ORGANIZATIO

N DESIGN:
Sources of power:
Authority: is the power that has been legitimized by
the organization. (The power that comes with position
in an organization)/ legitimate power
Reward Power. (Ability to reward,)
Coercive Power (ability to punish)
Charismatic power/ Referent power (personality, traits)
Expertise Power (skills, knowledge,)
Chain of command:
The continuous line of authority that extends from
upper organizational levels to the lowest levels and
clarifies who reports to whom.
o Chain of command explains on whom we have
got authority and to whom we are responsible.
o Chain of command helps to make sure the
implementation of the principle of unity of
command.
Authority:
The right inherent in a position to tell people what to
do and to expect them to do it.
Responsibility:
The obligation to perform any assigned duties.
Unity of command:
The management principle that each person should
report to only one manager.
Span of Control:
The number of employees a manager can handle
efficiently and effectively.
In an organization where number of employee being
handled by one manager are large the span of control
would be wider and narrow otherwise.
Importance:
i.
Determines number of organizational level
in an organization.
ii.
Determines the number of managers
iii.
Affect decision making
iv.
Determines labor cost
v.
Level of empowerment (wider, more
empowerment and vice versa)
Factors influencing span of control:
i.
Skills and abilities of the manager
ii.
Skills and abilities of the Workers
iii.
Nature of work (complex or simple)
iv.
Similarities of task (repetitive or unique)
v.
Standardization of procedures
vi.
Sophistication of Information system
vii.
Organizations culture (helpful or
restrictive)
viii. Preferred style of manager.(trusting, direct
supervising)
Centralization: The degree to which decision making
is concentrated at a single point in the organization.
Decentralization:
The degree to which lower level employees provide
input or actually make decisions.
Decision making is pushed down to the managers
who are closet to the action
Centralization or Decentralization is relative term, not
absolute- means an organization is never completely
Centralized or Decentralized. An organization where

all decisions are made by one person is not practicable,

just like an organization where every body is making
decisions.
Rule: Which fits the circumstances?
Larger the organization is, the chances for
decentralization are more because
i.
Lowest level managers are closer to the
action
ii.
Have detailed knowledge about problems
iii.
Lower level manager can give a better
solution to the problem, having the local
knowledge and near to the client.
Factors affecting the choice between Centralization
and Decentralization:
i.
Level of certainty/ stabilitymore unstability demands Decentralization.
ii.
Ability of lower level manager. If they
are capable to make rational decisions.
iii.
Personal choice of lower level
manager.. Regarding taking interest,
want to have a say, willing to take
responsibility.
iv.
Significance of decision decisions of
great importance demand Centralization.
v.
Corporate culture open culture
encourages lower level employee to make
input and participate in decision making
process.
vi.
Crises or Risk of collapse or survival
phase demands decisions to be taken at top
level.
vii.
Geographically dispersion. The more the
company is geographically dispersed, the
Decentralization becomes indispensable.
viii. Stage of business development.(growing
stagedecentralization, declining stage
centralization).
ix.
History of the organization.
x.
Intensive and expensive training(if
available than only decentralization is
possible)
xi.
Sophisticated planning and reporting
method.
Work Specialization:
The degree to which tasks in an organization
are divided into separate jobs, also known as division
of labor. (Cutting, printing, packing, etc)
a. Individual Development
b. Decreased Transfer Time
c. Specialized Equipment
d. Decreased Training Cost
Drawbacks:
a. Boredom and Dissatisfaction.
b. No Stimulation
c. Time wastage
d. More space is needed (to move a car from
worker to worker)
Formalization:
The degree to which jobs within an organization are
standardized and the extent to which employee
behavior is guided by rules and procedures.
In formalization job expectations are put in written
form.
Formalization is helpful where the nature of individual
job is complex and requires recognizable and
measurable out comes, in such circumstances to reduce
the possibility of incorrect or inappropriate behavior,

preferred methods are put into writing--- termed a s

procedures, policies, rules, or step by step guidance.
Features:
i.
Little discretion for the employee regarding
what, when and how.
ii.
Consistent and uniform out put
iii.
Explicit job description, clearly defined
procedures, step by step guidance.
iv.
Structured job behavior.
v.
Constraints of Time, space, Capacity,
Sequence,
vi.
Formalization involves a lot of
documentation.
In highly formalized organization you can not do what
ever you like or the way you likemean management
is not only concerned with out put but with the way out
put have been achieved.
In low formalized organization employees have great
deal of freedom and the management main concern is
how much you are doing. Employees dont have to
follow lengthy procedures and they are not supposed to
expect step by step guidance. Self guidance and taking
initiative would be a positive point in this type of
organization.
Departmentalization:
The basis by which jobs are grouped together is
called departmentalization.
Departmentalization By
Functions ( sale, purchase, accounting,
manufacturing)
Products (Tea, oil, soap, powder , )
Geographic (east , west, northwest , )
Process (dying , cutting, finishing, packing)
Customers (local, retailers, wholesalers,
export based )
Delegation:
The process by which the manager assigns a portion of
his or her total work load to others. Delegation is the
assignment of authority to another person to carry out
specific duties. In delegation authority plus
responsibility both are transferred. Delegation is
different from Participation where authority is shared
without any burden on the employee. Factors for
effective delegation:
i.
Clarify the assignment.
ii.
Specify the employees range of discretion.
iii.
Allow the employee to participate (while
deciding responsibility and authority)
iv.
Informing others about delegation process.
v.
Establish feed back channel
Reasons for delegation: / benefits.
ii.
To enable the manager to get more work
done.
iii.
Ease the managers burden.
iv.
Subordinate having more expertise (in that
particular situation)
v.
Subordinate having special training.
vi.
Subordinate being already familiar (with
that particular product, customer,
geographical area, )
vii.
Preparation for Future Managers
(shinning starstarted asking to serve the
customer on till)
viii. Creation of competitive atmosphere
(manager vs peers)

ix.

