and Administration Administration is concerned with the determination of major policies, while management is concerned with the execution of these policies. Administration is the thinking and the determination of functions, while management is the doing of these functions. Administration makes major decisions of the business while, management executes these decisions within the framework that is set by administration. Administration is a top-level activity of any business, while management is a middle level activity of any business. Administration is made up of the owners of the business who have invested their capital in it and receive profits as a reward, while management is a group of persons who render their skilled services to the business and get payments in form of salaries. This group of persons is termed as employees. Administration is a term that is common in governments, military, education and religious organisations, while management is a term that is common in business organisations. Administration is not concerned with directing human efforts in the implementation of plans and policies of any business organisation, while management is concerned with the directing of human efforts towards implementation of plans and policies of any business organisations. In Administration, planning and organisation functions are involved, while in management motivation and control functions are involved. To summarise the distinctions, administration is concerned with the setting of major objectives, determination of policies and decisions while management executes these policies and decisions.

Stages in management

THE CLASSICAL THEORY OF MANAGEMENT:

Scientific Management The systematic study of management as a separate field of activity started only during the second half of the 19th century even though there are evidences of the application of managerial techniques in handling different affairs. The earlier records of the Egyptians, Greeks and Romans show the use of management in one form or the other. The formal organizational system used in Roman Catholic Church is a unique example of using managerial techniques. The military organizations have also been using management tools to improve the moral of troops and using communication channels for messages. The German and Austrian administrators emphasize systematic administration as a source of strength and necessary to maximize material wealth. 1. Taylor's Scientific Management (USA 1856-1915): Started as an apprentice machinist in Philadelphia, USA. He rose to be the chief engineer at the midvale engineering Works and later on served with the Bethlehem Works where he experimented with his ideas and made the contribution to the management theory for which he is so well known. Frederick Winslow Taylor well-known as the founder of scientific management was the first to recognize and emphasis the need for adopting a scientific approach to the task of managing an enterprise. He tried to diagnose the causes of low efficiency in industry and came to the conclusion that much of waste and inefficiency is due to the lack of order and system in the methods of management. He found that the management was usually ignorant of the amount of work that could be done by a worker in a day as also the best method of doing the job. As a result, it remained largely at the mercy of the workers who deliberately shirked work. He therefore, suggested that those responsible for management should adopt a scientific approach in their work, and make use of "scientific method" for achieving higher efficiency. The scientific method consists essentially of (a) Observation (b) Measurement (c) Experimentation and (d) Inference.

He advocated a thorough planning of the job by the management and emphasized the necessity of perfect understanding and co-operation between the management and the workers both for the enlargement of profits and the use of scientific investigation and knowledge in industrial work. He summed up his approach in these words: Science, not rule of thumb Harmony, not discord Co-operation, not individualism Maximum output, in place of restricted output The development of each man to his greatest efficiency and prosperity.

Elements of Scientific Management: The techniques which Taylor regarded as its 1. Scientific Task and Rate-Setting (work study): Work study may be defined as the systematic, objective and critical examination of all the factors governing the operational efficiency of any specified activity in order to effect improvement. Work study includes. (a) Methods Study: The management should try to ensure that the plant is laid out in the best manner and is equipped with the best tools and machinery. The possibilities of eliminating or combining certain operations may be studied. (b) Motion Study: It is a study of the movement, of an operator (or even of a machine) in performing an operation with the purpose of eliminating useless motions. (c) Time Study (work measurement): The basic purpose of time study is to determine the proper time for performing the operation. Such study may be conducted after the motion study. Both time study and motion study help in determining the best method of doing a job and the standard time allowed for it. (d) Fatigue Study: If, a standard task is set without providing for measures to eliminate fatigue, it may either be beyond the workers or the workers may over strain themselves to attain it. It is necessary, therefore, to regulate the working hours and provide for rest pauses at scientifically determined intervals. (e) Rate-setting: Taylor recommended the differential piece wage system, under which workers performing the standard task within prescribed time are paid a much higher rate per unit than inefficient workers who are not able to come up to the standard set.

