NATURE AND SIGNIFICANCE OF MANAGEMENT Consider the following A school without a principal A cricket team without a captain, An army

WHAT IS MANAGEMENT Management is considered to be the activity that enables the performance of a job, by organizing the effort of other people. This aspects is extremely important in a business organization because most businesses have a number of people working together and therefore it becomes essential to ensure that all of them work together harmoniously, for achieving the goals of the business. Just consider what would happen to the working of a country if there was no government. There would be anarchy and unrest. In such a context then, the government works as a manager just as the principal of a school or the directors of a company or partners in a business etc. What about a sole trader? Is he / she is doing all the work alone, there is no management because the latter requires people, but if there are employees working in such a business there will be a management. (A manager creates conditions for his people to achieve results) In the case of a business unit, different people get together to achieve some objectives and in the process, there can arise different problems that need to be solved, thereby making management essential. It is the management that will:

1. Assemble resources 2. Assemble people 3. Provide instructions and guidance about the work 4. Check on the performance of the employees 5. Generally ensure that all related aspects are looked after Management has been defined as follows: C.S. George: Management consists of getting things done through others, a manager is one who accomplishes objectives by directing the effort of others. Koontz and ODonnell: Management is the creation and maintenance of an internal environment in an enterprise where individuals, working in groups, can perform efficiently and effectively towards the attainment of group goals. John F. McFarland: Management may be defined as the art of securing maximum results with minimum of efforts so as to secure maximum prosperity and happiness for both employer and employee and give the public the best possible service. Joseph Massie: Management is defined as the process by which a cooperative group directs action towards common goals. L.A. Appley: Management is the development of people and not the direction of things. Management is personnel administration. Stanley Vance: Management is simply the process of decision making and control over the action of human beings for the purpose of attaining pre-determined goals.

American Society of Mechanical Engineers: Management is the art and science of organizing and directing human efforts applied to control the forces and utilize the materials of nature for the benefit of man.

Taking a cue from the above quoted definitions it is easy to conclude that parents at home, teachers in classrooms, principals in schools, supervisors in stores or factories, chairmen of multinationals or even the Prime Minister or President of a country are all involved with management in some way or the other. FEATURES OF MANAGEMENT It is now right to examine the features of management and they are: 1. It is a group Effort. Management is required only when there is a group of people working towards the achievement of any goal. Take the example of a vegetable hawker such a person moves from place to place along with the goods meant for sale, in search of customers. Assuming that the person is operating alone, there is no scope for management as used in the business sense. People can argue that the person needs to manage ones own self and there can be merit in that opinion, but when used in business terminology, management refers to the channelizing of group effort and therefore there is a need for plurality of persons. 2. It aims to Attain Pre-Determined Goals. All business organizations are established with the aim of achieving a specific purpose which is determined at the outset by the management of the organization. It is then the duty of the management to make all

possible efforts to achieve the goals that have been established so that the purpose of establishing the organization can be justified. It is possible that the goals may undergo minor / major changes with changing times and conditions but the effort of the management must not change and it should continue to strive whatever goals are established over long and short periods of time. 3. It is Universal. Management is found in all types of organized activity involving group effort and should not be incorrectly linked with business organizations. Thus, whether an organization is a school, college, hospital, club, religious establishment, etc., there will be an effort made to get people to do the work so that the predetermined goals can be achieved. In other words, there is management. This aspect of universality covers all types of organizations involving group offers and also extends to all types of organizations (small or large, simple or complex) spread out all across the globe. University also implies that management exists throughout an organization and not just at the top levels. 4. It is tangible. This refers to the fact that management as an activity does not have a visible presence and therefore there is no solid thing to show up as management. There are of course the managers of an enterprise who can be referred to as the management but this is not the physical presence of the activity involving management. Therefore, although it is possible to understand the impact of management, it is not possible to view the concept as such and accordingly management is considered to be intangible.

5.

It is Social. Management involves the working of a number of people together, for the purpose of achieving common goals. Since there is a multiplicity of people, there is bound to be interaction between them and that creates a society. Thus. Management is regarded as a social activity since it influences the behaviour of people and also because it is modified by the manner in which people of an organization behave.

6.

It has the Quality of Integrating Goals . Most organizations have a single primary objective and multiple secondary objectives. It is the duty of any management to ensure that all the objectives of an organization are linked together so that they can be achieved in an efficient manner. There should also be integration between the long term and short term aims of a business and the duty of linking all the objectives is performed by the management of an enterprise.

7.

It is activity based. Management has been defined by one writer as management does. This and other definitions (quoted earlier), make it clear that management is an activity based exercise and therefore it involves the performance of some or the other thing. Management is not static but dynamic because it involves the performance of some or the other activity continuously. (Features of Management at a Glance) 1. It is a group effort 2. It aims to attain pre-determined goals 3. It is universal 4. It is intangible 5. It is social

6. It has the quality of integrity goals 7. It is activity based OBJECTIVES OF MANGEMENT The section is an attempt to discover what goals or targets are desired to be achieved by management. The following can be stated as the main aims of management: 1. Survival of the Enterprise. This aims at trying to ensure that an organization continues to exist in the future despite competition from external forces and changes in environmental conditions. Every management needs to be dynamic enough to anticipate changes and also be prepared to manage them so that an organization can survive successfully. 2. Profitability of the enterprise: The main aim of any business is to earn profits and it is the management of any enterprise that strives to achieve that aim by making meaningful decisions for the success of the organization. 3. Building up the image of the organization . This refers to the establishment of a good name for a business and then striving to maintain it. Businesses like Wipro, Reliance, Toyota, Nokia, General Motors, etc. have all been led by management teams that have worked hard to ensure that their organizations were at the helm in their respective fields so that they have the special advantage that goodwill brings to them. 4. Aiming to Expand the Business. The is essential in order to increase the profits because there is a direct relationship between the scale of operations and the earning of profits. It is no wonder

then, that multinational corporations normally earn the highest profits. Naturally, every management must try to increase the scale of operations. 5. Supply of Quality Goods at Reasonable Prices. This is essential because consumers these days are very aware of their rights and do not accept sub standard products / unreasonable prices. Therefore the sellers need to take account of these facts and the managements must act accordingly. 6. Environmental protection and conservation. With growing awareness of environmental protection and the increasing laws applicable to the business sector it has become very important for the management of business enterprises to ensure that their organization does not defy and laws and in fact, contributes positively to the conservation of natural resources as well as environmental protection. 7. Promotion of Moral Values. It is believed that modern managers generally adopt ethical principles in the process of managing. This practice would help people in distinguishing between the right and the wrong aspects in life and thereby promote a more civilized society. 8. Payment of Taxes on Time to the Government. This becomes possible due to the maintenance of appropriate records, which makes it easy to calculate the correct taxes. Moreover, the existence of ethical managements makes it necessary to pay taxes on time. 9. Employment opportunities. Management is a field where there are plenty of job opportunities. This is true whether or not a person

possesses specialized managerial education from business schools. With the growing world economies and increasing globalization, the job opportunities extend not only to ones own country but also to other parts of the world if people are prepared to take up the option. 10. Fair wages and reasonable working conditions for employees. Most modern managements recognize the fact that satisfied employees lead to organizational success. They, therefore, make an attempt to provide as many facilities as are possible, for the employees so that the organization may finally gain. Thus, whether it is fair earnings or good working conditions or free travel etc., the aim is to make the organization finally gain. 11. Provision of Training and Development Opportunities. Every contemporary management aims to improve the efficiency of its work force because that would led to organizational efficiency. This would also include the ascertaining of the employees that need to be trained from time to time and all other such measures that an organization can take so that the employees feel generally good working where they are. The importance of this aspect lies at the core of the increasing importance of the concept of Human Resource Management. 12. Job Security and Job Enrichment for workers. This is related to the previous point to the extent that it deals with the aspect relating to employees. In this specific case, there is emphasis on the provision of a sense of security to the employees so that they can work more efficiently they need to be free from the problems

associated with the thought What happens if I am jobless tomorrow?. Objectives of Management at a Glance 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. Survival of the enterprise Profitability of the enterprise Building up the image of the organization Aiming to expand the business Supply of quality goods at reasonable prices Environmental protection and conservation Promotion of moral values Payment of taxes on time to the government Employment opportunities Fair wages and reasonable working conditions for employees. Provision of training and development opportunities for the workers Job security, job enrichment for workers.

Management can be interpreted as an activity, process, discipline and as a group MANAGEMENT AS AN ACTIVITY We know that: Dancing is an activity Trekking is an activity Painting is an activity Why?

The underlying answer is that they all involve the doing of something. What about management does it involve the doing of anything? The answer is Yes! in that case, it is reasonable to regard it as an activity. The question that can arise is what does management do? The answer is that it consists of making and implementing decisions for the purpose of achieving targets. Or, as Harold Koontz has observed, it is the art of getting things done through and with people in formally organized efforts. Thus, management does the work of setting goals (through the various plans) and then it does the work of getting people to achieve those goals. All these involves considerable decision making and therefore this forms the decision making activities performed by the management. The other activity is related to the passing on of information and such activity is entitled informational activity. Finally, management performs activities connected to maintaining good relations among the people working in the organization and such activities are entitled inter personal activities, e.g. addressing the grievances of subordinates. MANAGEMENT AS A PROCESS Some people regard management as process. What then is a process? The answer could be a course of action or a manner of working or a route taken, etc. The underlying idea is that a process involves a series of steps for the purpose of accomplishing some goals. It is, therefore, like cooking

or tailoring or computer programming or even surgery, all of which involve the performance of a series of steps, in order to achieve specific targets. The process of management likewise involves certain steps like planning, organizing, staffing, directing and controlling all of which are undertaken for the specific purpose of accomplishing targets like profit earning, employee welfare, customer satisfaction, etc. As a process, management is regarded as a social process because it aims to make people work together, it is also regarded as an integrating process because it aims to ensure that all the resources (financial, physical and human), work together in an integrated manner and management is regarded as a dynamic or continuous process because it never stops rather, it is carried on continuously. MANAGEMENT AS A DISCIPLINE When viewed in this context, management is considered to be a specialized field of knowledge, which is not only studied as a distinct field of knowledge but also has extensive application. The western world has already recognized the importance of management by making it essential to appoint qualified managers for large scale organizations, the underlying assumption being that the more qualified they are, the better is their ability to make successful decisions. Qualified managers would mean those managers who have studied the theory of management and also learnt to apply it. They should have

completed the requisite course of study that are available and accordingly make management eligible to be considered as a discipline. Management can be considered to be a multidisciplinary subject, as it is a combination of various subjects like economics, statistics, sociology, mathematics, psychology, anthropology, etc. Also, the study of management can be divided into several sub fields like production management, financial management, marketing management etc. Management is being studied as a discipline these days both within the country and globally. There are numerous management schools or institutes imparting the required knowledge and there is great demand for qualified managers. No one can deny that there is a high premium on the products of elite business or management schools like the Indian Institutes of Management in India and the Harvard Business School in the United States. MANAGEMENT AS A GROUP A group is understood to be a collection or assembly of various people, e.g. a group of students, a group of teachers or a group of employees or even a group of managers. Thus, when management is regarded as a group, it is viewed as a collection of people who are doing the work of managing or organization. The group may be divided into several levels, viz. the top level, the middle level and the lower level. The group would include managers at various levels of the organization (top, middle and supervisors) but the fact is that together all the levels form the group of management. For example, the management of

Reliance Industries or the management at Infosys or at Coca Cola or at the Reserve Bank of India etc. Thus management being universal, the group will be found everywhere irrespective of the size of the organization, the country being considered or the type of industry being researched, etc. some people suggest that when referred to as a group, management includes only the top level people this cannot be denied but it applies in a narrow context. Thus, according to Drucker: Management is a multipurpose organ that manages a business and manages managers and manages workers and work. IMPORTANCE OF MANAGEMENT It can be seen by one and all the management is becoming a very important activity these days and qualified managers are much sought after persons, as is entry to good management schools, like the Indian Institutes of Management. This would lead one to accept that management serves a important and useful purpose. Fortunately, these are no two opinions about this conclusion and thus one needs to study the aspects that make management so important. Some of these aspects are: 1. Best Use of Owned Resources: It is essential that the resources available to a business be used in the best of most efficient manner so that the business is able to earn the maximum from those resources. The efficiency of the management normally determines the degree of efficiency with which the resources are used. Efficient managers will be able to decide with greater precision about the type of goods / services that should be produced and

marketed, the type of labour to be hired and the accompanying remuneration packages and many other important decisions relating to the organization. 2. Best Use of National Resources. Efficient managements not only benefit the organization that they look after, but also the entire nation. This happens because the efficiency of one organization can lead to the conservation of resources of the nation since each one makes a difference. Thus, Dhirubhai Ambani, the late founder of Reliance Industries was able to increase his personal, corporate and national wealth by simply managing his organization in an efficient manner. 3. Lowest Possible Costs. This aspects relates to the fact that it is the duty of any management to ensure, that wherever possible, it should reduce the cost of operations. This is on account of the simple logic that profit (the main goal of any business) is the difference between the sales revenue and the cost of sales. It is therefore possible to improve profits by reducing costs, wherever possible. However, it should also be remembered that lowering of costs should not be achieved at the expense of quality of products / services, e.g. the Indian Railways should not aim to reduce the fare of its Shatabdi trains by offering poor quality food or reduced efficiency in services to customers. Thus, the management seeks to lower the costs at any predetermined level of quality of operations. 4. Improving Human Relations. Management is important because it aims to improve the relationship between the people working together in an organization. Good managers know that the

efficiency of an enterprise is determined greatly by the level of satisfaction of the people working therein and therefore they strive to provide an environment for the best performance of the people in the organization, and ultimately benefit everyone involved. 5. Achieving organizational goals. This is achieved by the efficient combination of the different factors of production which is the main task of any management. It is the management that is responsible for acquiring the various resources, deciding how they are to be combined and then implementing their decisions. The management must also check on the efficiency of its decisions by collecting information from the dealers, suppliers, customers, etc. and then make the required changes for the future. 6. Creating job opportunity. These days, there are many jobs for managers and real life experiences will vouch for the fact that efficient managers are able to command very good remuneration. Ever since 1991, when liberalization on a large scale was introduced in India, leading to the entry of the multinational companies, which in turn brought in expert management and the accompanying high salaries there has been in an all round interest in management jobs in this country. The opportunities are numerous despite the competition but the fact is that management is now a lucrative source of employment. Importance of Management at a Glance 1. Best of owned resources 2. Best use of national resources 3. Lowest possible costs

4. Improvement of human relations 5. Achievement organizational goals 6. Creating job opportunity. LEVELS OF MANAGEMENT In management the word level is used to refer to the differences in the degrees of importance enjoyed by the various people managing an organization. The importance consists of the right to make decisions for the organization and everyone can agree to the conclusion that in all organizations there are some people whose decisions affect the entire unit, while there are three levels of management i.e. top, middle and supervisor (low). Top Level This is so named because it includes that part of management which enjoys the maximum importance in the organization. It includes the owners of a business and also their chosen representatives appointed for the purpose of making overall decisions, eg. The Manager, General Manager, Managing Directors etc. Such people are rarely seen to be doing any work in fact they appear to be enjoying themselves. The fact, however, is that they are the ones who make decisions that can make or break the organization and there fore shoulder the entire responsibility of the organization. They: (a) Set the overall goals (b) Choose the important personnel (c) Communicate important decisions to the concerned people (d) Link all the people / departments / regions

(e) Check the working of the branches and departments Middle Level This normally consists of that level of management, which provides assistance to the top managers for the purpose of managing the organization. It is known as the middle level of management because it is in the middle of the top and the low levels of management and it has the function of linking both the other levels to one another. This level has less authority than the top level and naturally its area of responsibility is also limited as compared to the top level. This level generally includes Assistant Managers, Deputy Managers or even Area Managers, in the case of those organizations that have offices in different areas. Supervisor or Low Level This level of management consists of all those managers who operate at the lowest levels of authority in an organization and do not have any managers working below them. Also known as operative management, it is this level, which has an authority to get work done from others. This level includes Factory Supervisors. Factory forement. Office superintendents. Section officers, etc. and such manager arrange for the performance of the actual work on a day to day basis by assigning work to people, arranging the required resources conveying the essential instructions and providing guidance wherever needed.

LEVELS OF MANAGEMENT

TOP MANAGEMENT (Board of Directors, Chairman, Managing Director, General Manager)

MIDDLE MANAGEMENT (Departmental heads, Viz. Marketing Manager, Production Manager, Manager Finance)

LOWER MANAGEMENT (Office Manager, Superintendents, General Foremen, Foreman, Chief Clerks Supervisors)

NATURE OF MANAGEMENT Management as a Science The world science brings to mind subjects like physics, chemistry, biology or other such subjects that have a systematic and organized content, which is also supported by practical experiments. If one looks into the details of the term science, the following features can be distinguished 1. 2. 3. There exists a systematic and organized field of knowledge There exists a cause and effect relationship between the different variables under consideration The principles are developed through observation, experimentation and analysis

4. 5.

The truth of the principles can be tested under the specified conditions The principles apply universally

Having listing the features of a subject that qualifies as a science, it is now time to ascertain whether management is a science. For this purpose, it is essential to relate the above stated features to management. 1. As an organized field of knowledge . Does management have this quality? The answer to this one is a definite yes! There exist various principles, theories and extensive research work related to management. 2. Cause and effect relationship between the various elements . This is true of management too. The underlying reason is that the principles have been developed through a study of the cause of certain behaviour and its resulting effect. Take the example of Piece Rate Payment Plans they suggest that if a person is paid according to the number of units (pieces) produced, he / she will try to increase the output. 3. Principles Developed through Experiment and Analysis. This feature is also applicable to management since the management theories and principles have been developed after carefully observing and experimenting with the behaviour of human beings. An important management theory is Taylors Scientific Management and in that he has brought out the fact that if human beings work in harmony they can increase productivity.

4.

Testing of Theories and Principles. This one also applies to management because under the stated conditions managerial theories can be tested for similar results.

5.

Universal applicability. Although

there are some managerial

principles and theories that appear to apply universally, i.e. to all the all the aspects being considered mostly this is where managerial theories fail to pass the test, unlike the other science subjects. For example, it is a scientific fact that a burning object will be extinguished if it is deprived of oxygen this fact applies whether the fact is tested in India or Egypt or Australia or Canada! However, in the case of management theories, this need not happen. A theory application in America need not have the same conclusion in India or elsewhere, for the simple reason that management relates to human behaviour and that is different places and also at different times thereby altering the conclusions at various times of experimentation. Take the case of Money as an incentive! In India it may be possible to motivate an employee by offering more money for more work but in Germany, it may not be possible to do so especially at the higher income levels for the simple reason that the Indian worker behaves in a different way compared to the German worker. Thus, management can be regarded as a science to a large extent but not in an exact sense. Since it fails to satisfy all the principles applicable to a science. It would therefore be reasonable to regard it as a behavioral science because the outcome of managerial principles depends on the behavior of human beings.

Management as an Art When we think of an art, we think of drawing, painting, acting, dance, music or any other such activity that requires some kind of skill or talent that a person is born with. Some of the distinct features of an art are: 1. The existence of individual skill or talent 2. the existence of a creative approach 3. the existence of practical knowledge 4. the ability of apply the knowledge and skill for achieving desired results 5. Results practice by the individual. The reader would surely agree that all these features would be present in the lives of Lata Mangeshakr, M.F. Husain, Amitabh Bachan, Picasso. Mozart, Pandit Ravi Shanker, Ustad Amjad Ali Khan and Many other artistic personalities. The question that needs to be considered now is whether management is an art and to find the answer we need to correlate the features of an art with management. 1. Existence of Individual Skill or Talent. This feature is clearly visible in management because every manager has his / her own style of managing the work and the level of skill and talent possessed by him / her will determine his / her style. This aspect may be contradicted by the products of management schools who believe in the principle that managers are made not born, but the can, in turn easily asked to explain the existence of successful managers from the business world who may even be totally illiterate! We shall leave this matter to rest on the conclusion that in order to be a successful manager one needs to possess skill and

talent. The example of the late Dhirubhai Ambani who is a success story in managing Indias largest private enterprise, Reliance, bears fruit to this conclusion. 2. Existence of a Creative Approach. This implies the desire to make something new something that does not already exist. Management also satisfies this feature of an art since each manager in order to accomplish the work. In the process he/she may discover and create new things and new ways of doing the assigned jobs. 3. Existence of Practical knowledge. This refers to the availability of various aspects of knowledge relating to a subject and the use of that knowledge in actual life. Just like any other art, management also has many theories, principles and in fact, extensive knowledge to be acquired about the subject. There is full scope to apply the knowledge in real life and accordingly management is also regarded as an art. 4. Ability to apply the knowledge to Achieve the desired results . The mere existence of knowledge is not enough there should be an attempt to apply or use that knowledge if a subject is to qualify as an art. This aspect is satisfied by management because the existing knowledge on the subject is actually put into use for the purpose of accomplishing the goals of the organization by regulating human behaviour e.g. one theory of management because the existing knowledge on the subject is actually put into use for the purpose of accomplishing the goals of the organization by regulating human behaviour e.g. one theory of management suggests that a worker is subject to fatigue levels after

accomplishing a certain level of work and therefore needs to be given some rest. This theory is put into actual practice by managers in the form of rest time or breaks (something which we get even while watching television). 5. Regular Practice by the Individual. Every art requires that the practitioner be regular in applying the art if he / she desires to improve the subsequent performances. The underlying philosophy of the maxim is practice makes perfect. Thus, dancers like Raja and Radha Reddy will improve their performance with regular practice, as will Lucky Ali or Adnan Sami (the singers). This aspect is visible in management also because the more experienced the manager, the better is his ability to manage. No wonder then, there is such a high monetary package for experienced manages. From the above analysis it is possible to conclude that management is more of an art than a science some people go as far as to say that managing a business is an art and not a science. Management as a Profession To recognize any body of knowledge as a profession, one has to look for the following distinct features. 1. There should be specialized 2. the entry should be regulated through testing / examinations 3. There should be a strict code of conduct prescribed for the persons practicing the profession. 4. There should be an inherent motive of service to the people,

5. There should exist a regulating agency for the working of the professionals. All these features can be found in professions like Law, Medicine, Architecture, etc. However, one needs to determine if they are present in the case of management because if they are not, then management cannot be regarded as a profession. 1. Specialized Knowledge. Is there specialized knowledge relating to management? The answer to this one is positive, because there is sufficient theoretical knowledge related to management that has been developed over the previous century. Outstanding managerial writers include Taylor, Fayol, Drucker, Sheldon, Lyndall, Urwick and many others. Since management is regarded as a dynamic subject, there is research effort being made even now and therefore there will be improvements and more new theories on the subject, in the future. 2. No regulated Entry. Is there any restriction on individuals regarding the entry to management? In other words, does a person have to compulsorily pass any tests / examinations in order to become a manager? The answer to this one is negative, because in reality, anyone can be a manager tests and examinations are not necessary to become a manager. If a person has the ability to organize people get them to work jointly, he will be regarded as a managers (think of Mahatma Gandhi). Of course, there are people who become managers, after pursuing simple and complex

managerial courses, but the fact remains that there is no restriction on the entry to management. 3. No code of conduct. Is there a strict code of conduct regulating the working of the members? The answer to this is also negative since there is no code of conduct for the working of managers and each manager is on his / her own. 4. Motive of Service. Do managers work with the aim of service to the people? This is a debatable point since some people feel that it is only money that motivates managers and they are willing to compromise on all levels so long as their decisions get them the monetary return. On the other hand, there is a school of thought that feels that managers work together with people in order to achieve the goals of an organization and therefore they have an attitude of caring and understanding their subordinates. Thus, they work with a service motto. We can then conclude that to some extent managers work with a service objective. 5. No regulating agency. Is there an agency that regulates the working of managers? This aspect will also be answered in the negative because in India there is no such organization that governs / regulates the working of managers? The existence of the All India Management Institute may be cited as an example of a central level governing body for the working of managers but the fact remains that it is not in a position to lay down rules and then enforce them with regard to managers. Even on the global level, there is no such governing body.