Managerial creativity- provides manager

with time and freedom for creativity and
problem solving activities.
Delegation process:
a. Assigning responsibility (preparing report,
managing a team, looking after a customer)
b. Granting Authority (access to resourcesinformation, equipment, people, material)
c. Creating Accountability. (obligation to carry
out assigned task)
Problems in Delegation:
i.
Disorganized manager unable to plan in
advance
ii.
Lack of self confidence among managersubordinates performance pose a threat for
manager.
iii.
Lack of manager trust on subordinates
abilities.
iv.
Lack of confidence among subordinatesregarding completion of jobs.
v.
No monetary reward for additional
responsibilities.
vi.
Subordinate being a Risk avoider
Overall responsibility resides with the manager, who is
accountable to a higher-level manager.
Generic Models of Organizational Design
Mechanistic organization:
An organizational design thats rigid and tightly
controlled, characterized by high specialization, rigid
departmentalization, clear chain of command, narrow
spans of control, centralization and high formalization.
In mechanistic organizational design emphasize is on
minimizing the impact of differing personalities,
judgments, and ambiguity by introducing rules,
regulation, standardized task, & controls.
This organizational design helps in eliminating
inefficient and inconsistent human traits.
Organic Organization:
An organizational design that is highly adaptive and
flexible, characterized by cross functional teams, free
flow of information, wide spans of control,
decentralization, & low formalization, by having this
type of organizational design, it is possible to change
rapidly as needs require
In organic organization instead of relying on rules,
procedures and written instructions, employees are
highly trained and are empowered to handle diverse
jobs.
Team work, sharing of ideas, helping team members,
High level of skills, Training, and Empowerment are
common features of this organizational design.
Factors Affecting organizational Design decision /
Contingency Factors.
1. Strategy and Structure: Strategy defines the ways
to achieve the goals while the structure facilitates the
achievement of those goals.
Structure should not only support the strategy but it
should follow the strategy.
A change in strategy must be followed by a change in
organizational design to accommodate that change.
Dimensions of strategy:
i.
Innovationshows the degree to which an
organization is pursuing new innovations.
ii.
Cost minimization--- where the
organizations main aim is to minimize the
cost.

iii.

Imitation. ---where the organization is

trying to minimize risk and maximize
profits by copying market leaders.
Different strategies need different organizational
design to facilitate these strategies.
i.. Flexibility, free flow of information,
ii. Efficiency, stability and tight control
iii. Tight control+ flexibility.
2. Size and Structure:
Larger the organization is, there is more need for
departmentalization, work specialization, and formal
rules and regulation.
However centralization is an element that has a reverse
relation with size, as the size grows there is less
centralization and more decentralization.
There are large companies who prefer to have highly
trained and empowered employees rather than binding
them in strict rules and regulations.

ii.

3. Technology and Structure:

Technology is the method of converting input into
output.
i.
Unit production
ii.
Mass production/ Batch Production
iii.
Process production.

b.

4. Environmental Uncertainty and Structure:

The greater the uncertainty, the more an organization
needs flexibility and the organizational structure tends
to be more organic, while an environment featured by
stable and simple conditions can afford to have a
system which is more mechanical in nature, coupled by
high formalization and centralization..

d.

Forms of Organizational Design:

I. Traditional organizational design:
a. Simple structure: A design with low
departmentalization, wide span of control,
centralization, and little or almost no
formalization.
Owners and Managers are same.
b. Functional structure: An organizational
design that groups similar or related
activities together. (Functional manager)
c. Divisional Structure: An organizational
structure made up of separate units or divisions.
(divisional manager/ Div commander in army)
II. Contemporary Organizational Designs.
Dynamic and complex environment faced by managers
coupled with market place demand for being lean,
flexible and innovative requires them to find a creative
combination of the building blocks to design an
organization which is more responsive to the needs of
both internal and external customer.
i.
Team Structure: in which the entire
organization is made up of work groups or
teams.
a. Employees empowerment
b. No line of authority (from top to bottom) /
Chain of command.
c. Free designing of work
d. Individual responsibility for each team
e. High level of employee involvement
f. No barriers among functional areas.
g. High pressure.
h. Team Leaders instead of managers.

a.
b.
c.
d.
e.
f.
g.
h.
i.
iii.

a.

c.

e.

Project structure: An organizational

structure in which employees continuously
work on projects.
No formal departments
No going back
Transfer to new projects
No job title
Formation, disbanding and formation as per
work requirement.
No departmentalization,
Quick actions
Manager are facilitators and coaches
Project Managers serve the project team
Matrix: An organizational structure that
assigns experts from different functional
departments to work on one or more
projects.
Project managers as well as Functional
managers
Dual chain of command (violation of the rule
of Unity of command )
Project managers is using authority regarding
project goal while departmental managers have
got authority regarding promotion, increments,
and annual review of contract based on the
performance in each project.
Efficient and sophisticated information system
(between managers and leaders)
Experts go back to concerning department on
completion of a project and then might be
assigned on an other project by their functional
managers.