2. Planning the Task: Having set the task which an average worker must strive to perform to get wages at the higher piece-rate, necessary steps have to be taken to plan the production thoroughly so that there is no bottle neck and the work goes on systematically. 3. Selection and Training: Scientific Management requires a radical change in the methods and procedures of selecting workers. It is therefore necessary to entrust the task of selection to a central personnel department. The procedure of selection will also have to be systematized. Proper attention has also to be devoted to the training of the workers in the correct methods of work. 4. Standardization: Standardization may be introduced in respect of the following. (a) Tools and equipment: By standardization is meant the process of bringing about uniformity. The management must select and store standard tools and implements which will be nearly the best or the best of their kind. (b) Speed: There is usually an optimum speed for every machine. If it is exceeded, it is likely to result in damage to machinery. (c) Conditions of Work: To attain standard performance, the maintenance of standard conditions of ventilation, heating, cooling, humidity, floor space, safety etc., is very essential. (d) Materials: The efficiency of a worker depends on the quality of materials and the method of handling materials. 5. Specialization: Scientific management will not be complete without the introduction of specialization. Under this plan, the two functions of 'planning' and 'doing' are separated in the organization of the plant. The `functional foremen' are specialists who join their heads to give thought to the planning of the performance of operations in the workshop. Taylor suggested eight functional foremen under his scheme of functional foremanship. (a) The Route Clerk: To lay down the sequence of operations and instruct the workers concerned about it. (b) The Instruction Card Clerk: To prepare detailed instructions regarding different aspects of work. (c) The Time and Cost Clerk: To send all information relating to their pay to the workers and to secure proper returns of work from them. (d) The Shop Disciplinarian: To deal with cases of breach of discipline and absenteeism.

(e) The Gang Boss: To assemble and set up tools and machines and to teach the workers to make all their personal motions in the quickest and best way. (f) The Speed Boss: To ensure that machines are run at their best speeds and proper tools are used by the workers. (g) The Repair Boss: To ensure that each worker keeps his machine in good order and maintains cleanliness around him and his machines. (h) The Inspector: To show to the worker how to do the work. 6. Mental Revolution: At present, industry is divided into two groups management and labour. The major problem between these two groups is the division of surplus. The management wants the maximum possible share of the surplus as profit; the workers want, as large share in the form of wages. Taylor has in mind the enormous gain that arises from higher productivity. Such gains can be shared both by the management and workers in the form of increased profits and increased wages.

Benefits of Scientific Management: Taylor's ideas, research and recommendations brought into focus technological, human and organizational issues in industrial management. Benefits of Taylor's scientific management included wider scope for specialization, accurate planning, timely delivery, standardized methods, better quality, lesser costs, minimum wastage of materials, time and energy and cordial relations between management and workers. According to Gilbreths, the main benefits of scientific management are "conservation and savings, making an adequate use of every one's energy of any type that is expended". The benefits of scientific management are:1. Replacement of traditional rule of thumb method by scientific techniques. 2. Proper selection and training of workers. 3. Incentive wages to the workers for higher production. 4. Elimination of wastes and rationalization of system of control. 5. Standardization of tools, equipment, materials and work methods. 6. Detailed instructions and constant guidance of the workers. 7. Establishment of harmonious relationship between the workers. 8. Better utilization of various resources. 9. Satisfaction of the needs of the customers by providing higher quality products at lower prices.

Criticism: 1. Worker's Criticism: (a) Speeding up of workers: Scientific Management is only a device to speed up the workers without much regard for their health and well-being. (b) Loss of individual worker's initiative: Scientific Management reduces workers to automatic machine by taking away from them the function of thinking. (c) Problem of monotony: By separating the function of planning and thinking from that of doing, Scientific Management reduces work to mere routine. (d) Reduction of Employment: Scientific Management creates unemployment and hits the workers hard. (e) Weakening of Trade Unions: Under Scientific Management, the important issues of wages and working conditions are decided by the management through scientific investigation and the trade unions may have little say in the matter. (f) Exploitation of workers: Scientific Management improves productivity through the agency of workers and yet they are given a very small share of the benefit of such improvement. 2. Employer's Criticism: (a) Heavy Investment: It requires too heavy an investment. The employer has to meet the extra cost of the planning department though the foreman in this department do not work in the workshop and directly contribute towards higher production. (b) Loss due to re-organization: The introduction of Scientific Management requires a virtual reorganization of the whole set-up of the industrial unit. Work may have to be suspended to complete such re-organization. (c) Unsuitable for small scale firms: various measures like the establishment of a separate personnel department and the conducting of time and motion studies are too expensive for a small or modest size industrial unit.