The obvious conclusion then is that management is not a profession. This section can then is that management is not a profession. This section can then be summed up as follows management has some principles that have been scientifically derived (to that extent it is regarded as a science), it even exhibits certain features of a profession (there is the existence of specialized knowledge) but over and above all the related aspects, it is more of an art than anything else. This finding is based on the fact that management is practical in nature since it aims to deal with reality and it definitely improves with practice like any other art. MANAGEMENT AND ADMINISTATION Consider the following: In a business organization, when a newly appointed worker met with an accident while at work and had to be subsequently hospitalized, the question of granting a leave of absence could not be decided by his immediate boss he was informed that the matter was under managements consideration. It was only after the administration rules on the matter, would the employee know, whether he was being granted a leave of absence. Having read the above example, it is possible that some readers of this text would conclude that management and administration are two different words that have a similar meaning and can therefore be used interchangeably. This conclusion is not entirely incorrect but actually it is incomplete. Management and administration are two different terms and are regarded as such by one school of thought while another school of thought regards them a different terms.

Management and Administration are Interchangeable Terms. This school of thought believes that managers as well as administrators are those people in an organization who make decisions at various levels throughout an organization and therefore they are essentially the same the terms management and administration interchangeable authors like Henri Fayol, McFarland, Koontz and Duse hold this view. Management and Administration are Distinct Concepts . This school of thought believes that the two concepts are different from one another. However, there is no consensus on the nature of difference between them. The European writers believe that management is the all important aspect since administration is only a part of it, while the American writers feel that it is administration that is supreme or most important and that management is subordinate to it. The further explain the concept the Europeans feel that management is the most important activity undertaken in any organization because it involves undertaken in any organization because it involves the making of over all decisions and policies of the organization. Administration on the other hand, is concerned with the implementation of the policies laid out by the management. The American think the reverse because they believe that it is the administration that lays down the policies for the entire organization while management is concerned with the execution of the policies. Thus, according to the Americans, it is administration that is most important and management is subordinate to it. The importance of administration is

visible as one goes up the levels of management and simultaneously, the significance of management decreases thus, the two concepts have an inverse relationship. ADMINISTATION AND MANAGEMENT
Administration

Top Middle Supervisory

Management

Management and Administration at a Glance

Basis of difference 1. Essence 2. Level at which practiced 3. Commonly used in 4. Affected by 5. Generally undertaken by 6. Aim 7. Important at 8. Title of practitioner Management It is a going activity Middle and low Business organizations Internal environment Employees To implemented policies Middle and low levels of Administration It is a thinking activity Top Government organizations External environment Owners To formulate policies Top level of the

an organization organization Manager, Managing Minister, Governor, Director, Manager etc. General Commissioner, Registrar etc.

New Terms Learnt Management It consists of getting work done through the effort of other people. Management as an activity consists of the doing of some thing. Management as a Process Consists of the performance of a series of steps, in order to achieve specific goals.

Management as a Discipline Refers to a specialized field of knowledge Management as a Group Refers to the people who undertake the task of managing an organization. Administration The top level management that has the task of making important decisions for the entire organization. Functions of Management 1. Planning:- It is the conscious determination of future course of action. This involves why an action, what action, how to take action and when to take action. Thus, planning includes determining of specific objectives, determining programmes, setting policies and strategies, setting rules and procedures and preparing budget. Planning depend upon forecastin g. Planning can be long term or short term. 2. Organizing: It is the process of dividing work into convenient tasks or duties to the individuals according to their positions. Organizing functions also includes structure and hierarchy levels in the organization. 3. Staffing: It includes creating human resources for the organization, it includes the function of recruiting, training, fixing financial compensation, appraisal of performance etc. 4. Directing:- When people are available in the organization they must know what they are expected to do in the organization superiors communicate about their goal, then they motivate lower level to work and thus lead them to achieve higher efficiency towards goal.

5.

Controlling:- Controlling

involves identification of actual

results, comparison of actual results with expected results, identification of deviation between two, if any, and take corrective action. So that result match with expected results.

CHAPTER 3 ORGANISING Organizing has defined by Koontz et.al., as the grouping of activities. Which are necessary to attain objectives, the assignment of each such grouping to a manager with the authority necessary to supervise it, and the provision for coordination horizontally and vertically in the enterprise structure. The purpose of organizing is to create an organization structure that is designed to clarify who is supposed to do what and who is responsible for which results; to remove obstacles to performance caused by confusion and uncertainty of assignment, and to furnish decision making and communication networks reflecting and supporting the enterprise objective. Organization is basically used with reference to: A certain company or group of persons working together. E.g. Tata Iron and steel company limited, or Torrent Pharmaceuticals Limited. The organization is a structure or a network with specified relationship among its members. According to G.R. Terry, organizing is the establishing of effective behavioural relationship among selected work persons and work places so that the groups can work together efficiently. According to John Pfiffner, Organization is essentially a matter of relationship

Chester Bernard, Organization is a system of cooperative activities of two or more persons. L.Urwick Organization is the process of dividing up the activities, which are necessary to any purpose and arranging them in groups, which are assigned to individual.

Mooney and Reiley, Organization is the form of every human association for attainment of a common purpose.

PRINCIPLES OF ORGANISATION There is a need to follow certain principles in order to formulate and develop and sound and efficient organization structure. Some of the important principles of organization are as follows: Principles of Objectives: The formulation or organization structure is very much influenced by the objectives of the business concern. In view of this, the objectives of the business concern should be clearly stated. This helps the management in formulating the org structure and also in achieving the enterprise objectives with minimum cost and effort. Principle of specialization: It is similar to the principles of division of work. In this the org structure should be formulated in such a way that the activities of the enterprise are divided according to different functions and the same are assigned to persons according to different functions and the same are assigned to persons according to their specialization. Principles of Span of Control: The span of control should be minimum because there is a limit to the number of persons that

can be effectively supervised by one boss. The number of subordinates may be few or many. This depends upon the ability, the job, the complexity of the duties of the subordinates may be few or many. This depends upon the ability, the job, the complexity of the duties of the subordinates, the nature and importance of the work to be supervised etc. these factors should be considered at length before taking any final decision in this respect. Principles of Exception: Only exceptionally complex matters should be referred to the executives for their decision and the subordinates themselves should decide matter of routine nature. This is necessary because the executive at a higher level instead of spending their time for deciding routine matters can concentrate on more important matters. The Solar Principle: This principles is sometimes known as the the chain command also. The line of authority should be clearly stated. The line of authority from the Chief Executive at the top of the enterprise to the bottom must be clearly defined. The principle of Authority: authority is the element of Org Structure. It is the tool by which a manager is able to create an environment for individual performance. So the responsibility and authority of each manager and supervisor should be clearly defined. Authority that is given to the manager enables him to accomplish the objective of the enterprise. Hence the authority, should be clearly defined and it should be equal to the responsibility entrusted to him

The principle of unity of command : according to this principle, each subordinate should have only one superior and dual subordination should be avoided. Dual subordination may result indiscipline of subordinates, under mining of authority, disorder, delay and confusion. This principle avoids the possibility of conflicts in instructions and develops the feeling of personal responsibility for the work

Principle of Delegation: The org structure should provide for the delegation of authority at every level. The authority delegated should be equal to responsibility so as to enable the concerned person to accomplish the task assigned to him by his superior.

Principle of Flexibility: The org structure should be such which should be adaptable to the changing circumstances. There should be a possibility, if the circumstances warrant, for expansion and replacement without disrupting the basic design of the structure.

Principle of simplicity: The org structure should be simple with a minimum number of levels. If the org structure has a large number of levels, the problem of effective co-ordination and communication may arise.

Principle of Continuity: There should be continuity in the org and it is possible only if the org is dynamic and capable of adopting itself to the needs of changing circumstances.

Principle of Unity of Direction: It means, for a group of activities having the same objective, there should be one plant and one objective. The facilities verification and coordination of activities and also completion of task as per the schedule.

Principle of Efficiency: The structure that is formulated should enable the business concern to function efficiently and achieve its objectives with minimum cost and effort.

The principle of Balance: In every org structure there is need for balance. For effective grouping and assigning activities, this principle calls for putting balance on all types of factors human technical as well as financial.

Process of Organization Organization is a continuous process. Even after the organization has been created, changes may need to be made from time to time. Since the org is created in order to meet the enterprise objectives. It must change whenever what change can help achieve the organizational objectives better. The process of org. as described by Koontz et.al. is a follows: 1. Establishment of enterprise objectives 2. formulation of supporting objectives, strategies and plans 3. Identification and classification of activities necessary to accomplish these objectives. 4. Grouping these activities in the light of human and material resources and best possible way of utilizing them and assigning responsibility for performing those activities. 5. Delegation to the lead of each group, the authority necessary to perform activities in effective manner.

6. Coordinating those activities horizontally and vertically through flow of information and authority relations.

DEPARTMENTATION This first real task in designing an org structure is the identification of activities and top group them properly. The process of grouping the activities is commonly known as departmentation. The terms used to denote the departments that result from departmentation are different as in the business organizations, such terms as division, departments and section are used. In government, these are called branch, department, bureau and section, in military, these are referred to as battalion, group company, etc. moreover, the terms used to designate departments may differ in different organizations of the same nature. However, the process of departmentalization will remain the same. Need and importance of Departmentation 1) Advantages of specialization: The basic advantage of the specailisation lies in terms of efficiency with which the work is performed because a person focuses his attention on a narrow aspect of the work and he gets mastery over that aspect. Naturally, this results into performing the work more efficiently. Thus, if the managerial function is conceived as a set of activities facilities the work of the org. these activities can be carried out more efficiently and effectively through the division of work leading to a specialization of managerial function. 2) Fixation of Responsibility: Departmentation helps in fixing the responsibility and consequently accounting for the results. Responsibility can be discharged properly when it is clear, precise and definite. Through departmentation, the work is fixed accurately. The manager concerned to whom responsibility and

authority are clearly specified, a manager knows what exactly he has to do in the org. this helps the manager to become more effective. 3) Development of Managers: Departmentation helps in the development of managers. Development is possible because of the two factors. First, the managers focus their attention on some specific problems, which provides them effective on the job training. Second, managerial need for further training can be identified easily because the managers role is prescribed and training can provide them opportunity to work better in their area of specialization. Thus, need for training and its methods can be easily identified. 4) Facility in appraisal: Managerial performance can be measured when the area of activities can be specified and standards in respect of these can be fixed. Departmentation provides help in both these area. When a broader function is divided into small segments and a particular segment is assigned to each manager the area to be appraised is clearly known: the factors affecting the performance can be fixed easily because factors affecting the work performance can be known clearly. Thus, performance appraisal will be more objective when departments have been created. 5) Feeling of Autonomy: Departmentation provides motivation by developing feeling of autonomy to the extent possible. Normally departments are created in the org with certain degree of autonomy and freedom. The manager in charge of a department can take independent decisions with in the overall framework of the org.

thus, he enjoys satisfaction of being important to the org. This feeling itself is a source of better performance among managers. BASES OF DEPARTMENT There are several bases of departmentation 1. Functional department 2. Product department 3. Territory department 4. Process department 5. Customer department Functions The grouping of common activities to from an org unit is known as functional departmentation. Functional departmentation is the most widely used basis for organizing activities and is present almost in every large org at some level. Since functional departmentation can be adopted at various levels of the org., the various functions of the org are divided into basic and secondary functions. Basic Functions: The basic or major functions are those, which are essential for the organizations, and their operations contribute to the organizational efficiency. E.g. in a manufacturing org, basic functions may be produced. Marketing and finance. Similarly company, financing in a finance activities may be basic functions. Thus, basic

functions are determined on the basis functions are determined on the basis of their importance to the achievement of organizational activities.

Secondary Functions: When departments are created on the basis of major functions and a manager feels that his span of management is too wide to manage effectively or take the advantages of specialization, he may create departments within the major functional department. Such departments will be created by dividing the major function into sub functions. This process may go down further when a department may be created at the top level. However, in order to perform marketing function properly, particularly in large organization. It may be divided into selling, marketing research, advertising etc. further advertising may be divided into print media advertising. T.T. Advertising etc. Thus the process of functional differentiation will continue through several levels in the org. Advantages of Functional Departmentation: Advantages of specialization Ensuring performance of activities necessary for the achievement of organization objectives. Elimination of unnecessary activities. Maintaining the relative importance of functions in the org.

Disadvantages of Functional departmentation Lack of responsibility for the end results Over specialization and consequently lack of general

management point of vie Problems of conflicts and coordination among functional departments

Therefore the functional departmentation is useful only up to top or immediately below the top level. Production Departmentation: Product departmentation involves the grouping together of all activities necessary to manufacture a product for product line. As the org grows in size, it becomes difficult for managers to coordinate the activities of the expanding product lines. One commonly adopted strategy is to establish departments based on products. Product departmentation is preferred expansion and diversification when manufacturing and marketing characteristics of each product are of primary concern. It is generally used when the product is relatively complex and a great deal of capital is required for plant and other facilities such as automobile electronics. Advantages of product departmentation Beneficial for multiple products Takes care of product lines more efficiently Reduces problems of coordination for different products Provides opportunities fur further diversification and expansion of org Provides product specialization necessary for managers specially when each product is different from others.

Disadvantages of product departmentation Problem at top level management for coordination, multiplicity of efforts because same functional staff services. Territory Departmentation Territorial or geographical departmentation is specially useful to large sized organizations having activities which are physically or geographically spread such as banking insurance, transportation, etc. In such as case, all the activities in a given are of operations are grouped into zones, branches, divisions etc. The assumption is that if markets are widely dispersed, an improved cost profit situation will result if all activities affecting a product line or service in a specific geographical region are grouped totter. E.g. LIC. Advantages Territorial departmentation is specially to large scale organizations of other organizations whose activities are physically or geographically spread In such cases, territorial departmentation provides certain efficiency in operation. Local factors such as customers, culture, styles, preferences etc. always affect organizational functioning. In fact, the same kind of work is always different when location is different. Thus, facilities are required for different products and problem in maintaining economical central

knowledge of local conditions is an important element in effective management. Moreover, some costs of operations can be save for example, serving of customers at different location. The corresponding facilities are created looking into the needs for local conditions. Territorial depatmentation may provide training to mangers to look after every aspects of organizational operations. Therefore, they can develop a skill of looking at the org as a whole and can progress at the tope level of the org where general management qualities are needed. Disadvantages : The first importance problem is of communication. However, this problem can be overcome without much difficulty once the system of communication is developed added with modern communication facilities. Another problem that comes in the way is the distance between policy framers and policy executors. Often both of them are at a distance not only in terms of physical distance but also in terms of mental distance because of different local conditions. However, this problem can be overcome by providing suitable training to the managers concerned. Some problems or coordination may also arise between top level and territorial level managers as some of the functions are to be performed at the head office level. This arrangement requires

many managers with general management skills. Therefore, training and development should be a continues process. Process Departmentation: The process departmentation processes involved in the production or various types of equipments used are taken as basis for departmentation. When the production activities involve the use of several distinctive processes, these can be used as the base for grouping of activities. Such activities may be textiles, oil production etc. Advantages: The basic purpose of such departmentation is to achieve economic advantages. The processes are set in such a way that a series of operations is feasible making operations economic. In such a case, efficient can be achieved if department are created for each process as each has its peculiarities. It provides advantage of specializations required at each level of total processes, maintenance of plant can be done in a better way and manpower can be utilized effectively. Disadvantages This arrangement has the problem of coordination because the work of each process is dependent fully on the entire process. Therefore, there are chances of conflicts among managers looking after different processes. However, this problem can be overcome

by developing suitable norms and understanding among managers. Another problem that comes in the way is the distance between policy framers and policy executors. Often both of them are at a distance not only in terms of physical distance but also in terms of mental, distance because of different local conditions. However, this problem can be overcome by providing suitable training to the managers concerned. Some problems of condition may also arise between top level and territorial level. This arrangement requires many managers with general management skills. Therefore, training and development should be a continues process. Process Departmentation The process departmentation, process involved in the production or various types of equipments used are taken as basis for departmentation. When the production activities involve the use of several distinctive processes, these can be used as the base for grouping of activities. Such activities may be textiles, oil production etc. Advantages: The basic purpose of such departmentation is to achieve economic advantages. The processes are set in such a way that a series of operations is feasible making operations economic. In such a case, efficient can

be achieved if department are created for each process as each has its peculiarities. It provides advantage of specializations required at each level of total processes, maintenance of plant can be done in a better way and manpower can be utilized effectively. Disadvantages This arrangement has the problem of coordination because the work of each process is dependent fully on the entire process. Therefore there are chances of conflicts among managers looking after different processes. However, this problem can be overcome by developing suitable norms and understanding among managers. Customer Departmentation Customer based departmentation is basically market oriented in which departments are created around the markets served or around marketing channels. While both these approaches to departmentation are used to emphasis marketing and make it more effective they differ in some respects. Grouping of activities around marketing channels involves making an org structure reflect the ways an org reaches an ultimate customer market centered grouping supports marketing efforts for different types of customers. Therefore such a grouping is suitable to these organizations which either serves different customers such as a pharmaceutical company supplying to hospitals government, retail stores

etc. for applying different marketing channels like wholesale, retail, installment and hire purchase, export etc.

Advantage of Customer departmentation If focuses on customer who are the ultimate suppliers of money to the org. Therefore different types of customers can be satisfied easily through specialized staff. In fact the basic idea of this departmentation is to provided services to clearly identified, group of customers. Each group of customers has different purchase behaviour, payment schedule, demand pattern, etc. Therefore, they can be attracted to the organizations business by satisfying them by providing services most suitable to each of them. Disadvantages Coordination between sales and other functions becomes difficult because this method can be followed only in marketing division. Duplication and confusion may raise in product, research and development activities as well as in manufacturing, as the market oriented managers demand special attention and services. This may generate more conflicts in the org. Further, there may be unemployment of manpower in some departments, specially when demand for the customer group decreases. Therefore, customer oriented departments should be created to the extent they justify their existence.

DELEGATION OF AUTHORITY Delegation of authority is one of the important factors in the process of organizing It is essential to the existence of a formal organization. To delegate means to grant or confer. Here delegation means conferring authority from one manager or organizational unit to another in order to accomplish particular assignments. A manager simply does not delegate authority: he delegates authority to get certain work accomplished. By means of delegation the manager extends his area of operations, without delegation, his actions are confined to what he himself can perform. Features of Delegation The Important features of delegation are as follows : 1 Delegation of Authority : Delegation of authority is an authority to a manager to act in a certain manner. The degree of delegation defines the limit within which a sub ordinate manager has to decide the things .Being formal authority org at top level. it is distributed delegation or re- delegation. 2 Person Delegating Holds Authority : A sub- ordinate staff receives authority from his superior still holds his original authority. 3 Delegated Authority can be enhanced, reduced or withdrawn : This may happen at any time depending upon the situation and requirement E.g. Change in policy. Procedure or method etc may bring a change in the degree of delegation of authority.

No delegation without Authority : A manager cannot delegate authority , which he himself does not possess. or what is vested to him.

There cannot be total delegation : A manager cannot delegate the entire authority vested in him because if he delegates all his authority. He is no more required. Therefore only a part of the authority is delegated.

Delegation may be general or specific : Delegation is called specific when courses of action for particular objectives are specified. It is general when these are not specified. Though objectives may be specified, delegation may also be formal or informal written or implied.

Authority to delegate depends upon several factors : These factors are the ability of the executive to delegate, the ability of the subordinate to accept delegation, the philosophy of management the confidence of the superior in the subordinate etc.

No escape from Responsibility : No manager can escape from his obligation by delegation authority to sub ordinates. Therefore, he has to provide a means to check whether the work assigned to the subordinate has been done as the wishes.