Boundary less organization:

An organization whose design is not defined by or
limited to the any of boundaries imposed by a
predefined structure.
a. Vertical boundaries ----- between different
levels in an organization
b. Horizontal boundariesbetween different
departments
c. External boundaries--- among organization,
customers and suppliers
Features:
1. flexible and unstructured
2. No chain of command
3. Limitless spans of control
Types:
Virtual organization:
An organization consists of a small number of fulltime employees and that temporarily hires outside
experts to work on opportunities.
o Film industry
o Freelancers/ free agents
o Minimum or almost no overhead
o No structural complexity
o Actors, directors, costume, set designers,
story writers, editors etc
Network Organization: A small core organization
that out-sources major business functions.
o Concentrate on what we are best in.
o Contract out other activities. (who are best in
those activities)
o Cost effective Contractors
o Nike, (Product development and marketing)
o Ericsson (Research and development )
The Learning Organization:
An organization that has developed the capacity to
continuously learn, adapt, and change.

a. No specific design
b. Describes a philosophy which has significant
implication on design
c. Knowledge management
d. Continuous learning and acquiring new
knowledge.
e. Organizations ability to apply that learning
f. Ability is being used as competitive advantage
g. Sharing information
h. Collaboration on work activities
i. Cross functional as well as cross hierarchal
collaboration
j. Teams
k. Managers are facilitators, supporters and
coaches.

GENERAL
ENVIORNMENT :
External Environment:
Environment: every thing out side the organization
which affects the organization in one or another way.
Environmental factors play an important role in an
organizations success or failure and those
organizations that do not pay attention to their
environment, sooner or later will face trouble.
A. General Environment / Indirect Action
Components
(Which influence the climate in which organization
operates and in certain cases may become direct action
component.
o Nonspecific Dimensions (Broad)
o Impact is often rather vague (not clear)
o Not Individual units
o Factors or processes
o Conditions and events that have
potential to influence organization
A. General Environment/ Indirect Action
Components:
1. Technological Changes
o Rate of technological breakthrough
o Competitors adapting new techniques
o Market pressure for using new
technology
o Cost saving effect
o Growth rate of productivity
o Monitoring current in order to make
informed decision about investment
2. Economic Factors
o Economic system of the countrycapitalism, socialism, communism.
o Operating Conditionmonopoly,
oligopoly, imperfect competition, perfect
competition,
o Economic condition influence labor,
material cost,
o Monetary policies
o Fiscal policies
o Inflation, deflation,
o Unemployment ratehigh rate more
choice, low rate --- premium wage rate
o Interest rateborrowing cost inflates, IRR ,
prefer to deposit with bank,
o Foreign exchange rate. Imported raw
material, export finished products

3. Political Dimension
o Government policiespro- or anti
business, Ayub khan vs. Bhutto
o Stability effect economic conditions, level
of uncertainty increases with unstable
political conditions
o Political conditions affect foreign
investment Democratic vs. Dictatorship
o Political conditions affect foreign
policies. Friendship with India
4. Legal & Regulatory Factors
o Legal system defines the boundary of an
organization
o Legal system promoting a particular
economic system (monopoly, oligopoly,
perfect competition etc)
o Regulatory agencies define acceptable level
of profit.
o Legal formalities regarding working
environment
o Legal requirement regarding Audit n
disclosure.
o Legal requirement regarding labor force
hiring n promoting discrimination policies
o Legal factor regarding disabled employees
as well as customers.
o Laws regarding environmental pollution
5. Cultural and Social Dimension
o Customs, values, norms, traditions, of the
society
o Indicate acceptable level of products,
services,
o Standards of conduct. Level of corruption,
moral values,
o Determines employee behavior about
organization, Japanese workers committed
and attached to their organization as
compare to American
o Family system, Single mothers, No of
children, Casual buying behavior
o Spending behavior, Importance of products
and services according to culture
o Life style busy life style fast food,
o Health conscious (Organic Foods in
Europe)
6. International Dimension
o Global village
o Multinationals MNCs
o Foreign competition at home (Chinese
products every where)
o Foreign Exchange, Equally important for
organizations not-for-profit
o Foreign technological breakthrough
o Foreign condition, war, civil war,
o Immigration policies, educational exchange
program.
o International Quotas, Antidumping Duties
o Tariffs

SPECIFIC
ENVIORNMENT
B. Specific / Task Environment / Direct Action
components.
All those organizations that have a direct impact on
the decisions of an organization and an