2. Frank and Lillian Gilbreth, a husband-and-wife team, studied job motions. In Frank's early career as an apprentice bricklayer, he was interested in standardization and method study. He watched bricklayers and saw that some workers were slow and inefficient, while others were very productive. He discovered that each bricklayer used a different set of motions to lay bricks. From his observations, Frank isolated the basic movements

necessary to do the job and eliminated unnecessary motions. Workers using these movements raised their output from 1,000 to 2,700 bricks per day. This was the first motion study designed to isolate the best possible method of performing a given job. Later, Frank and his wife Lillian studied job motions using a motion-picture camera and a split-second clock. When her husband died at the age of 56, Lillian continued their work. Thanks to these contributors and others, the basic ideas regarding scientific management developed. They include the following:

Developing new standard methods for doing each job Selecting, training, and developing workers instead of allowing them to choose their own tasks and train themselves

Developing a spirit of cooperation between workers and management to ensure that work is carried out in accordance with devised procedures

Dividing work between workers and management in almost equal shares, with each group taking over the work for which it is best fitted

Process Management Henri Fayol: The Father of modern operational theory. Perhaps the real father of modern management theory is the (French industrialist) Henri Fayol. His acute observations on the Principles of general management first appeared in 1916 in French, under the little admistration industrielte in generale . This monograph, reprinted in French several times, was not translated into English until 1929. No English translation was made or published in the US until 1949. Industrial Activities: Fayol found that industrial activates could be divided into six groups as shown in figure. 1. Technical (Production) 2. Commercial (buying, Selling and exchanging). 3. Financial (Search for, and optimum use of capital). 4. Security (Protection of property and persons). 5. Accounting (including Statistics).

6. Managerial (Planning, organization, command, contribution and control).

Henri Fayol pointed out that these activities exist in every size of business. Fayol observed that first five were well known and he devoted most of his book to an analysis of the sixth.

Managerial Planning, organization, staffing, leading, control. Fayols activities in industrial undertaking: General Principles of Management: Fayol listed Fourteen Principles based on experience. He notes that Principles of management are flexible, not absolute and must be usable regard less of changing and special conditions. Some kinds of Principles appeared to be indispensable in every undertaking.

1. Division of Work: - Fayol applies the principle to all kind of work, management as well as technical. 2. Authority and responsibility: Henri Fayol finds authority and responsibility to be related with the latter arising from the former. He sees authority as a combination of official factors, managers position and personal factors, Compounded of intelligence, experience, moral worth, past services etc. 3. Discipline: Fayol declares that discipline requires good superiors at all levels. 4. Unity of Command: This means that employees should receive order from one superior only. 5. Unity of Direction: According to this principal, each group of activities with same objective must have one head and one plan. 6. Subordination of individuals to general interest: When the two are found to differ, management must reconcile them. 7. Remuneration: Remuneration and method of payment should b fair and have maximum possible satisfaction to employees and employer. 8. Centralization: Without using the term centralization of authority Fayol refers authority dispersed or concentrated. 9. Scalar Chain: Fayol thinks of this as Chain of Superior from beigest to low ranks should be short circuited.

10. Order: Fayol classify this into material and social order. This is essential principle in arrangement of things and people in an organization. 11. Equity: Loyalty and devotion should be elected from personnel on biases of kindliness and justice, when dealing with subordinate. 12. Stability of tenure: In bad management, Fayol points out id dangers and costs. 13. Initiative: Initiative is execution of a plan. 14. Esprit de crops: This is the principle that in the union there is strength. This principle emphasis on work, unity of communication. In order to accomplishment the objective.