Importance of Delegation of Authority The Importance of delegation can be judged from the following 1 It has dynamics of management and essence of sound organization: It has been observed that an individual cannot manage an control everything in the org due to various limitations. Therefore, he has to divide the work load and share the responsibility with his subordinates. When a mans job grows beyond his capacity, he must share it to get it done successfully through other people. 2 It is an art of getting things done : Delegation of authority has been recognized as an art of getting things done in the best possible manner. By delegating, the superior or senor share their workload with others and concentrates on more important policy matters. He is relieved of the routine matters. 3 It establishes healthy relationship : In this healthy relationship between the executive and his subordinates are established. it increases interaction and understanding among managers and subordinate. It is managements best technique to help, to improve the job satisfaction, motivation and morale of subordinates. It is helpful in satisfying the needs for recognition responsibility and freedom. 4 It facilities management authority: A manager who does not delegate. It is because of simple reason that the management harnesses fully the skills and the capabilities of the sub ordinates. Therefore the managers cannot do much more than they could do if they had not delegate. By delegation they multiply themselves.

5 Delegation aids to executive development Delegation aids to managers at lower levels to get valuable experience in decisionmaking. They develop their abilities and team fill the higher position in case of need. It facilities the diversifleation and expansion of business through a team of component and contented workers. Its is practically definite that an org cannot expand itself without delegation. 6 Creation of right and responsibilities : Through the delegation process each position in the org become a cluster of person to function in certain defined ways. high, responsibilities, relationship and obligations, which demand the

Principles of Delegation Delegation of authority is a conscious effort on the part of the manager. Therefore, in delegating authority, he should observe certain principles so as to make delegation effective. 1 Delegation by Results Expected : Delegation should be based on results expected from a position in the org, Delegation by results expected implies that planning exercise has been taken and goals for each position have been set, communicated and properly understood by those who are responsible for achieving these golas, Often managers fail to delegate adequately because either they have very vague ides about the contributions of their subordinates or they just do not bother to determine whether the subordinates have authority to do the things. 2 Functional Definition : Closely related with the principle of delegation based on results expected is principle of functional definition. In an org, activities are classified and grouped to create departments or units. Each department contributes to organizational objectives but at the same time has its own objectives. Thus, there is a need for coordination of objectives and activities of the department in such a way that they contribute maximum to the org. This gives rise to the principle of functional definition. The more a department has clear definitions of results expected, activities to be undertaken, authority delegated and authority and information relationships with other departments. The more adequately the department can contribute towards accomplishing the organizational objectives.

Clarity of Lines of authority :Each position in the org is linked with others through authority relationship: some directly through line authority, others indirectly. More clearly these lines of authority are defined, more effective is the delegation of authority. In this respect, classical authors have given two principles, which guide the delegation of authority. These principles are scalar chain and unit of command. Scalar chain principle refers to the chain of direct authority and relationship from superior to subordinate throughout the org. Clearer the line of authority from the top manager to every subordinate position in the org, the more effective will be responsible decision making and organizational communication. The other principle, that is unity of command suggests that a subordinate should be responsible to a single superior and he should receive instructions from the same superior only. The more complete an individual has a reporting relationship to a single superior, the less is the problem of conflict results. in instructions and greater the feeling of personal responsibility for

Level of authority: Authority level principle suggests that maintenance of intended delegation requires that decisions within the authority competence of individuals are made by them and not refers upward in the org structure. Thus, managers should make whatever decisions they can in the light of their delegated authority and only matters that authority limitations keep them from deciding should be referred upward. This is possible if authority delegation is clear and managers at each level are sure what authority they have.

A problem comes when two or more managers can decide the things jointly without referring the matter upward but singly none of them can decide. Such a mater may be related with inter deter mental functioning. A single manager cannot make decision because of splintered authority. Splintered authority exists whenever a problem cannot be solved or a decision made without pooling the authority delegation of two or more manages. Eg. production manager of plant A can reduce his costs by some procedural changes in plan B However. he cannot do this unless he pools his authority with manager of plant B. Alternatively, he can refer the mater upward and positive thing can happen by the action of common superior In such a case it is preferable to consolidated and pool splintered authority rather than referring the matter upward fro decision Splintered authority rather than referring the matter upward for decision, Splintered authority cannot be wholly avoided in making decisions. However, recurring decisions on the same matters may indicate the need for recognition and red legation of authority. 5 Absoluteness of Responsibility : Responsibility is an obligation to get the assigned work done. Since responsibility cannot be delegated, a superior cannot be absolved of his responsibility for the activities assigned to his subordinates to their superiors for performance is absolute; once they have accepted an assignment and the authority to carry it out, superior cannot escape responsibility subordinates. for the performance of activities of their

Parity of Authority and responsibility : A common saying in management is that authority and responsibility should be always equal, It implies that since authority is the discretionary right to carry out assignment s and responsibility is the accomplish them, authority should obligation to to the correspond

responsibility. Thus, responsibility for actions cannot be greater than authority delegated, nor should be less. This parity is not mathematical but, rather, coextensive, because both relate to the same assignment. Blocks to Effective Delegation There are many factors that can blocks effective delegation of authority. Factors in Delegation (Superior) The qualities of superior managers play an important part in determining the kind of functional and social equilibrium that will achieved in the superior subordinate relationships, and consequently the delegation of authority. A superior manager is likely to delegate less authority in the following situations. 1 Love for Authority : A superior will delegate his authority specially if is an autocrat. Such a manager has intense desire to influence others, to make his importance felt in the org. and to see that his subordinates come frequently to get their decisions approved. Such desires on the part of the manager keep him away from delegation of adequate authority to his subordinates irrespective of their needs.

Maintenance of Tight control : A manager does not delegate authority because he wants to maintain tight control over the operations assigned to him. He likes to show business and security created by work piled high on his desk. Doing tangible work is a pleasurable activity, whereas spending ones time thinking planning and other less tangibles is a difficult process. The manager may become habituated to the constant contact of subordinates bringing matters to him for approval.

Fear of Subordinates: A manager may not delegate adequate authority because of fear of subordinate. The fear of a subordinates growth may be real. It can take two forms. The subordinate might show that he can perform the superiors work so well that he becomes entitled to his position, status, title, or prestige. The subordinates increasing ability might earn him a promotion to some other part of the org and the superior may lose the best subordinate.

In this case, the may adopt defensive behavior. He simply fails to delegate simply because adequate delegation may reveal managerial shortcomings being practiced. This may happen specially when the superior has poor operating procedures, methods and practices. 5 Attitudes towards subordinates : Delegation of authority is a particular kind of trust between superior and his subordinates. Therefore his attitude towards subordinates, and their attitudes towards him become important in the process of delegation.

Negative attitudes work against delegation of authority in several ways. If a superior has a lack of confidence in his subordinates capacity he will not like to delegate them authority. The superior may feel that his subordinates just do not require more authority than they have been delegated Such feeling may result into inadequate delegation of authority. The superior may not have good interpersonal relationship with subordinates, which may result into less delegation of authority. 6. Personality of Superior : Personality factors of superior also affect the degree of delegation of authority E.g. An autocrat superior will delegate less authority as compared to a democrat. Similarly, a superior believing in the application of modern techniques likes to delegate adequately. A superior coming from the rank and file may delegate less, Similarly a manager who has not been delegated adequate authority in his career is likely to delegate less.

Factors in Delegant (Subordinates) The degree of delegation of authority is also determined by the qualities of subordinates While superior a perception about the qualities of subordinates plays an important role in delegation of authority, subordinates themselves after the degree of delegation of authority . They affect the delegation in several ways Some subordinates have more capability to assume more responsibility Since responsibility and authority go together, competent subordinates may get more authority. The delegation of authority is formal and institutional but is exercise is personal. Thus a competent subordinate may assume and exercise more authority than others although working within the context of same set of delegation. In the following situations however subordinates are expected to exercise less authority. 1 2 3 4 5 When they fear jarsh criticism for unfavourable results. When they lack self confidence When they lack resources. When the have inadequate positive incentives When their superior is easily available for making decision on their part. Organizational Factors Although personal factors affect the authority delegation to a very great extent, other organizational factors also affect the degree of authority delegation. Individual managers do not have

control over these factors but have to work within the context of these factors. Eg. organizational even the autocrat has to factors so warrant delegate authority if the so warrant. Various factors

organizational factors such as management philosophy policy towards centralization or decentralization availability of managerial personnel. control techniques etc. determine the delegation of authority at various levels of managements. If these factors are not favorable delegation of authority will be affected adversely.

DECENTRALISATION OF AUTHORITY In the words of Satya Saran Chatterjee:- Decentralization is the pushing down of authority and power of decision making to lower levels of organization According to Henri Fayol Everything that goes to increase the importance of the subordinates role decentralization. He has obviously referred the division of authority with certainty is the essence of decentralization. Factors Determining Degree of Decentralization The factors determining the degree of decentralization are: 1. Size of Organization: Decentralization depends on the size of the org. The larger the size of an org. the more urgent is the need for decentralization. In a large org. more decisions are to be made at more places. In such cases, it becomes difficult to coordinate them. The complexities of the large organization may require major issues to be passed down the line for discussion. Managers at various levels are to be consulted. This process may take sufficiently long time resulting in slow decision making. Slow decision makings may be quite costly to the organization. Therefore, to minimize the cost, authority should be decentralized. 2. History of Organisation: Decentralization of authority depends on the way the org has been built up over the period of time. Normally those organizations, which expand from within or expand under the direction of the owner founder show a marked tendency to keep authority centralized. This is the reason why

organizations belonging to many industrial houses have been designed on centralized basis. On the other hand, organizations that show represent amalgamations and consolidations are likely to a definite tendency to retain decentralized authority

specially if the acquired unit is operating profitably. Moreover the management process and pattern of acquired organization, once independent one cannot be changed immediately so as to centralize the authority. Therefore at least for some time, the acquired unit will enjoy considerable autonomy (self governing). 3. Management philosophy : The management philosophy of top level management has considerable influence on the extent to which authority is decentralized. In fact decentralization is a kind of management philosophy to regulate organizational process including decision making. In many cases, top managers may see decentralization as a way of organizational life that takes advantage of the innate desire of people to create to be free, or to have status. They may find in it a means to harness (control and use) the desired freedom to economic efficiency. On the other hand many top management may keep authority with them not merely to gratify a desire for their status or power but because they simply cannot give up activities and authorities they enjoyed before they reached the top or before the org expanded from a small one. 4. Availability of Managers: Availability of managers directly affects the degree of decentralization because exercise of authority requires competence on the part of those who exercise authority. If better quality managers are available there is more chance for decentralization because of two reasons:

These managers can handle the problems of decentralized units effectively. Such managers have higher need for degree of autonomy which is possible in decentralized structures only. Moreover decentralized also works as training ground for managers, which increases the ability of good managers. 6. Pattern of Planning: Planning is usually the most crucial management function in thinking about decentralization. Other functions of management, namely organizing, staffing, directing and controlling are also important but assigning those activities to managers at various levels typically depends on how planning duties have been allocated and the extent to which planning activities have been undertaken. Allocation of planning activities may be subject wise and type of plan wise, that is, what subjects can be decided at what level and what type of plan can be formulated at what level. In the org having carefully drawn standing plans, the chance for decentralization is high because managers can make decisions with the context of those plans without referring the matters under decision upward. Similarly, if they have been made party to the planning process, other functions, which are to be performed within the context of planning process, can be easily decentralized. 7. Control Techniques: Development and use of control techniques affect the degree of decentralization by ensuring whether the

performance at various levels and points of the org is in line with planning. Higher the degree of development and use of control techniques affect the degree of decentralization by ensuring whether the performance at various levels and points of the org is in line with planning. Higher the degree of development and use of control techniques, better is the prospect for decentralization. In fact, improvements in statistical devices, accounting control and other techniques have helped make possible the current trend towards decentralization. In the absence for adequate control techniques either there is less chance for decentralization or it may not work properly. 8. Decentralized Activities: In many cases, decentralization of authority becomes necessary because there is decentralization based on other factors like economies of division of labour, the opportunities for using physical facilities at various locations, and the nature for work e.g. The activities for banking, insurance and transport organizations have to be decentralized. Although this kind of decentralization may be geographic or physical in nature, it influences the decentralization of authority. In fact, some organizations with diverse locations may form local board of directors. E.G SBI operates on the basis of local board of directors with each zone having its own board of directors. 9. Rate of Change in Organization: The rate of change in the org. also affects the degree to which authority may be decentralized. If the business of the org is fast developing and it is facing the problems for expansion, there is more chance that authority will be decentralized because in this case, top manager will have to

share

disproportionate

decision

making

and

consequently

overburdened. This problem can be overcome by delegating authority at the lower levels. As against this, in old well established or slow moving organizations, there is a natural tendency to centralize authority because few major decisions are made and in most cases, decisions are programmed requiring insignificant amount of analysis and time. 10. Environmental Influences: There are environmental influences also which determine the degree of decentralization. Among the most important environmental forces are the government regulations over the private business and leave any little scope to the use of discretionary power of the manager. Business covered by administered prices like fertilizers etc. requires less time of managers in determining the price structure and sometimes even distribution pattern. Thus even marketing functions throughout the country may be centralized. Moreover since top management itself does not have authority over these aspects, there is not question of its delegation. Rationale of Decentralization Decentralization has become the prevailing philosophy for organizing activities on the part of large organizations. Experience shows that many organisation, which were centralized and working efficiently at one point of time, have adopted decentralization because they were not able to cope up with the situation under the old system. Decentralization offers the following benefits.

1. 2. 3. 4. 5.

It reduces burden for the top management so that it can focus more attention on strategic management. It facilitates growth and diversification in the org. It is good philosophy to motivate managers It encourages development of managers by providing them opportunities to shoulder more responsibility. It emphasis on horizontal growth of the org. thereby reducing the number of management levels and increasing the span of management.

6.

It pinpoints more accurately on the results to be achieved by each unit of the org by making various units autonomous.

Decentralization is useful basically to large organizations with multiple products or operating in different geographical locations. Further, if the organizations is growing rapidly and working in dynamic environment decentralization is the best philosophy to achieve positive results. However it does not mean the decentralization offers all positive things as compared to centralisation. In fact, there are many problems in decentralization. Some of the major problems of decentralization are of the following nature If not followed properly, decentralization will create chaos in the org in the absence of proper control. It tends to increase costs by making most units autonomous for facilities.

In decentralized structure, there is more need for good managers. Unless these managers area available, decentralization cannot be effective

Decentralization requires high degree of self motivation and self control because of autonomy given to managers.

These problems however, are not inherent to decentralization but emerge because it is not followed properly. Making Decentralization Effective Following are the some measure which make decentralization more effective. 1) Centralised Top Policy and Control: To make decentralization effective, centralized control is also necessary so that headquarters people know where their various units are going. This control is related with overall performance of a unit rather than interference in day-to-day operations of the unit. Thus, operational control is within the domain of unit managers. Each unit enjoys considerable autonomy within the context of overall organizational policy. To make control effective, there is a need for developing appropriate control and reporting techniques. The system has been described as centralized control with decentralized responsibilities or decentralised operations and responsibilities with coordinated control. In fact, this approach is followed by many large and diversified Indian organizations like

D.C.M Limited, Century Textiles Limited, and so on. The centralized policy and control, however should be limited to certain basic and important activities affecting the functioning of entire organization. Such areas may be financing pattern, dividend distribution etc. 2) Appreciation of Concept of Decentralization: A major problem before decentralization and its working is that managers do not really understand and appreciate the philosophy of decentralization and, therefore, they are not ready to practice it as organizational philosophy. Therefore, there is a need for developing a proper climate in which decentralization is taken in right perspective. Therefore leadership role of top managers is quite important. Unit managers should be given free hand in operations matters and must be held responsible for final results. They should be given adequate compensation in the form of security of job, promotion and other benefits based on their performance. 3) Development of Managers: The success of decentralization depends on the quality of managers who hold various positions. It can be said that better quality managers are always needed whatever the structure is adopted and they will show good result. It may be true but only good managers cannot turn the results unless their abilities and potentials are utilized properly. Decentralization provides this opportunity. At the same time, however, decentralization requires more managers of good quality. Since these managers cannot always be recruited from outside, there is an urgent need for developing managers from within. Therefore,

transformation from centralisation to decentralization should be a gradual process so that there is no vacuum in the org. in respect of managers. 4) Competition among units: Since various units of a decentralized org work independently, there should be proper competition among these units. One of the basic problem in large organization is that unit managers tend to assume protected monopoly position and may develop complacency (self satisfaction) unless there performance is measured objectively and independently. Thus, what one department produces will be used by another department irrespective of cost or quality, and inefficiency of one department may be passed to another department. This problem may be overcome by introducing the element of competition in which the contribution of each department is to be measured in terms of market price or quality. This will create consciousness among unit department managers. Similarly, where various units produce goods, which are not used internally, competition may be generated in terms of overall contributions of the units to the org and suitable incentive package may be adopted to reward highly efficient units.

COMMITTEE ORGANSIATION ADVANTAGES DISADVANTAGES 1. Best to exchange 1. Delayed decision SUGGESTION 1. Limited no. of

views members 2. Decentarlisation of 2. Injustice to minority 2. Definite authority & authority 3. Co-operation 4. Co-ordination 5. Matured decision 6. Useful for training 7. Improvement 3. Difficulty responsible of 3. Regard for time fact. in 4. Availability of

preserving secrets 4. Difficulty locating 5. Expensive

agenda 5. Choice of efficiency

chairman 6. Bad atmosphere to 6. Active participation work in 7. Indecision 7. Indecision of members 7. Equal importance to all departments 7. Equal importance to all departments

labour relations 8. Continuity in policy 9. Research Useful 10. Helpful for communication 5)

Matrix Organization Structure:

It is essentially a violation of unity of command and hence whole classical concept related to the principle of unity of command are violated. Matrix structure is the realization of two dimensional structure which emanates directly from two dimensions of authority. Two complementary structures pure project structure and functional structure are merged together to create matrix structure. Thus matrix structure not only employs a multiple command but also related support mechanism

and associated organizational culture and behaviour. Thus it shows many organizational overlaps not only in terms of command system but also in terms of whole organizational processes and behaviour. For. E.g. Davis & Lawrence have presented matrix structure as Matrix = Matrix + Matrix + Matrix + Matrix Organization structure system culture behaviour. MATRIX ORGANISATION CHART GENERAL MANAGER Project A Project B Project C Project D Production Prod. Prod. Prod. Prod. Marketing Mktg.. Mkgt Mkgt Mkgt Finance Fin. Fin. Fin. Fin. Personnel Pers. Pers. Pers. Pers.

Advantages 1. 2. 3. 4. Matrix structure focuses on resources on a single project permitting better planning and control to meet project deadline. It is quite flexible structure as compared to traditional structure. It emphasis on professional competence by elaborating of knowledge rather than position. It improves motivation because people can focus more directly on completion of one project than they can in traditional structure. Disadvantages 1. There is always power storage in matrix structure 2. Matrix structure can develop anarchy if not properly managed. 3. This structure can not work very well when there is economic crunch. 4. If matrix organization is now followed properly, there is delay in decision making. Q4. Centralisation Vs Decentralization Centralisation When all the power decision concentrated management. 2. Imp centralisation. of Centarlisation It making in is Decentralization of When authority to take are decisions is delegated to all top levels of the management. It called is called decentralization. the Decentralization give

Points 1. Meaning

reduces

subordinates 3.

importance of subordinates making

weightage and importance to

Decision Decision

subordinates authority Decision making power is

making

rests with the top management delegated to all levels of

power management. 4. Delegation There is no delegation of Authority is delegated to all of authority authority 5. Burden on The burden the superiors 6. of Leaders 7. Rigidity superiors of work levels on The burden of work on in superiors is reduced.

increase

centralisation. There is no environment for As managers at all levels take decisions, leaders are prepared. When organization structure When organization structure is rigid centralisation is seen is subject to frequent change

Development the development of leaders

decentralization in useful. 8. Difficulty There is a little difficulty in There will arise difficult in Co- Co-ordination. Where there is problems of co-ordination. a small size of the organization is adopted of Where there is a small size of When business is big and the organization is adopted organization complex times of prevails. crises In time structure us decentralization of crises creates ordination 9. Size

Org. structure 10. crisis 11.

Facing In

centralisation becomes more decentralization

useful. problems in solving crises. Where When work is respective, Where work is not standardized, have effective standardized, system of communication and routine organization is small organization centralisation is appropriate. work is big is of and and natural

appropriate

complex decentralization is

appropriate. This is the most commonly used organization chart. Traditional organization structure depend on this type of chart. It present the different levels of organization in the form of a pyramid. The flow of authority pyramid. The flow of authority is vertical proceeding from top to bottom. In this type of chart lines of command proceed from top to bottom vertically as shown in the diagram. (ii) Horizontal chart i.e. from left to right: This type of organization chart is occasionally used. It moves from left to right. The pyramid lies horizontally. The line of command proceeding horizontally i.e. from left to right showing top level at the left and each successive level extending to the right. This type of organization chart is not very common.

MANAGING DIRECTOR

Production Manager

Marketing Manager

Finance Manager

Personnel Manager

Regional Sales Manager A Sales Executive 1

Regional Sales Manager B Sales Executive 2

Regional Sales Manager C Sales Executive 3

Salesman

Salesman

Salesman

Salesman

5. 6.

Inferiority complex among the staff and superiority complex among the line. The line authorities fear that they would loose their power status if they would work as per staffs advice while staff authority fear that they would loose their position if they work as per line orders.

In order to avoid the line and staff conflict mutual understanding among both should be developed by making them know that both are equal important for the business unit.

3.

Organizational Chart:

According to Koontz and ODonnel, Organisation chart is nothing more than an indication of how, departments are tied together, along their line of authority. Types (i) Vertical i.e. from top to down MANAGING DIRECTOR

Production Manager

Marketing Manager

Finance Manager

Personnel Manager

Sales Manager Regional Sales Manager

Marketing Research Manager B Regional Sales Manager B

Sales Promotion Manager Regional Sales Manager C

Sales Executive 1

Sales Executive 2

Sales Executive 3

Salesman

Salesman

Salesman

Salesman

Centralization of Authority Centralization of authority means concentration of decision making power at the top hierarchy of management. Centarlisation is the systematic and consistent reservation of authority at central points within the org. Under centralisation all important decisions are taken by the top executives and operative decisions and actions at lower levels in the org are subject to the close supervision of the top executives. As Henri Fayol has said Everything that goes to increase the importance of the subordinates role is decentralization, everything which goes to reduce it is centralisation. Importance of Centralisation of Authority The importance of centralisation of authority can be studied under the following heads: 1. It facilitates Personal Leadership: In a small and medium sized enterprise personal leadership goes a long way in ensuring its success. Under a manager leader who is talented the following importance accrue to the enterprise Quick Decision Enterprising efforts Forceful action Flexibility Successful operation

2.