organization simply can not ignore while making

any decision.
o Closer Relationship, Direct Relationship
o Non-ignorable relationship, Dimensions are
composed of specific organization/ Units
1. Clients/ Customers. (Present needs, Emerging
needs Altering current products, Developing new and
starting new business)
o The one who is paying (father) , The one who
is using (child)
o The one who is buying (servant) (Agent)
o Individual, schools, hospitals, government
organizations, wholesalers, retailers,
manufacturers, )
o Ex, Present, Potential.
Information about customer can be obtained from
(market research, surveys, consumer panels, sales
representatives, )
2. Competitors:
Intratype Competition (between businesses engaged
in same activityTwo Bank, Two Colleges, Milk
Pack, Haleeb, Olpers Good Milk, )
Intertype Competition: (Between businesses engaged
in different activities for same customer, Bank and
Saving Schemes, Hospitals and Health maintenance
organizations.., College sports team and Professional
Clubs, )
Competition is not only for customers money
o Scare material
o For good n cheaper material
o Skilled workforce
o Capital (for a loan from a bank)
o Technological advancement
o Patents
o R&D
3. Suppliers:
Inputs.. Raw Material, Services, Energy, Equipment,
Labor, Funds,
The availability of resources determines the
organizations capacity to respond to the threats and
opportunities presented to it.
Depending upon the nature of business some suppliers
are more critical than others.
The suppliers of all these resources have a directaction impact on management.
Raw Material
Supplies, energy WAPADA, Sui Northern,
Capital Goods: equipment, machinery,
Services, insurance, banking, security, medical
services,
Labor, recruitment agencies, job centers, training
centers
Funds, banks, private lenders, Share holders,
Government departments,
4. Regulators:
Units in task environment that have the capacity to
control, regulate, or influence organizations policies
and decisions.
Government Agencies: Created by Government to
protect public interest and to protect organizations
interest even. EPA (Environmental Protection
Agency), LDA TEPA, PHA
SECP HEC FDA (Food and Drug Administration),
OSHA (Occupational Safety and Health
Administration), Punjab Sensor Board
These agencies are given official power to conduct
investigation, set standards and rates, and impose
fine or take action against those, who violate the
laws agencies were created to enforce.

Interest Groups: Interest groups are organized by its

members in an attempt to influence organizations.
National organization for women, Airline Passenger
Association, National Advertising Reviews, APPSA
(All Pakistan Private Schools Association), Trade
Unions
These groups not only influence organizations
but in certain cases influence Government and local
bodies on behalf of organization, (last three).
5. Unions:
Labor unions represent not only Blue-Collar but
White-collar workers as well. An organization must
recognize and bargain with a union if that union has
been legally established by the organizations
employees. In Large organizations there may be more
than one union and in that case Management must
maintain a balance while bargaining and giving
representation in Quality Council and in other posts.
6. Associates:
Two or more relatively autonomous organizations that
are controlled by another organization, such as a
holding company or parent company.
Since success or failure of one organization
have some affect on other associate companies, its vital
to take them in consideration before we make a
decision.
Due to the current trend toward merger, acquisition,
and diversification it is very much important to
understand the true role of associates and due
importance must be given to them while making
strategic decision especially

Benchmarki
ng:
Why our competitor is famous in customer service?
Why someones customers always out with a smile on
their face, not ours
Why our labor is always on strike not our suppliers
Why the next door shop can sell things cheaper than
our cost even.
Why the managers of other organization are feeling
comfortable while ours are always panicking.
Why waiting time in one hospital is 5 minute, while in
others you have to wait for hours before a doctor
appears with an angry face.
Why its only our deliveries getting late not our
suppliers
To answer we have to look for someone who is best or
for all those who are best in any field, thats what they
call Best Practice Benchmarking.

The search for the best practice among

competitors or non-competitors that lead to
their superior performance
Taking advantages of others experience, instead of
experiencing every thing from beginning

Principle: (adopted by Xerox international)

Any thing anyone else can do better, we should aim to
do at least equally well

In Best Practice Benchmarking if we see someone

else doing something better than us, level of their
performance should be our new base standard.
BPB offers following benefits.
a. BPB provides us a standard to compare
against.
b. It ensures we can react to and keep up with
others improvement.
c. BPB indicated the areas where there is a room
for improvement.
d. Provides better understanding of customers
and competitors.
e. Results in decrease in complaints, increased
customer satisfaction.
f. Reduction in waste, Quality problem, & Rework
g. Faster awareness of important innovations.
h. Stronger reputation.
i. As a result increased profits and sales turnover.

Steps in benchmarking:

A. Form a Benchmarking Team

B. Gather internal and External Data
(gathering information on own system and on
selected organization system)
Double check information from different sources,
against each other.
Homework before visiting a company or a
department

C. Analyze data to find performance gaps

(analysis to find out where there is
nonconformance, gap or where they have left us
behind),
Be precise
Only related information
Quantify the performance gap
Compare like with like
Get other managers opinion

D. Prepare and implement action

plans.(to meet or exceed the standard)

We Benchmark against:
o Competitors
o Our own organization (other branches,
divisions, )
o Associates, sister companies,
subsidiaries, parent company etc)
o Inside the industry
o Outside the industry (Benchmarking for
specific activities)
How to choose a company:
Following points must be consider before choosing
companies,
o Who are they, Do they know us. (do we
have any pre-existing relation with them
customer, supplier, etc)
o Relevancy of their experience, (how much
their experience is relevant and up to what
extent that is useful for us?
o Is that company still performing that
activity for which it is famous. (a company
might have left that process long time ago
but still got reputation for that specific
activity)
o Are we legally able to exchange this kind of
information with that company.

Partnerships may be developed to share

benchmarking data, taking what they are best in and
giving what we are best in.
(we have to look for someone who is looking for
information on a process we think we are best in)
Sources of information:
i.
ii.
iii.
iv.
v.
vi.
vii.
viii.

Competitor intelligence
Mag & news papers
Trade association reports
Customers
Suppliers
Their employees
Institute of marketings information centre
Reverse engineering

o Set new standard

o Communicated the new standard
o Explanation for the change (why there is a need
for change)
o Delegation of authority and responsibility (too
keep an eye )
o Provision of resources (for additional work)
o Monitoring the progress for effective
implementation.