Element of Management: Fayol said the element of management is its functions. Planning, organizing, staffing, leading, and controlling. He point out that the principles of management can apply not only to business but also to practical, religious, military and other understanding. Behavioral Science / Behavioral management theory: The behavioral management theory is often called the human relations movement because it addresses the human dimension of work. Behavioral theorists believed that a better understanding of human behavior at work, such as motivation, conflict, expectations, and group dynamics, improved productivity. The theorists who contributed to this school viewed employees as individuals, resources, and assets to be developed and worked with not as machines, as in the past. Several individuals and experiments contributed to this theory.

NEO- CLASSICAL THEORY:

Neo-classical theory deals with the human factor. Elton mayo pioneered the human relations to improve levels of productivity and satisfaction. This approach was first highlighted by the improvements know as Hawthorne studies George Elton Mayo (Australia, 1880 - 1949): Elton Mayo was born in Australia. He was educated in Logic and Philosophy at St. Peter's College, Adelaide. He led a team of researchers from Harvard University, which carried out investigation in human problems. Elton Mayos contributions came as part of the Hawthorne studies, a series of experiments that rigorously applied classical management theory only to reveal its shortcomings. The Hawthorne

experiments consisted of two studies conducted at the Hawthorne Works of the Western Electric Company in Chicago from 1924 to 1932. The first study was conducted by a group of engineers seeking to determine the relationship of lighting levels to worker productivity. Surprisingly enough, they discovered that worker productivity increased as the lighting levels decreased that is, until the employees were unable to see what they were doing, after which performance naturally declined. A few years later, a second group of experiments began. Harvard researchers Mayo and F. J. Roethlisberger supervised a group of five women in a bank wiring room. They gave the women special privileges, such as the right to leave their workstations without permission, take rest periods, enjoy free lunches, and have variations in pay levels and workdays. This experiment also resulted in significantly increased rates of productivity. In this case, Mayo and Roethlisberger concluded that the increase in productivity resulted from the supervisory arrangement rather than the changes in lighting or other associated worker benefits. Because the experimenters became the primary supervisors of the employees, the intense interest they displayed for the workers was the basis for the increased motivation and resulting productivity. Essentially, the experimenters became a part of the study and influenced its outcome. This is the origin of the term Hawthorne effect, which describes the special attention researchers give to a studys subjects and the impact that attention has on the studys findings. The general conclusion from the Hawthorne studies was that human relations and the social needs of workers are crucial aspects of business management. This principle of human motivation helped revolutionize theories and practices of management.

Modern Management /Recent contribution to management thoughts: Peter Ferdinand Drucker (November 19, 1909November 11, 2005): He was a writer, management consultant, and self-described social ecologist. Widely considered to be the father of modern management, his 39 books and countless scholarly and popular articles explored how humans are organized across all sectors of society in business, government and the nonprofit world. His writings have predicted many of the major developments of the late twentieth century,

including privatization and decentralization; the rise of Japan to economic world power; the decisive importance of marketing; and the emergence of the information society with its necessity of lifelong learning. In 1959, Drucker coined the term knowledge worker" and later in his life considered knowledge work productivity to be the next frontier of management. Basic ideas: Decentralization and simplification: Drucker discounted the command and control model and asserted that companies work best when they are decentralized. According to Drucker, corporations tend to produce too many products, hire employees they don't need (when a better solution would be outsourcing), and expand into economic sectors that they should avoid. Respect of the worker: Drucker believed that employees are assets and not liabilities. He taught that knowledge workers are the essential ingredients of the modern economy. Central to this philosophy is the view that people are an organization's most valuable resource and that a manager's job is to prepare and free people to perform. The need to manage business by balancing a variety of needs and goals, rather than subordinating an institution to a single value. This concept of management by objectives forms the keynote of his 1954 landmark "The Practice of Management". A company's primary responsibility is to serve its customers. Profit is not the primary goal, but rather an essential condition for the company's continued existence. An Organization should have a proper way of executing all its business processes. A belief in the notion that great companies could stand among humankind's noblest inventions. Braham Maslow is well renowned for proposing the Hierarchy of Needs Theory in 1943. This theory is a classical depiction of human motivation. This theory is based on the assumption that there is a hierarchy of five needs within each individual. The urgency of these needs varies. These five needs are as follows-

Physiological needs- These are the basic needs of air, water, food, clothing and shelter. In other words, physiological needs are the needs for basic amenities of life. Safety needs- Safety needs include physical, environmental and emotional safety and protection. For instance- Job security, financial security, protection from animals, family security, health security, etc.