It facilitates integration: This types of org moves like one unit. It unites and integrates, the total operations of the unit. It keeps all parts of the org moving together towards a common goal. It assures uniformity of standards and policies among organizational units. The manager acts as a unifying force and provides direction to enterprise activities.

3.

It promotes uniformity of action: In this the uniformity of action is followed by integration of the operations of the enterprise under one direction and command. Buying goods, recruiting personnels: advertising, planning, framing the policies and chalking out programmes are a few of the activities in which the uniformity is desirable for better results. Concentration of authority promotes such uniformity of action.

4.

It is helpful in successful handling of emergencies . In this type of organizational structure, quick decisions, imaginative leadership, which help in successful handling of a situation, which calls for immediate and quick decisions. Under centralised system this can be easily taken and in emergencies this may be tackled properly and with desired results.

5.

It is helpful in improving efficiency : centralisation enables the management to exercise better control over the resources, make better utilization of men machine and material and reduce the wastes to the minimum, thus achieving economy in operation.

Problems of centralisation of authority In the centralized system of organizational structure the following problems must be taken into consideration.

1)

The top level managers are overburdened with work : At many times centralisation has been recommended for small units or at the initial state of a big business when operations are not too large, however, it makes the top level manager over burdened with work which is not consistent to their position.

2)

Acute problem is in Data Processing : In centralisation system it becomes very difficult for the managers to process the bundles of data regarding products, markets, costs, finance, people etc. and make out results quickly and take decision in an appropriate manner.

3) 4)

Every chance of misuse of power. This organization also suffers, as there is every possibility of misusing the power given to a person. Unnecessary importance attached to the people of top management: centralisation kills initiative, self reliance and judgment of lower level personnel. The fate of the org very much depends on the health and vitality of the top management people. The organization will have to suffer a lot if the decision taken by them goes wrong. Centralisation is, therefore not suitable for big and expanding business.

Advantage of Centralisation of Authority Every organization structure in the beginning starts with centralized management structure. But with its every growth it tends to decentralized and after its full growth it cannot remain centralized. Delays and difficulties of centralisation results into decentralization. But it does not mean that centralisation is never good. It is good at times and serves better if the structure is not large and growth is comparatively small or medium sized. The following are advantages of centralisation:

1. It brings uniformity in the activities of enterprise. All the orders and directions for all the activities for the enterprise are issued from a single point of management under the system centralisation of authority. Power to make the decision to decide the policies, to prepare the rules are vested with the top management only. Therefore, it brings uniformity in the activities of enterprise because all the subordinates and workers follow these policies and orders. 2. It encourages integration in the enterprise: Under centralisation of authority in the org direction and control of the enterprise remains in the hands of the hands of the top management. All the best efforts are made to bring uniformity in the activities of the enterprise. Therefore, it encourages integration in the enterprise. 3. The control and administration becomes easier. It has been said that One man control is best efforts are made is big enough to control the whole affair. According to this convention, the system of centralization of authority is considered to be the best form of control and administration because under this situation, the business remains under the control of one person. Top management can easily control the affairs of the enterprise. 4. It makes to decision making process. The important advantage of centralisation of authority is the quickness in decision making process. Top management is empowered to take all the important decisions, it makes the decision making process very easily and the decisions can be taken at the earliest.

Advantages of Centralisation of Authority Every organisation structure in the beginning starts with centralized management structure. But with its every growth it tends to decentralized and after its full growth it cannot remain centralized. Delays and difficulties of centralisation results into decentralization. But it does not mean that centralisation is never good. It is good at times and serves better if the structure is not large and growth is comparatively small or medium sized. The following are advantages of centralisation. 1. It brings uniformity in the activities of enterprise: All the orders and directions for all the activities for the enterprise are issued from a single point of management under the system of centralisation of authority. Power to make the decisions to decide the policies, to prepare the rules are vested with the top management only. Therefore, it brings uniformity in the activities of enterprise because all the subordinates and workers follow these policies and orders. 2. It encourages integration in the enterprise: Under centralisation of authority in the organisation direction and control of the enterprise remains in the hands of the top management. All the best efforts are made to bring uniformity in the activities of the enterprise. Therefore, it encourages integration in the enterprise. 3. The control and administration becomes easier: It has been said that One man control is best in the world if that one man is big enough to control the whole affair. According to this convention; the system of centralisation of authority is considered to be best form of control and administration because under this

situation, the business remains under the control of one person. Top management can easily control the affairs of the enterprise. 4. It makes to decision making process very easy: The important advantage of centralisation of authority is the quickness in decision making process. Top management is empowered to take all the important decisions, it makes the decision making process very easy and the decisions can be taken at the earliest.

INFORMAL ORGANISATION Informal organization refers to the natural grouping of people on the basis of some similarity in an org. The formal organization means natural groupings of people in the work situation. Whenever people work together, they evolve some sort of grouping or pattern of relationship among them, which is not according to what is prescribed by the formal organization. Characteristics of informal organization are as follows 1. 2. Informal org is a natural outcome at the work place. It is not designed and planned. Informal org is created on the basis of some similarity among its members. The bases of similarity may be age, sex, place of origin, caste, religion, personality characteristics, likings / disliking, etc. 3. Membership in an informal org is voluntary. A person may become member of several informal organization at the same time. 4. Behavior of members of the formal org. is coordinated and controlled by group norms and not by the norms of the formal org. Reasons for Informal Organization Informal organization is inevitable along with formal organization and to obtain a total picture for an orgs structure in its true form, one must consider informal org. also. The basic reason behind the emergency of informal org is the inadequacy of formal org. structure to meet the needs of both members and org. Either it does not provide the most convenient way of interactions or it may produce some psychological pressure on the

members of the org. Thus, members try to find out alternative way of interactions. Particularly in the following circumstances, people try to establish informal org. Desire to socialize with others: It is a natural tendency that people like to socialize in the org in order to satisfy their need social and ego needs. Normally, such needs are quite important for people. Informal org provides them opportunity to interact religion, place, common interests other than organizational relationship etc. Similarity on any one or more of these aspects provides satisfaction to people through interaction which they cannot get through formal interaction. This is the natural way of need satisfaction and therefore, becomes important reason for the emergence of informal org. Psychological Fatigue of Routine Tasks: Due to increasing level of specialization, people concentrate on single task or a few simple tasks. Simple and routine type of tasks have undesirable influence on the people. They become bored by their tasks and may feel psychological fatigue. They are unable to relate the meaning of their tasks to the whole org. Greater the degree of specialization, greater is the concentration of fragmented tasks and greater is the degree of boredom. This boredom is far from deal condition. Therefore, people try to overcome this boredom through interactions, which may provide them stimulus, which is possible through informal org. Through informal interactions, they are able to realize the tension created on the job. Informal org, thus, has the capability to fill up the psychological vacuum created by dull boring and monotonous jobs.

 Hierarchical

Control

and

Communication:

Modern

large

organizations are characterized by hierarchy with formal chain for control and communication. There exists a superior subordinate relationship with a natural tendency of exercise of control by superiors while subordinates may not like control. When a subordinate is not able to thwart such hierarchical control, he tries to find out an association where he does not face similar type of control. Thus, he joins informal group. Moreover, formal organizational process, particularly communication may be quite lengthy and time consuming while people may like to work through a shorter way. Thus, they develop their own way of interaction. Eg. If the communication downward does not carry meaningful information from subordinates point of view, they will try to collect the information through informal sources rather than relying on formal sources. Greater the degree of bottleneck in hierarchical communication greater is the chance for communication through informal org. Various functions of Informal Organization: Informal org contributes in several ways to the interests of its members. These may be in the areas of: 1) Protecting their interest 2) Working as regulatory device 3) Protection of cultural values of members 4) Validation of their beliefs 5) Outlet for overcoming frustration 6) Exploitation potential. and development of leadership

Similarly, informal org also works for the interest of formal org in several ways like: 1) Filling gap in managerial abilities 2) Restrain on managers area of operation 3) Medium of communication 4) Source of information It can be observed here that though an informal org may contribute to formal org. but its basic objective is to contribute to the members interest. This is why people go for creating informal org within formal org. Working of Informal Organization] Authority Structure: Authority in informal org is personal and not positional. In fact informal org works on the basis of mutual understanding and acceptance of others. Therefore, authority arises because people accept someones ability to control the informal org. from positional point of view, every member has equal right. It is possible that someone may hold some personal power in the informal org with his official authority: however, such power cannot be more than what other members of the informal org enjoy. Therefore, the influence process in the informal org is personalized and a person may exercise influence to mould the behaviour of members based on his capacity to satisfy the needs of members. Because members feel satisfaction through a particular person, they may agree to be influenced by the person.

 Leadership : Leadership is the ability to persuade others to seek defined objectives enthusiastically. It is the human factor which binds a group together and motivates it towards goals. While in the case of a formal organizations superior assumes the role of a leader in informal org. there is no formal leader. The leadership role may come from anyone in the informal org. let us see the role of an informal leadership and the type of person likely to assume the role of leadership. A leader performs vital functions that contribute to the groups ability to survive in its environment. These functions are as follows: 1. 2. 3. A leader initiates action in group He facilitates consensus He provides a link between the group and outside world such as managers other groups etc. Normally any one performing these functions may become leader of the group. The person who emerges as leader is perceived by others in the group as being as being the best able to satisfy the groups needs. The members may not make a rational calculation to establish just who can lead them best may be based on experience and the positive statement by potential leaders about what ought to be done. The position of an informal leader changes when he is appointed as superior of the group.

This happens because of two reasons 1. With his appointment as superior, he gets formal authority, which was not available to him as informal leader. This authority enables him to increase or decrease the satisfaction of his subordinates (members of the group). 2. He has obligation not only to satisfy his subordinates but also to achieve the organizational objectives. Thus, there may be conflicting roles to be performed by him meeting of organizational objectives and satisfaction of members needs. Therefore, unless he maintains a proper balance between these two roles, he is likely to fail as a formal leader. There have been instances inability to balance the conflicting roles. Communication: Informal org develops its own media and channels of communication. Communication is mostly oral and many carry the information which can not be obtained through the formal channel. Informal org is a need fulfillment device generated from within and also from without when it is found that the existing formal communication channel is inadequate to supply the requirement information or information at right time. The requirement of speedier communication brings the need for informal channel. Informal channel is called grapevine, which may take several shapes in terms of communicative relationship. where good informal leaders have been ineffective as formal leaders because of their

Difficulties due to Informal Organization The major problems that emerge because of the operation of informal org may be in the following directions. 1. Resistance to Change: Informal org. produces resistance to change in the org. Every group promotes certain values and norms, which are considered to be desirable for it. In course of time, members guard these values and norms resulting in a perpetuation of the status quo. Any intended change by the management facing change of commonly shared values and norms is forcibly resisted. Though people perceive the outcome of a change programme individually, specially if the outcome of a change programme individually, specifically if the outcome is precise and definite, often they show their reaction in group. Since informal org. is bound by values and norms, there will be considerable amount of resistance to change. E.g. if members perceive that a layoff is imminent though in actual it is not necessary, because of rationalization of work, they will resist it. Since the resistance comes in the form of group, it becomes quite effective. The need for modern organization to bring continuous change is high. Thus, if informal org is not handled properly, there may be problems in bringing about these changes. 2. Generation of Rumour: Romour is a specific statement for belief, passed from person of person usually by word of mouth without securing the standards of accuracy in the communication. Roumour deals with temporary events in a way that implies whatever is said is true though there is not much authentic information to support it. Rumour is spread through informal org.

the basis for the circulation of rumour is unclear circumstances and reliving of emotional tensions felt by people because of lack of clarity. If there is no official communication on any aspect of important happening in the org. it will be communicated through rumour which may be far from truth. This creates problems for both management and employees. It may be destructive in the sense that it affects morale of people adversely as every one goes on adding information from his own side most suitable to him. This may create bitter feelings between management and employees specially if rumour relates to matters dealing with employees. 3. Role Conflict: An individual perceives role conflict when he has to fulfill conflicting requirements of two or more roles. It may be observed that a person may perform several roles at the same time. Due to informal org. a person has to perform two roles. One relates to his official position Another relates to satisfaction of members of his group. These two roles are often conflicting that is performance of one role may be at the cost of the other. Since people have tendency to associated with informal groups, such role conflict may come in the way of performance of official duties. Higher the degree of role conflict, higher is the dysfunctional impact on organizational functioning. Thus, generation of too many informal organizations may be harmful to the org.

4.

Conformity: In the case of informal organization. Conformity means to act according to the general standards of informal org. This can make group members reluctant to act independently, creatively, or assertively for the fear of losing group approval and membership. Pressure for conformity may result into restricted output. Sometimes informal leaders change the group towards undesirable needs or their own selfish ends. Therefore, there is considerable chance that members of the group may use the resources of the org not for its own benefits but for the benefits of others. Naturally this is harmful to the org.

5.

Social Costs: Informal org. is costly from social point of view also. When informal groups are engaged in gossiping joke telling or idle conversion that satisfy some of the members social needs, they incur social costs. More the time wasted in such things more is the operating costs for the org because all these things take place within the stipulated office time.

Introduction to strategic planning: No business firm can afford to travel in a haphazard manner. It has to travel with the support of the route map. Strategic planning provides the route map for the firm. It makes it possible for the firm to take decisions concerned with the future with a greater awareness of their implications. It lends a framework which can ensure that decisions concerning the future are taken in a systematic and purposeful way. It provides direction to the company it indicates how growth could be achieved. Strategic planning also serves as a hedge against uncertainty, a hedge against totally unexpected developments on the business horizon strategic planning also helps the firm understand trends better, thereby making available the benefit of a lead time for taking crucial decisions and actions. Moreover, since the resources available with the any business firm are usually limited, the firm has to utilize them creatively and optimally strategic planning ensures such utilization of Limited Resources in proper and efficient way. It tends a frame of reference for investment decisions. It aids (helps) the concentration of resources on vital (important) areas, areas of best potential. Strategic planning affects a methodology by which the firm could anticipate and project the future and be internally equipped to face it. It helps develops processes, system, mechanisms and managerial attitudes that are essential for this purpose.

Nature and scope of strategic planning: 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. It serves as a route map for the company. It lends a framework for systematic handling of corporate decisions. It lays down growth objectives of the firm and also provides strategies needed for achieving them. It ensures the firm remains a prepared organization. It ensures that the firms businesses, products and markets are chosen wisely. It ensures best utilization of the firms resources among the product market opportunities. It serves as a hedge against uncertainties arising from environmental turbulence. It helps the firm understand trends in advance and provides the benefits of the head time for taking crucial decisions and actions. It helps avoid haphazard response to environment. It provides the best possible fit between the firm and the external environment. It helps to build competitive advantages and core competencies. It draws from both intuition and logic. It prepares the firm to not only face the future but even shape the future in its favour. It seeks to influence the firms mega environs in its favour, working into the environs and shaping it.

Scope of Strategic Planning: 1) 2) 3) 4) Strategic planning is concerned with the future, or the long term dynamics of the firm rather than day to day task. Strategic planning is concerned with growth direction, extent, pace, pattern and timing of growth. Strategic planning is concerned with environment the fit between the business and its environment. It is concerned with the basket of business the firm should have. More specifically it is concerned with what to change / add / delete to the firms product market postures. 5) Strategy is concerned, with not the nuts and bolts of routine activities. Growth priorities and the choice of corporate strategy is its concern. 6) Strategic planning is meant to equip the organization with capabilities needed to face uncertainties. In other words the creation of core competencies and competitive advantages is its concern. 7) It involves the top management task of taking the business forward. It views the organization / business in its totality. It is a integrative task. Difference between strategic planning, administrative planning and operational planning. 1) Strategic planning deals with long range consideration such as mission, corporate objective, corporate strategies and base policies.

Tactical planning is interested in medium term planning and contracts on resources acquisition and allocation, personnel selection and training, structuring of man machine system, etc. Operational planning is related to short term decisions for current operations. Pricing, production levels, inventory levels, marketing mix, programmes etc. are reflected in an operational plan e.g. yearly budget. 2) Strategic decisions do not surface on their own, strategic planners / top managers have to discern what strategic decisions are needed, other decisions normally surface on their own. 3) Strategic decisions deals with the growth of the corporation. Accordingly they have a long range focus. Other decisions do not handle corporate growth as such operational decisions are routine ones. Administrative decisions, though not routine, are by and large patterned after existing practices in the corporation. 4) Administrative and operational decisions are concerned with issues that are essentially internal. Matters which are purely internal to the firm form the subject matter of operational decisions, administrative decisions, too generally tackle internal issues relating structure, system and staffing. As a total contrast strategic decision pertain to the relation between the firm and its environment and therefore, are concerned more with external issue. 5) Administrative and operational planning do not touch the basic characteristics of the business of the firm. The decisions at these levels accept the business, the products, markets, production facilities etc as they are. The endeavour is to use them as

effectively as possible in tackling problems. Strategic planning on other hand seek to alter, as found necessary, the basic characteristic of the business. 6) Strategic planning involve intricate process, external studies and analysis as they tackle long term issues. Strategic planning always need the support of external data / original information. Administrative and operational planning generally needs only internal information. 7) Operational and Administrative planning can be altered when necessary at minimum cost and without causing much damage to the corporation. But in the case of strategic planning, change has major implications. Since strategic planning have far reading consequences to the well being of the firm, errors in these decisions turn out to be very costly to the firm. 8) The impart of operational / administrative decisions is measurable and to some extent known in advance to those who take these decisions. But the consequences of strategic planning are neither measurable nor discernible in advance. 9) In the matter of frequency, too, strategic planning differ from other categories. While operational / administrative decisions are frequently taken, the occasions for strategic decisions are for and few between. Again, while the former are repetitive, the latter are non-repetitive. The same issue and context normally does not recur in the case of strategic decisions. 10) Strategic planning is the responsibility of the top management. By their venture, these decision / planning are centralized, where as the others are decentralized decisions.

Strategic Decision 1 2

Administrative

Operational Decision

Decision Deals with long term Deals with medium Deals with short term planning term planning planning Deals with external Deals with internal but Deals with internal issues big issues basic Dont touch if small is but small routine issues. Do not touch

Touches characteribility

needed in company For taking decision Internal information is Internal external data and taken information enough. Lost lead cause to analysis is obtained This planning cost Cost less more Changes and failure No a big loss. Decision are big

5 6

or Very least damage to the the company. are Decisions and measurable known are and

in planning can cause damage 7 company not Decision

measurable and result measurable advance known

cant be known in advance result can be advance result can be

LINE ORGANISATION STRUCTURE Line org structure is also known as scalar, military, or vertical org and perhaps is the oldest form. This concepts holds that in any org. or hierarchy derived from a scalar process, there must be a single head who commands it. Although an executive can delegate authority, he has ultimate responsibility for results. Line org can be designed in two ways. Pure line organization: Under this form, similar activities are performed at a particular level. Each group of activities is self contained unit and is able to perform the assigned activities without assistance of others. Pure Org may be shown as follows:
Production Manager

Foreman-A Foreman-C | Workers

Foreman-B | Workers PURE LINE ORGANISATION | Workers

Departmental Line Organization: Under this form, entire activities are divided into different departments on the basis of similarity of activities. Each department is placed under one department superintendent. All persons in the department are subject to control by the departmental head. The basic objective of this form is to have uniform control, authority, and responsibility.