Competitor intelligence:
Environmental scanning activity that identifies who
competitors are, what they are doing, and how their
actions will affect the organization

The Team Will Make 3 Important Decisions

a. What is to be benchmarked? (function, activity,
or process)
What is most important for customer
satisfaction?
What is directly linked with our cost of
production?

P&G vs Unilever

b. Selection of organization, (to be benchmarked

against)
c. Data collection method.

Legal position:
The economic espionage Act 1996 makes it a crime to
engage in stealing a trade secret.
Master vs Visa

Change:
An alteration of an organizations environment,
structure, technology or people.

Introduction of new product by competitors, demand

of new and improved product by customer,
implementation of new Laws by govt, and a variation
in employees need

We can not ignore these changes, we like them or not

that is not important, the important thing is that
Change is an organizational reality, and we have to
handle it
Handling change is an integral part of every Managers
job.

Forces for change:

External Forces.
(i)
(ii)

(iii)

(iv)
(v)
(vi)

Market Place ===Competitors, Customers

Technology: internet, E-commerce,
Automation, E-mail (Greeting Cards).
Assembly line (replacement of human labor
with machine.
Economic Changes: == interest rate,
exchange rate, fiscal policy, monetary
policy, federal budgets.
Govt Laws & Regulations:== Disabilities
Act, One Dish
Fluctuation in Labor Market.==Shortage of
work force
Environmental Changes/ Social
Changes.== way of spending, level of
social activity,

Internal forces:
(i). Modification or re-definition of strategy
(ii)Introduction of new Equipment
(iii). Work force composition (change in age,
nationality, origin, sex)
(iv). Employees attitude (job dissatisfaction)

Resistance :
People always resist change, they want the things to go
as going, they dont want changes, they dont want to
change their routine and they feel happy if things
remain same. They love Status Quo (present
position, as it is)
Sources/Reasons for resistance.
(i)
Uncertainty == Fear of future. People
like the things they know very well, they
are not interested in things they dont know,
for them a bird in hand is better than two
in bushes.
(ii)
Habit (programmed response)
We do things out of habits, we dont want
to change the way of doing things. (because
its easy not to experiment)
(iii) Fear of loss. (of something already
possessed)
People have invested in Status Quo in shape
of Money, Time, Experience, Status,
Authority, Friendship, Personal
Convenience, & other economic benefits.
Older workers have more investment
Older workers more resist (to change)
(iv)
Personal Beliefs.
That the change is against the interest of
Org. (on the bases of personal experience,

knowledge, Skill, & sometime Sixth

Sense.)
(v)
Misunderstanding. (they dont understand
why this change is necessary = Lack of
communication)
(vi)
Lack of trust. / Lack of interest
(vii) Different Assessment. (the change agent is
thinking that he has taken care of every
aspect before forwarding a change while
others think there is still need for study.
Steps to reduce resistance:
1. Education & Communication.
(communication to make employee
understand the logic of change,
education to create mutual trust and
credibility )
2. Participation (participation to get
expertise from those who opposes, to
reduce resistance, obtain commitment,
and increase quality of change decision)
3. Facilitation & Support (Support such
as counseling, skills training,
transportation arrangement, baby sitting
facilities, day care centers etc)
4. Negotiation (offering something of
value to reduce resistance,
5. Coercion (using direct force,
inexpensive, must have some strong
cards in hand, Legal constraints must be
kept in mind, Business ethics must not
be ignored)
6. Manipulation and Co-option (twisting
or distorting facts, withholding
damaging information, creating false
rumors, inexpensive , but very
expensive if targets realize the real
situation)
Types of Change.
1. Structural Change (is a change in any of the
basic components of organizational structure.
i.
Degree of centralization
ii.
Spans of control
iii.
Work schedules
iv.
Level of formalization
(rules, regulations,
procedures )
v.
Departmental change
vi.
Reward system
vii.
Performance appraisal
system
viii.
Controlling system
ix.
Chain of command
x.
Reporting system.
B. Technological Change (a change in the
conversion process used to transform inputs
into out puts)
i.
change in equipment
ii.
change in work processes
iii.
change in work sequence
(altering the order of the
work stations involved in a
particular manufacturing
process.
iv.
change in information
processing system
v.
change in automation
C. People focused change/ Changing People
(change concerned with changing employee

performance, skills, attitudes, perceptions,

behavior, or expectations.
i.
Replacement of
personnel
ii.
Selection (organization
fine-tune or upgrade its
selection criteria
iii.
Training and
Development (refining the
skills and boosting the
performance levels of
existing employees)
iv.
Life and career planning
v.
Coaching and counseling
vi.
Inter-group activities (to
promote cooperation, , to
resolve conflicts)
vii.
Team building (both
structural as well as people
)
Change Agent:
The person who acts as a catalysts and assume the
responsibility for managing the change process. (a
manager is a change agent)

Change Process:
2. Recognition of the need for change.
i.
Problem- Strike --Reactive
change
ii.
New market potential
Planned changed
3. Establishing goals for change
i.
Settlement of strike
ii.
Enter into new market
4. Diagnosis (identification of reason)
i.
inferior working
conditions
ii.
increase in income, change
in fashion (people have
started using our products)
5. Selection of change techniques
i.
New reward system,
ii.
Opening of branch, Direct
sale, franchise etc
6. Planning for implementation
i.
cost of the change
ii.
affect of proposed change
on other areas of the
organization
iii.
employee participation
level in proposed change
7. Implementation
i.
practical steps in
implementation
8. Evaluation and follow-up
i.
evaluation of change upon
strike
ii.
exploitation of new
opportunities
if the change which have been
implemented recently hasnt met its
objectives further changes may be
needed.