Social needs- Social needs include the need for love, affection, care, belongingness, and friendship. Esteem needs- Esteem needs are of two types: internal esteem needs (self- respect, confidence, competence, achievement and freedom) and external esteem needs (recognition, power, status, attention and admiration).

Self-actualization need- This include the urge to become what you are capable of becoming / what you have the potential to become. It includes the need for growth and self-contentment. It also includes desire for gaining more knowledge, social- service, creativity and being aesthetic. The self- actualization needs are never fully satiable. As an individual grows psychologically, opportunities keep cropping up to continue growing.

According to Maslow, individuals are motivated by unsatisfied needs. As each of these needs is significantly satisfied, it drives and forces the next need to emerge. Maslow grouped the five needs into two categories - Higher-order needs and Lower-order needs. The physiological and the safety needs constituted the lower-order needs. These lower-order needs are mainly satisfied externally. The social, esteem, and self-actualization needs constituted the higher-order needs. These higher-order needs are generally satisfied internally, i.e., within an individual. Thus, we can conclude that during boom period, the employees lower-order needs are significantly met.

Implications of Maslows Hierarchy of Needs Theory for Managers As far as the physiological needs are concerned, the managers should give employees appropriate salaries to purchase the basic necessities of life. Breaks and eating opportunities should be given to employees. As far as the safety needs are concerned, the managers should provide the employees job security, safe and hygienic work environment, and retirement benefits so as to retain them. As far as social needs are concerned, the management should encourage teamwork and organize social events. As far as esteem needs are concerned, the managers can appreciate and reward employees on accomplishing and exceeding their targets. The management can give the deserved employee higher job rank / position in the organization. As far as self-actualization needs are concerned, the managers can give the employees challenging jobs in which the employees skills and competencies are fully utilized. Moreover, growth opportunities can be given to them so that they can reach the peak. The managers must identify the need level at which the employee is existing and then those needs can be utilized as push for motivation. Limitations of Maslows Theory It is essential to note that not all employees are governed by same set of needs. Different individuals may be driven by different needs at same point of time. It is always the most powerful unsatisfied need that motivates an individual. The theory is not empirically supported. The theory is not applicable in case of starving artist as even if the artists basic needs are not satisfied, he will still strive for recognition and achievement.

The Function of Managers: There are five functions of managers: Planning, Organizing, Staffing, Leading, and Controlling. The functions of managers provide a useful structure for organizing management knowledge. (1)Planning:

Planning involves selecting missions and objectives and the action to achieve them it requires decision making, that choosing future courses of action from among alternatives. There are five types of planning: 1. Missions and objectives. 2. Strategies and polices. 3. Procedures and rules. 4. Programs. 5. Budgets. (2)Organizing Organizing is the part of managing that involves establishing an intentional structure of roles for people to fill in an organization. The purpose of an organization structure is to creating an environment helpful for human performance. It is then management tools and not an end. Although the structure must define the task to be done, the rules so established must also be designed in the light of the abilities and motivations of the people available designing an effective organization structure is not an easy managerial task. Many problems arises in making structures fit situations. (3)Staffing Staffing involves filling and keeping filled, the positions in the organization. This is done by identifying the work force requirement inventorying the people available and recruiting, selecting, placing, promoting, appraising, planning the careers, compensating and training. (4)Leading Leading is influence people so that they will contribute to organization and group goals. All managers would agree that most problems arises from peoples desires and problems , their behavior as individuals and in groups and that effective managers also need to be effective leaders. Leading involves motivation, leadership styles and approaches and communications. (5)Controlling: Controlling is measuring and correcting individuals and organizational performance. It involves measuring performance against goals and plans, showing where the deviations from standards exit and helping to correct them. In short controlling facilitates the accomplishment of plans. Control activity generally relate to the measurement of achievement. Some means of

controlling like the budget for expenses, inspection, record of labors-hours lost, are generally familiar. Each shows whether plans are working out