Production Manager |
Foreman (Spinning Foreman Weaving Foreman (Dyeing) Foreman (Finishing)

| Workers

| Workers

| Workers

| Workers

Line organization structure has following characteristics: 1. Lines of authority and instruction are vertical, that is they flow the top to the bottom. 2. The unity of command is maintained in a straight and unbroken line. It implies that each subordinate receives instructions from his immediate superior alone and is responsible to him only. 3. All persons at the same level of organization are independent of earth other. It implies that all the departmental heads are supermen in their respective areas and independent of one another and are responsible to the chief executive. This applies to all other positions also. 4. This structure specifies responsibility and authority for all the positions limiting the area of action by a particular position holder. Merits Line Organization structure has following merits: 1. Simplicity : This org is quite simple in both understanding and implementation. Every person is clear about what is expected of him. Since a person is receiving orders and instructions from only one

superior, he does not have any confusion in his mind about his role and responsibility in the org. 2. Discipline : Since each position is subject to control by its immediate superior position, often the maintenance of the discipline is easy. Unit of command and unity of direction foster discipline among the people in the org. 3. Prompt decision: Most of the decisions in such organisations are taken by the superiors concerned. This makes the decision making process easier and less time consuming. Moreover, since they have not to consult others or look for others advice, they can make the decisions very quickly. 4. Orderly communication: Line org follows scalar chain method of communication. It implies that communication going up and down will pass through the immediate superiors. This system of communication is easy to maintain, orderly in nature, supports the authority of the superior, and provides for closeness of contact thereby reducing changes of miscommunication. 5. Easy supervision and control: The line org provides for each supervision and control because each subordinate is controlled by a single superior. The superior has direct and close contact with his subordinates, which facilitates supervision and control. 6. Economical : The line org is quite economical because it does not use staff specialists whose appointment is a costly affair specially for small organizations. Every person in the organization is directly responsible for his contribution to the organizational objectives. 7. Overall Development of the Managers: Since the line org does not have provision for staff specialists, the various managers have to

combine among themselves the expertise of a staff member. Thus the function of managers are more comprehensive which leads to the overall development of the managers concerned. Demerits Line org offer many problems and limitations which are as follows 1) Lack of Specialization : The line org does not offer scope for specialization. A manager has to perform a variety of functions, which may not necessarily be closely interrelated. Any manager, whatever may be his qualities, cannot cope up with the requirement of various complications of business system. The results is that he cannot make a very valid decision for all requirements in the org. the quality of management is, thus not very satisfactory in this type of org structure. 2) Absence of Conceptual Thinking: The managers in this system do not find time for conceptual thinking so essential for organizational growth and development because they remain quite busy in their day to day managerial problems. A mans ability being limited, he cannot meet the diversified and varied demands of his functions because he has too much and too numerous activities to perform. Many times, even the managers are involved in non managerial functions also which not only disturb their efficiency but leave little scope, whatsoever may be, for concentrating on long term problems of the org. 3) Autocratic Approach: The line org is based upon autocratic approach. The line of authority being direct demands high level of obedience on the part of the subordinates. It leaves little

consideration to them, which ultimately discourages the initiatives on their part. This may also result into one way communication, that is, only downward communication, and the manager at the top may sometimes be lacking the actual knowledge of the situation. 4) Problems of Coordination: Condition among various activities and the departments is achieved through horizontal relationship, whereas the line org focuses only on vertical relationship. Thus, there is acute problem of coordination, particularly in a large org. 5) Lack of Ground work for Subordinates Training : In line org, the superiors take decisions and subordinates merely transfer them into action, thus, they are mostly involved in routine type of activities which prevent them learning new methods of working or taking overall view of the org. concerned as they are quite unrelated from other parts of the org. thus, a succession problem is there, and if a high level person is retiring or leaving the job, or unavailable for other reasons, his position cannot be filled up easily by existing organizational personal. The line org is not suitable for large scale organizations because it cannot fulfill the requirements of large organizations. However, it is quite suitable to small scale organization where the number of subordinates is quite small. The need for small organization is centralized control, only few levels of authority, direct inter personal The line org is not suitable for large scale organizations because it cannot fulfill the requirements of large organizations. However, it is quite suitable to small scale organization is centralized control, only few levels

of authority, direct inter personal communication and direct control and supervision. The various limitations of the line structure for large scale organizations give way for the emergence of other types of structure. Line and Staff Organization Structure Line and staff org refers to a pattern in which staff specialists advise line managers to perform their duties. The staff positions or departments are of purely advisory nature. They have the right to recommend, but have no authority to enforce their preference on other departments. In actual, sometimes it is difficult to determine which departments are line are staff. The problem can usually be solved by classifying activities within an org in two ways. The which is direct in its contribution to the organizations overall objectives, is a line org. That, which is indirect in its contribution, is a staff org.

The positions and departments in rectangles are staff and others are line. These staff specialists may provide services to a particular person, department or org as a whole Merits 1. Planned specialization : The line and staff structure is based upon the principle of specialization. The line managers are responsible for operations contributing directly to the achievement of organizational objectives whereas staff people are there to provide

expert advice on the matters of their concerns. Thus, there is enough chance for creative thinking for generating new ideas and actions, which are quite important for the organization. 2. Quality Decisions: The quality of decisions in line and staff structure is high because the decisions come after careful consideration and thought. Each expert gives his advise in the area of his specialization which is reflected in the decision. 3. Prospect for Personal Growth: This system of organizing offers ample proposed for efficient personal to grow in the org. Not only that, it also offers opportunity for concentrating in a particular area, thereby increasing personal efficiency. This is also according to the personal liking that is, one is expected to work better in ones main discipline. 4. Training Ground for Personnel: It provides training ground to the personnel in two ways. Since everybody is expected to concentrate on one field ones training needs can easily be identified. The staff with expert knowledge provides opportunities to the line managers for adopting rational multi dimensional approach towards a problem. Thus by observing how staff people look at a solve a particular problem, line managers themselves sharpen their diagnostic and problem solving abilities. Thus they easily take the totality of view of the organizational functioning 1) Lack of well defined Authority: Though it is easy to say about line and staff authority, often in practice, it becomes difficult to differentiate clearly between line and staff because, in actual

practice, the authority is often spread widely. Thus, the managers may not be clear as to what is expected of them or what is the actual area of the operation of their authority. Thus, confusion may be created in the org. 2) Line and Staff Conflicts: The main problem of line and staff structure is the conflicts between line and staff managers. Such conflicts may be because of various reasons and sometimes the organizational conflicts may be taken as personal conflicts resulting in interpersonal problems. The structure can be followed on large organizations where specialization of activities is required because it offers ample opportunity for specialization. An expanding org may adopt this structure to enhance the efficiency. This structure, however, is not suitable for small organizations as it is quite costly for them. Moreover, they cannot take the full advantage of experts because of lack of adequate activities for them. Functional Organization Structure Functional organization structure is the most widely used in the medium and large organizations having limited number of products. This structure emerges from the idea that the org must perform certain functions in order to carry on its operations. Functional structure is created by grouping the activities on the basis of functions required are classified into basic, secondary and supporting functions are according to their nature and importance.

The basic or major functions are those, which are essential for the org. e.g. in a manufacturing org. production and marketing are basic functions. When departments are created on the basic of basic functions and a manager feels that his span of management is too wide to manage effectively, which invariably happens in large organizations, several departments are created on the basis of dividing a basic function into sub function e.g. marketing may be subdivided into marketing research, advertising, sales and so on. Thus, the process of functional differentiation may continue through successive levels in the org. apart from basic and secondary functions, departments are also created to take advantage of specialization and to support basic and secondary activities. Such departments may be finance, accounting, personal, industrial relations, legal etc. these department may be created and placed according to their role in the org. e.g. if the org focuses on product development and innovation, research and development department may be given high status. Authority relationship in functional structure may be in the form of line, staff and functional. In fact, the concept of functional authority is very appropriate for functional structure. Thus, functional structure is characterized by the following; 1. Specialization by functions 2. Emphasis on sub goals 3. Pyramidal growth of the org 4. Line and staff division

5. Functional authority relationships among various departments 6. Line and staff division 7. Functional authority relationships among various departments 8. Limited span of management and tall structure Functional structure has certain potential advantages and disadvantages. Whether of not these advantages are realized depends on the specific organizations situation. The establishment of a functional org structure becomes necessary as a small org grows and business activities becomes more and more complex. in such a situation, there is need for more formalized and systematic approach to major activities and for increased delegation of authority of decision making throughout the org. however, top management will continue to control decisions that involve strategic and coordinative variables. The functional structure works better if the org has one major product or similar line. In such a case, the org may take the following benefits. 1) Functional structure can result into high degree of specialization because a unit or department is concerned only with one aspect of total activities. Thus, the org can employ greater variety of skills. 2) Functional structure brings order and clarity in the org by prescribing what one is expected to do. Everyone understands his job clearly which adds to efficiency. 3) It promotes professional achievement, as a person is restricted to his own area of specialization. Thus, it provides satisfaction to specialists.

4) There is economy in the use of organizational resources various units of the org use the centralized resources of a kind. Thus, there is no duplication of activities and processes, which save resources. 5) There is high degree of control and coordination of functions because all work of one kind is under one manager. Also there is a clear chain of command for communication and authority decisions. However, from total organizations point of view, this poses problems in control and coordination. Problems in Functional Structure 1. Responsibility for ultimate performance cannot be fixed in functional structure because no one is responsible for product cost and profit. Each department focuses on its contribution to the product. Not only does this place the burden of control and coordination for the operations at the top, where the emphasis should be no longer range problems but it makes judging the performance of each department difficult. 2. Functional structure essentially generates slow decision making process because the problem requiring a decision has to go to various departments as all of them have something to say on the matter. As against this, complex and different activities require faster decision making because time factor is of prime importance. 3. Functional structure lacks responsiveness necessary to cope up with new and rapidly changing work requirements (e.g. if the org decides to add some new business there is question mark as how to add this because it may mean a new functional structure as the new business cannot be easily absorbed by old functional structure.

4.

Functional structure offers usually line and staff conflict and interdepartmental conflict. The heightened degree of such a conflict becomes harmful to organizational efficiency.

COMMITTEE Committee is another form of formal group. Committees are found in every large org. the word committee means those to whom some matter or charge is committed. Thus, committee can be defined as a body of persons appointed to meet on an organized basis for the discussion and dealing of matters brought before it. Features of committee 1. A committee is a group of persons. It implies that there should be at least two persons. There is no limitation on the maximum number of persons in a committee. however, beyond a certain number work at committee meetings become difficult. It has been observed that if the number of committee members rises beyond seven, communication becomes centralized because committee members do not have adequate opportunity to communicate directly with other members. 2. A committee can work only on matters that are brought before it. It cannot go for action in all spheres of activities. When a committee is formed, there are strictly defined jurisdictions within which it is expected to justify its existence. 3. Members of the committee draw authority through delegation. The authority of members is usually expressed in terms of one vote for each member for deciding the matters. 4. The type of authority delegated to a committee may change from making final decisions on a matter to mere submission of relevant information on the matter concerned. In few cases, it might happen that the committee may work on the matter without any authority for making or recommending decisions.

5. A committee may be constituted at any level of the org and its members can be drawn from any level or function. Moreover a person can be member of more than one committee at the same type. In an org, there can be several types of committees like: 1. In terms of duration / time period : Temporary or adhoc, permanent / standing committees: Some committees are crated for a specific objective and once the objective is fulfilled the committees are dissolved. E.g. committee for cost reduction may be created in a year in order to bring down operational costs by 20% over the previous years figure. This committee with a specific objective may be dissolved once the findings / recommendations are reported. The second type is a standing committee, which may have rotary members at different points of time but the committee itself is permanent. Most often the purpose for which the committee is created, is also kept unchanged unless there is a need to revise it. E.g committee for quality improvement is an org. if quality improvement is pursued on a continuous basis in the org. this committee remains and members may change periodically and the committee keeps on exploring and recommending ways of improving product quality by taking up various aspects related to production. 2. In terms of level of representation / Status of members : Organizational Functional / Departmental, Sectional / Mixed: Committees may be appointed at a particular level in an org, depending on its objective, there may be members representing the

whole org, or department or a section. E.g. A committee with a purpose relevant to purchase department may have most of its members coming from the purchase department may have most of its members coming from the purchase department only. On the other hand if there is a committee to find out ways of improving profitability, there may be representatives of most of the departments on it. 3. In terms of power Authority : Non executive, executive: Nonexecutive committees or advisory committees have limited scope of authority or power. They may work upon the task assigned to arrive at findings. In a step forward, they may also make suggestions or recommendation it makes or to arrange for implementation. Executive committees on the other hand are authorized by its constitution to execute its decision. Committees with the executive powers are considered to be the most powerful form among all. 4. In terms of Constitution: Permanent members or rotary retirement: Many committees provide for maximum duration of individual membership in order to leave scope for fresh members and therefore fresh ideas. Many committees make it compulsory for its members to retire by rotation after completing a specified term. However, in order, to take advantage of senior members vision, knowledge and experience, distinguished members may be offered permanent membership also. 5. In terms of formality: Formal committees are of a permanent nature. They form a part of the organizational structure, performing

the functions assigned to them and exercising the authority delegated to them. The formation of informal committee is for solution of a specific problem.

BARRIERS TO EFFECTIVE PLANNING Planning as a management function is essential to every manager and every organization but there are some practical problems in proper planning. The reasons why people tend to fail in planning emphasise that the practical difficulties encountered in planning disclose that effective planning is not easy. Managers can do better if they are aware of these limitations so that they can take can take adequate precautions against them. Given below are the major limitations to effective planning 1. Difficulty of Accurate Premising. (Planning exercise is undertaken under certain assumptions of future events which are determined by a large number of factors in the environment. Thus, a limiting factor in planning is the difficulty of formulating accurate premises. Since the future cannot be known with accuracy, premising is subject to a margin of error. Though this margin of error can be minimized by making suitable forecast of future events, perfection cannot be expected. It is often suggested that since long range planning requires peeping into the distant future, and distant future is not certain, it is useless to undertake long range planning. In fact this is true to some extent and specially under two situations long range planning cannot be undertaken : first, in the formative stage of the organizations development when it may not be possible to take up long range planning second, when the environment in which the organization operates is unstable and uncertain owing to social technological and other changes. 2. Problems of Rapid Change. Another problem which is related to the external environment is the rapid change which takes

place in the environment. In a complex and rapidly changing environment, complications that make planning extremely difficult often magnify the succession of new problems. The problem of change is more complex in long range planning than in short range planning. Present conditions lend to weigh heavily in planning, and by overshadowing future needs may sometimes result in error of judgment. In rapidly changing conditions, planning activities taken in one period may not be relevant for another period because the conditions in two periods are quite different. 3. Internal inflexibilities. Managers while going through the planning process have to work in a set of given variables. These variables often provide less flexibility in planning which is needed to cope up with the changes in future events. Such inflexibilities may be either internal to the organization or may lie outside. The major internal inflexibilities are: psychological, policy and procedures and capital investment. (i) Psychological Inflexibilities. Psychological inflexibility is in the form of resistant to change. Managers and employees in the organization may develop patterns of thought and behavior that are hard to change. They look more in terms of present rather than future. For them, present is not only more certain but is also more desirable and more real. They believe that if they do not take care of present, future will not be there. For them, planning tends to accelerate change and unrest. Thus, this approach works against planning because planning often depends on the unwillingness of people to accept change.

(ii)

Policy

and

Procedural

Inflexibility.

Another

internal

inflexibility emerges because of organizational policies and procedures. Once these are established, they are difficult to change. Though these policies, procedures, and rules are meant to facilitate managerial action by providing guidelines, they often tend to be too exacting and numerous that they leave very little scope for managerial initiative and flexibility. Since managers have to plan for future which is not static but changing, they often find themselves in great constraints. Such problems are more prominent in bureaucratic organizations where rules and procedures become more important than results. (iii) Capital investment. In most cases, once funds are invested in fixed assets, the ability to switch future course of action becomes rather limited, and investment itself becomes a planning premise. During the entire life of the fixed assets, this inflexibility continues unless the organization can reasonably liquidate its investment or change its course of action, or it can afford to write off the investment. 4. External Inflexibilities. Besides the internal inflexibilities, managers are confronted with many external inflexibilities and they do not have control over these. For example, managers have little or no control over social, economic, technological and political forces. Whether these change quickly or slowly, they do stand in the way of effective planning. Three environmental factors generate inflexibilities for an organizational planning: political climate, trade unions, and technological changes.

(i)

Political Climate. Every organization, to a greater or lesser degree is faced with the inflexibility of the political climate existing at any given time. Attitudes of government towards business, taxation policy, regulation of business, etc. generate constraints on the organizational planning process. Government, being the major supplier of certain raw materials, finance through financial institutional may affect the business organizations considerably.

(ii)

Trade Unions. The existence of trade unions, particularly those organized at the national level, tends to restrict freedom of planning. Apart from wages and other associated benefits, they affect the planning process by putting limitations on the work that can be undertaken by the organization. They set up the work rule and productivity. To that extent, managers are not free to make decisions of their choice.

(iii)

Technological Changes. The rate and nature of technology changes also present very definite limitations upon planning. An organization is engaged in its process with a given technology. When there is a change in technology, it has to face numerous problems resulting into higher cost of production and less competitive competence in the market. However, the organization cannot change its technology so frequently. Thus, higher the rate of technology changes, more would be the problem of loge range planning.

5.

Time and Cost Factors. Planning process is quite a costly and time consuming process the various steps of planning may go as far as possible because there is no limit of precision in planning

tools. Managers can spend unlimited amounts of time in forecasting, evaluating alternatives, developing supporting plans, or attending other aspects of planning, if they do not have limitations of time and money. Planning process suffers because of time and cost factors. Time is a limiting factor for every manager in the organization. If managers are busy in preparing elaborate reports and instructions beyond certain level, they are risking their effectiveness. Excessive time spent on securing information and trying to fit all of it into a compact plan is dysfunctional in the organization. Besides time factor, planning is also limited because of cost factor. Planning cost increases if planning becomes more elaborate and formalized. Additional staff is to be appointed. Looking at the cost aspect, many people have commented that planning consumes more but contributes less. Thus, planning cannot be undertaken beyond a certain level. It should be taken at a level where it justifies its cost. A part from direct cost involved in managers time, financial compensation for those who are involved in planning costly to the organization indirectly. Plans provide rigidity of action, though the action is based on future projection. If future events change, the organization does not have any alternative except to sustain loss on the investment committed for planning period. 6. Failure of people in planning. A part from the above factors, sometimes, people involved in planning process fail to formulate correct plans. There are many reasons why people fail in planning

at the formulation level as well as implementation level. Some of the major reasons for failure are lack of commitment to planning, failure to formulate sound strategies, lack of clear and meaningful objectives, tendency to overlook planning premises, failure to see the scope of plan, failure to see planning as a rational approach, excessive reliance on the past experience, lack of top management support, lack of delegation of authority, lack of adequate control techniques, etc. These personnel factors are responsible for either inadequate planning or wrong planning in the organization. MAKING PLANNING EFFECTIVE Various limitations of planning should not lead not lead one to believe that planning is unnecessary in the organization, or it is the luxury that only large organizations can afford. The fact is otherwise. It must be recognized that planning is an essential managerial function in all organizations irrespective of their size. Therefore, it should be given proper emphasis. The question is not whether to plan or not, but the question is how well to plan. In making planning effective, managers have to make question is how well to plan. In making planning effective, managers have to make attempts in two directions : understanding the features of a good plan which results from the planning process and taking actions for making planning process effective. Features of Good Plan There may be various features of a good plan which help in achieving the objectives for which it is prepared. Though some of these features may

vary according to the type of plans, in general, a good plan has the following features: 1. Linked to long term objectives: All the plans whether falling in the category of strategic or operational must be linked to long term objectives of the organization. Though a short term plan may focus more on the immediate objectives, these objective must be derived from the long term objectives of the organization. We have seen earlier that various plans can be arranged in hierarchy and a lower level plan contributes to the realization of the objectives of a next higher level plan. As we move up in the hierarchy of plans, more orientation is towards long term objectives. For example, a budget is a short term plan, mostly for one year. However, while allocating resources to various units and functions of the organization, the focus must be on the achievement of long term objectives through annual resource allocation. 2. Direction for action. A good plan is one which provides direction for future course of action clearly and specifically. For providing direction for action, the plan must specify the actions which should be taken and the outcomes of these actions so that progress towards completion of the plan can be measured and suitable corrective actions can be initiated if the present actions are not in accordance with the plan. From this point of view, the plan must have a feed back system so that the progress of the plan can be measured for taking suitable actions.

3.

Consistent. A plan must be consistent in terms of external and internal factors which are considered at the time of plan formulation. External consistency involves alignment of plan to the external environmental factors because the successful implementation of the plan depends on the behavior of these factors. Though it may be difficult to predict the exact likely behaviour of these factors, the forecast of these factors should be based on reality as far as possible. Similarly, the plan must be consistent in terms of various organizational factors which may be in the form of organizational resources both human and physical, organization structure, and various other organizational plans.

4.

Feasible. A good plan is not necessarily highly ambitious but it must be based on reality of the situations. It must be feasible to be implemented. While addition of ambition is a welcome feature because it puts pressure for better performance, it should not be at the cost of feasibility. A highly ambitious plan, sometimes, adds frustration specially when the targets are set too high. We often find more misses in Governments plans because, most of the times, these are not based on reality.

5.

Simplicity: A good plan must be simple to understand. Simplicity is required because the plan is formulated by one group of personnel and is implemented by another group of personnel. Sometimes, there may not be frequent communication between these two groups of people and plan implementation may hamper. Often, plan fails because of lack of proper coupling between plan

formulation and its implementation. To the extent a plan is simple to understand, the degree of this coupling will be high and plan implementation is facilitated. 6. Flexible. A plan should be flexible enough to incorporate unforeseen future events. Though a forecast can be made in respect of future uncertainties, unforeseen future changes require a change in planning. Thus, planning cannot be static, but flexible. There are two principles of flexibility in planning. (i) Principle of Flexibility. The more the flexibility can be built into plans, the less the danger of losses incurred by unexpected events, but the cost of flexibility should be weighted against the risks involved in future commitments made. The planning should be in such a way that a change in it, because of changes in planning premises, can be made without undue costs or friction. Flexibility is required generally in long range planning when there may be fundamental changes. Sometimes, it might be required in short run also, for example, change in production schedule in case of strike. (ii) Principles of Navigational Change. This is based on the principle of a navigators checking constantly where his ship is going in this vast ocean. If it is not going on the right path, the changes it according to planned path to reach at the destination. Similarly a manager should constantly check his plans that these are proceeding in the right way. He may redraw the plans to meet the objectives, if required. Since the distant future is generally more uncertain than the immediate future, long range planning

requires such constant checking. If the future could be accurately predicted, managers could be able to plan ahead without fear. This uncertainty of future places limitations on the practicability of forward planning. A plan which is soundly conceived and evaluated for feasibility, desirability, and practicability provides the basis for day to day decisions and action. However, it requires a constant watch. Measures for making planning effective After identifying the essential features of a good plan, managers can adopt various measures to make their planning exercise effective. Though these measures and their effectiveness depend mostly on the work culture of individual organizations, managers, particularly at higher levels, may adopt the following measures to make planning effective.

1.

Establishing Climate for Planning: Managers should create a climate where every person in the organization takes planning action. Every superior manager should remove obstacles to planning and present facilities for planning. This can be done by setting goals, establishing and publishing planning premises, involving all managers in planning process, reviewing subordinates plans and their performance and ensuring that managers have appropriate staff assistance and information. All these steps add to recognizing that planning will not occur unless it is forced and the facilities required to undertake planning are provided.

2.

Initiative at Top Level. Planning to be effective must originate at top level. It must be supported by top management. In fact, in any organization, the role of top management in planning is quite unique and important. It is the top management which is responsible for the success or failure of any organizational process, and planning is no exception. For planning process, basic goals from which plans stem must be organization wide and, therefore goals must be set at the top management level. The example and drive of top management are the most important single force in the planning process. When top management rigorously reviews subordinates programmes, it naturally stimulates planning interest throughout the organization. Effective planning may start at the top level and get support from lower level managers. But this should not mean that subordinate managers can do nothing in initiating the planning process. There is something to encouraging an upward push as well as downward press, superiors may be pushed into setting goals and premises and approving plans if a well reasoned programme is presented to them.