Change:
Once unfreezing has happened change will happen
without any problem. Just like after the hard day of
farmer the soil is ready for the seed to be cultivated

Refreezing:
Just introducing the change is not enough, you have to
refroze the situation, so employees may not revert to
old ways of doing the things. (by keeping an eye ,
monitoring the performance, and having discussion
about the positive aspects of new status.

Change Agent:
The person who acts as a catalysts and assume the
responsibility for managing the change process. (a
manager is a change agent)

Communi
cation:
The transfer and understanding of meaning.
Types of Communication
9. Interpersonal
10. Organizational
Communication Process.
Sender -----Message----Encoding----Channel-----Receiver-----Decoding-----Feedback-----Organizational Communication
1. Formal. That follows official chain of
command.
2. Informal . that is not defined by org structural
hierarchy
(tea break, smoking, pubs,
Directions of Communication Flow.
Downward
Upward
Lateral
Diagonal
Nonverbal Communication (with out words)
(Siren Red Light)
Body language(gesture, facial expression, etc
that convey message)
Barriers to effective interpersonal
Communication.
1. Filtering
2. Emotions (mental condition while receiving
a message)
3. Information Overload (more than
processing capacity
4. Defensiveness (being threatened,
5. Language (age education, & cultural back
ground)

6.

National Culture (thumb impression,

..HSBC)
Overcoming Barriers
1.
2.
3.
4.
5.

Use Feed back

Simplify Language
Listen Actively
Constrain Emotion
Watch Nonverbal cues

Motivation: The processes that account for an

individuals willingness to exert high level of effort
to reach organizational goals, conditioned by the
efforts ability to satisfy some individual need.
Motivation Process
Unsatisfied need---Tension---Effort--Satisfied NeedTension Relieved
Intensity-Direction-Persistence-Need
An Internal State that makes certain out comes
appear attractive

Forecast
ing:
To predict future events effectively and in timely
manner.
Forecast is the prediction of outcomes.
Forecasting is the process of developing assumptions
about the future that managers can use in planning or
decision making.
Forecasting is the process of using past and current
information to predict future events
Types of forecasting:
i.
Sales Forecasting,
ii.
Technological forecasting: focuses on
predicting what future technologies are
likely to emerge and their effect on our
products and services.
iii.
Resource forecasting, (Capital, Labor,
Material)
iv.
Market size forecasting,
v.
Population Behavior forecasting
CPFR: collaborative planning, forecasting and
replenishment: in which different organization share
data through internet regarding past sale, trends,
promotion plans, and other factors to forecast a
demand for a particular product.
Forecasting Techniques:
i.
Quantitative Forecasting that applies a
set of mathematical rules to a series of past
data to predict outcomes.(sufficient hard
data, reliable information)
o Time series analysis, Estimation of a
factor based upon relationship between
that factor and time.

(Prediction of future sale on the basis of

last couple of years sale)
Fits a trend line to a mathematical
equation and projects into the future by
means of this equation.
Casual Modeling
o Regression models. Systematic
evaluation of the impact of a number of
independent variables on a single
dependant variable.
Predicting one variable (dependant) on
the basis of some other assumed
variable (independent).
(Forecasting change in sale because of a
change in price, or advertisement
expenditure, commission, competing
products, availability of credit,)
o Econometric models.
Prediction of a factor based upon
relationship between that factor and a
segment of economy.
(predicting change in House/Car sale as
a result of change in Taxes, Change in
value of Currency, or interest rates)
Using a set of regression equations to
stimulate segments of the economy
o Economic indicators. Using economic
indicators to predict a future state of the
economy. Using GDP or Per Capita
Income to predict Saving ratio, or
Disposable income.
ii.
Qualitative Forecasting- that uses the
judgment and opinion of knowledgeable
individuals to predict outcomes. When
precise data is not available, or available
but limited.
o Panel /Jury of expert opinion./
Opinion of experts (HR, )
Hunches
o Sales force composition. Estimates
from sales people( customers wants for
next year)
o Customer evaluation. Estimate from
customers purchases . (retailers)
iii.
Special Techniques:
o Morphological analysis--involves
identifying all relevant dimensions of a
subject, specifying all the variations and
combinations of those dimensions, and
then finding practical applications for
them. (if our product is used in four
other products made by different
manufacturers, Morphological analysis
would tell us the effect of technological
changes of demand of each
manufacturer and would identify future
users of our product as well.
o Substitution effect model. Using
mathematical formula to predict how,
when, and under what circumstance a
new product or technology will replace
an existing one. (Wireless vs Landline,
DVD vs VHS,
Forecasting effectiveness:
Factors affecting the effectiveness are:
i.
Number of people providing input, (in
some organization 1000 to 5000 managers
for this purpose

ii.

iii.

iv.
v.

Level of uncertainty in the environment.

The more stable the environment is the
more accurate forecasting could be,
Non-seasonal events. (Unusual occurrence,
recession, reaction of competitors), the
lesser the frequency of happening of these
events the less accuracy is in forecasting.
Time span. The longer the time span the
less accurate forecasting would be,
Number of forecasting method, using
more than one method and then averaging
the result would increase the accuracy.

Techniques for allocating resources:

Resources:
The assets of an organization including
Financial, (equity, debt, retained earnings,
debentures, etc)
Physical, (Equipment, buildings, material, and other
tangible assets)
Human, (Experience, skills, knowledge,
Competencies,)
Intangible, (Brand names, patents, reputation,
Copyrights, Registered design, Goodwill)
Structural as well as cultural, (History, culture,
Work system, level of trust, working environment,
policies, traditions, values and structure,)
These resources must be allocated efficiently and
effectively.
Four techniques:
Budgeting
Scheduling
Breakeven Analysis
Linear Programming.
Budgeting:
Budget: A numerical plan for allocating resources to
specific activities.
Budgeting is an important managerial activity because
it forces financial discipline ad structure throughout the
organization.
Budgeting is a planning tool as well as a controlling
technique.
Types:
Revenue Budget. (sales)
Cash Budget (in + out)
Expense Budget (fix + variable) list all activities and
allocate amount to each of it.
Profit budget.
(We make budgets to improve the use of time, space,
and material resources)
Budgeting can be daily, weekly or monthly basis.
Budgeting Process:
i.
Identification of work activities, to be
performed in the next period. Established
goals.
Managerial level.
ii.
Determination of required Resources.
(money, time, space, human, material,
capacity)
Goals, Nature of activity

iii.

iv.

v.
vi.

vii.

viii.

Estimation of Cost. (of each of the

required resource, old budget, functional
managers, colleagues, other contacts inside
and out side the organization created in
Liaison role)
Checking the availability of resources.
(monthly, Quarterly or annual budgets have
detailed of available resources with time
period)
Assigning the Resources. (as needed to
complete the desired activities)
Reviewing the budget periodically. Must
review before the end of the time period, to
monitor whether Over or Under budget.
Corrective Action. (if things are going out
of budget, where is the gap, try to bridge
the gap)
Using experience (gained in this session
for next time, same if got any experience in
past would have use in this budgeting)

Types of budgeting:
i.
Variable Budgeting
Since forecast data are based upon assumption
about future, incase assumption prove wrong,
budgeting process wont be affective. So we need
to have some sort of flexibility for the change in
condition.
A variable budget provides for the possibility that
actual out put deviates from planned out put. When
we make a budget stating planned profit with three
different level of production we are talking about
variable budget.
Output
1400

1000

1200

Sale (Rs 5 per unit)

7000

5000

6000

Variable cost Rs 3
4200

3000

3600

Fix Cost
1000

1000

1000

Total Cost
5200

4000

4600

Planned Profit
1800

1000

1400

Moving Budgeting:
Is the preparation of a budget for a fix period with
periodic updating at fixed intervals.
Making a budget for one year but updating it on
monthly basis.
At the end of each interval the results are
compared with actual planning and the budget is
updated and most recent information is included in
the budgeting process.
Since with the start of every interval, the
management has learnt from experience so
assumptions can be revised constantly.

Instead learning after 12 months at the cost of a

year loss why cant we take corrective action when
the loss is equal to one month.
Moving budgeting could prove costly to maintain.
But it provides a systematic reexamination.

TQM:
Quality: Quality is closely related with performance,
and performance is compared with customers
expectation. If the performance is equal to or greater
than expectation it is of high quality and vice versa.
Quality:
The ability of a product or service to meet customer
needs.
Types
User based/ Marketing concept of Quality : quality
lies in the eyes of the beholder
Higher quality means better performance, nicer
features, and other improvements. (marketers +
customer favor this definition)
Manufacturing Based: quality means conforming
to standers and making it right the first time
The Dimension of Quality:
Quality has nine different dimensions on the bases of
which quality products are determined. These are
independent of each other, which means a product
could be excellent in one dimension and poor in
another.
Marketers identify the importance of each
dimension and than use in their differentiated
marketing offer, the one in which a product excels.
o Performance: Primary product features,
Brightness of a picture
o Features: Additional features, Remote control
o Conformance: Meeting the Standards
o Reliability: Consistency of performance over
time
o Durability: Useful life
o Service: Ease of repair
o Response: Human-to-Human interface,
Doctors treatment,
o Aesthetics: Sensory characteristics, exterior
finish
o Reputation: Past performance etc.
Total Quality management:
Management of an entire organization so that it
excels in all aspects of products and services that is
important to the customer.
TQM stresses a commitment by management to
emphasize on quality throughout the organization from
external suppliers to external customers via internal
suppliers and internal customers.
TQM is the art of managing the whole to achieve
excellence.

Total Quality Management is the integration of all

functions and processes within an organization in order
to achieve continuous improvement of the quality of
goods and services.
TQM is thinking about quality in terms of all functions
of organization from very beginning to the very last
point, believing that the overall effectiveness of system
is higher than the sum of individual out puts.
(Synergism)
TQM involves the organizations long term
commitment to the continuous improvement of
quality, throughout the organization and with the
active participation of all members at all levels to
meet and exceed customers expectations.
TQM demands continuous monitoring through
ongoing data collection, evaluation, feedback, and
improvement programs. TQM is not one time effort,
instead it is a continual long term endeavor that needs
to be recognized, reinforced and rewarded.
Basic Concepts:
There are six steps to be taken while moving towards
Total Quality Management:
i.
A committed and involved management
ii.
Focus on both Internal and External
Customer.
iii.
Employee involvement
iv.
Continuous Improvement of product and
processes
v.
Treating suppliers like partners
vi.
Establishing Standards to measure
performance