3.

Participation in Planning Process: No doubt, top management can initiate planning process by providing goals and planning premises, effective planning can take place by the participation of subordinate managers. The best planning is likely to be done when managers are given opportunities to contribute to plans affecting areas over which they have authority. Participation in planning affecting managers areas of authority at all levels through their being informed, contributing suggestions, and being consulted leads to their

commitment, loyalty to planning and enthusiasm to implement the plan. There are several ways of getting participation from subordinates in planning process. If corporate planning is based on management by objectives, the participation of subordinates with superiors is a key factor in making this programme work. Another method of participation is through the formation of planning committee at various levels. The role of such a committee would be to transmit planning information, getting suggestions and reactions of subordinate managers over planning efforts, and formulating plans. Help can be taken from corporate planning staff if organized separately. A third method of participation in planning may be in the form of grass root budgeting in which budgets are prepared for every small unit of the organization and then move upward. Thus, instead of preparing budgets at the top management level and transmitting to the lower levels, these must be prepared at lower levels and transmitted upward for integration and adjustment. Various methods of participation can be adopted in planning process depending on the situations in the organization. 4. Communication of Planning Elements. Many planning efforts fail because managers do not really understand their goals and other planning premises which affect their planning efforts. Similarly lack of proper understanding of organizational policies and strategies affects planning, particularly at the lower levels. In order to avoid this impediment, it is highly desirable that these aspects of planning are communicated properly. If planning division has been created, it

can communicated planning aspects to various level managers. If no such division exists, there should be direct communication between various level of managers whose planning efforts are directly related. While communicating, it should be borne in mind that information about planning should be specific and clear. Those who executive a plan can do their best if they understand their own assignment and the plan in its entirely - including its objectives, the general and specific means of attaining them, and jobs others are expected to do. 5. Integration of Long term and Short term Plans . To be effective, it is necessary that both long term and short term plans are fully integrated in which short term plans should be taken as contributing to long term plans. If managers emphasize only short term plans, they cannot set direction for their future course of action. Long term and short term plans can best be integrated if the latter is prepared in the light of the former. Similarly, if the long term plans are prepared keeping in view what the organization can implemented by way of its short term plans, coordination between the two can be achieved. 6. An open System Approach. Planning can be made effective by taking it as an open system approach. It suggests that managers must take into account interactions with their total environment in every aspect of planning. Objectives, a starting point in planning, should be set taking into account the various environmental forces. Planning premises represent a clear recognition that plans cannot be constructed in the vacuum of an internal system. The interfaces and interactions of plans with every element of the conditions and influences surrounding an organization are many and complex. This

fact should be recognized in the planning process. Therefore, it should not be taken as simple process, but the process. Therefore, it should not be taken as simple process, but the process of many interactions and influences. PLANNING IN INDIAN ORGANISATIONS Since planning is the basis for managerial actions, it has existed in all organizations, either formally or informally. However, it has been emphasized during 1990s with the process of liberalization of economy. With the increased competition, more and more organization are undertaken strategic planning approach. In fact, many companies have established separate corporate planning divisions or cells to provide aid in arriving strategic decisions. Here corporate planning practices in two companies are provided. Exhibit 6.1 shows the corporate planning process in British Oxygen Limited and Exhibit 6.2 shows the corporate planning process in ACC (Associated Cement Companies) Limited. EXHIBIT 6.1: Corporate planning in British Oxygen Limited. British Oxygen Limited (formerly Indian Oxygen Limited), established in 1935, is engaged in the business of producing industrial gases, welding consumables and equipments, cryogenic and process plants, and health care gases and accessories. It has adopted a formal corporate planning process. For its formal and systematic corporate planning process. BOL has adopted a five year period which is normally the case with most of the companies in India. for implementing the long term plans, short term plans are prepared in the form of annual budgets. Both long term and short term plans are closely interlinked. This has been done to integrate

the companys long term and short term plans are closely interlinked. This has been done to integrate the companys long term activities with its actual operations. Thus, the long term plans are taken on rolling concept basis whereby it is subject to review and modifications during the budget exercise whenever necessary. This system provides both basic documents and guidelines for the company to follow but at the same time provides adequate flexibility. The company prepares its planning document for long term period which is known as corporate strategy and growth plan. This document defines corporate mission, managerial philosophy, and corporate objective as well as functional objectives. Thus objectives also include targets for sales, volumetric growth, operating efficiencies, and profit performance. At the same stage, functional policies are defined in the areas of operations, finance, marketing, personnel, research and development, and public relations. The document defines corporate strategy and growth plans for various product divisions as well as for corporate divisions. Further, it also prescribes the process of strategy implementation, monitoring and controlling of foregoing activities. Decision making is an indispensable component of management process and managers life is filled with making decisions after decisions after decisions. Managers see decisions making as their central job because they constantly choose what is to be done, who is to do, when to do, where to do, and how to do. Looking at the role of decision making in management, William Moore has equated it with management when he says that management means decision making. Decision making,

though permeates all managerial functions, is at the core of planning because it is the planning where major decisions are made which set the organizational tone. It is the stage at which major decisions regarding setting of organizational tone. It is the stage at which major plans, laying down of policies, procedures, rules etc. are made. Collectively, the decisions of managers give form and direction to organizational functions. Decisions making is both managerial function and organizational process. It is managerial function because it is a fundamental responsibility of every manager. It is organizational process because many decisions transcend the individual managers and become the product of group, teams, committees, etc. in fact, more important decisions are made by group of managers rather by managers individually. Therefore, managers should develop decision making skills and acquaint themselves with the dynamics of decision making because of the following reasons. 1. Managers spend a great deal of their time in making decisions. In order to develop their decision making skills, it is necessary that they know how to make effective decisions. 2. Managers are evaluated on the basis of quality of their decision making. To improve the quality of decisions, they should know how quality of decision making can be improved. Concept of Decision and Decision Making Before we go through the various aspects of decision making, it is essential to go through the concept of decision making. The word

decision has been derived from the Latin word deciders which means a cutting away or a cutting off, or in a practical sense. Thus, a decision involves a cut of alternatives between those that are desirable and those that are not desirable. The decision is a kind of choice of a desirable alternative. Lopez has defined a decision as follows. A decision represents a judgment, a final resolution of a conflict of needs, means or goals, and a commitment to action made in face of uncertainty, complexity and even irrationally. Decision making is a process to arrive at a decision, the process by which an individual or organization selects one position or action from several alternatives Shull et.al. have defined decision making as follows. Decision making is a conscious human process by which an individual or organization selects one position or action form several alternatives. Shull et.al. have defined decision making as follows: Decision making is a conscious human process involving both individual and social phenomenon based upon factual and value premises which concludes with a choice of one behavioral activity from among one or more alternatives with the intention of moving towards some desired state of affairs. Decision making, thus, is an act of projecting ones own mind upon an opinion or a course of action. In decision making, three aspects of human behavior are involved (1) cognition activities of mind associated with

knowledge (2) conation the action of the mind implied by such words as willing, desire, and aversion, and (3) affection the aspect of mind associated with emotion, feeling mood, and temperament. Based on the above concept of decision making, its features can be derived as follows: 1. Decision making implies that there are various alternatives and the most desirable alternative is chosen to solve the problem or to arrive at expected results. A problem situation which does not have alternatives is not really a problem requiring solution though the problem may by quite injurious. 2. Existence of alternatives suggests that the decision maker has freedom to choose an alternative of his liking through which his purpose is served. 3. Decision making may not be completely rational but may be judgmental and emotional in which personal preferences and values of the decision maker play significant role. 4. Decision making, like any other management process, results through decision making. TYPES OF DECISIONS Decision making is involved in every walk of life, it is relevant in organizational as well as non organizational context. In organizational context, decisions may vary from the major ones like determination of organizational objectives or deciding about major projects to specific decisions about day to day operations. Therefore, there are different types of decisions which are made by managers in organizations and for each type of decision, decision making variables and conditions differ. There is goal directed. It implies that the decision maker attempts to achieve some

are different ways in which organizational decision may be classified. One way of classifying these decisions is to group them into routine and repetitive or non routine. In another way, these decisions are classified as programmed or non programmed. These are further classified as strategic and tactical decisions are mostly routine and programmed. Therefore, understanding of porgammed and unprogrammed decisions and strategic and tactical decisions is necessary for managers to enhance their decision making skills. Progarmmed and Non programmed Decisions Herbert Simon has grouped organizational decisions into two categories based on the decision factors which are taken into consideration. These are programmed and non programmed decisions. Programmed Decisions. Programmed decisions are routine and repetitive and are made within the framework of organizational policies and rules. These policies and rules are established well in advance to solve recurring problems in the organisation. For example, the problem relating to promotion of employees is solved by promoting those employees who meet promotion criteria. These criteria are established by promotion policy and the managers have just to decide which employees meet criteria for promotion and the decision is made accordingly. Programmed decisions are comparatively easy to make as these relate to the problems which are solved by considering internal organizational factors. Such decisions are made by personnel at lower levels in the organization where the environment affecting decision making is static and well structured.

Non Programmed Decisions. Non programmed decisions are relevant for solving unique / unusual problems in which various alternatives cannot be decided in advance. (for such decisions, the situation is not well structured and the outcomes of various alternatives cannot be arranged in advance. For example, if an organization wants to take actions for growth, it may have several alternative routes like going for a grass route project or taking over an existing company. In each situation the managers have to evaluate the likely outcomes of each alternative to arrive at a decision. For evaluating the likely outcomes of these alternatives, the managers have to consider various factors, many of which lie outside the organization. A common feature of non programmed decisions is that they are novel and non recurring and, therefore, readymade solutions are not available. Since these decisions are of high importance because of their long term consequences, these are made by managers at higher levels in the organization. Strategic and Tactical Decisions Organizational decisions are classified as strategic and tactical or operational. The distinction between strategic and tactical decisions is required because authority for tactical decision may be delegated to lower levels in the organization while for strategic decision, it cannot be delegated lower than a particular level in the organization. However the distinction between strategic and tactical decisions is not as fine as a manager would wish because both these decisions attempt to achieve organizational objectives. Moreover, what might be a strategic decision

for one organization may be tactical decision for another. Therefore, the nature of both decisions can be understood by analyzing them in detail. Strategic Decision. Strategic decision concept is based on strategy which is a major action plan in an organization. Therefore, strategic decision can be defined as follows: Strategic decision is a major choice of actions concerning allocation of resources and contribution to the achievement of organizational objective. 1. The decision is a major one which affects the whole or major part of the organizations. 2. It contributes directly to the achievement of organizational objectives. Though all decisions try to contribute in this direction, strategic decisions contribute directly and other decisions are derived from these. 3. A strategic decision may involve major departure from earlier ones concerning some organizational practices, for example, change in product mix, expansion of business, change in personnel policies, etc. 4. The strategic decision has normally three elements (I) a course of action or plan which specifies the work to be done to achieve the result, known as action element (ii) a desired result or objective to be achieved through the implementation of the decision, result element and (iii) a commitment which directs some part of the organization to undertake the course of action, makes the personnel involved responsible for attaining the objective and allocates resources to them, commitment element.

5. The strategic decision is normally a non programmed decision which is made under the condition of partial ignorance. The alternatives involved and the outcomes of these alternatives cannot be known in advance. This is so because strategic decision is to be taken in the context of environmental factors which are quite dynamic and uncertain. Tactoca; Decision. Tactical or operational decision is derived out of strategic decision. It relates to day to day working of the organization and is made in the context of well set polices and procedures. The various features of a tactical decisions are as follows. 1. Tactical decision relates to day to day operation of the organization and has to be taken very frequently. The decision is mostly repetitive, for example, purchase of raw materials, assigning duties to employees, etc. 2. Tactical decision is mostly a programmed one. The decision is programmed through the prescription of policies, rules, procedures, etc. therefore the decision can be made within the context of these variables. Such prescriptions provide what to do in a particular case. When the case for decision making comes, the decision maker simply applies those prescriptions and decides the things. 3. The outcome of tactical decision is of short term nature and affects a narrow part of the organization. For example, purchase of raw materials in routine manner will affect production department for a short period because raw materials are purchased very frequently in the context of well set policies.

4. The authority for making tactical decision can be delegated to lower level managers. This is done because of two reasons: First, the impact of tactical decision is narrow and of short term nature. Therefore, the lower levels managers have adequate perspective to make such decisions. Second by delegating authority for such decisions to lower level managers, higher level managers are free to devote more time on strategic decisions which are more important. DECISION MAKING PROCESS When a manager makes a decision, it is in effect the organizations response to a problem. As such, decisions should be thought of as means rather than ends. Every decisions is the outcome of a dynamic process which is influenced by multiple forces. This process is presented in fig. 10.1 However, this process should not be interpreted to mean that decision making is a fixed procedure. A process is basically a dynamic concept rather than static. Events and relationships are dynamic, continuous and flexible and must be considered as a whole in which many forces interact, a force affecting others and being affected by others. Therefore, the decision making process as presented in fig. 10.1 should be seen as sequential process rather than a series of steps to enable the decision. Moreover, the process reveals that it is more applicable to non programmed decisions than to programmed ones. Problems that occur infrequently are unstructured, and are characterized by a great deal of uncertainty regarding their outcome, require the manager to utilize the entire process. For frequently occurring, structured problems, it is not necessary to consider the entire process. If a policy is established or a specific rule or procedure developed to handle such problems, it will be

necessary to develop and evaluate various alternatives each time the problem arises. Specific Objective The need for decision making arises in order to achieve certain specific objectives. Every action of human being is goal directed. This is true for decision making also which is an action. Therefore, the starting point in any analysis of decision making involves the determination of whether a decision needs to be made. In fact, setting of specific objective itself is an outcome of an earlier decision. However, since the objective setting is an outcome of earlier decision, this may not be considered truly as the first step of decision process but provides framework for further decisions. Problem Identification Since a particular decision is made in the context of certain given objectives, identification of problem is the real beginning of decision making process. A problem is a felt need, a question thrown forward for solution. It is the gap between present and desired state of affairs on the subject matter of decision. It is just like the diagnosis of patient by the doctor makes a diagnosis, he has a normal, healthy person and he also has a fairly clear concept of what a healthy person is. With this model as the desired result, he looks for disparities in the patients actual state of health or factors which indicate that his future health will fall short of normal. In the case of management decision, however, a manager cannot rely on a commonly accepted norm such as healthy person. The objectives, if set precisely and specifically on the subject matter of decision, will provide clue in identifying the problem and its possible

solution. Further in management, a problem exists whenever one faces a question whose answer involves doubt and uncertainty. If there is no solution to the problem, it cannot be treated as problem from decision point of view, though the consequences of not solving this problem may be terrible. A problem can be identified much clearly, if managers go through diagnosis and analysis of the problem. 1. Diagnosis. The term diagnosis has come from Medical Science where it is used as the process of identifying a disease from its signs and symptoms. A symptom is a condition or set of conditions that indicates the existence of a problem. For example, a patient has certain symptoms on the basis of which his disease can be identified. Symptoms occupy an essential place in the problem solving process for they signal the existence of problem and guide the search for the underlying problem. For example, if an organization has high turnover of its employees, it indicates that something is wrong with the organization. The symptom of high turnover may provide the clue to the real problem and managers can overcome the problem by taking appropriate action (decision making involves in taking action). Often managers fail to diagnose the problem correctly and sometimes they treat symptom as problem. Therefore, they should do this exercise very carefully. Diagnosing the real problem implies knowing the gap between what is and what ought to be, identifying the reasons for the gap, and understanding the problem in relation to higher objectives of the organization.

2.

Analysis. While the diagnosis of problem gives the understanding of what should be done in terms of decision making, analysis of problem takes it a step further. The analysis of the problem requires to find out who would make decision, what information would be needed, and from where the information is available. This analysis may provide managers with revealing circumstances that help them a gain an insight into the problem. The whole approach of analysis of problems should, however, be based around critical factors like the availability of information for making decision, criticality of decision, and the time available for making decision. For example, information may be available from external and internal sources and some of the information may not be available at all. Similarly the criticality of decision will determine the level at which the decision can be made. Thus, diagnosis and analysis of problem requiring decision will clarify what is needed and where the alternatives for doing the thing can be sought.

Search for alternatives A thorough diagnosis defines both a specific problem and the situation in which the problem exists. With this definition in mind, a decision maker seeks possible solutions. A problem can be solved in several ways, however, all the ways cannot be equally satisfying. Further, if there is only one way of solving a problem, no question of decision arises. Therefore, the decision maker must try to find out the various alternatives available in order to get the most satisfactory result of a decision. Identification of various alternatives not only serves the purpose

of selecting the most satisfactory one, but it also avoids bottlenecks in operation as alternatives are available if a particular decision goes wrong. However, it should be borne in mind that it may not be possible to consider all alternatives either because some of the alternatives cannot be considered for selection because of obvious limitations of the decision maker or information about all alternatives may not be available. Therefore, while generating alternatives the concept of limiting factor should be applied. A limiting factor is one which stands in the way of accomplishing a desired objective. If these factors are identified managers will confine their search for alternatives to those which will overcome the limiting factors. For example, if an organization has limitation in raising sizable finances, it cannot consider projects involving high investment. A decision maker can use several sources for identifying alternatives : his own past experience, practices followed by others, and using creative techniques. Past experience, applied in most cases of decision making, takes into account the actions taken by the decision maker in the past with obvious differences between the former challenges and the present one. The successful action of the past may become an alternative for the future. This is a very simple approach but has obvious limitations because they may be so much changes in the decision context that old action becomes totally irrelevant. Copying from the experience of others is another way of generating alternatives. Thus, alternatives used by successful decision makers can be thought of as alternatives. Thus, alternatives used by successful decision makers can be thought of as alternatives of decision making. This is also practiced by many

organizations after making suitable amendments in the light of changed decision context. Importing of technology from foreign countries with suitable changes is good example of this type of alternatives. The third method of generating alternative is through creative process where various exercises are taken to generate entirely new ideas. This aspect of search for alternatives will be discussed in a separate section of the chapter. Evaluation of Alternatives After the various alternatives are identified, the next step is to evaluate them and select the one that will meet the choice criteria. However, all alternatives available for decision making will not be taken for detailed evaluation because of the obvious limitations of managers in evaluating all alternatives. The energy of managers is limited and psychologically most of them prefer to work on plans that have good prospect of being carried out. In narrowing down the number of alternatives, two approaches can be followed: constraint on alternatives and grouping of alternatives of similar nature. The decision maker develops a list of limits that must be met by a satisfactory solution. He may treat these limits as constraints, that is, he may check proposed alternatives against limits, and if an alternative does not meet them, he can discard it. In the second approach, various alternatives can be grouped into classes on some specific criteria important to decision making. A representative alternative from one group may be selected for future analysis. Then having found the group that shows up the best, decision maker can concentrate on alternative within this group. This method is very helpful in decision making regarding the location of plant, warehouse etc.

Having narrowed down the alternatives which require serious consideration, the decision maker will go for evaluating how each alternative may contribute towards the objectives supposed to be achieved by implementing the decision. Evaluation of various alternatives dissects an alternative into various tangible and intangible factors. Tangible factors are those which can be quantified because they are quite obvious like the cost per unit, investment required, output to be received, etc. Such factors can be measured easily, though their happening may not be measured with certainty, for example, demand projection at a given price in a particular alternative. As against these, intangible factors are mostly qualitative and cannot be measured in terms of quantity. Therefore, some definition can be used for such factors. For example, in a plant location, various non economic factors like psychological problem arising out of displacement of persons from the plant site, ecological balance etc. have to be taken into account. For determining the impact of a factor, various quantitative techniques have been developed which will be discussed in a separate section of the chapter. Choice of Alternative The evaluation of various alternatives presents a clear picture as to how each one of them contributes to the objectives under question. A comparison is made among the likely outcomes of various alternatives and the best one is chosen. Choice aspect of decision making is related to deciding the most acceptable alternative which fits with the organizational objectives. It may be seen that the chosen alternative should be acceptable in the light of the organizational objectives. Thus, it

is not necessary that the chosen alternative is the best one. This concept is based on the satisfying approach rather than the maximizing approach of decision making, to be discussed later in detail. In choosing an alternative, the decision maker can go through three approaches: experience, experimentation, and research and analysis. 1. Experience: Managers can choose an alternative based on their past experience if they have solved similar problems earlier. Reliance on past experience play a larger part that it deserves in decision making. Managers rely more on experience than alternative methods of choice. Past experience has some benefits but it has certain limitation that it blocks making correct choice specially when the environmental factors are more flexible. 2. Experimentation. Experimentation which is generally used in scientific enquiry involves that a particular alternative is put in practice, result is observed, and the alternative giving the best result is selected. For example, many organizations go for test marketing of their products before the products are really introduced in the market. During test marketing, the actions can be taken to change product features which are not acceptable. Experimentation as a method for choice of an alternative can be used on a limited scale because of cost and time factor. 3. Research and Analysis: Research and analysis is the most certain method of selecting an alternative, specially when major decisions are involved. This approach entails solving a problem first by

comprehending it. This involves a search for relationships between the more critical variables, constraints, and planning premises that bear the objectives sought. In the second stage, the alternative is broken into various components. There individual impact on objective is evaluated and eth impact of all factors of an alternative is combined to find out the total impact of the particular alternative. The one having the most positive impact is chosen. Since this required making a lot of calculations, often the help of computer is taken. In fact, various computer based models have been developed to make the choice of an alternative easier. Though various approaches are available for choosing an alternative, the decision makers personal values and aspirations affect what alternative will be chosen. In fact, in one way, the decision making is the translation of ones values and aspirations in to action. Thus, the rational process of decision making is considerably affected the personal factors. Further, managers should take into account the uncertainty of outcome of a decision. Therefore they should be ready with alternative action if one fails. In order to do this, managers should often be ready with contingency plans. Action Once the alternative is selected, it is put into action. Truly speaking, the actual process of decision making ends with the choice of an alternative through which the objectives can be achieved. However, decision making, being a continuous and ongoing process, must ensure that the

objectives have been achieved by the chosen alternative. Unless this is done, managers will never known what way their choice has contributed. Therefore, the implementation of decision may be seen as an integral aspect of decision. Once the creative and analytical aspects of decision making through which an alternative has been chosen are over, the managerial priority is one of converting the decision into something operationally effective. This is the action aspect of decision making. The basic difference between decision making as an analytical process and action is that the former requires the use of conceptual skills since it translates the abstract ideas into reality. For example, suppose that there is a change in consumers tastes. This change is very abstract and cannot be seen unless some specific techniques and measurements are applied. How this change can provide opportunity to the organization is mostly a conceptual exercise requiring managers to interpret what changes are taking place and what products or services will be preferred in the changed situation. Action, on the other hand, relates to putting a decision into practice so that objectives of decision are achieved. This practice will provide further feedback for evaluating the soundness of the decision and, if need be, a change in the decision. Implementation of a decision requires the communication to subordinates getting acceptance of subordinates over the matters involved in the decision, and getting there support for putting the decision into action. The decision should be effected at appropriate time and in proper way to make the action more effective. The effectiveness of action is important

because it is only effective action through which organizational objectives can be achieved, and right decisions help in effective action. Results When the decision is put into action, it brings certain results. These results must correspond with objectives, the starting point of decision process, if good decision has been made and implemented properly. Thus, results provided indication whether decision making and its implementation is proper. Therefore, managers should take up a follow up action in the light of feedback received from the results. If there is any deviation between objectives and results, this should be analysed and factors responsible for this deviation should be located. The feedback may also help in reviewing the decision when conditions change which may require changes in decision. Therefore, a successful manager is one who keeps a close look at the objectives and results of the decision and modifies his decision according to the changes in the circumstances.