Obstacles:
Following Problems may hampered the
implementation of TQM
1. Lack of management Commitment
2. Inability to Change Organizational Culture.(it
takes up to five years to change culture). People
do resist change, so a company must use ways to
reduce resistance and must spend more time on
planning for cultural change.
3. Improper Planning: Active participation by all,
Customer satisfaction oriented planning,
4. Lack of Continuous Training and Education:
Training must be given in group discussion,
communication techniques, quality improvement
skills, problem identification, and problem
solving methods.
5. Incompatible organizational Structure.
6. Ineffective Measurement Techniques and lack
of access to Data and Results
7. Inadequate Attention to Internal & External
Customers
8. No Use of Empowerment and Team Work
9. Failure to Continually Improve
Benefits of TQM:
i.
Improved Quality
ii.
Employee Participation
iii.
Teamwork
iv.
Working Relationship
v.
Customer Satisfaction
vi.
Employee Satisfaction
vii.
Productivity
viii. Communication
ix.
Profitability

x.
xi.
xii.
xiii.

Increased Market Share

Less defects
Less wastage
An environment having priority for quality.

Business Process Re-engineering/ BPR

Is a process to re-define the mission statement,

analyze the critical success factors, re-design
the organizational structure, and re-engineer
the critical processes in order to improve
customer satisfaction.
BPR is the radical redesign of business as a whole or
individual work processes in order to maximize
business effectiveness.
Rethinking the traditional method of doing work
Commitment to customer focused process.
Question the effectiveness of the traditional
organizational structure
In BPR we emphasize on changing the processes not
the culture of the organization, but for certain drastic
and radical changes ground work is required for
creating suitable atmosphere.
It involves identifying Strategic Business Processes
BPR helps in:
Preparing the organization to handle the future.
In shape of
i.
Rapid technological changes
ii.
Competitive pressure
iii.
Increased demand for quality
iv.
Innovations
Three important questions to be answer before
starting BPR
1. The nature of the business
i.
what business are we in
ii.
how fast is our business changing
iii.
what are our strengths and weakness?
2. the critical success factors:
i.
what are key success factors customer
looking for
ii.
what are our current customer asking or us
and other suppliers
iii.
will they be asking the same in future.
3. The processes to be improves.
i.
where could the competition hurt us.
ii.
How can we effectively apply continuous
process improvement
iii.
Which process need re-engineering?
Re-engineering is necessary when:
a. The process is strategic
b. There is inverse relation between customer
defined success factors and companys
weaknesses
c. The process has a high price of
nonconformance attached to it.
d. The process may soon become strategic due to
change.
BPR aims at increasing the Value by Value
Engineering:
Value could be increased by following steps:
1. Reduce functions and reduce cost more
2. Keep functions unchanged and reduce cost
3. Increase functions and reduce cost
4. Increase functions and keep cost unchanged
5. Increase functions more than cost increase.

Quality Management System:

ISO Introduction, International

organization for standardization (ISO)
was established in 1946 in
Switzerland. Members more than 90
countries,
Main aim is to promote the development of
international standards to facilitate the exchange of
goods and services world wide.
TC (technical committee) developed series of
international standards for quality system published in
1987.ISO 9000, ISO 9001and 9004.
Originally the standards were only advisory nature and
were developed for use in 2 party contractual situations
and internal auditing, but with passage of time the
standards have become universally accepted.
What is two-party Contract?
In this system the suppliers would develop a quality
system that conformed to the standards, and then the
customer would audit the system for acceptability.
Two-party system requires multiple audits by both
supplier and customer and cost a lot, thats why Thirdparty registration system has been introduced.
In Third-party registration system, Registrar
assesses and audits the customers quality system on
periodic bases, on satisfactory performance the
Registrar issue a certificate of registration to the
supplier which is documentary evidence upon which
customers can trust without any further audit.
ISO 9000 Series of standards
ISO series of standards is generic in scope; mean it can
be modified and tailored according to the need of
organization small or large, simple or complex.
It is equally beneficial for construction, engineering,
health, legal, education and manufacturing.
The Standards require the suppliers to say what they
are doing and to do what they say, and to provide
documentary evidence that they did what they said
ISO 9000: - Includes Fundamental and vocabulary
discusses the fundamental concepts related to QMS
and provides related terminology.
ISO 9001:- Includes Requirements and the standard
used for registration by demonstrating conformity of
the QMS to customers, regulatory and the
organizations own requirements.
ISO9004:- Includes Guidelines for performance
improvement- provides guidelines that an organization
can use to establish a QMS focused on improving
performance.
Benefits of ISO Registration
1. Customers demand is fulfilled,
2. Improvement in processes and systems
3. Global deployment of product and services.,
4. Increase market share
4. Well-documented quality system.
5. Improvement in Internal qualityscrap
rework, nonconformities
6. Production reliabilityNo of break downs per
month, downtime per shift, emergencies.
7. External QualityProduct acceptance by
customers, claim of nonconformities, No of
returns products.
8. Time performancetime to market, on-time
delivery,

9. Increase customer satisfaction. Increase in

customer loyalty.
10. Lower cost, more control, Consistency.

ISO 9001-Informative Clauses: (for

information)
1. Scope
The purpose of the standard is for the organization to
demonstrate its ability to provide a product that meets
customer requirements and achieve customer
satisfaction. The purpose is achieved by evaluating and
continually improving the system, instead of product.
2. Normative Reference
3. Terms & Definitions
ISO 9001-Requirement Clauses
4. Quality Management System
5. Management Responsibility
6. Resource Management
7. Product Realization
8. Measurement, Analysis, and Improvement.