PLANNING Planning is a prerequisite of every management whether it is organizing, staffing, directing or controlling. All these functions have to br preceded by a system of efficient planning otherwise the persons concerned with executing them will find it difficult to perform them systematically and efficiently. Planning enables to provide for the uncertain future. Planning is the most basic of all management function since it involves decides of future course of action. The other functions of management viz, organizing, staffing, directing, and control, must reflect proper planning. Planning involves anticipation of future course or events and deciding the best course of action. It is basically a process of thinking before doing. Planning is the basic function that leads to the clarity of: Which activities will be done in order to achieve common goals? Who will perform which activity? When and how would these activities be performed?

DEFINITION: Planning : Planning is the selection and relating of facts and making and using of assumptions regarding the future in the visualization of proposed activities believed necessary to achieved desired result. (G.R.Terry).

Planning at its best is not only a system for solving problems but more importantly a system that leads to the discovery of new opportunities Whatever is the level at which a manager operates, he has to ensure that the subordinates whose performance he is responsible for, take instructions from and understand very clearly what exactly has to be accomplished by them in order to be effective. Planning also involves development of options and selection of future course of action from among the same. It is a formal and rational approach towards selection of business as well as the way in which it will be conducted. That is to say, a serious deliberation of why an action should be taken, how to act and when to act, who will act and so on. To conclude, planning is thus the first step in the management process concerned with the establishment of objectives and goals to be attained in the future in the light of an analysis of present limitation for attaining such goals with a view to their removal or deduction, anticipation of the future environmental factors and their impact and designing the course of action and programmes for attaining such pre-selected goals. It involves both communication and thought. PLANNING PROCEDURE / STEPS As described by Koontz, ODonel and Weihrich: Planning process involves several steps that will essentially follow. Whenever there is a thorough attempt to plan. If the plans to be developed are minor or decisions to be taken are not very significant, it is obvious that the

planning effort that be devoted to them shall be proportionate. The steps recommended by them are:

1.

IDENTIFICATION OF OPPORTUNITY OR PROBLEM

This step is strongly focused on markets, customers and competition. Understanding of these three is used to evolve a clear and realistic idea of the opportunities they offer as well as threats they generate. For e.g., if the competitor is going to introduce a new innovated product, it may have bad effect on our sales. If we can identify a new way of presenting use of our product to a new customers, it is an opportunity for us to increase sales. This leads to understanding of problems that we will have to solve and the gain that we expect. 2. ESTABLISHING OBJECTIVES:

At this stage, major organizational and unit objectives are set. Objectives specify the result expected and indicate the end points of what is to be done, where the primary emphasis is to be placed, and what is to be accomplished by the various types of plans. The organizational objectives should be specified in all key result areas. (Key result areas are those which are important for achieving the objective) for e.g. key result areas are profitability, sales, research and development, manufacturing and so on. Once organizational objectives are identified, objectives of short term can be identified for the long term. 3. PLANNING PREMISES

After determination of organizational goals, the next step is establishing planning premises, that is, the condition under which planning activities will be undertaken. Planning premises are planning assumptions, forecasts, application basic, policies and existing company plans put together on the basis of which, plans are made. Use planning premises

are external and internal. External premises include total factors in task environment like political, social, technological, competitors plans and action. Internal factors include organizations policies, resources of various types and the ability of the organization to withstand the environmental pressure. The plans are formulated in the light of both external and internal factors. The more individuals charged with planning understand and utilize consistent planning premises, the more cocoordinated planning will be. The natures of planning premises different at different levels of planning. 4. DETERMINATION OF ALTERNATIVES:

This step involves search of and identification of alternatives that are feasible and available. Most of the times, there are more than one ways to achieve the objectives or to seize the opportunity or to solve the problem. This step signifies that without jumping to conclusion or setting for the first available option, careful consideration is made on elaborating all possible alternatives. For e.g. if an organization ahs set its objective to grow further, it can be achieved in several line, diversifying in other areas, joining hands with other organizations, or taking over another organization, and so on. The most common problem with alternatives is not that of finding of alternatives only but to reduce the number of alternatives so that most promising ones may be taken for detailed analysis.

5.

EVALUATON OF ALTERNATIVS:

All the options identified in the previous step may not be pursued in action. Each alternative must be carefully analyses in order to see which serves best for achievement of our objective. Again it is the set of objectives or goals that provide basis for selection or rejection of an option. For e.g., one alternative may be most profitable but requires heavy investment with long gestation period, another may be less profitable but also involves less risk. 6. CHOICE OF ALTERNATIVE:

After the evaluation of various alternatives, the fit one is selected. Sometimes evaluation shows that more than one alternative is equally good. In such a case, a planner may choose more than one alternative. There is another reason for choosing more than one alternative. Alternative course of action is to be taken in future, which is not constant. A course of action chosen keeping in view the various planning premises may not be the best one if there is change in planning premises. Therefore, planner must be ready with alternatives, normally known as contingency plan, which can be implemented in changed situations. 7. FORMULATION OF SUPPORTING PLANS:

In order to achieve organizational or common goals that require effort or several individuals working in different functional areas or specially areas, it may become necessary to develop the whole hierarchy of plans. The major or high level plan may need to be supported by peripheral or supporting plans. For e.g. if the organization has an objective to achieve

highest market share, it can be achieved by snatching the share of competitors or by expanding the market itself. 8. ESTABLISHING A SEQUENCE OF ACTIVITIES, ACTION AND MONITORING This is the last logical and natural step in the process of planning. In this step, the plan is ready for implementation. In order to ensure that the plan is executed as desired and necessary changes are made during execution, continuous monitoring, measurement, feedback, evaluated etc. are needed while action is in progress. For taking care of these, effective information systems and decision making mechanism must be but, monitored and improvised. WHY PLANNING? (Class assignment) Prime activity of management Reduces uncertainty or it offset uncertainties Help in control It bridges gap between where to go? It helps in co-ordination with other department Improve competitive strength

CLASSIFICATION OF PLANNING ACCORDING TO TIME: 1) Long Range Planning: Long range planning sets long term goals for the enterprise and then proceeds to formulate specific plans for attaining these goals. It involves an attempt to

anticipate, analyse and makes decisions about basic problems and issue, which have significance reaching well beyond the present operating horizon of the enterprise. 2) SHORT RANGE PLANNING. Short range planning, on the other hand, is concerned with the determination of short term activities to accomplish long term objectives. Short range planning relates to a relatively short period and has to be consistent with the long range plans. ACCORDING TO FUNCTION: a) CORPORATE PLANNING: The planning done on the top level is known as corporate planning. Corporate planning determines the long term plan, considering some of the environmental changes. Sometimes there is a difference in opinion about corporate planning and long term plan, because it underemphasizes the comprehensive nature of corporate planning. The process of corporate planning is concerned with all aspects and not only the long range. Normally, corporate planning is divided into strategic planning or long range planning and operational, tactical, or short range planning. b) FUNCTIONAL PLANNING: As against corporate planning which is integrative, functional planning is segmental and it is undertaken for each major function of the organization like production, marketing, finance, personnel, etc. At the second level, functional planning is undertaken for sub functions within each major function. For eg. Marketing planning is undertaken at the

level of marketing department and then sub divided into sales, advertising, promotion, distribution etc. ACCORDING TO MANAGEMENT a) STRATEGIC PLANNING : Strategic planning sets the long term direction of the organization in which it wants to operate in future. Examples of strategic planning in an organization may be : planned growth rate in sales, diversification of business into new lines, type of products to be offered, and so on. In this way strategic plan takes into consideration all the functional areas of business and is affected within the existing and long term framework of economic, political, technological and social. A basic problem in strategic planning is the period for which plan is to be formulated. Normally more than one year period is considered to be a long one. There should be logic in selecting the right time range for planning. b) OPERATIONAL PLANNING: Also known as tactical planning, usually covers one year or so, it is aimed at sustaining the organization in its production and distribution of current products or services to the existing markets. Operational planning answer the following questions: Why is the action required? What action is to be taken? What will the action accomplish?

 What are the results of the action required? What objectives and conditions must be met? Operational planning is undertaken out of the strategic planning. Operational planning is further divided into: SINGLE USE PLAN: 1. OBJECTIVES: Before initiating any course of action, the objectives in view must be clearly determined, understood and stated. The determination of objectives influences policy, organization, personnel, leadership and control. Effective management is managed by objectives. Enterprise objectives influence the management philosophy and practice. Objectives decide where we want to go, what we want to achieve and what is our destination. If we have well defined objective and goals, we can ensure orderly and progressive growth and progress. 2. STRATEGIES: In corporate planning, strategy is the Grand Design or an overall plan which a company chooses in order to move or each towards the set mission, basic long term objectives and the adoption of course of action and allocation of resources necessary to achieve these objectives. The strategy defines the basis for all further steps. Developing a good strategy is a creative and conceptual process that tries to make maximum use of internal and external forces to push forward the organization to achieve the objective. Objective emphasize the state

of being there, while strategy emphasizes the process of getting there. It prescribes the preferred means to attain the desired ends. Strategic decisions help the management to develop a fine art of dealing with the unknown and the unfamiliar in important situation. Most business failure is due to jack of right strategy or due to lack of implementation of good strategy. 3. BUDGETS: A budget is a plan expressed usually in numeric terms. If the plans have to be successfully implemented, all the people involves in the same need to have a very clear understanding of what is expected of them and what are the constraints. An organization involves collective action towards achievement of a common objective. Hence the budgets also are created to apply to various organizational activities. Normally budgets are made for one performance period i.e. one year. This annual budget can be further divided into smaller part. 4. PROGRAMME : It is a single use plan. It is a sequence of activities designed to implant policies and accomplish objectives. It gives step by step approach to guide action necessary to reach predetermined targets. It is a instruction of co-ordination, i.e. a timetable of action. A good programme ensures smooth and efficient operation. A procedure tells how it is to be done, whereas a programme tells what is to be done. 5. FORECASTING : Planning is concerned with linking the present and the future. This attempt of charting out the path to the future

could be a waste if there is no proper attempt at developing a clear vision for future. Forecasting is an important tool that helps managers develop this clarity of vision. Forecasts, when formally created and accepted by the planners become important ingredients of the planning premises. Forecasting is basically an exercise into asking questions that relate to future or, planning period, followed by making systematic attempts of the near accurate answers for the same. STANDING PLAN: Is further divided into: 1. MISSION: In every joint enterprise we must have a definite purpose or mission, then only the organization becomes meaningful or purposive. This will act as a reference point in our risky journey in the business world. It is created by top management in consultation with members of the organization. The mission answer basic question. What business are we in? What will our business be? Who are our customers? The basis purpose or the mission of a business organization is production and distribution of economic goods and services to serve the customer demands. Provision of employment and income through which the citizen can buy their commodities and services.

The word mission is a general term describing the fundamental reason for the existence of an organization. It also points out the beliefs, values, creed or philosophy of the management. 2. POLICIES: It is the responsibility or the top management to make policies or to take policy decisions. Policies involve standing decisions, which are used repetitively over a period of time by different levels in the organization. Policies are required in different functions of the enterprise. Policy describes the major features of how the accomplishment of objectives will be pursued. Policies point out. How are we going to get there, A policy is a general standing plan guiding the management in the conduct. It guides thinking, decision making and action in the organization. Policies represent value system of the top managers in an organization, since two enterprises in the same business may have different policies on the same matter. For e.g., some organizations promote employees on the basis of seniority, whereas others on the basis of merits of enterprise management operations. Such policy decisions, when known and accepted by subordinate managers or employees, ensure that subordinates do not have to ask for directions too frequently, resulting into saving a managerial time. Policies may affect major as well as minor aspects of business decisions. One policy may be derived from another. Policies may be major or general, affecting the whole organization, or departmental. They may be formally communicated to employees in

written form, or they may be informally communicated to employees in written form, or they may be informally discussed or discovered by employees. 3. PROCEDURES: Procedure is a systematic way of handling regular events. It is stated in terms of steps to be followed in carrying out certain kinds of work. it is a list of systematic steps for handling events that occur regularly. A procedure is a guide to action rather than to thinking, so it hardly leaves any room for judgment. They contain detailed, often step wise guidelines to the exact manner in which an activity must be performed. A procedure is also a standing plan describing a customary method of handling a future activity. It gives a sequence of action directed at a single goal that is repeatedly pursued. A procedure of scientific selection of employees may have the steps as follows Preliminary interview Application blank Reference check Employment tests Final interview Supervisors approval Medical check Appointment Induction or orientation

4. METHODS: The method lays down specially and in all possible details how a particular task is to be performed and the best manner of doing so with adequate consideration to the objective. Facilities available and the total expenditure of time, efforts and money. It specifies how a step or procedure is followed. A method is more limited as compared to a procedure. Method involves only one department and one person. A method influences the behaviors of an individual e.g. there is a prescribed method of completing an employment form, of ironing shirts in a big laundry. 5. RULES : Rules constitute the simple and the most specific types of standing plans, chosen from various alternatives. A rule is more rigid, and always much more specific, than a policy. It demands that a specific action be or be not taken with respect to a situation. A rule is formulated to a procedure as it guides action but mentions no time sequence. a rule is formulated to define in advance what decisions must be made. It guides action. No smoking is a good example of a rule usually well communicated in a factory dealing with inflammable materials. Such a rule is applicable to any person working in or passing through the prohibited area. PLANNING PREMISES INTERNAL FACTORS: Managers while going through the planning process have to work in a set of given variables. These variables often provide less flexibility in planning which is needed to cope up with the changes in future events. The major internal factors are:

1. Psychological Factors: Psychological factors are in form of resistant to change. Managers and employees in the organization may develop patterns of thought and behaviour that are hard to change. They look more in terms of present rather than future. They believe that if they do not take care of present, future will not be there. For them, planning tends to accelerate change and unrest. 2. Policy and procedural factors: Another internal factor emerges because of organizational policies and procedures. Once these are established, they are difficult to change. Though these policies, procedures, and rules are meant to facilitate managerial actions by providing guidelines they often tends to be too exacting and numerous that they leave very little scope for managerial initiative and flexibility. 3. Capital Investment : In most cases, once funds are invested in fixed assets, the ability to switch future course of action becomes rather limited, and investment itself becomes a planning premises. During the entire life of the fixed assets, this inflexibility continues unless the organization can reasonably liquidate its investment of change its course of action, or unless it can afford to write off the investment. External Factors: Beside the internal factors, managers are confronted with many external factors and they do not have control over social, economic, technological, and political forces. Whether these change quickly or slowly, they do stand in the way of effective planning. These are:

1.

Political Factors: Every Organization to a greater or lesser degree is faced with the inflexibility of the political climate existing at any given time. Attitude of government towards business, taxation policy, regulation of business. Generate constants on the organizational planning process. Government being the major supplier of certain raw materials, finances through financial institutions may affects the business organizations considerably.

2.

Trade Unions: The existence of trade unions, particularly those organized at the national level, tends to restrict freedom of planning. Apart from wages, and other associated benefits, they affect the planning process by putting limitations on the work that can be undertaken by the organization. They set up the work rule and productivity. To that extent, managers are not free to make decision of their choice.

3.

Technological Changes: The rate and nature of technology changes also present very definite limitation upon planning. An organization is engaged in its process with a given technology. When there is a change in technology, it has to face numerous problems resulting into higher cost of production and less competitive competence in the market.

4.

Time and cost factors: Planning process is quite a costly and time consuming process. The various steps of planning may go as far as possible because there is no limit of precision in planning tools. Managers can spend unlimited amounts of time in forecasting,

evaluating alternatives, developing supporting plans, or attending other aspects of planning, if they do not have limitations of time and money. Planning process suffers because of time and cost factors. Time and cost is a limiting factor for every manager in the organization. 5. Failure of people in planning: A part from the above factors, sometimes, people involved, planning proceed fail to formulate correct plans. These are many reasons why people fail in planning at the formulation level as well as implementation level. Some of the major reasons for failure are: lack of commitment to planning, failure to formulate sound strategies, lack of clear and meaningful objectives, tendency to overlook planning premises, failure to see the scope of plan, lack of delegation of authority, lack of adequate control techniques etc. Write note on Planning Premises: [April 2002] 5 marks Development of planning premises is one of the important steps in planning. Premises deal with generation, communication and agreement regarding the bases on which the plans are made for planning period. Premises can be classified as under; a) External Factors: Business and economic condition Political stability Cultural and market environment Resources availability capital, labor

 c)

Sociological factors Industry demand Social norms Government control. Internal Factors: Basic policies and programmes Sources of raw materials, components Capital commitment Sales forecast

The internal factors cover the relatively controllable corporate resources that are used to produce goods and services. BARRIERS TO EFFECTIVE PLANNING Lack of reliable data Lack of initiative Costly process Rigidity in organizational working Non acceptability of change External limitations Psychological barriers.

Distinguishing Between: Policy Procedure It describes how of business i.e. It described how of business i.e. how we are going to get there? how to go for that? It is concerned with a major or It is concern with a major aspect of

minor aspect of business business A policy is a standing customary A policy is a standing customary method of handling future as well method of handling future as present activity It contains comprehensive guidance It contain stepwise guidance to to perform an act perform an act.

Autocratic Style Democratic Style The power lies in the hands of The power lies in the hands of leader or manager subordinates as well. The work will be completed in time There may be delay in work due to due to fear of punishment. no strike punishment It is implemented when unskilled It is implemented where skilled and and uneducated people are working educated people are working Method Rule It is more flexible It is more rigid It influences the behaviours of an It influences all people directly or individual indirectly connected to it. It relates to how a particular task is It relates to what action to be taken to be performed with respect to a situation Method has to be communicated It can be communicated formally or formally in written form informally in written or oral form. It can be framed by middle as well It is framed by only top as lower level of management management of the company.

Mission Objectives Mission relates to what is our Objectives answer where we want to business go? It describes fundamental reason for It describes the fundamental goal for the existence of an organization the existence of an organization. It point out beliefs, value and It point out the path

philosophy Mission cannot be divided into Obj. can be divided into long term and long and short term Mission gives direction short term. Objectives give result and direction

Policies Objectives Policies are guidelines, which facilitate Objectives are the ends towards the achievement of predetermined which all activities of the enterprise objectives are directed. Policies determine how the work is to be Objectives determine what is to be done done. Policies prescribe the more and the Objectives are the end points of manner in which objectives can be planning achieved Policies are formulated at the top level, The owners or top management of middle level, and lower level the business determines objectives. CHAPTER 2 : EVOLUTION OF MANAGEMENT THOUGHTS University of Management The concept of university of management indicates that management can be practiced from one place to another and from one country to the another. Successful transmission of management knowledge and techniques is possible (i) (ii) By one manager from one country to another country or By people of one developing country coming to study and work in a more industrialized one and returning to home country. In order to take up a job or (iii) Through training and development programs designed for managers in the developing countries.

The following authors subscribe to the concept of university of management: Knoontz and Odonnel: Management has universal application in every kind of enterprise and at every level of enterprise. Allen:- Management is universal and many of the examples of practices at Du point provided a pattern that was followed with noticeable success by many other companies. McFerland:- Management skills is an exportable commodity and it is one of the important exports of the multinational or international firms. Richman:- The evolving Soviet approach to management utilsies the essential function of planning long held by American concepts. But some other management experts do not agree with such a view of university. Quoting some references Haire: A study of 3600 managers in 14 countries indicates that the variations in managerial behaviour patterns were due to identifiable culture difference. 1) W.Oberg:- Management principles are universal, but the challenge of cultures and other business climates must be recognized. Arguments in favour of universality concepts Emphasis on management process:-

Management as a process is universal. The various elements of management process planning, organizing, staffing, directing and controlling are universal for all organization, staffing, directing and controlling are universal for all organization and as a manger each one must, at one time or another carry all these duty, characteristics of managers. Only the intensity of particular element differ depending upon the situations. 2) Distinction between management fundamentals and practices:-

While the practice of management may differ but the fundamentals of management remains the same. This is so because management is both art and science. The art of managing or practice of managing make the use of organized knowledge that is science. However its practice is subject to variations under different conditions. 3) Distinction between fundamentals and techniques.

Management fundamentals are underlying principles of management. Management techniques are tools for performing managerial functions. Management techniques differ from country to country and from one situation to another. Argument against university 1) Culture of a country or of an organization The application of management is determined by the culture because management is people oriented process and people oriented process based on culture from where people come. Culture is set of beliefs, attitudes and values that are shared commonly by the members of the

society for e.g. the culture of America is different from Japan. American believes in Individualism and Japanese believes in collectivism. Thus, the working pattern or organizing pattern in the organization of both the countries are different. 2) Management Philosophy

Philosophy can mean an attitude towards certain activities. Every organization, has philosophy of doing business. Different philosophy requires fog e.g. private and government enterprises are two enterprises even in the same industry may have differences. Organization Objective The objective of enterprise determines the type of management required. Business organization exit for achieving certain objective and management consists of skills and techniques for attaining these ends for e.g. the objective of profit making organization and non profit organization is different and thus management skills, abilities are needed would be different. The various argument for and against the university of management concept should be analysed so as to arrive conclusion an analysis suggest that there are certain management principles which are universal thought there practice may differ from country to country. Therefore, the knowledge of management can be transferred from one country to another country. Evolution of management thoughts:-

Management in some form or other has been practiced in the various parts of the world since the dawn of civilization. Evidence of the use of well recognized principles of management is to be found in the organization of public life in ancient Greece, the organization of the Roman Catholic church and the organization of military forces. They were not much used in the business world so long as the structure of industry was simple. With the one set of industrial revolution, however the position undergone a radical change. The structure of industry become extremely complex. The organization of industry and commerce on a large scale created new problems for entrepreneurs. The need for expansion further added to the worries of business leaders at this stage, the development of a formal theory of management both of work and the workers become absolutely necessary. This led to the emergency of a variety of orientations and approaches in management. Evolution of management thought Management thought 1. Early contributions 2. Scientific Management 3. Administrative / Operational 4. Human Relations approach 5. Social system approach 6. Management science approach 7. Human behavior approach 8. System approach 9. Contingency approach Early contributors:Period Upto 19th century 1900-1930 1916-1940 1930-1950 1940-1950 1950-1960 1950-1970 1960 onwards 1970 onwards

As we have --------- earlier, Roman catholic church have introduced sound principles in administering staff personnel and then it was carried by military during 16th and 18th century. In the field of business organization some stray contributions comes from Robert Owen, James Watt, Charles Babbage and Henry Town. Their ideas created an awareness about managerial problems. By the end of 19 th century, a stage was set for taking systematic study of management and he beginning was made by Taylor in early part of 20th century which took the shape of scientific management. Scientific Mgt. School Taylor & Scientific Management The concept of scientific management was introduced by Federick Taylor in USA in the beginning of 20th century. This concept was further carried on by Frank and Lillian Gilbreth, Henry Gratt, George Berth etc. scientific management was concerned essentially with improving the operational efficiency at the shop floor level. Taylor defined scientific management as follows:Scientific management is concerned with knowing exactly what you want men to do and then see in what they do it in the best and cheapest way. Since Taylor has put the emphasis on solving managerial problem in scientific management.

Taylor joined Midvale steel company in USA as a worker and later on become supervisor. During this period he completed his M.E. subsequently, joined Bethlehem Steel Company. At both these places, he carried experiments about how to increase the efficiency of people. Elements and Tools of scientific management Taylor conducted experiments at his work places to find out how human beings could be made more efficient by standardizing the work and better method of doing the work. These experiments have provided the following features of scientific management. (1) Separation of planning and doing: Before Taylors scientific management a worker used to plan the work, arrange the instruments and then starts the actual work and the supervisors. Job was merely to see how. Workers were performing. This was create a lot of problems. Taylor emphasize that planning should left to supervisor and workers job is only to perform the task with efficiency. (2) Fundamental foremanship:-

Separation of planning from doing result into the need of supervisor who ca plan the work besides supervising the workers for this purpose Taylor introduce the concept of foremanship in this 8 persons are involved to direct the worker at job from which 4 are doing the work of planning and remaining four are concerned with doing the work. (3) Job analysis:-

Job analysis is undertaken to find out the one best way of doing the thing. The best way of doing a job is one which requires the least movements,

less time and less cost. The best way of doing the thing can be determined by taking up time motion fatigue studies. (4) Standardization:-

As far as possible standardization should be maintained in respect of instruments, and tools, period of work, amount of work, working conditions etc. (5) Scientific selection and training of workers:-

The selection of workers should be done on scientific basis taking into account their education, work experience, aptitude, physical strength etc. a worker should be given work for which he is physically and technically most suitable. Apart from selection emphasize on giving training to the workers. (6) Financial incentives:-

To motivate workers financial incentive should be given financial incentive should be given on performance basis. (7) Economy

Apart from efficiency in work adequate attention must be given to cost and profit consideration for this purpose, techniques of cost estimates and control should be adopted productivity maintain by eliminating wastages. (8) Mental Revolution

Scientific management depends on the mutual co-operation between management and workers. So it is need a change of their mind set and achieve their goals. Principles of scientific management 1) Replacing rule of thumb with science:Taylor has emphasized that in scientific management, organized knowledge should be applied which will replace rule of thumb. Scientific methods gives exactness in various aspects of work like days fair work, standardization in work, etc. 2) Harmony in Group Action:-

Group harmony suggests that there should be mutual give and take situation with proper understanding. 3) Cooperation :-

Scientific management emphasize on achieving co-operation rather then chaotic individualism. It is based on mutual confidence and goodwill. 4) Maximum output.

Emphasize on maximum output by increasing productivity and eliminates wastages. 5) Development of workers:-

Through training workers skills are developed which help them increase their productivity.

Criticism of scientific management theory:(1) (2) (3) Taylor ignored human aspect at workplace he only considered mechanical view of production. The workers are, observed by strict supervision which might affect them negatively. There was lack of scientific standardization of work and whatever standards use to be set by the management, the workers had to follow strictly. Such standards often used to raise production norm without taking into consideration the factors affecting such a norm. (4) The most crucial element was differential piece rate system which was opposed by many people. Henry Gantt: He work initially with taylor, but later become an independent consultant. Over and above Taylors incentive to every worker. Who finished the days assigned work, he added incentives to the supervisors if worker under him achieve target. He recommended public charting of every workers daily performance, with black letters for standard performance and red letter for substandard work. He originated charting system for production scheduling called Gnatt Chart, CPM, PERT technique. The Gilberths:Frank Gilbreths and Lillian Gilbreth were spouses working as a team. They concentrated on Fatigue and motion studies. They worked on the ways to promote workers welfare. They interpreted scientific management as a means to help workers reach their full potential. They argued that every motion eliminated would reduce fatigue. They used

motion picture cameras to study each motion in order to arrive at conclusion as to, which were the most economical motions for accomplishing the given task so for performance could be upgraded and fatigue reduce. Management Process School. This approach is known by various labels such as the traditional approach, the classical approach or the operational approach. The father of this school of thought was the noted French thinker and practitioner Henri Fayol. According to this school, management can be studied in terms of process that it involves. The management process consisting of 5 broad categories of functions, viz, planning, organizing, staffing, directing and controlling is in evidence in all managerial situations following this, this school of management thought has evolved some universal principles. Henry had a view that this principles are universally accepted. They could be applied to any type of organization. This principles of management described by Henry are:1) 2) 3) 4) 5) 6) 7) 8) 9) Division work Authority and responsibility Discipline Unity of command Unity of direction Subordination of individual to general interest Remuneration of personnel Centralisation Solar chain

10) 11) 12) 13) 14) (1) (2) (3)

Order Equity Stability of tenure Initiative Esprit de corps The study of management should focus on the role and functions of managers. The functions of managers are same irrespective of the type of organization. The conceptual framework of management can be built through an analysis of the process of management and identification of principles.

The main features of management process school are:-

(4)

The 5 functions, viz, planning, organizing, starting, directing, and controlling are the core of management. The chief contributors and thinkers belonging to this school of thought are :Henry Fayol, J.D. Mooney, A.C. Reiley, Lyndall Urwick, Harold Koontz, McFarland. This school is criticized on 3 main grounds.

(1)

This school is loosing ground as hardly any significant contribution has been made after what Henry contributed at the end of 19th century.

(2) (3)

The so called universal principles of management do not always stand the test of empirical scrutiny. Organizations function under dynamic conditions and therefore, searching for universal principles may not always be fruitful exercise.

(4)

With all these criticisms, the management process school does provide a concept on framework which could be usefully utilized in understanding the basics of management.

The empirical school or management by customs school. Those subscribing to this school of thought believe that management is a study of experiences of managers if managerial experiences can be studied closely, management knowledge would emerge and grow out of it. This knowledge can be utilized by other managers in making their own decisions and solving managerial situation faced by them. But this school of thought depends heavily on the historical methods of study. The basic assumption of this approach to the study of management is that the of actual business situation contributes to the development managerial skills. It uses case study method to analysis and study particular management situations. The main features of this school of thought are:1) 2) Management is the study of experience: The managerial experience can be passed over to the practitioner and students

3)

The success and the failure of management is the process of decision making could provide guidance to the manager ni a similar situation.

4)

Theoretical research has to be based on practice experience

The empirical school of thought goes mainly by precedents in so far as it studies the managerial situations handed by the managers and their own experience. However, the exponents of this school do not fully realize that a manager has to work under dynamic situation and that history does not exactly repeat itself. The method used to solve any managerial problem in the past cannot be fully applied in present situation. The principle tool of emphirical study is case study method which has its own limitation there are certain variables which change in dynamic situations so it cannot applied in every decision making situation. The main contributors, and thinkers are Havard Business school, Ernest Dale and American Management Association. Human Behaviour School or Human Relations Management could rightly be thought of as the process of getting things done through or with people if that be so, any organization cold be compared to a building that is made up of bricks of people. The relationships among these people are the cementing force that bind them together in pursuit of command objectives. According to this school of thought, management is the study of behaviour of people at work. The school had its origins in a series of experiments conducted by Prof. Aiton

Mayo and his associate at the Harvard School of Business at the Western electric companys. Hawthrone works, near Chicago. This experiment popularly known as Howthrone studies. It brought out for the first time the important relationships between social factors and productivity. Previously productivity of employees was considered to be a function of physical conditions of work and the wages paid to them for the first time it was realized that productivity dependent heavily upon the satisfaction of the employees in work situations. Following the Hawthrone experiments, a great deal of work has been carried on by behavioural scientist. Those who subscribe to the Human Relations school of thought are of the view that the effectiveness of any organization depends upon the quality of relationships among the people working in the organization. The basic assumption of this school still remains that the goals of the organization are accomplished through and with people. Apart from the study of formal organization and techniques this school also studies the psychological process in the organization, group dynamics, informal organizations, conflict, motivation, change, and relationship among the various groups of people in the organization. The main feature of Human Behaviour school are:1) Since management is getting things done through and with people, a manager must have a basic understanding of various aspect of Human Behaviour. 2) 3) Management must study interpersonal relations among people. Greater production and higher motivation can be achieved only through good human relations.

4)

Motivation, management.

leadership,

communication,

participative

management and group dynamics are critical study of 5) The study of management must draw upon the concepts and principles various behavioural sciences like psychology and social psychology. The main thinkers are Elton Mayo, Roethlisberger, McGRAGOR AND Keith Devis and Psychologist like Maslow, Hertzberg and McClelland. While there is no denying the fact that the study of Human behaviour in work is extremely important but it is not that management should confined to these only other variables like technical aspects is also very important. The system approach school Major contributions in the development of management thought since 1960 have come basically from the qualitative and behavioural science schools of thought. However a new direction in management thought has been given by what has come to be commonly called as the systems approach. A system is composed of related and interdependent elements which form a unitary whole. It may be viewed as an assemble age or a combination of things or parts forming a complex whole. Every system is made of sub system arranged in a hierarchy from this point of view, an organization may be viewed as a system made up of different parts in the

form of departments. Each of departments like finance, personnel, production or marketing is also a system comprising various other systems. According to the system approach school, attention must be paid to the overall effectiveness of the system rather than the effectiveness of a subsystem in isolation from the sub system. The main focus here is on the interdependence and interrelated of various sub systems, from the point of view of the effectiveness of a larger system. Previously, each department or function of management has to be studied separately with the introduction of system approach, this method is changed. In a organization, for instance, a project management approach may be introduced by forming teams drawn from different specializations, co-ordinated by a project manager. This team would represent a combination of sub-systems brought together in pursuit of the goals of the larger system called the organization. System could be simple or complex. Simple systems can be studied more easily in terms of input, process and output. In addition, feedback from the could be linked with the input so that improvements can be brought into the system. But when it comes to complex system various computer and mathematical techniques is used. The features of system approach are: (1) A system consists of interrelated and interdependent parts

(2) (3) (4)

The system approach emphsisised the study of the various parts in their inter-relationships rather than in isolation from each other. The system approach to management problem much more sharply than any other approaches. The system approach can be utilized by any other approaches including the process approach behavioural science approach, mathematical approach etc.

(5)

The system approach has been utilized in studying the function of complex organization.

The major contributors are:Kenneth, Johnson, C.S.Churchman and Martin. The problem with the system approach is its utter complexity particularly when it comes to a study of large and complex organization or for that matter the whole management concept and function. Contingency Approach It is also called situational approach. In one way it is extension of system approach. The basic idea for contingency approach is there cannot be a particular management action which is suitable for all situations. Rather an appropriate action is one which is designed on the basis of external environment and internal states and needs. Contingency approach suggest that what should be done in response to an event in the environment. Tosi and Hammer Says

When a subsystem in an organization behaves in response to another system or sub-system, we say that response is contingent on environment. Hence, a contingency approach is an approach when the behaviour of one submit is dependent on its environmental relationships to their units or subunits that have control over consequences desired by the subunit. From the above view point contingency approach has following features. 1) 2) Management action is contingent on certain action outside the system or subsystem as the case may be. Organization action should be based on the behaviour of action outside the system so that organization should be integrated with the environment. 3) Because of the specific organization environment relationship, no action can be universal it varies from situation to situation. Contribution of Peter Druker He can be introduced without doubt as the seminal thinker on 20th century business organization. He was accepted in management The main contribution of Peter Drucker are as follows 1) Nature of Mgt. Drucker has emphasis management as creative and innovative approach. The idea of innovation in broader sense includes development of new ideas, combining of old and new ideas, adaptation of ideas from other fields, encouraging workers to carry out innovations. He treated management as a discipline as well as profession with its own tool and techniques.

2)

Management functions:-

According to Drucker a manager in the organization has to perform certain functions like he has to work as administrator where he has to improve work efficiency, he has to work as an entrepreneur where his job is redirecting the resources to achieve efficiency. A manager also have to perform several more functions like clear objective setting, decision making organizing, and motivating. 3) Organization Structure:

He has emphasized 3 basic characteristics of effective organization structure. These are 1. 2. 3. Enterprise should be organized for performance It should contain the least possible managerial levels It should make possible the training and testing of tomorrows top managers by giving him responsibilities today. He also identify 3 basic organizing activity.:Activity analysis, decision analysis and relation analysis. 4. Federalism:-

It refers to centralized control in decentralized structure. It has certain positive values. They are:1) 2) 3) 4) It sets the top management free to devote itself to its proper functions. It defines the functions and responsibilities of operating people It creates a yardstick to measure their success. Help to resolve the problem.

5)

MBO

Management by objectives is very important contribution of Drucker. He introduced this concept of planning, setting standards, performance approved and --------- workers and management sits together and decide objectives that are to be achieved. 6) Organization Changes:-

Drucker has visualized rapid change in the society because of rapid technological development. Some changes can be absorbed by the organization but not rapid changes. He believes that organization should develop a philosophy and take to adapt with it. He emphasis on the development of dynamic organization which are able to absorb changes much faster than static ones. 7) 8) 9) 5. 6. 4) 5) 4) (6) 6) 5) (5) (5)

(6) (5) 6) 7) (9) (10) 3)

Ch-1 Management as a profession Management is regarded as profession by many but it does not possess all the characteristics of profession. The word profession has been given a variety of meaning and different people attach different characteristics to it. For e.g. car Saunders claims that profession may perhaps be defined as an occupation based upon specialized intellectual study and try the purpose of which is to supply skilled service or advice to others for a definite salary. Mc. Farland has give some characteristic of profession. They are existence of body of knowledge or technique. - Formalised methods of acquiring training or experience - The establishment of a representative organization with professionalisation as its goal - Ethical codes - Fees Profession is an occupation for which specialized knowledge, skills and trg. Are required and the use of these skills is not meant for self satisfaction but these are used for larger interest of the society.

Thus, all profession are occupation in the sense it provides livelihood. However, all occupation are not profession because they lack some characteristics. The various characteristics of profession which will found in management to some extent and which help in deciding whether management as a profession or not. 1) Existence of knowledge A profession emerges the establishment of fact that there is a body of knowledge which is studied for being successful in profession. Management has been developed as a distinct body of knowledge over the last 5 or 6 decades because of large and complex organization is increasing. However the concept of management is still evolving and continuously new principles are being developed. 2) Acquisition of knowledge: An individual can enter a profession only after acquiring knowledge and skills through formal try for e.g. A law graduate can enter in profession of law from this point of view, management cannot be regarded as a profession because the management in an organization is not ltd. to management graduates only if they have knowledge of management they can perform slightly better. 3) Professional Associates: An occupation which claims to be profession should have an association. A professional association consists of firms and individuals whose membership is based on common professional, scientific or technical aims. The body may of professionals is needed to regulate and develop

the professional activities. In the field of mgt, there are associations at various levels for e.g. All India management association. However professional group like Indian Medical Council for doctors or BAR Council of India for legal people. In sense management cannot be termed as true professional. 4) Ethical Codes:For every professions, some ethical standards are provided and every individual of the profession is expected to maintain conformity with these standards. The need for ethical codes arises because of the fact that occupations whose personnel have mastery over their area of knowledge and their expertise knowledge they can use for the benefits of professionals at the cost of the society. This has resulted in many occupations issuing a code of ethics of professional practice so that client may know their standard and commitment. In management also a code of conduct has been formulated to suggest the behavioral pattern for professional managers. Though this ethics are not fully accepted by managers around world. 5) Service Motive:This concept suggest that professionals should keep social interest in their minds while charging fees for their professional service. It is essential because the monetary value of professional service cannot be measured easily. Since the professionals are in position to charge higher fees by virtue of their expert knowledge which is not right, the motive of profession should be service and this is true for management also.

Management should contribute to society by using the resources in optimum manner and by delivering high values to customer. Mgt as emerging profession:In addition to contemporary profession like doctors, engineering, etc. mgt is fast moving towards professional status. The main implication of professionalisation in management are found in 5 areas of development 1) The growth of organized, systematized body of knowledge 2) The evaluation of profession school of mgt. 3) A growing emphasis on the ethical behavior of mgt. 4) The increasing no and use of mgt consultant and 5) The large number of mgt associations. Professional approach of mgt:1) Commitment towards work and society 2) Application of modern mgt tools 3) Team approach 4) Accepting change 5) Preference on competence for promotion 6) Optimization oriented decision Professionalisation of Management in India:The term professional mgt. has become a glamorous expression in corporate mgt in India. However the question arises to what extent has Indian mgt has been professionalised?

Associations are exist, code of conduct is made but still Indian organization is fully not professionalised. From this point of view, Indian Mgt. can be divided into two parts:Traditional managed sector and professionally managed sector. Traditionally managed sector:In common parlance, Indian mgt. is described as family, mgt. with Traditional Values the 2 features of family management are:a) Both ownership and control of the organization are in the hands of the members of the family and b) Organizational objective is to maximize of weaker section of the society This type of mgt maintains the control of the organization by value system and often the working of two organization greatly differ if they managed by different family organization structure has been retained by the family will be head of dept. and relative organizational positions of the family members are determined in accordance with their positions in the family. ACC TO PL TANDON In a family buss they hired professional engineers, accountant, marketers, but all the decision making is centralized at the top with the head of the family, who has no professionalism he only have experience and intuition for decision making.

Public Sector:In many public sector organization, the situation is no better. It is an accepted fact that mangers in many public sector organizations particularly at higher levels often greatly borrow the traits of bureaucracy, many top level public sector managers have worked, lived and imbibed the government way of working. This seriously comes is the way of iniative, innovativeness and flexibility in the working style. Civil servants, military personnel and politicians are appointed as head of the organization who have no buss sense. In such a case, one hardly expect proefssionalisation. Apart from this there are few more reason for lack of professionalisation in India they are:1) Attituditional conservatism :-

The popular belief that buss is matter of common sense and luck reflect this attitude. This attitude has paid good dividend in the past because of controlled economy and lack of competition. However in todays situation where size of organization increasing complexity of organization is also increasing the business cannot run successfully with this kind of attitude. 2) One man show:-

Most of the organization in the pvt sector are generally one man show. Often the owner also perform the managerial functions. This is true not only small organization but also for large organization. Owner style of functioning is different from manager he believes in more direct control? Centralisation in the organization.

The main reason for the professionalisation in this sector are as follows:= 1) The most important factor contributing to professionalisation of the Indian management is the international impact. It can be observed that the modern management concepts comes from subsidiaries and associates of MNCs in India. 2) Professionalisation of management in certain sector has been because of compulsion for e.g. during 5 year plan the public sectors unit which are sick government tries to revive them by making them more sophisticated and professionalized. 3) Above 2 factors generated a need of professionalisation, availability of trained and educated professional managers has facilitated the process of professionalisation of management. After 2nd 5 year plan there has been increasing emphasis on management education. Today there are many institutes of management at Ahmedabad Kolkatta, Bangalore, Lucknow etc. apart from this any organization like TATA, ITC Ltd.has their own business management courses. 4) The emergence and development of public sector enterprises have put pressure on the government to find out suitable managers for these enterprises. These managers were originally deputed from the civil services who had altogether different perspective and style of functioning. This has also worked against the profesionalisation of mgt in public sector. 5) Business in India has not yet reached the level of sophistication as in the comparision of developed countries. Indian business is still in the infancy stage.

Professionally managed sector As against traditionally managed sector there are various organization both in private sector as well as in public sector, whose management graduates at various levels of management introduced modern concept of management, professional competency.